BNP Paribas released its second quarter results today, and they reconfirm that 2021 is a very good year - unless you happen to compare it to 2020.
After last year's $200m loss in equities trading, profits at BNP Paribas' corporate and investment bank bounced back by 33% in the first half of 2021 compared to the first half of 2020. Revenues were up too, but by a more diminutive 4%.
The problem, from a revenue perspective, is the second quarter of 2021. As some have observed, if you're a fixed income trader this was the sort of quarter that only happens once in a career. - However good 2021's revenues are, they're never going to compare to 2020's, because the second quarter of 2020 was exceptional (equities trading excepted).
BNP's charts below show why. In global markets, fixed income currencies and commodities (FICC) revenues were nearly double their global average in the second quarter of last year; in corporate banking (which for BNP includes financing in equity and debt capital markets as well as loans), revenues were above average in both the second and fourth quarters.
2021 looks like a step-down by comparison, but as BNP's trend lines reflect, it remains an excellent year compared with pre-pandemic times of 2018 and 2019. Capital markets activity in particular has been "very high", and growth in structured equity derivative products has been "very strong." And as BNP Paribas points out, its fixed income currencies and commodities revenues may have been down 43% in the second quarter of 2021 versus the exceptional second quarter of 2020, but they were still up 45% versus the more normal second quarter of 2019...
It's worth noting that unlike Credit Suisse - which is cutting the capital allocated to its markets busines, BNP has increased the equity allocated to its traders by nearly 10% this year. Deutsche Bank has done much the same, for what it said this week are regulatory reasons. It's not clear whether this is why Paribas has increased capital in the trading unit too, but it looks like a vote in favour of its markets professionals.
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Photo by Dewang Gupta on Unsplash