BNP Paribas' Q1 results were impacted by the health crisis. However, despite this shock, the bank's revenues held up well, demonstrating the robustness of its "diversified and integrated" business model. Read all about it.
BNP Paribas remains profitable to the tune of 1.28 billion euros
Like Société Générale, Europe's leading bank suffered from the fall in its trading activities, particularly in equity derivatives. The suspension of dividends required by several European authorities led to a loss of 184 million on structured products. The downturn in equity markets in March also led to accounting losses of 384 million euros on portfolios held by its insurance division.
On May 5, the Group announced a 33.2% drop in net income for the 1st quarter, due to the impact of the health crisis that has severely hit the global economy and financial markets. Nevertheless, net income remained profitable at 1.28 billion euros, based on net banking income of 10.90 billion.
The cost of risk, which measures expected losses on loans granted, rose by 85.4% to €1.4 billion in the first three months of the year. This indicator is expected to rise sharply in 2020, although BNP Paribas has not yet provided a quantified forecast.
Net income expected to fall by 15-20% this year
In a press release, the bank indicates that its net income could fall by 15-20% in 2020 compared with 2019, " barring further crisis or new developments ". According to analysts, this forecast is above consensus, which could result in upward revisions to investor forecasts.
At the investor conference, BNP Paribas CEO Jean-Laurent Bonnafé said that the reduction in management fees would be amplified in the coming months, with the aim of achieving "300 to 500 million euros in additional savings". This announcement follows last year's 600 million euro cost-cutting plan.
Despite the shock to structured products, BNP Paribas' diversified business model proved resilient. While its performance remains below that of European rivals such as Barclays and UBS, the bank is among the most balanced in the sector. To face up to the current health crisis, the Group can count on its abundant capital reserves. Indeed, its CET1 capital ratio is well above the regulatory minimum, at 12% at the end of March, compared with 12.1% at the end of 2019.