Bloomberg Audio Studios, podcasts, radio news.
Let's go to Paris now in terms of the earning story, we are going to talk about BNP Poarabos earnings and we're joined by the CFO Lars Match and Eel Lars. Very good morning to you. Let's get straight to the positives here. First quarter equity and prime services revenue up by forty two percent year on year. That's much higher than the estimates. That's much higher than the average achieved on Wall Street. But of course the question is how sustainable is that kind of performance?
Yeah, good morning.
Indeed, well, if I take it just a step back, if you look at the total bank, we clocked in three billion of net profit, and indeed with the record quarter for CAB.
If you look at CAB in particularly, we have.
Three divisions right, so markets, Global banking, security Services, and they've all been performing well. And if you zoom in on your question if we talk, if we talk about global markets, do remember that.
We have been completely changing our setup.
We have the full wid of products and of services, and therefore we enter into growth.
By taking market share.
Again this quarter, there was a very strong additional volatility, so we stepped up even in those results and we have a record quarter. But nevertheless, I mean we are on a strong growth intrinsic growth, which was somewhat boosted this quarter given the exceptional volatility in the inqubon.
Okay, so the exceptional volatility of course help, but you sense you're taking market share and so maybe some sense of sustainability to strong performance. What about the cost side of the business then, last, because at the net level, the numbers look almost in line with expectation, but some people are citing that cost space and just I'm wondering what it is that's that's going up here after year that you're having to pay out for.
Listen, if you look if I take it back again at the BNP parabel level, Indeed, if you look at it, you see costs going up full like four percent.
So this is a number that is kind of high.
But then if you look through it, there are elements which is basically the forex the fox lifted it for half a basis point. Then there is also inflation that lifted it for half a basis point, and then also the variable costs that basically come with the strong results of the first quarter. So if you look at it, intrinsically, cost evolution is two point five percent in the first quarter and that is what we aim for for the
rest of the year. And that two point five percent growth is marginal costs, so it comes with costs to accompany the revenues. So we feel intrinsically that it is under control. There are some exceptional elements, call it noise in the first quarter, but we stick to for the rest of the year to two point five percent marginal cost growth.
Last, good morning, it's guy. Can I just take you back to the Market's division. Is the Market's division running at maximum risk at the moment?
Oh, actually, we consider it runs at low risk.
What I mean by that and we talk about.
Being able to step up market share, It basically means that we keep on doing exactly the same underwriting the same kind of business that we do, but we take higher market shares. So if you look at the evolution of our top line in cib and if you look at the metric whatever it is, we take the VAR, which is a metric for the risk that you take. The VAR is basically stable, whereas our top line grows. So we really stick to underwriting the same kind of business.
But in the positioning we take market.
Sharees, if volatility comes down, could you take more risk?
Listen.
We are really confident that the activity that we do, we consider it flow and that flow basically means companies and institutionals they typically need currencies they need for X, whatever it is. So there is a good play. And if you look at well, what typically the outlookcess this business grows on a year two year basis and we will continue to grow and to take market share.
Again, we do this with the same cost of risk.
Listen, we call our division CIB Corporate and Institutional banking. We don't call it investment banking. So we stick to our on the writing principles.
If volatility comes down and you're making less money on that side, does deal making go up? If we go into a more certain environment, will there be more deal making and less money coming out of the market division. Those two kind of compensate for each other in a more certain environment.
Now that is typically what we do.
You know, what we stand for is we have diversified but complementary kind of activities.
It's true like if you look.
At our results today, the markets activities were strong given the increased volatility in the quarter.
However, if you then look.
At our global banking activities and then you look at the demand for kind of mergers and whatever, that was lower given the uncertainty. So when that uncertainty will taper off, yes, indeed, the markets activities will probably normalize. However, there is a likelihood that the demand for whatever it is investment banking, MNA activities will step up. And that's I cannot say it's every quarter like that, but that's if you look at the trend of the last couple of years, that's how it has been.
Good morning, Lasi's Lizzie here. Can I ask you broadly how you see this trade war and the general geopolitical uncertainty impacting economic growth and inflation as we go ahead.
Yeah, there's several things to that. I mean, it's probably a tad too early to say something. If you look at our first quarter results, you don't see anything going forward. I basically for the moment, I don't see many things moving why. On one hand, yes, with whatever the tariffs will come, some transatlantic volumes.
Of trade will go down.
However, if you look at Europe, which is putting all sales to reinvest, look at what Europe is saying, look at what Germany is saying, look at what several countries are saying, And so we anticipate that those investments will basically compensate.
Of course, tariffs will come.
Immediately, whereas those investments will take a bit of time to come, but normally that should happen. I'll give you another thing that I look at on your cost of risk as a front leading indicator for me to see if companies run into trouble, I basically look at their liquidity. So if I look at cib if I take the corporates, if the corporates all of a sudden come brushing in with liquidity demands, that is kind of a hint that
something is going I don't see that. At the same time, if you go to the headphones, if the headphones all of a sudden have problems putting up the initial margins, that's also an indicator.
I don't see that.
So I don't see the corporates coming forth funding needs, and I don't see the funds having issues with putting the initial margins out. So from that point of view, what I'm just saying that things could level out at this stage with all the indicators I have, and that's what I see.
But I mean, you are especially exposed among the European banks to this trade. What you've got a high proportion of loans and advances to manufacturing the most of your rivals. Does part of that first quarter provision already include those risks? Are you're going to have to increase it if the trade will kind of intensifies between the US and Europe.
Listen, let me clarify.
If you look at our exposure and you look at the sectors and then you take the sectors that could be impacted by those stairs, for US, that represents quote unquote only ten percent of our exposure.
So from that point of view.
I feel comfortable that Europe has compensating effects. And then for US, we are so diversified that we are not exposed in any material way to that kind of trading related activities.
That's great to catch up, always a pleasure. Thanks for updating us BNP's CFO Las Machel, BNP Powerabar