BNP Paribas climbing into top tier of European investment banks

[PARIS] BNP Paribas SA is climbing into the top tier of European investment banks as the industry's struggling giants retreat.

The French bank ranked third among European firms in global markets revenue at the end of March, after boosting trading income by about US$1 billion in the preceding 12 months, data compiled by Bloomberg show. Deutsche Bank AG, Credit Suisse Group AG and Barclays Plc saw trading revenue decline.

Jean-Laurent Bonnafe, BNP Paribas's chief executive officer, told shareholders last month he wants the Paris-based firm to become one of the top three investment banks in Europe by winning hundreds of new corporate clients and doing more business with those it already has. He's targeting growth in Germany, Britain and Scandinavia, as well as Asia and the US.

"There's momentum in terms of corporate issuance and of providing the investment strategies and risk-management solutions clients are looking for," Pascal Fischer, the head of capital markets for Europe, the Middle East and Africa at BNP Paribas, said in an interview.

Europe's investment banks have struggled to boost revenue since the financial crisis amid stricter capital rules, rising compliance costs and fierce competition from US firms. Tougher conditions prompted UBS Group AG and Credit Suisse to pivot toward wealth management and pushed Deutsche Bank and Barclays into repeated rounds of restructuring.

BNP Paribas weathered the past decade without an annual loss, while Deutsche Bank and Credit Suisse - burdened by legal penalties and reorganization costs - each suffered billions in losses in just the past two years and tapped investors for funds in recent months.

There's been less turmoil at BNP Paribas, where Yann Gerardin, a 30-year veteran of the firm, has been running the corporate and institutional bank, or CIB, since late 2014. Both Olivier Osty, the executive head of global markets, and Fischer also ascended through the ranks over decades.

Mr Gerardin brought the equities and debt trading operations together, a move that improved cooperation across teams, increased cross-selling opportunities and yielded cost savings, said Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods in London. BNP Paribas, long a leader in equity derivatives and structured products, has climbed into third place in European bond sales this year, pushing Deutsche Bank out of the top three.

"BNP Paribas has broken its old silos structure and the effort is paying off," said Mr Lambert. "Innovations in equity derivatives, for example, are now more easily transferable to structured products in fixed income." The bank, which is investing 3 billion euros(S$4.66 billion) to upgrade technology companywide, recently extended its electronic pricing and trading platform to rates and credit from equity derivatives. The investment bank announced plans last year to hire more than 200 developers for areas such as blockchain.

BNP Paribas intends to increase revenue by about 5 perc ent annually at its global markets operations through 2020, and boost return on equity - a key measure of profitability - to 19 per cent at the CIB from about 13 per cent last year.

The firm and French rivals, including Natixis SA and Societe Generale SA, saw a pickup in trading early this year partly as clients sought protection before the presidential election. Trading income at France's top four banks surged 26 per cent in the first quarter from a year earlier.

BLOOMBERG