As banking commentator William Wright points out, BNP's fixed income revenues aren't looking very healthy at all. Bac in 2010, BNP said it wanted to follow French rival SocGen and make hundreds of hires for its front office fixed income business. Today, Wright points out that BNP has registered its worst second-quarter fixed income sales and trading results for five years. Since 2010, fixed income revenues at BNP have fallen 36%. Perversely, the peak year for BNP's Q2 fixed income revenues was 2009 - before the hiring push took place.
This all begs an obvious question: should BNP Paribas have bothered going for it in fixed income? Would it not have been better off being like UBS and resigning itself to being a bit player in fixed income markets? (Arguably BNP is a bit player in fixed income anyway, with a market share so small that it's off the scale, according to this 2012 analysis from Bernstein research).
A BNP spokeswoman said there are no problems with the bank's fixed income business, pointing out that revenues for the past quarter were down only 4.3% year-on-year as a result of the impact of volatility on the rates business. Jean Pierre Lambert, a French banks analyst at KBW agrees that there are no issues at BNP in particular: "The fall, quarter on quarter in BNP Paribas' fixed income sales and trading revenues, was in line with Barclays and Credit Suisse," he says.
Nonetheless, European fixed income sales and trading is starting to look like a business in stasis at best and decline at worst. And BNP Paribas has been hiring - seemingly without effect. "They were very active recruiters last year," said one headhunter, speaking on condition of anonymity. "They hired a lot across rates and high yield sales."
This year, however, headhunters in London say BNP has been losing fixed income staff. Robert Lepone, head of distressed and leveraged trading at the bank has left in the past month. Olivier Imbert, a government bond trader, has also left - reportedly for J.P. Morgan. "10 salespeople have left BNP's London fixed income business this year," said another headhunter, again speaking on condition of anonymity. BNP has also been hiring though: earlier this year it recruited Sean Richards and Axel Bleyman from RBS and Goldman Sachs respectively.
Headhunters say BNP is a surprisingly generous payer when it comes to fixed income hires, offering both written and verbal guarantees. However, the French bank is allegedly less generous when it comes to existing staff. Self-reported pay from BNP staff on banker pay benchmarking site Emolument suggests the average MD across BNP Paribas in London earns £557k, versus £1.09m at J.P. Morgan.
"They've been buying people in to try and win market share," claimed one headhunter. "But if the revenues aren't there, people need to question whether they'll get paid."
Lambert said BNP is preparing a full group business plan to be released in early 2014. Despite today's poor results, he says fixed income sales people and traders have nothing to worry about: "Fixed income is a core business for BNP and the bank is in a good position in terms of capital and leverage."