BNP Paribas results suggest traders' bonus hopes are justified
As we reported last month, people in BNP Paribas' fixed income business had a strong end to 2019 and are feeling pretty confident about bonuses. Today's full year results from the French bank suggest their confidence is justified.
Profits in BNP Paribas's global markets rose by a huge 73% last year to €1.3bn as the bank gained market share in both fixed income and equities trading.
As the chart below shows, BNP's revenue growth in trading far exceeded rivals'. Coupled with the bank's ongoing programme of cutting costs, the effect was to supercharge profit growth in the global markets business.
In the fourth quarter. BNP attributed revenue growth in markets to a "sharp rebound in forex and emerging markets and very good performance in rates" alongside a "gradual recovery" in equities and "a good performance on equity derivatives in particular on structured products." Insiders told us previously that the credit trading business had an excellent end to the year and smashed its targets.
Will BNP traders' strong 2019 make itself felt in bonuses, which are announced soon? In 2018, regulated staff (who include senior traders) at BNP's corporate and investment bank (CIB) were paid an average salary of €379k and an average bonus of €358k. While this was generous compared to other French banks, it was less generous compared to U.S. investment banks and to other Europeans like Deutsche Bank and Barclays. The coming bonus round might be an opportunity to make amends.
Needless to say, that's unlikely to happen. BNP Paribas doesn't reveal compensation in its global markets division with its fourth quarter results - we need to wait until its full annual report for that. However, the French bank did say today that it's still cost cutting. After announcing €2.7bn of cost reductions in 2017, BNP announced a further €500m of cost reductions last year. This means it has another €1.5bn in cost savings to make during 2020 alone. - Now is hardly the time to hike pay.
While BNP's traders can justifiably expect something extra for their success in 2019, today's results also suggest they should share some of the spoils with shareholders. While most banks are cutting capital allocated to trading businesses, BNP increased equity allocated to global markets by 6% last year, to €8.3bn.
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