BNP Paribas wants to be one of Europe's top investment banks when it comes to sales and trading. Today's results from the French bank suggest it's well on the way to achieving this - largely thanks to the travails of its rivals, Barclays and Deutsche Bank.
As the charts below show, during the first nine months of this year BNP Paribas' fixed income trading business was larger than Barclays' when stated in dollar terms. So was its equities trading business, which was nearly as large as Deutsche Bank's.
In sales and trading, BNP is now up there with the European greats.
None of this should come as any great surprise. At BNP's investor day last March, it declared its intention of becoming a top five bank in global markets in Europe by 2020 and a top two player in the eurozone. Today's results suggest it's achieved this ahead of time.
BNP's success is partly down to Deutsche and Barclays' failure. Although Barclays is blighted by the declining pound when its results are converted in dollars, its sales and trading business hasn't exactly done well in home currency terms either: Barclays sterling fixed income revenues were down 17% in the first nine months of this year vs. the same period of 2016; its equities revenues were down 8%. Deutsche's fixed income sales and trading revenues were down 11% and its equities revenues were down 18%. By comparison, BNP, fixed income revenues were down 6% and equities were up 23% in the first nine months of this year.
Like HSBC, BNP is doing something right. In fixed income, it helps that the French bank is focused on macro trading, where rates revenues were strong earlier in the year. In equities, however, BNP seems to be thriving in equity derivatives, where it said there was a "rebound in client business" in the third quarter. This was in direct contrast to Deutsche Bank, which last week blamed "reduced client flow" in equity derivatives for its weak equities sales and trading performance in the three months to October. Whatever's afflicting Deutsche's equities business is therefore not afflicting BNP. The French bank is seizing market share after combining equities and fixed income trading operations in 2014 and has rolled out its leading equity derivatives pricing system to credit and rates as it upgrades technologically.
This isn't to say that everything's going great for the traders at BNP Paribas. In its March investor presentation, the French bank boasted of having achieved ~5% compound annual revenue growth between 2013 and 2015 in its global markets business, and set a target for similar growth between 2016 and 2020. So far this year, BNP's markets revenues are up - but only by ~3%. More worryingly, global markets costs rose to 77% of revenues at BNP Paribas in the third quarter, up from 71% a year earlier. For a bank that's trying to reduce its cost base, things are moving in the wrong direction. BNP said today that it has another €200m of costs to take out before the end of 2017, of which €108m are expected to come out of the corporate and investment bank - suggesting more fixed income traders at the bank could find themselves surplus to requirement.
Even so, BNP isn't doing badly compared to its German and British rivals. Some traders at rivals banks already seem alert to its potential. Others may want to monitor the situation closely - whilst cost cutting, BNP has also been "upgrading." Deutsche Bank traders seem a recent favourite, although BNP has also spent this year hiring fixed income traders from UBS, HSBC and Goldman Sachs.