* Shares in BNP, SocGen, Credit Agricole drop sharply
* Trading lags US rivals
* Weak dollar drags revenues
* Retail banking offsets pressures
PARIS, April 30 (Reuters) – French banks BNP Paribas,
Societe Generale and Credit Agricole landed subdued trading
results on Thursday, prompting share price falls as they lagged
U.S. rivals due to a weak dollar and a failure to capitalise on
Iran war-linked market volatility.
Overall, the French trio broadly met first-quarter market
expectations, supported by resilient retail banking and cost
controls, but that strength did not extend to their trading
desks, where results were broadly weaker.
Shares in BNP, SocGen and Credit
Agricole were down by 4.5%, 5.1% and 5.8% respectively
at 0950 GMT as investors digested their first-quarter results.
SUBDUED TRADING PERFORMANCES
Unlike the French listed banks, their U.S. counterparts on Wall
Street once again delivered bumper trading results, highlighting
a long-standing challenge for European banks in the global
investment banking business.
U.S. banks continue to outpace European rivals in trading
and investment banking, aided by scale, deeper capital markets
and more favourable regulation.
JPMorgan, Morgan Stanley, Goldman Sachs
and Citigroup all reported sharply higher revenues
from equities and fixed income trading, benefiting from heavy
client activity across rates, commodities and currencies.
Although BNP reported a modest increase in its trading
revenues, its fixed income performance was largely flat.
Credit Agricole posted the biggest miss overall, with
revenue falling short of expectations across several businesses,
including in its fixed income trading.
SocGen was hardest hit, reporting an 18% drop in sales from
trading in fixed income, currencies and commodities, citing
weaker client activity and tougher European rates markets.
SocGen CEO Slawomir Krupa told reporters that two main
factors were responsible for the slump: weaker client activity
and volatile short-term rates linked to the Middle East crisis,
combined with the bank’s reliance on European interest rate
trading and lack of commodities business.
This left it more exposed than more diversified U.S. rivals.
DOLLAR DRAG
Currency moves were a clear drag as all three French lenders
generate a significant share of investment banking revenues in
U.S. dollars, which are then translated into euros.
The weaker dollar, which came amid heightened global
uncertainty in part due to the effects of the Iran war, reduced
reported earnings even where underlying activity held up.
Typically seen as a safe haven, the dollar instead weakened
as investors rotated into the euro, yen and gold, amid concerns
over U.S. trade policy and political risk.
BNP, SocGen and Deutsche Bank all flagged the dollar effect.
PROVISIONS RISE CAUTIOUSLY
The French lenders also raised provisions for potential loan
losses, echoing a cautious stance across European banking.
The Iran war and its impact on energy prices and global
growth prompted banks to build buffers, although executives
stressed that asset quality remained sound and that the moves
were largely precautionary.
“It all depends on the duration of this conflict,” Krupa
said, speaking of the impact of the war on the outlook for
growth in Europe — and by extension loan demand, adding that if
the conflict ends in a few weeks, the impact would be
limited.
BNP and Credit Agricole both increased provisions, while
SocGen’s provisioning rose less.
European rivals including Deutsche Bank and
Lloyds reported similar trends, suggesting growing
caution rather than signs of stress.
What did support earnings at the French banks was the
strength of domestic retail banking. SocGen benefited from
improved margins in its retail business after changes to savings
rates and steep cost reduction.
BNP also saw gains in France and Belgium, while Credit
Agricole also reported improved margins at home.
(Reporting by Mathieu Rosemain; Editing by Ingrid Melander,
Tomasz Janowski and Alexander Smith)
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