BNP Paribas equity and prime services trading revenues collapse in first quarter

BNP Paribas suffers similar fate to Societe Generale as equities revenues plummet due to dislocation in hedges at height of coronavirus crisis.

French investment bank BNP Paribas has suffered a major loss in its equity trading division in the first quarter this year, following a sharp market downturn last month caused by the ongoing coronavirus pandemic.

BNP Paribas revealed in its first quarter earnings that equity and prime services within the global markets division suffered a huge 118% decline in revenues, dropping from €488 million in the same period last year to minus €87 million.

The investment bank said the quarter was marked by the “very strong impact of extraordinary shocks” on European markets, which led to a dislocation in hedges due to European restrictions on 2019 dividends. BNP Paribas said the development caused a one-off loss of €184 million.

“At the end of a quarter supported by an excellent business drive, in line with its 2020 objectives, the results of BNP Paribas for the first quarter 2020 were impacted by the harshness of the health crisis,” Jean-Laurent Bonnafé, chief executive at BNP Paribas, commented. “The good resilience of revenues and results despite this shock demonstrates the robustness of the Group’s diversified and integrated model.”

BNP Paribas is the second French investment bank to fall victim to the sharp market movements last month, although many European rivals saw large gains across trading divisions due to the increased volatility and activity.

Societe Generale’s first quarter results saw equities revenues collapse nearly 99% to just €9 million, after it posted a €200 million loss on structured products linked to potential future shareholder dividend payments. Societe Generale chief executive, Frédéric Oudéa, said it may have to rethink its equities business and reduce the amount of risk it takes on. 

BNP Paribas is also taking on Deutsche Bank’s electronic equities and prime brokerage clients as part of a major deal, as the German institution looks to significantly reduce costs and pull out of non-profitable businesses. The integration of Deutsche Bank’s prime brokerage and electronic equities clients is underway, and BNP Paribas said the first client transfers have already been completed.

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