PARIS (Reuters) - BNP Paribas (BNPP.PA) reported a better than expected rise in quarterly earnings, with a scaling-back of its investment banking operations proving less turbulent than at some European rivals.
The French bank said it had largely completed the downsizing of its energy and commodity investment banking operations, which face higher regulatory and compliance costs in the United States.
BNP emerged relatively unscathed from the global financial crisis and restructured its business following the acquisition of Belgium’s Fortis in 2009. It is betting on its diversified business model where investment banking operations account for no more than one third of allocated capital.
European banks, including Deutsche Bank (DBKGn.DE) and Credit Suisse CSGN.VX, are shrinking investment banking activities as the industry struggles with tighter regulation and economic uncertainty.
Deutsche Bank warned on Thursday of two tough years of dividend cuts, pay restraint and thousands of job cuts, as part of a wide-ranging overhaul of the company, while Credit Suisse plans to raise cash from investors and cut costs.
BNP Paribas on Friday reported a 14.5 percent rise in net income in the third quarter. Its shares were up 1.5 percent at 1032 GMT - paring some gains after a 3-percent rise at the opening of the session.
“Publishing results after Deutsche is already a winning case,” a Paris-based analyst said.
BNP Paribas plans to present its new investment banking strategy early next year, and is considering further cost cuts, sources have told Reuters.
While the French lender said it had largely completed the “reduction” of its energy and commodity business, it did not give its precise current exposure to that sector. In September, Credit Suisse analysts estimated BNP’s exposure at 2.6 percent of its balance sheet - the lowest level among French banks.
The bank had been the leader in energy and commodities trade finance for decades, but started to pull back following the financial crisis and speeded up the process after a settlement with U.S. authorities for sanctions violations.
BNP said third-quarter net income rose to 1.83 billion euros ($2.01 billion), supported by lower provisions, beating the average of analyst estimates of 1.68 billion in a poll compiled by Thomson Reuters I/B/E/S.
It raised its core equity tier 1 ratio by 10 basis points to 10.7 percent, taking into account a 45 percent dividend pay-out for 2015.
Revenue rose 8.5 percent to 10.3 billion euros, broadly in line with the poll average of 10.24 billion.
BNP fared better than the biggest U.S. banks on average in trading activities during a quarter when worries about the global impact of Chinese economic weakness weighed.
Revenue from equities trading grew 21 percent and was flat in fixed income, compared with an 11 percent rise and a 19 percent drop respectively on average for U.S. banks, according to Reuters calculations.
“With a steady set of numbers and in-line capital and leverage ratio, we think the market should respond positively to the results, given the turbulence shown by other European banks so far,” analysts at Citi wrote in a note.
($1 = 0.9109 euros)
Reporting by Maya Nikolaeva and Julien Ponthus; Editing by James Regan, Jason Neely and Pravin Char