France’s biggest bank – and European leasing giant – BNP Paribas has posted a mixed bag of Q4 and full-year 2019 Group results, alongside a strongly performing leasing division.
Although net income and revenue were up for the bank, this was largely attributed to its investment banking division.
- Net income: +4.7% to €8.17bn in FY 2019 (+28% to €1.85bn in Q4)
- Revenue: +4.9% to €44.58bn in FY 2019 (+11.5% to €11.33bn in Q4).
Against positive results for the BNP Paribas’ trading side of the business, the bank’s commercial banking business performed less well.
The bank said last year’s decision by the European Central Bank to maintain its negative interest rate policy for the foreseeable future affected its retail banking profits.
Retail banks, which make their profits from the differential between interest paid on deposits against interest taken on loans, have been hit with rock-bottom interest rates across the Eurozone (and in the UK) for several years.
“BNP Paribas’ earnings are a mixed bag as they benefited from renewed activity from the fixed income, commodities, currencies and corporate and investment banking, thanks to the rebound in markets in 2019 but its costs are still too high and negative interest rates across its main European businesses are cutting into margins,” said Clairinvest co-founder and chief investment officer Ion-Marc Valahu, told Reuters.
Domestic markets and specialised businesses
Meanwhile, BNP Paribas’ domestic markets business, which includes its leasing divisions, saw revenue up by 3.4% in Q4 (compared to Q4 2018) and was up by 0.8% for the whole of 2019 (against FY 2018).
The domestic segment accounts for more than a third of the group’s total revenues.
The bank added, “growth in loan volumes and the strong increase in the specialised businesses were almost entirely offset by the low-interest-rate environment in the networks,” referring to its retail bank network business.
BNP’s specialised businesses are composed of Arval (auto finance) and Leasing Solutions (equipment finance).
Arval and Leasing Solutions
BNP said Arval’s “leading position was confirmed on its perimeter of 27 countries and strengthened by the doubling of the number of white label partnerships with car manufacturers.” Its finance fleet division grew by 8.9% across all segments.
Leasing Solutions’ financing outstandings were up by 6.9% compared to 2018, the bank said.
Looking ahead, BNP said it “anticipates a continuation in the acceleration of its business drive and the development of revenues, leveraging its leading positions in the specialised businesses.”
Despite the surge in profits, the bank cut its key return on equity (ROE) target for 2020. “Lower rates mean we have made a slight adaptation to our ROTE target, but 10 per cent is still very strong for a European bank,” chief financial officer Lars Machenil told the Financial Times.