BNP Paribas’ CIB cashes in on increased structured products activity

BNP Paribas corporate and institutional banking (CIB) posted operating revenues of €3.1 billion in the fourth quarter of 2019, an increase of 30.3% compared to 4Q 2018.

The division, which is made up of four business units – fixed income, currencies & commodities (FICC), global markets, equity and prime services, and security services – saw its operating expenses go up 16.2% year-on-year, due to ‘strong’ increase in business while its gross operating income, at €871m, rose ‘sharply’ compared to the fourth quarter of 2018 (€460m).

Revenues of equity and prime services, at €520m, were up significantly compared to a low base in 4Q2018 (€145m) with the business recording a ‘very good’ derivatives client business, in particular on structured products.

Equity and prime services’ full year 2019 revenues, at €2 billion, were stable compared to 2018, with a gradual recovery in 2019 from a low point at the end of 2018 and a good performance on equity derivatives, again thanks to structured products.

BNP Paribas (BNPP) issued 44,038 structured products worth an estimated US$2.4 billion in the fourth quarter of 2019, an increase – both in issuance and sales – from the 43,340 structures worth US$2 billion in the prior year quarter, according to SRP data.

Issuance for full year 2019 stood at 162,487 with sales of US$8.2 billion compared to 214,483 products worth US$8.5 billion in full year 2018.

The vast majority of BNPP’s products were listed certificates targeted at investors in Germany and Austria.

The French bank also issued 310 tranche products across 17 different jurisdictions, including France, where it collected approximately €972m from 118 structured products between October 1 and December 31 2019 (4Q2018: €815m from 59 products). The French products were distributed via 18 providers, including, among others, Alta Profits, Arkéa, DS Investment Solutions, Milleis, MMA Assurances, Nexo Capital, and Privalto.

Other European markets were the bank was active during the fourth quarter included Italy (€286m from 19 products), Belgium (€127m from 16 products), and Ireland (€33m from 12 products).

Outside of Europe, the French bank was the manufacturing company behind structures from XP Investimentos in Brazil, Bank SinoPac, CTBC, E Sun Bank, First Securities, Fubon, Shing Kong Bank and UBS in Taiwan, while in Japan it issued 23 products that were marketed via 11 different securities companies.

BNPP’s issuance in Japan also included the best-selling product of the quarter, which came in the shape of 82 Securities’ KI M20221223, a three-year registered note linked to the Nikkei 225 and S&P 500 that sold JPY9.5 billion (US$86.7m) during the subscription period.

BNP Paribas' medium/long term (MLT) wholesale funding plan for 2019, at €41.4 billion issued, can be split into €38.1 billion of senior debt – of which €15.8 billion structured products with an average maturity of 2.1 years – and €3.3 billion of capital instruments.

The group’s 2020 MLT wholesale funding programme of €35 billion can be broken down into €13 billion non preferred senior debt; €4 billion capital instruments; and €18 billion other senior debt. The latter includes approximately €15 billion worth of structured products (preferred senior) and €3 billion worth of secured funding and local wholesale funding.

BNPP’s immediately available liquidity reserves totalled €309 billion, which is equivalent to more than one year of ‘room to manoeuvre’ in terms of wholesale funding, according to the bank.

Commenting on full year 2019, Jean-Laurent Bonnafé (pictured), chief executive officer, stated: ‘With a net income of €8.2 billion, BNP Paribas achieved a very good performance in 2019 thanks to its good business drive and the effects of its transformation.’

Click the link to read the BNP Paribas fourth quarter and full year 2019 results and presentation.