BNP Paribas estimates €400 million revenue gain from Deutsche Bank deal

Deutsche Bank is transitioning its prime brokerage and electronic equities clients to BNP Paribas as part of a major restructure.

BNP Paribas has said it expects to gain around €400 million in additional revenues after agreeing to take on Deutsche Bank’s prime brokerage and electronic equities trading clients.

The French investment bank told analysts on its third quarter earnings call that it will take more than a year for the transition of Deutsche Bank’s clients to be completed, but it expects the deal, which was officially signed in September, to close imminently.   

“As you know, the deal still has to be closed, which will happen soon, and then we start a phase of transition,” said Lars Machenil, chief financial officer at BNP Paribas. “It’s a transition that is gradual and that will take time… it will take a year or more before we have the full transfer. We anticipate that once this is done, the full-year effect on the top-line would be around €400 million.”

He added that the return on equity BNP Paribas anticipates from its deal with Deutsche Bank will be around 20%. When questioned on his thoughts around what Deutsche Bank may have missed with its prime brokerage business, Machenil said BNP Paribas had observed a difference in the cost of funding between the two banks.

Deutsche Bank and BNP Paribas signed a master transaction agreement in September after agreeing on a deal in principle in July to transition the German bank’s prime brokerage and electronic equities clients to BNP Paribas. Deutsche Bank is undergoing a major restructure to drastically cut costs, and confirmed plans to withdraw from equities trading, including prime brokerage servicing hedge funds, earlier this year.

Speaking to analysts earlier this year on a separate earnings call, BNP Paribas’ Machenil said the process and phasing of transfer of Deutsche Bank’s clients should be completely finalised by the summer of next year. Although he acknowledged the process is advancing quicker than expected, Machenil confirmed it will take some time before it is completed.

BNP Paribas reported a surge in fixed income, currencies and commodities (FICC) revenues in the third quarter of 38.7%, with a sharp increase in primary markets and credit, and a rebound in foreign exchange and emerging markets. A 15% decline in equities trading revenues was offset by structured products and a “slight increase” in prime services, Mahenil said on the earnings call.