Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Let's go to Paris now in terms of the earning story,
Speaker 2: we are going to talk about BNP Poarabos earnings and
Speaker 2: we're joined by the CFO Lars Match and Eel Lars.
Speaker 2: Very good morning to you. Let's get straight to the
Speaker 2: positives here. First quarter equity and prime services revenue up
Speaker 2: by forty two percent year on year. That's much higher
Speaker 2: than the estimates. That's much higher than the average achieved
Speaker 2: on Wall Street. But of course the question is how
Speaker 2: sustainable is that kind of performance?
Speaker 3: Yeah, good morning.
Speaker 1: Indeed, well, if I take it just a step back,
Speaker 1: if you look at the total bank, we clocked in
Speaker 1: three billion of net profit, and indeed with the record
Speaker 1: quarter for CAB.
Speaker 3: If you look at CAB in particularly, we have.
Speaker 1: Three divisions right, so markets, Global banking, security Services, and
Speaker 1: they've all been performing well. And if you zoom in
Speaker 1: on your question if we talk, if we talk about
Speaker 1: global markets, do remember that.
Speaker 3: We have been completely changing our setup.
Speaker 1: We have the full wid of products and of services,
Speaker 1: and therefore we enter into growth.
Speaker 3: By taking market share.
Speaker 1: Again this quarter, there was a very strong additional volatility,
Speaker 1: so we stepped up even in those results and we
Speaker 1: have a record quarter. But nevertheless, I mean we are
Speaker 1: on a strong growth intrinsic growth, which was somewhat boosted
Speaker 1: this quarter given the exceptional volatility in the inqubon.
Speaker 2: Okay, so the exceptional volatility of course help, but you
Speaker 2: sense you're taking market share and so maybe some sense
Speaker 2: of sustainability to strong performance. What about the cost side
Speaker 2: of the business then, last, because at the net level,
Speaker 2: the numbers look almost in line with expectation, but some
Speaker 2: people are citing that cost space and just I'm wondering
Speaker 2: what it is that's that's going up here after year
Speaker 2: that you're having to pay out for.
Speaker 1: Listen, if you look if I take it back again
Speaker 1: at the BNP parabel level, Indeed, if you look at it,
Speaker 1: you see costs going up full like four percent.
Speaker 3: So this is a number that is kind of high.
Speaker 1: But then if you look through it, there are elements
Speaker 1: which is basically the forex the fox lifted it for
Speaker 1: half a basis point. Then there is also inflation that
Speaker 1: lifted it for half a basis point, and then also
Speaker 1: the variable costs that basically come with the strong results
Speaker 1: of the first quarter. So if you look at it, intrinsically,
Speaker 1: cost evolution is two point five percent in the first
Speaker 1: quarter and that is what we aim for for the
Speaker 1: rest of the year. And that two point five percent
Speaker 1: growth is marginal costs, so it comes with costs to
Speaker 1: accompany the revenues. So we feel intrinsically that it is
Speaker 1: under control. There are some exceptional elements, call it noise
Speaker 1: in the first quarter, but we stick to for the
Speaker 1: rest of the year to two point five percent marginal
Speaker 1: cost growth.
Speaker 4: Last, good morning, it's guy. Can I just take you
Speaker 4: back to the Market's division. Is the Market's division running
Speaker 4: at maximum risk at the moment?
Speaker 1: Oh, actually, we consider it runs at low risk.
Speaker 3: What I mean by that and we talk about.
Speaker 1: Being able to step up market share, It basically means
Speaker 1: that we keep on doing exactly the same underwriting the
Speaker 1: same kind of business that we do, but we take
Speaker 1: higher market shares. So if you look at the evolution
Speaker 1: of our top line in cib and if you look
Speaker 1: at the metric whatever it is, we take the VAR,
Speaker 1: which is a metric for the risk that you take.
Speaker 1: The VAR is basically stable, whereas our top line grows.
Speaker 1: So we really stick to underwriting the same kind of business.
Speaker 3: But in the positioning we take market.
Speaker 4: Sharees, if volatility comes down, could you take more risk?
Speaker 3: Listen.
Speaker 1: We are really confident that the activity that we do,
Speaker 1: we consider it flow and that flow basically means companies
Speaker 1: and institutionals they typically need currencies they need for X,
Speaker 1: whatever it is. So there is a good play. And
Speaker 1: if you look at well, what typically the outlookcess this
Speaker 1: business grows on a year two year basis and we
Speaker 1: will continue to grow and to take market share.
