BNP takes the place of Credit Suisse at the table of the stock markets

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BNP Paribas SA has long sought a place at the forefront of global stock exchange banks. His push is finally starting to pay off.

The French bank has overtaken its Swiss rival Credit Suisse Group AG with ever better equity earnings over the past year, and it is hot on the heels of Britain’s Barclays Plc, which has also invested resources in the business.

BNP’s efforts helped to increase equity and bond trading revenues by 53% in the first quarter compared to the same period last year – well beyond expectations and beating all rivals in terms of of growth. Combined with a strong performance in its other businesses, the bank posted a group pre-tax profit of 3.3 billion euros ($3.5 billion), 50% better than expected, according to Bloomberg data.

Earnings benefited from the growth in trading revenue, but also from the absence of credit-related losses in traditional lending. BNP has minimal exposure to Russia-related risk, and its move away from credit cards – and towards business loans, wealthier clients and mortgages – has helped keep risk low in its commercial arm and personal.

BNP’s equity and bond trading revenue was driven by unusual conditions in the first quarter which boosted profits at many investment banks. A strong period of increased risk-taking and new investments from the beginning of the year was followed by high volatility, uncertainty and investors seeking protection in March after the invasion of Ukraine by Russia and a series of high inflation figures.

In fixed income, currencies and commodities, BNP’s year-on-year dollar revenue growth was in line with Barclays but better than all others, including Goldman Sachs Group Inc. Like its competitors, it was helped by rising bond yields and investor expectations for interest rates, as well as currency and commodity volatility.

BNP’s bond, currency and commodity trading is more closely tied to the borrowing and hedging needs of ordinary businesses than to the speculative activity of investment funds, which drives the activity of many his rivals. Despite this difference in clientele, this quarter was as unusually strong for BNP as for its main competitors.

On the equity side, much of BNP’s growth has come from acquisitions. Its prime brokerage, which involves trading and lending to hedge funds, has grown significantly since its agreement to take over operations from Deutsche Bank AG in 2019. The last remaining clients transferred to BNP in January this year . Last year, the bank also bought back the 50% of shares it did not own in Exane, an equity broker with which it had been associated for 17 years.

BNP said how much revenue Exane added to the shares – €80m on its €424m year-on-year growth – but it did not say how much its new hedge fund clients bought. Even if these two additions were only representing half of BNP’s revenue gains, which is probably a conservative estimate for prime brokerage, its underlying growth in equities would still have outpaced its rivals in this exceptional quarter for investors. markets.

What matters, however, is that Exane and hedge fund clients have provided a move upmarket that won’t go away and that BNP can build on. He likely also got hedge fund clients from Credit Suisse’s decision to shut down its own brokerage after suffering losses following the collapse of Archegos Capital Management.

Shares of the French bank are trading at a higher multiple of expected book value than its European counterparts Barclays, Credit Suisse and Deutsche Bank. On this basis, BNP’s valuation deserves to be even higher.

More from Bloomberg Opinion:

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• The hideous strength of the US dollar: Marcus Ashworth

• Investors upset Deutsche Bank and Credit Suisse: Paul J. Davies

This column does not necessarily reflect the opinion of the Editorial Board or of Bloomberg LP and its owners.

Paul J. Davies is a Bloomberg Opinion columnist covering banking and finance. He previously worked for the Wall Street Journal and the Financial Times.

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