BNP Paribas Group: Financial Performance in H1 2014
In the 2nd quarter BNP Paribas Group has again managed to prove its strong position in the market even despite the sanctions imposed by the American authorities.
In the 2nd quarter BNP Paribas Group has again managed to prove its strong position in the market even despite the sanctions imposed by the American authorities. The Group’s financial results show very significant impact of one-off items, very good performance with €1.9BN in net income excluding these items.
The Group’s results this quarter include the impact of the comprehensive settlement with the U.S. authorities1 regarding the review of certain USD transactions, which includes among other things the payment by BNP Paribas of a total amount of 8.97 billion U.S. dollars (6.6 billion euros) in penalties. Given the amount already provisioned, the Group thus booked this quarter a one-off charge for a total amount of 5,950 million euros, of which 5,750 million euros in penalties and 200 million euros corresponding to the future costs of the remediation plan announced at the time of the comprehensive settlement.
Excluding these items, the Group’s performance was very good this quarter.
The Group’s revenues totalled 9,568 million euros, down 2.3% compared to the second quarter 2013. It included this quarter two exceptional items for a net total of -353 million euros: -166 million euros as a result of the introduction of Funding Valuation Adjustment (FVA) at Fixed Income and -187 million euros in Own Credit Adjustment (OCA) and own credit risk included in derivatives (DVA). The one-off revenue items at the same period last year totalled +150 million euros. Excluding these exceptional items and at constant scope and exchange rates, revenues rose by 4.8% compared to the same quarter last year.
Revenues from the operating divisions increased 4.0%2 compared to the second quarter 2013: they were stable3 in Retail Banking, posted good growth in Investment Solutions (+5.0%3), and were up sharply in Corporate and Investment Banking (+14.6%2).
Operating expenses, at 6,517 million euros, were up by 4.3%. They included this quarter the one-off 198 million euro impact of Simple & Efficient transformation costs (74 million euros in the second quarter 2013). Excluding transformation costs and at constant scope and exchange rates, they were up 4.1%.
The operating expenses of the operating divisions were up 3.9%3, in line in particular with business growth at Investment Solutions and CIB, and include the effects of Simple & Efficient. They were up 0.8%3 at Retail Banking, 3.7%3 at Investment Solutions and 11.9%3 at CIB.
Gross operating income declined by 13.8% over the period to 3,051 million euros. Excluding exceptional items and at constant scope and exchange rates, it was up by 6.1% and 4.3% for the operating divisions.
The Group’s cost of risk was down 18.1% this quarter at 855 million euros (53 basis points of outstanding customer loans), overall stable since the beginning of 2013, reflecting the Group’s good risk control.
Given the impact of the comprehensive settlement with the U.S. authorities, pre-tax losses thus came to -3,600 million euros (pre-tax income of 2,713 million euros in the second quarter 2013).
Excluding exceptional items and at constant scope and exchange rates, pre-tax income was up 15.8% (+11.4% for the operating divisions).
Net losses attributable to equity holders thus came to -4,317 million euros (net income of
1,765 million euros in the second quarter 2013). Excluding the impact of the one-off items, net income attributable to equity holders totalled 1,924 million euros, up 23.2% compared to the same period last year.
Excluding the net impact of the costs related to the comprehensive settlement with the U.S. authorities, annualised return on equity1 was 8.2% and net earnings per share this quarter came to €2.51.
The Group’s balance sheet is rock-solid. The Group’s solvency was in line with the objective