Speaker 3: Again, we do this with the same cost of risk.
Speaker 1: Listen, we call our division CIB Corporate and Institutional banking.
Speaker 1: We don't call it investment banking. So we stick to
Speaker 1: our on the writing principles.
Speaker 4: If volatility comes down and you're making less money on
Speaker 4: that side, does deal making go up? If we go
Speaker 4: into a more certain environment, will there be more deal
Speaker 4: making and less money coming out of the market division.
Speaker 4: Those two kind of compensate for each other in a
Speaker 4: more certain environment.
Speaker 3: Now that is typically what we do.
Speaker 1: You know, what we stand for is we have diversified
Speaker 1: but complementary kind of activities.
Speaker 3: It's true like if you look.
Speaker 1: At our results today, the markets activities were strong given
Speaker 1: the increased volatility in the quarter.
Speaker 3: However, if you then look.
Speaker 1: At our global banking activities and then you look at
Speaker 1: the demand for kind of mergers and whatever, that was
Speaker 1: lower given the uncertainty. So when that uncertainty will taper off, yes, indeed,
Speaker 1: the markets activities will probably normalize. However, there is a
Speaker 1: likelihood that the demand for whatever it is investment banking,
Speaker 1: MNA activities will step up. And that's I cannot say
Speaker 1: it's every quarter like that, but that's if you look
Speaker 1: at the trend of the last couple of years, that's
Speaker 1: how it has been.
Speaker 5: Good morning, Lasi's Lizzie here. Can I ask you broadly
Speaker 5: how you see this trade war and the general geopolitical
Speaker 5: uncertainty impacting economic growth and inflation as we go ahead.
Speaker 1: Yeah, there's several things to that. I mean, it's probably
Speaker 1: a tad too early to say something. If you look
Speaker 1: at our first quarter results, you don't see anything going forward.
Speaker 1: I basically for the moment, I don't see many things
Speaker 1: moving why. On one hand, yes, with whatever the tariffs
Speaker 1: will come, some transatlantic volumes.
Speaker 3: Of trade will go down.
Speaker 1: However, if you look at Europe, which is putting all
Speaker 1: sales to reinvest, look at what Europe is saying, look
Speaker 1: at what Germany is saying, look at what several countries
Speaker 1: are saying, And so we anticipate that those investments will
Speaker 1: basically compensate.
Speaker 3: Of course, tariffs will come.
Speaker 1: Immediately, whereas those investments will take a bit of time
Speaker 1: to come, but normally that should happen. I'll give you
Speaker 1: another thing that I look at on your cost of
Speaker 1: risk as a front leading indicator for me to see
Speaker 1: if companies run into trouble, I basically look at their liquidity.
Speaker 1: So if I look at cib if I take the corporates,
Speaker 1: if the corporates all of a sudden come brushing in
Speaker 1: with liquidity demands, that is kind of a hint that
Speaker 1: something is going I don't see that. At the same time,
Speaker 1: if you go to the headphones, if the headphones all
Speaker 1: of a sudden have problems putting up the initial margins,
Speaker 1: that's also an indicator.
Speaker 3: I don't see that.
Speaker 1: So I don't see the corporates coming forth funding needs,
Speaker 1: and I don't see the funds having issues with putting
Speaker 1: the initial margins out. So from that point of view,
Speaker 1: what I'm just saying that things could level out at
Speaker 1: this stage with all the indicators I have, and that's
Speaker 1: what I see.
Speaker 5: But I mean, you are especially exposed among the European
Speaker 5: banks to this trade. What you've got a high proportion
Speaker 5: of loans and advances to manufacturing the most of your rivals.
Speaker 5: Does part of that first quarter provision already include those risks?
Speaker 5: Are you're going to have to increase it if the
Speaker 5: trade will kind of intensifies between the US and Europe.
Speaker 3: Listen, let me clarify.
Speaker 1: If you look at our exposure and you look at
Speaker 1: the sectors and then you take the sectors that could
Speaker 1: be impacted by those stairs, for US, that represents quote
Speaker 1: unquote only ten percent of our exposure.
Speaker 3: So from that point of view.
Speaker 1: I feel comfortable that Europe has compensating effects. And then
Speaker 1: for US, we are so diversified that we are not
Speaker 1: exposed in any material way to that kind of trading
Speaker 1: related activities.
Speaker 4: That's great to catch up, always a pleasure. Thanks for
Speaker 4: updating us BNP's CFO Las Machel, BNP Powerabar