BNP Paribas has blamed a downturn in revenues of the equity and prime services (E&PS) business unit on a limited demand for structured products in declining markets in Europe. Revenues for the E&PS business, at €428m, were down by 41.2% in the first quarter of 2016 compared to a very high base in 1Q2015, the French bank said during the presentation of the 1Q2016 results.
Revenues for the corporate and institutional banking (CIB) business at €2.6bn, were down by 18.9% (15.5% excluding funding valuation adjustment - FVA) from the first quarter 2015 which benefited from a very favourable environment, the bank said.
Global markets revenues (€1.3bn) were down by 24.4% year-on-year (y-o-y) due to a wait-and-see attitude by investors during the first two months of the year amidst concerns over global growth and banking regulations combined with uncertainties over monetary policies, according to the bank.
Fixed income, currencies, and commodities (FICC) revenues, at €890m, were down by 13.2% with weak activity in forex and commodities, good performance of the rates and credit businesses, and a good resilience of the primary bond market where the business unit further strengthened its positions (ranked number one for all bonds in euros and number eight for all international bonds), the bank said. Value at risk (VaR), which measures market risks, was still at a low level (€43m).
BNP Paribas sold 208 structured products via its retail distribution network across Europe during 1Q2015, claiming a share of 12% of the European market, ahead of Vontobel (12%), UniCredit (10%), Banco Populare (8%) and Deutsche Bank (4%), according to SRP data. The products, of which the vast majority were wrapped as securities, collected sales of €2.5bn.
In its home market of France, BNP Paribas issued 14 structured products worth €198m in the first quarter, down from 17 structured products with a sales volume of €508m during 1Q2015 and also down from the previous quarter when 19 products worth €319m were issued by the bank.
In Belgium, another core European market, the bank issued 13 structured products to retail investors with a sales volume of €293m. The bank's best-selling structure in Belgium was the BNP Paribas Fortis Funding (LU) Fix to Spread Note 2026, which sold €45m during its subscription period while Smart Invest Bon Demography 1, a joint venture with AG Insurance, collected €44m in January. The latter, a 10-year capital protected unit-linked life insurance product, participates for 80% in the iStoxx Europe Demography 50 Index, subject to 30 months back-end averaging.
Across Europe BNP Paribas had a share of 27% of the Italian market, where it sold 162 structured products worth €1.9bn. In Germany - where the bank's main focus lies with listed certificates - it issued 16 tranche products; 11,054 flow products, such as capped bonus certificates and discount certificates; and 26,917 leverage certificates during 1Q2016.
Assets under management (AUM) for the international financial services business stood at €381bn at the end of March 2016, split between bonds (33%), diversified (23%), equities (19%), money market (19%) and alternative, structured and index-based (6%).
Revenues for the group as a whole totalled €10.8bn, down by 2% compared to the first quarter of 2015. They included the one-off impact of €365m in own credit adjustment (OCA) and own credit risk included in derivatives (debt valuation adjustment DVA) of €37m.
Operating expenses, at €7.6bn were down by 2.3% compared to 1Q2015, according to the bank. They included the one-off impact of the acquisitions' restructuring costs and the CIB transformation plan's costs for a total of €46m (€20m in the first quarter 2015).
Click the link to view the BNP Paribas report for 1Q2016 and the presentation.
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