1 00:00:02,360 --> 00:00:06,680 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:06,840 --> 00:00:09,719 Speaker 2: Let's go to Paris now in terms of the earning story, 3 00:00:09,760 --> 00:00:11,920 Speaker 2: we are going to talk about BNP Poarabos earnings and 4 00:00:11,920 --> 00:00:14,320 Speaker 2: we're joined by the CFO Lars Match and Eel Lars. 5 00:00:14,400 --> 00:00:16,239 Speaker 2: Very good morning to you. Let's get straight to the 6 00:00:16,280 --> 00:00:19,800 Speaker 2: positives here. First quarter equity and prime services revenue up 7 00:00:19,800 --> 00:00:22,200 Speaker 2: by forty two percent year on year. That's much higher 8 00:00:22,239 --> 00:00:25,200 Speaker 2: than the estimates. That's much higher than the average achieved 9 00:00:25,200 --> 00:00:27,400 Speaker 2: on Wall Street. But of course the question is how 10 00:00:27,440 --> 00:00:29,320 Speaker 2: sustainable is that kind of performance? 11 00:00:30,560 --> 00:00:31,560 Speaker 3: Yeah, good morning. 12 00:00:31,840 --> 00:00:34,000 Speaker 1: Indeed, well, if I take it just a step back, 13 00:00:34,040 --> 00:00:36,720 Speaker 1: if you look at the total bank, we clocked in 14 00:00:36,800 --> 00:00:39,320 Speaker 1: three billion of net profit, and indeed with the record 15 00:00:39,360 --> 00:00:40,160 Speaker 1: quarter for CAB. 16 00:00:40,720 --> 00:00:42,559 Speaker 3: If you look at CAB in particularly, we have. 17 00:00:42,560 --> 00:00:46,680 Speaker 1: Three divisions right, so markets, Global banking, security Services, and 18 00:00:46,720 --> 00:00:49,080 Speaker 1: they've all been performing well. And if you zoom in 19 00:00:49,080 --> 00:00:51,120 Speaker 1: on your question if we talk, if we talk about 20 00:00:51,200 --> 00:00:53,520 Speaker 1: global markets, do remember that. 21 00:00:53,440 --> 00:00:56,240 Speaker 3: We have been completely changing our setup. 22 00:00:56,240 --> 00:00:58,680 Speaker 1: We have the full wid of products and of services, 23 00:00:58,840 --> 00:01:00,880 Speaker 1: and therefore we enter into growth. 24 00:01:00,640 --> 00:01:01,800 Speaker 3: By taking market share. 25 00:01:02,040 --> 00:01:06,640 Speaker 1: Again this quarter, there was a very strong additional volatility, 26 00:01:06,880 --> 00:01:10,280 Speaker 1: so we stepped up even in those results and we 27 00:01:10,319 --> 00:01:13,040 Speaker 1: have a record quarter. But nevertheless, I mean we are 28 00:01:13,080 --> 00:01:16,800 Speaker 1: on a strong growth intrinsic growth, which was somewhat boosted 29 00:01:16,800 --> 00:01:20,120 Speaker 1: this quarter given the exceptional volatility in the inqubon. 30 00:01:21,440 --> 00:01:23,880 Speaker 2: Okay, so the exceptional volatility of course help, but you 31 00:01:24,280 --> 00:01:27,200 Speaker 2: sense you're taking market share and so maybe some sense 32 00:01:27,240 --> 00:01:30,520 Speaker 2: of sustainability to strong performance. What about the cost side 33 00:01:30,560 --> 00:01:33,800 Speaker 2: of the business then, last, because at the net level, 34 00:01:33,959 --> 00:01:37,280 Speaker 2: the numbers look almost in line with expectation, but some 35 00:01:37,319 --> 00:01:40,080 Speaker 2: people are citing that cost space and just I'm wondering 36 00:01:40,080 --> 00:01:43,920 Speaker 2: what it is that's that's going up here after year 37 00:01:43,959 --> 00:01:45,399 Speaker 2: that you're having to pay out for. 38 00:01:46,240 --> 00:01:48,200 Speaker 1: Listen, if you look if I take it back again 39 00:01:48,240 --> 00:01:50,840 Speaker 1: at the BNP parabel level, Indeed, if you look at it, 40 00:01:50,960 --> 00:01:52,880 Speaker 1: you see costs going up full like four percent. 