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FX hurts BNPP's Q2 but 2020 plan on track

BNP Paribas had its excuses ready to explain a second quarter fall in CIB profits and FICC revenues, but strength in equities and continued progress on its strategic plan looked good

Fixed income at BNP Paribas was eye-catching for all the wrong reasons in the second quarter of 2018 as the FICC unit posted a 17% fall in revenues in sharp contrast to most peers that enjoyed a strong recovery from the prior year period. However, a strong equities and prime services performance was the more notable number for the French bank, since FICC and the corporate and institutional banking division more broadly were both hit hard by adverse foreign exchange movements compared to US firms.

BNPP this week followed Deutsche Bank in reporting a big fall in profits in its corporate and institutional banking (CIB) division for the second quarter of 2018. It’s not a flattering comparison. Deutsche is trying to climb out of a crisis. What's BNPP's excuse for a 26% fall in pre-tax earnings?

BNPP graph 

It was in fact the previous year's period that was the outlier rather than 2Q18, partly as it contained some hefty capital gains in corporate banking that were not repeated this time around, as well as higher write-backs. Setting aside the 2Q17 period, the second quarter of 2018 was the best quarterly result for the CIB division in recent years (see graph).