EuroBusiness Media (EBM): BNP Paribas, one of Europe’s leading banks, reports 2015 first quarter results. Jean-Laurent Bonnafé welcome! You are the CEO of BNP Paribas. What are your comments on the Group’s first quarter results?
Jean-Laurent Bonnafé: BNP Paribas delivered very good results in the first quarter of the year on the back of strong revenue growth. Revenues progressed in all the operating divisions and altogether were up close to 14% with a very good contribution from CIB and the specialized businesses. The bolt-on acquisitions closed in 2014 also contributed to this result.
In Q1 we also benefitted from the US dollar appreciation as some of our activities are in dollars. I’m thinking in particular of BancWest and of our US CIB platform and to a lesser extent at our Asian and European businesses.
Costs of the operating divisions increased by a little over 10%, implying a size-able positive jaws effect in our operating divisions.
On the back of this, the operating divisions’ gross operating income marked a strong increase in excess of 20%.
Given an essentially stable cost of risk, BNP Paribas closed the first quarter with a significantly higher net result of 1.6 billion euros, up 17.5% on the previous year despite the impact of the first contribution to the Single Resolution Fund.
Across the Eurozone we have been seeing green shoots of economic recovery which are translating progressively into higher demand for credit. In fact after several quarters of contraction, our Domestic Markets loans have shown a positive evolution as they increased by 1.6% on the previous year.
Turning to the balance sheet, our fully loaded common equity Tier 1 ratio remained stable at 10.3% after taking into account a 45% dividend pay-out and bearing in mind the impact on the first quarter of IFRIC 21. This is a new accounting rule whose consequence is to book certain taxes entirely in the first quarter and which had hence a seasonal impact of 9 basis points this quarter on the ratio.
Lastly, we continued to create value for our shareholders through the cycle as our book value per share increased to 70 euros at the end of the first quarter.
EBM: You’ve mentioned that you’re seeing green shoots of recovery across the Eurozone. How has this been reflected on your Domestic Markets results?
Jean-Laurent Bonnafé: As I mentioned before, these green shoots have been reflected into increased loan out-standings in Q1 as clients’ demand picked up. In parallel with this, deposit gathering has maintained a good pace especially in France and Belgium.
And private banking continues to develop well in our main markets as exemplified by the combined 5% increase in assets under management in France, Belgium and Italy which reached 185 billion euros at the end of March.
Revenues of our Domestic Markets progressed by 2.3% with a good performance of our Belgian Retail and our specialized businesses. However, the low interest rate environment continued to weigh on interest income in France.
Good cost control resulted in a further improvement of the cost/income and a 4.6% increase in gross operating income.
The improving macroeconomic backdrop resulted in a lower cost of risk including in Italy where we had a moderate contraction.
Overall, Domestic Markets contributed 0.8 billion of pre-tax income in Q1 marking a 17.7% improvement on the previous year.
EBM: What’s your update on the performance of your Personal Finance business in the light of its continued business development?
Jean-Laurent Bonnafé: In Q1 Personal Finance has continued to pursue its commercial development through new partnership agreements with banking counter-parties as well as in the distribution and auto sectors.
Loan out-standings were 23% higher mostly due to the inclusion of LaSer’s out-standings. On a comparable basis, loans increased by 2.1%.
Revenue growth exceeded 27% and stood at some 1% on a comparable basis with good growth in Germany, Italy and Spain.
Costs evolved similarly to revenues excluding one-offs while cost of risk on a comparable basis was lower. On the back of these dynamics, pre-tax income marked a significant improvement, increasing by close to half and +29% on a like-for-like basis. This was clearly a good quarter for our consumer finance business.
EBM: Your International Retail Banking markets have been quite dynamic. What has been their performance in Q1?
Jean-Laurent Bonnafé: Our International Retail Banking which consists of Europe Med and BancWest has remained quite dynamic in Q1.
Looking first at Europe Med, we continued the integration of Bank BGZ in Poland which we acquired last year. Its merger with BNP Paribas Polska has taken place today, 30th of April, and the resulting bank is already a reference bank in a dynamic and appealing market.
In terms of volumes, deposits were up some 9% driven by strong showings in Turkey and Poland. Loan growth was even stronger at over 13% with a positive performance in all countries, particularly in Turkey.