41 00:01:53,240 --> 00:01:55,320 Speaker 3: So this is a number that is kind of high. 42 00:01:55,560 --> 00:01:57,800 Speaker 1: But then if you look through it, there are elements 43 00:01:58,000 --> 00:02:00,680 Speaker 1: which is basically the forex the fox lifted it for 44 00:02:00,760 --> 00:02:03,280 Speaker 1: half a basis point. Then there is also inflation that 45 00:02:03,320 --> 00:02:05,560 Speaker 1: lifted it for half a basis point, and then also 46 00:02:05,600 --> 00:02:08,280 Speaker 1: the variable costs that basically come with the strong results 47 00:02:08,320 --> 00:02:11,080 Speaker 1: of the first quarter. So if you look at it, intrinsically, 48 00:02:11,320 --> 00:02:13,720 Speaker 1: cost evolution is two point five percent in the first 49 00:02:13,800 --> 00:02:16,320 Speaker 1: quarter and that is what we aim for for the 50 00:02:16,360 --> 00:02:18,720 Speaker 1: rest of the year. And that two point five percent 51 00:02:18,880 --> 00:02:22,400 Speaker 1: growth is marginal costs, so it comes with costs to 52 00:02:22,440 --> 00:02:25,919 Speaker 1: accompany the revenues. So we feel intrinsically that it is 53 00:02:26,000 --> 00:02:29,320 Speaker 1: under control. There are some exceptional elements, call it noise 54 00:02:29,400 --> 00:02:31,720 Speaker 1: in the first quarter, but we stick to for the 55 00:02:31,760 --> 00:02:33,960 Speaker 1: rest of the year to two point five percent marginal 56 00:02:34,000 --> 00:02:34,560 Speaker 1: cost growth. 57 00:02:36,080 --> 00:02:37,919 Speaker 4: Last, good morning, it's guy. Can I just take you 58 00:02:37,960 --> 00:02:40,840 Speaker 4: back to the Market's division. Is the Market's division running 59 00:02:40,840 --> 00:02:42,359 Speaker 4: at maximum risk at the moment? 60 00:02:43,720 --> 00:02:46,840 Speaker 1: Oh, actually, we consider it runs at low risk. 61 00:02:46,919 --> 00:02:49,760 Speaker 3: What I mean by that and we talk about. 62 00:02:49,400 --> 00:02:52,520 Speaker 1: Being able to step up market share, It basically means 63 00:02:52,520 --> 00:02:55,320 Speaker 1: that we keep on doing exactly the same underwriting the 64 00:02:55,320 --> 00:02:57,880 Speaker 1: same kind of business that we do, but we take 65 00:02:58,040 --> 00:03:00,519 Speaker 1: higher market shares. So if you look at the evolution 66 00:03:00,720 --> 00:03:02,960 Speaker 1: of our top line in cib and if you look 67 00:03:03,000 --> 00:03:05,400 Speaker 1: at the metric whatever it is, we take the VAR, 68 00:03:05,480 --> 00:03:07,399 Speaker 1: which is a metric for the risk that you take. 69 00:03:07,840 --> 00:03:10,799 Speaker 1: The VAR is basically stable, whereas our top line grows. 70 00:03:11,000 --> 00:03:14,280 Speaker 1: So we really stick to underwriting the same kind of business. 71 00:03:14,480 --> 00:03:16,440 Speaker 3: But in the positioning we take market. 72 00:03:16,240 --> 00:03:21,480 Speaker 4: Sharees, if volatility comes down, could you take more risk? 73 00:03:23,280 --> 00:03:23,640 Speaker 3: Listen. 74 00:03:23,880 --> 00:03:26,520 Speaker 1: We are really confident that the activity that we do, 75 00:03:26,560 --> 00:03:30,160 Speaker 1: we consider it flow and that flow basically means companies 76 00:03:30,240 --> 00:03:33,440 Speaker 1: and institutionals they typically need currencies they need for X, 77 00:03:33,520 --> 00:03:35,960 Speaker 1: whatever it is. So there is a good play. And 78 00:03:36,000 --> 00:03:39,880 Speaker 1: if you look at well, what typically the outlookcess this 79 00:03:39,960 --> 00:03:42,600 Speaker 1: business grows on a year two year basis and we 80 00:03:42,640 --> 00:03:45,240 Speaker 1: will continue to grow and to take market share. 