BNP CEO strikes upbeat tone on European outlook despite mixed results

By Mathieu Rosemain

PARIS - BNP Paribas's CEO said on Thursday the French lender was preparing to capitalise on opportunities thrown up by a trade war-induced economic slowdown, striking an upbeat tone even as a mixed set of first-quarter results knocked its shares.

BNP is the first of the big European banks to report recent earnings, and after U.S. President Donald Trump unleashed a global trade war at the start of April all eyes are on the outlook and how banks expect to navigate an anticipated slowdown in economic growth that could hit loan demand.

However, Jean-Laurent Bonnafe shrugged off the potential impact of the trade war.

"There is probably a lot to come in terms of restructuring, refinancing, deleveraging, mergers and acquisitions," Bonnafe told analysts on a call, referring to large European companies.

"Europe has no choice but to reinvest," he added, referring to European governments unveiling big fiscal spending plans as the region tries to rebuild its militaries and revive economic growth.  

Bonnafe confirmed BNP's 2024-26 targets published in February, including average annual growth in net income of more than 7% and annual average growth in sales of more than 5%. 

The CEO's comments contrasted with the mixed quarterly results his group released earlier, marked by a jump in revenues at its investment bank but also rising costs.

The euro zone's biggest bank by assets said group net income over the first three months of the year fell by 4.9% from the same period a year earlier to 2.95 billion euros ($3.34 billion), against the 2.94 billion-euro consensus forecast.

Excluding its Ukrainian operations, which were re-included this year, BNP's three main divisions all posted an increase in pre-tax income, led by its corporate and institutional banking (CIB) unit, which saw sales advance 12.5% to a record as turbulent financial markets spurred more client activity. Operating expenses were up 4% to 8.26 billion euros, above market expectations, led by an 8% jump at the CIB division. 

Sales from equity trading and prime services jumped by 42% while revenue from trading in fixed income, currencies and commodities rose by 4.4%. This mirrored similar performances by Wall Street rivals, including JPMorgan, Morgan Stanley, Bank of America and Citigroup.

UNCERTAIN OUTLOOK

Investors were less impressed and the bank's shares dropped 1.7% by 1515 GMT, underperforming the wider market.

BNP shares have underperformed rivals over the past 12 months, with rising revenues at its investment bank offset by struggles to boost profitability at its retail operations.

"BNP delivered a mixed set of results benefiting from strong trends in CIB while elsewhere performance was better/worse than expected and loan losses remained low," Royal Bank of Canada said in an early note to clients, adding that the "outlook is uncertain in our view".

Jefferies highlighted the 11.5% return on tangible equity that BNP pledged to deliver this year, adding that the bank's management needed to reassure markets about the closing date of its 5.1 billion-euro acquisition of AXA's asset management arm, slated in early July, on the heels of a regulatory snag. 

BNP's first-quarter numbers also showed sluggish performance at its retail business, especially at Italian unit BNL.

The car-leasing division Arval and Leasing Solutions suffered an 11.8% decline in sales as used car prices continued to fall.

A strategic overhaul of BNP's French retail unit is expected in June.

($1 = 0.8826 euros)

(Reporting by Mathieu Rosemain; Additional reporting by Bertrand de Meyer; Editing by Tommy Reggiori Wilkes, Sonia Cheema, David Evans and Gareth Jones)