France's two biggest banks have this week unveiled figures that suggest their underlying business is fundamentally sound, even as concerns grow about the potential impact the result of the French election could have on the sector in the country.
BNP Paribas says it delivered a good performance this quarter, demonstrating the strength of its integrated and diversified business model. CEO Jean-Laurent Bonnafé stated: “With €1.9 billion in net income, BNP Paribas delivered a very good performance this quarter. The revenues of the operating divisions were significantly higher thanks to good business growth. Costs were well under control and the cost of risk was down.”
The official figures show that revenues totalled €11,297m, up by 4.2% compared to the first quarter 2016.
The revenues of the operating divisions grew by 7.0%. They were down slightly by 0.3% at Domestic Markets due to the low interest rate environment, rose by 5.8% at International Financial Services and rebounded sharply by 20.0% at corporate and investment banking which had experienced a very challenging market environment in the first quarter 2016.
Pre-tax income thus came to €2,754m compared to €2,638m in the first quarter 2016 (+4.4%). It was up sharply by 25.1% for the operating divisions.
Balance sheet rock-solid
The CEO describes the Group’s balance sheet as rock-solid. The fully loaded Basel 3 common equity Tier 1 ratio was slightly higher than 11.6% as at 31 March 2017, up by 15 basis points compared to 31 December 2016, due primarily to the sale of 20.6% of First Hawaiian Bank (+10 bp). It takes into account a 50% dividend payout ratio.
The Basel 3 fully loaded leverage ratio, calculated on total Tier 1 capital, totalled 4.1% as at 31 March 2017. The Liquidity Coverage Ratio stood at 125% as at 31 March 2017.
The Group’s liquid and asset reserve immediately available totalled €345bn (€305bn as at 31 December 2016), which is equivalent to more than one year of room to manoeuvre in terms of wholesale funding.
For its part, Societe Generale published its first quarter 2017 results earlier today. With the country still buzzing from the previous evening's televised presidential debate - described as real battleground material by one Paris marketing executive - it remains to be seen how much coverage the pair will attract in the local and international press.
The bank reported net banking income for the businesses of €6,518m (+4.0 percent vs. Q1 16) driven by the growth in International Retail Banking & Financial Services and Global Banking & Investor Solutions. Book net banking income was €6,474m, up +4.8 percent versus Q1 16.
Operating expenses rose by 2.6 percent, reflecting the growth of the businesses and investments in the transformation of French Retail Banking. The bank describes this as a 'controlled increase'.
Said Frédéric Oudéa, SocGen CEO: “Once again, Societe Generale has demonstrated the quality of its diversified and integrated banking model, with a good performance in all its businesses. Group net income testifies to the substantial increase in the contribution of its businesses, underpinned by its revenue growth and its cost and risk control.”
“The Group is also continuing with its transformation. It has initiated a process to simplify its organisational set-up which will enable it to even better serve its customers, increase its agility and innovative capacity, and continue to exploit synergies between its businesses. Finally, over the next few quarters, the Group will continue actively working to bring an end to past disputes and complete the Culture and Conduct projects in order to further enhance the quality of its services and the control of its risks.”