81 00:03:45,400 --> 00:03:47,760 Speaker 3: Again, we do this with the same cost of risk. 82 00:03:49,080 --> 00:03:52,200 Speaker 1: Listen, we call our division CIB Corporate and Institutional banking. 83 00:03:52,400 --> 00:03:55,120 Speaker 1: We don't call it investment banking. So we stick to 84 00:03:55,200 --> 00:03:56,640 Speaker 1: our on the writing principles. 85 00:03:57,640 --> 00:04:02,760 Speaker 4: If volatility comes down and you're making less money on 86 00:04:02,800 --> 00:04:05,600 Speaker 4: that side, does deal making go up? If we go 87 00:04:05,680 --> 00:04:08,720 Speaker 4: into a more certain environment, will there be more deal 88 00:04:08,800 --> 00:04:11,520 Speaker 4: making and less money coming out of the market division. 89 00:04:11,680 --> 00:04:14,560 Speaker 4: Those two kind of compensate for each other in a 90 00:04:14,560 --> 00:04:15,560 Speaker 4: more certain environment. 91 00:04:16,200 --> 00:04:17,760 Speaker 3: Now that is typically what we do. 92 00:04:17,839 --> 00:04:21,200 Speaker 1: You know, what we stand for is we have diversified 93 00:04:21,320 --> 00:04:23,800 Speaker 1: but complementary kind of activities. 94 00:04:24,160 --> 00:04:25,400 Speaker 3: It's true like if you look. 95 00:04:25,240 --> 00:04:28,719 Speaker 1: At our results today, the markets activities were strong given 96 00:04:28,760 --> 00:04:30,400 Speaker 1: the increased volatility in the quarter. 97 00:04:30,600 --> 00:04:32,279 Speaker 3: However, if you then look. 98 00:04:32,160 --> 00:04:35,039 Speaker 1: At our global banking activities and then you look at 99 00:04:35,080 --> 00:04:37,919 Speaker 1: the demand for kind of mergers and whatever, that was 100 00:04:38,000 --> 00:04:42,920 Speaker 1: lower given the uncertainty. So when that uncertainty will taper off, yes, indeed, 101 00:04:43,000 --> 00:04:47,039 Speaker 1: the markets activities will probably normalize. However, there is a 102 00:04:47,160 --> 00:04:50,599 Speaker 1: likelihood that the demand for whatever it is investment banking, 103 00:04:50,920 --> 00:04:54,400 Speaker 1: MNA activities will step up. And that's I cannot say 104 00:04:54,400 --> 00:04:56,400 Speaker 1: it's every quarter like that, but that's if you look 105 00:04:56,440 --> 00:04:58,680 Speaker 1: at the trend of the last couple of years, that's 106 00:04:58,680 --> 00:04:59,440 Speaker 1: how it has been. 107 00:05:00,880 --> 00:05:03,200 Speaker 5: Good morning, Lasi's Lizzie here. Can I ask you broadly 108 00:05:03,279 --> 00:05:06,800 Speaker 5: how you see this trade war and the general geopolitical 109 00:05:06,880 --> 00:05:10,960 Speaker 5: uncertainty impacting economic growth and inflation as we go ahead. 110 00:05:12,120 --> 00:05:15,360 Speaker 1: Yeah, there's several things to that. I mean, it's probably 111 00:05:15,400 --> 00:05:17,480 Speaker 1: a tad too early to say something. If you look 112 00:05:17,520 --> 00:05:21,920 Speaker 1: at our first quarter results, you don't see anything going forward. 113 00:05:22,600 --> 00:05:24,840 Speaker 1: I basically for the moment, I don't see many things 114 00:05:24,880 --> 00:05:28,200 Speaker 1: moving why. On one hand, yes, with whatever the tariffs 115 00:05:28,240 --> 00:05:31,080 Speaker 1: will come, some transatlantic volumes. 116 00:05:30,640 --> 00:05:31,719 Speaker 3: Of trade will go down. 117 00:05:32,000 --> 00:05:34,839 Speaker 1: However, if you look at Europe, which is putting all 118 00:05:34,920 --> 00:05:38,120 Speaker 1: sales to reinvest, look at what Europe is saying, look 119 00:05:38,160 --> 00:05:40,440 Speaker 1: at what Germany is saying, look at what several countries 120 00:05:40,440 --> 00:05:43,920 Speaker 1: are saying, And so we anticipate that those investments will 121 00:05:43,920 --> 00:05:45,000 Speaker 1: basically compensate. 