Release Date: July 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BNP Paribas (BNPQF, Financial) reported a strong net income of EUR 3.4 billion for Q2 2024, up 1% year-on-year.
- Revenues increased by 3.9% compared to Q2 2023, driven by strong performance across operational divisions.
- Global Markets division saw a significant revenue increase of 17.6%, with equities up 57%.
- The company achieved efficiency savings of EUR 650 million, contributing to a total of EUR 1 billion for the year.
- BNP Paribas (BNPQF) maintained a solid financial structure with a CET1 ratio of 13%, well above the regulatory requirement.
Negative Points
- Operational costs increased by 3.5%, partly due to the DGS contribution in Italy amounting to EUR 51 million.
- Specialized businesses within CPBS saw a revenue decline of 3.6% year-on-year.
- The cost of risk remains a concern, particularly with a specific credit situation in France impacting the quarter.
- Personal Finance experienced a slight deterioration in cost of risk despite structural improvements.
- The company faces competitive pressures in the Eurozone, particularly in the mortgage and corporate deposit markets.
Q & A Highlights
Q: Can you explain the strong performance in equities trading and the prime brokerage balances?
A: The strong performance in equities trading is due to the successful integration of our equity franchise, including prime brokerage services. The prime brokerage balances reflect the exposure we provide on the balance sheet, which is hedged. The demand for these activities was subdued last year but picked up significantly in the second quarter of this year, leading to the strong performance.
Q: Is the high revenue run rate in the insurance and asset management businesses sustainable?
A: There are no one-off items in the second quarter's performance, and the strengths of the platform are aligned with the underlying economic and market evolution. While global market businesses can be volatile, the platform's quality and strategy execution suggest that the strong performance is sustainable.
Q: What is the outlook for the RWA optimization plan and securitization?
A: We are optimizing RWAs but are waiting for better pricing opportunities in the second half of the year. The plan to use securitization to offset the reconsolidation of Arval is still in place and will be executed at the appropriate time.
Q: Why not update the full-year targets given the strong first-half performance?
A: While the first half has been strong, we maintain our guidance of exceeding last year's net income. We do not provide forward guidance every quarter, but the trajectory for the year is positive, and we are on track to meet our targets.
Q: Can you clarify the 12% CET1 target for 2025 and the impact of Basel IV and FRTB?
A: The 12% CET1 target for 2025 includes the impact of Basel IV but excludes FRTB, which has been delayed in Europe to align with the US. We will continue to optimize capital and redeploy excess capital as needed.
Q: What is the impact of political instability in France on BNP Paribas' operations?
A: The impact of political instability in France is expected to be marginal. Most of our business is not directly tied to the domestic economy, and we do not foresee any significant changes in client behavior or risk profile.
Q: How is the derisking in commercial real estate progressing?
A: Our exposure to US commercial real estate is minimal, and we are not significantly impacted by the market's deterioration. In Europe, we have a prudent risk management approach and are well-positioned to handle any potential issues.
Q: What are the trends in loan growth in different regions, particularly in the corporate space?
A: We see strong demand in Europe, particularly in Belgium, where we are accompanying the growth. In Italy, we remain focused on international-oriented companies and are reducing the heritage loan portfolio, leading to different trends between the regions.
Q: How is the performance of Arval and leasing solutions, and what is the outlook?
A: The performance of Arval and leasing solutions is impacted by the resale value of cars, which is marked to market. The financing of new cars continues to grow, and we expect the impact of the resale value to normalize over the next few quarters.
Q: What is the strategy for personal finance, and how is the wind-down of non-core activities progressing?
A: We are focusing on core activities in the Eurozone and the UK, where we can cross-sell extensively. Non-core activities in Eastern Europe and Brazil are being wound down or sold. The balance sheet impact is roughly a third of the total, and we are managing the transition effectively.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
