In the early days of the coronavirus crisis, BNP Paribas stepped up in no uncertain terms to address the liquidity concerns of multinational corporate clients. While some large US banks seemed to pull back from Europe, the Paris-based firm deployed a remarkable amount of capital, underwriting financings with rare decisiveness; showing the benefits of its scale, the strength of its balance sheet and the advantages of a stable management team.
It is largely thanks to BNPP’s actions during the crisis that financial worries in the corporate sector have so far proven relatively short lived and limited to certain sectors. Even in aviation, the bank helped firms shore up their finances after aircraft were grounded, with a €2.5 billion bond for Groupe ADP, for example, a few days before leading Airbus’s €2.5 billion bond.
Its pivotal role is also evident outside France, in the UK and Germany. It has been on the front foot to a greater degree than other international lenders, and even some local banks in the US, since the start of the Covid-19 pandemic.
The firm was instrumental in reopening financial markets after the coronavirus shutdown.
“We came very early out of the gates with underwritten financings,” says Renaud-Franck Falce, head of capital markets for Europe, Middle East and Africa. “That gave the confidence to other banks, corporates and institutional investors active in the bond markets to know that the liquidity was there and the banks were doing their job.”
Particularly notable in terms of its ability to back deals was its position as sole bookrunner in a $10 billion syndicated facility for BP, just as the oil-price slump added to other Covid-19 troubles in financial markets. The bank also led the first euro-denominated corporate bond issuance after the crash, raising €2 billion for Unilever, before going on to raise bonds for firms including Switzerland’s Nestlé, which raised a similar amount in euros a week later.
UK market
The BP deal shows how central the bank is to the UK market. Indeed, BNPP’s wider UK strategy had already borne fruit over the past year with new corporate broking mandates for EasyJet and Smurfit Kappa. After the coronavirus outbreak, as primary equity issuance returned faster in the UK than elsewhere on the continent, it led accelerated bookbuilds for firms including Asos, DFS and WH Smith.
The story is clearer still in Germany, whose corporate banking sector BNPP has penetrated even more deeply. It led more key post-coronavirus syndicated loans in Germany than any international bank and more than almost any of the local banks, with particularly notable financings for firms such as Bosch and Daimler. It’s telling how Siemens turned to the French bank above any of the German lenders to lead a new multi-billion-euro financing during the coronavirus crisis.
Overall, in March and April 2020 BNPP’s market share in syndicated loans in western Europe rose to more than double that of its nearest rival. But in the US, since the start of the crisis, its balance sheet has grown even faster, reflecting its ambition to play a greater role in North American corporate banking.
We came very early out of the gates with underwritten financings. That gave the confidence to other banks, corporates and institutional investors to know that the liquidity was there and the banks were doing their job
Renaud-Franck Falce
The French bank rose close to a top-10 position in dollar-denominated investment grade corporate bond issuance during the first half of 2020, working on almost 250 deals. Having roughly doubled its share of high-yield bonds over the past three years, the bank further led the reopening of the US leveraged buyout bond market after the crash in March, with deals for PowerTeam Services and Radio Systems, as well as Olde Thompson in the middle market.
All this primary market activity has helped BNPP boost revenue in its fixed income, currencies and commodities division. But its relatively low level of provisions for credit losses at a group level in the first half of 2020 may add to confidence that its deployment of balance sheet during the coronavirus crisis has not just been beneficial for its clients but also good for its business.
“It bodes well for the future,” BNPP’s chief operating officer Philippe Bordenave tells Euromoney after the second-quarter results. “Clients will remember who was there when they were in need and who was not there. We will be able to keep growing market share.”
Sustainable finance
Since the oil price crash, BNP Paribas’ 2017 decision to stop working with the shale and Arctic energy sectors has looked similarly beneficial from a business and moral standpoint. Indeed, the same might be said for its sustainable finance practice. Its relatively early investments in that area mean it is well positioned to cater to increasing corporate demand for such products, even in the US.
The bank’s work late last year on a sustainable deposit solution for US airline JetBlue is one indication of its strength in sustainable finance and in treasury services globally.
BNPP’s transaction banking franchise in Asia is part of a long-standing relationship with Lenovo, for example. Late last year, that relationship led to one of the world’s biggest-ever trade receivables securitizations, raising $3 billion for the Chinese computer maker. Having provided bridge financing for that securitization, BNPP then assisted Lenovo in raising $1 billion in an unrated bond issue after the Covid-19 crash.
