BNP Paribas Sees Slump in Q4 Trading Revenues, Lowers Targets

The French bank lowered its targets after losing money in its trading business in the final quarter of 2018.

BNP Paribas has published its fourth quarter and full-year results for 2018 this Wednesday, which showcase a rather disappointing year for the firm. In addition, the French bank has lowered its forecasts for 2020 after the firm lost money in its trading business towards the end of the year.

For 2018, revenues for BNP Paribas totaled 42.5 billion, which is less than that achieved in 2017 by 1.5 percent. In the operating divisions, revenues were also down by 0.9 percent year-on-year.

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Breaking this down, revenues for Domestic Markets fell slightly by 0.2 percent when measured against the same time period in 2017, due to the low-interest rate environment, the bank said. However, for the International Financial Services operations, revenues were up by 3.4 percent year-on-year, despite an unfavorable foreign exchange (forex) effect.

Taking a look at the final quarter of 2018, for fixed-income, currencies, and commodities (FICC) trading, the French bank marked a drop for the seventh consecutive month. Specifically, the sector posted revenue of €505 million, which is a drop of 15 percent year-on-year.

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In the fourth quarter, the FICC market unit reported a loss of €225 million, with BNP Paribas attributing this to “lackluster conditions” in the rates and credit markets.

Furthermore, equity trading and prime services revenues followed the same trend and reported a 70 percent drop in the fourth quarter of 2018. The revenue for both fixed-income and equity achieved in the fourth quarter was below analysts’ estimates.

As a whole, Global Market’s revenues, which came in at €650 million, fell in the fourth quarter of 2018 by 39.5 percent, when measured against the same quarter of 2017. According to BNP Paribas, this was due to a “particularly challenging market context.”

BNP Paribas lowers its forecasts

Because of the lower than expected results, the French bank has lowered its forecasts for 2020, with cost savings increased to €3.3 billion from 2020, which is an additional €600 million, in comparison to the initial plan of €350 million.

This translates to an expected return on equity of 9.5 percent in 2020, down from a previous target of 10 percent. Furthermore, the bank forecasts growth in the earnings per share of more than 20 percent between 2016 and 2020.

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