It's bonus day at BNP Paribas. Sources say the French bank will disclose its 2020 bonuses to bankers and traders this Friday. Expectations are high and will hopefully not be disappointed.
As a reminder, BNP's fixed income traders had an exceptional 2020. Fixed income sales and trading revenues rose by nearly 60% last year, more than anywhere else except for UBS. Predictably, the French bank's out-performance was driven by its strong macro trading business. - BNP said there was notable growth in its rates and FX revenues, with "strong client activity and ongoing consolidation of market share gains."
Sources say BNP's traders are optimistic about this year's payouts. "BNP smashed it out of the park last year and traders are very hopeful for bonuses," says one. "Expectations haven't been managed too aggressively, so this might be the year that BNP pays very well."
The cloud on this sunny horizon is BNP's equities sales and trading business, which didn't do so well last year. Equities revenues fell nearly 42% after "exceptional shocks" in the first quarter during which the French bank lost around $200m on equity derivatives (dividend futures and structured products) at the start of the pandemic. By virtue of soaring revenues in fixed income trading, BNP's global markets division more than overcame this and ended 2020 with profits up 69% on 2019. Somewhat ominously, however, operating expenses in global markets - including compensation costs - rose by only 5% last year, suggesting that fixed income traders' big gains probably won't end up in their own pockets.
If they don't, there are suggestions that BNP traders could lose patience and look for jobs elsewhere. Some say that FX traders at the French bank were disappointed in 2019 and won't want to be disappointed again - even though BNP's compensation report for the year shows the overall bonus pool for material risk-takers in its investment bank rising to €366m for 843 people, up from €301m for 841 people in 2018.
The optimists think BNP will come through. "Together with Barclays, BNP will show that European banks can pay well," says one headhunter. "I will be very surprised if traders there aren't happy."
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