Still in Turkey, we successfully launched TEB’s digital offer in order to boost client acquisition and provide a viable complementary offer to the traditional branch network.
Revenues progressed in line with volume growth while effective cost control resulted in a near 27% growth of the gross operating income on a comparable basis.
Given an increase of the cost of risk this quarter, pre-tax income was only marginally higher than in the previous year on a comparable basis.
Overall, Europe Med confirmed its strong commercial development in all its main markets.
Moving to BancWest, here too volumes progressed well. Deposits and loans were some 7% higher, with loan growth being sustained by corporate and consumer loans.
We also continued to grow the assets under management of our private banking which reached 9 billion dollars at the end of March.
Revenue growth tracked that of volumes while costs were affected by higher regulatory costs. Net of these, the cost evolution stood at just under 3%.
Globally, given the US dollar appreciation I mentioned before, BancWest saw its pre-tax income increase by 23% in euro terms, hence confirming its strong contribution to Group results.
EBM: How have the savings and insurance businesses of your International Financial Services evolved in the first quarter of the year?
Jean-Laurent Bonnafé: In the first quarter of the year our savings and insurance businesses saw a strong increase of assets under management which reached 969 billion euros. This was mostly due to a size-able performance effect and to a lesser extent the depreciation of the euro. We also saw significant positive net inflows for over 11 billion in the quarter with all our main businesses contributing positively.
These good trends were also reflected on the P&L.
If I take the Insurance business first, revenue growth reached 7.5% as it benefitted from strong financial markets and good development of the international protection business.
Costs evolved in line with business development at +6% and the business delivered positive jaws.
All this meant that pre-tax income showed a double digit growth exceeding 300 million euros.
Wealth & Asset Management also progressed well. Revenue growth was driven by good activity in our Wealth Management and an improvement of our Asset Management.
Costs grew at about the same pace as revenues bearing in mind the investments we are making in our Wealth Management in Asia and in Real Estate.
In the first quarter, Wealth & Asset Management contributed 170 million of pre-tax income, up 4% on the previous year with a good overall performance.
EBM: Markets have been quite benign in the first part of the year. How has your new CIB fared in this context?
Jean-Laurent Bonnafé: Our Corporate & Institutional Banking had a very strong quarter. Global Markets saw sustained client demand. Corporate Banking volumes progressed well while Securities Services continued to grow its assets under custody at a strong pace.
Revenues grew by 24% to over 3.3 billion euros and were 13% higher at constant scope and exchange rates. On a like-for-like basis all our businesses performed strongly: Global Markets and Securities Services revenues were up 15% with Corporate Banking revenues increasing by 7%.
Costs increased on the back of the increased level of activity but at a much slower pace than revenues. CIB benefitted from accrued cost savings from Simple & Efficient but had to bear high regulatory costs as well as the ongoing investments in our development plans.
Given a moderate cost of risk in the quarter, CIB saw pre-tax income jump by 50% on a comparable basis delivering an annualized pre-tax ROE in excess of 20%.
These are very promising results as we continue to optimise our CIB activities in order to adapt the businesses to the changing operating environment.
EBM: Regarding the development of your global franchise, has your interest for Asia diminished in view of the slower growth experienced by some Asian countries? And how is your US CIB business evolving?
Jean-Laurent Bonnafé: Our activity remains sustained in Asia and in the US.
In Asia it’s true that probably some economies have slowed down recently but it’s equally true that they retain strong growth rates on a global scale.
In 2014 we increased revenues generated in Asia Pacific by 7% to reach 2.7 billion euros. At the end of the first quarter revenues progressed strongly with an increase in the region of +35% on the previous year also thanks to favorable foreign exchange and good customer activity in Global Markets.
Turning to the US, our CIB business is growing soundly. In fact in 2014 we grew revenues by 9% to reach 1.7 billion euros. Market conditions have remained favorable in Q1 and all our US CIB businesses delivered strong performances with roughly a 30% improvement overall also helped by the dollar appreciation.
So to wrap up, activity in both areas that you’ve mentioned is doing well and we are continuing to develop our business successfully.
EBM: Jean-Laurent Bonnafé, CEO of BNP Paribas, thank you very much!
Jean-Laurent Bonnafé: You’re welcome!