122 00:05:45,560 --> 00:05:46,960 Speaker 3: Of course, tariffs will come. 123 00:05:46,839 --> 00:05:49,480 Speaker 1: Immediately, whereas those investments will take a bit of time 124 00:05:49,520 --> 00:05:52,080 Speaker 1: to come, but normally that should happen. I'll give you 125 00:05:52,160 --> 00:05:54,080 Speaker 1: another thing that I look at on your cost of 126 00:05:54,160 --> 00:05:57,680 Speaker 1: risk as a front leading indicator for me to see 127 00:05:57,720 --> 00:06:01,160 Speaker 1: if companies run into trouble, I basically look at their liquidity. 128 00:06:01,279 --> 00:06:03,640 Speaker 1: So if I look at cib if I take the corporates, 129 00:06:03,839 --> 00:06:06,200 Speaker 1: if the corporates all of a sudden come brushing in 130 00:06:06,240 --> 00:06:09,039 Speaker 1: with liquidity demands, that is kind of a hint that 131 00:06:09,120 --> 00:06:12,279 Speaker 1: something is going I don't see that. At the same time, 132 00:06:12,320 --> 00:06:15,520 Speaker 1: if you go to the headphones, if the headphones all 133 00:06:15,520 --> 00:06:18,080 Speaker 1: of a sudden have problems putting up the initial margins, 134 00:06:18,400 --> 00:06:19,719 Speaker 1: that's also an indicator. 135 00:06:20,000 --> 00:06:20,719 Speaker 3: I don't see that. 136 00:06:21,000 --> 00:06:23,520 Speaker 1: So I don't see the corporates coming forth funding needs, 137 00:06:23,600 --> 00:06:25,880 Speaker 1: and I don't see the funds having issues with putting 138 00:06:25,920 --> 00:06:28,279 Speaker 1: the initial margins out. So from that point of view, 139 00:06:28,440 --> 00:06:31,240 Speaker 1: what I'm just saying that things could level out at 140 00:06:31,240 --> 00:06:33,400 Speaker 1: this stage with all the indicators I have, and that's 141 00:06:33,440 --> 00:06:34,039 Speaker 1: what I see. 142 00:06:35,279 --> 00:06:38,320 Speaker 5: But I mean, you are especially exposed among the European 143 00:06:38,360 --> 00:06:40,240 Speaker 5: banks to this trade. What you've got a high proportion 144 00:06:40,320 --> 00:06:44,000 Speaker 5: of loans and advances to manufacturing the most of your rivals. 145 00:06:44,480 --> 00:06:47,800 Speaker 5: Does part of that first quarter provision already include those risks? 146 00:06:48,000 --> 00:06:50,120 Speaker 5: Are you're going to have to increase it if the 147 00:06:50,200 --> 00:06:53,839 Speaker 5: trade will kind of intensifies between the US and Europe. 148 00:06:54,640 --> 00:06:55,880 Speaker 3: Listen, let me clarify. 149 00:06:55,960 --> 00:06:58,280 Speaker 1: If you look at our exposure and you look at 150 00:06:58,279 --> 00:07:00,800 Speaker 1: the sectors and then you take the sectors that could 151 00:07:00,839 --> 00:07:05,160 Speaker 1: be impacted by those stairs, for US, that represents quote 152 00:07:05,240 --> 00:07:07,640 Speaker 1: unquote only ten percent of our exposure. 153 00:07:07,800 --> 00:07:09,360 Speaker 3: So from that point of view. 154 00:07:09,120 --> 00:07:13,120 Speaker 1: I feel comfortable that Europe has compensating effects. And then 155 00:07:13,360 --> 00:07:16,080 Speaker 1: for US, we are so diversified that we are not 156 00:07:16,880 --> 00:07:20,120 Speaker 1: exposed in any material way to that kind of trading 157 00:07:20,120 --> 00:07:21,160 Speaker 1: related activities. 158 00:07:23,000 --> 00:07:24,800 Speaker 4: That's great to catch up, always a pleasure. Thanks for 159 00:07:24,880 --> 00:07:29,360 Speaker 4: updating us BNP's CFO Las Machel, BNP Powerabar