Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: So let's talk about our next guest. BAF Parabart has
Speaker 2: reported better than expected revenue and profit for the second quarter.
Speaker 2: It's stock traders, it's equity traders, absolutely smashing expectations. Joining
Speaker 2: us now is last match. Neil, the chief financial Officer
Speaker 2: of the CFO at BNP Parabart, lars always a pleasure.
Speaker 2: I feel like I'm going to ask you the same
Speaker 2: question that I asked you last time around, which is
Speaker 2: is BNP just an equity story? Now it is the
Speaker 2: rest of the bank performing as you would like it
Speaker 2: to or are the equity guys just doing what they
Speaker 2: need to do to keep this bank delivering these kinds
Speaker 2: of amazing numbers that you're delivering right now.
Speaker 3: Well, God, if you look at the results, it's basically
Speaker 3: all engines are firing on all are basically firing. If
Speaker 3: you look at it, I mean all the grout, all
Speaker 3: of the lines are basically double digit. So top line
Speaker 3: is up to a haelve percent growth. Operate incomes so
Speaker 3: revenues minus cost minus cost of risk up sixteen percent,
Speaker 3: bottom line given a capital gain up thirty three percent,
Speaker 3: And again it is cib which is doing fine, but
Speaker 3: it's also the retail activities which are doing fine, and
Speaker 3: also the IPS or the asset management and insurance activities,
Speaker 3: which are doing very fine. And moreover, our common equity
Speaker 3: T one is solid thirteen percent. We are there eighteen
Speaker 3: months ahead of business, so we are really firing on
Speaker 3: all cylinders and ready to continue to support the economy.
Speaker 3: So we are not that one trick pony. It is
Speaker 3: really the three divisions that are working collectively and that
Speaker 3: are boosting the results.
Speaker 2: Okay, let's just kind of absorb all of that, but
Speaker 2: talk a little bit about what is happening in equities.
Speaker 2: The equity numbers are strong and a well ahead of expectations.
Speaker 2: QY to equity and prime services revenue one point four one,
Speaker 2: that's plus f forty three percent year on year. Can
Speaker 2: you just give me a bit of detail that I'm
Speaker 2: curious as to how this breaks down equity and prime
Speaker 2: services lars. What are you getting on the prime services
Speaker 2: side of things? What are hedge funds doing? Where are
Speaker 2: you seeing the expansion when it comes to the hedge funds.
Speaker 2: Some of the Wall Street banks like Gold and Sanks,
Speaker 2: we're talking about really strong demand for leverage coming out
Speaker 2: of Asia. Where are you seeing the prime services business
Speaker 2: doing well and how does it compare with the rest
Speaker 2: of the equities business within that portfolio.
Speaker 3: Well, if you look our equity and prime services, we
Speaker 3: are one of the few banks in Europe that have
Speaker 3: the full scale, so we have cash, equities, derivatives and
Speaker 3: prime brokers, as you said, and that basically having a
Speaker 3: reach all around the world.
Speaker 1: And if you look at.
Speaker 3: The demand, the demand, probably related to the supercycle that
Speaker 3: we see, has been stronger both in the US and
Speaker 3: in Asia, but it has been strong overall. And as
Speaker 3: we are present in all of those domains and we
Speaker 3: have the capital, the liquidity, the leverage to do so,
Speaker 3: we are there to accompany that demand. And so that's
Speaker 3: what we've been seeing and so we're very pleased to
Speaker 3: have that complete setup and to be able to follow
Speaker 3: our clients all around the world.
Speaker 4: Actually last good morning. So that's the revenue side of things.
Speaker 4: What you're doing on provisions. One line in our report
Speaker 4: this morning suggests that maybe your provisions have been on
Speaker 4: the rise, maybe higher than had been estimated, and citing
Speaker 4: geopolitical risk, What is it that you are increasingly provisioning for.
Speaker 3: Yeah, listen, if I express the cost of risk as
Speaker 3: what fraction of my loans do I impair? So I
Speaker 3: express this in basis points, you have fraction of percentage.
Speaker 3: We clocked in this quarter at thirty nine basis points
Speaker 3: compared to thirty eight a year ago. But if you
Speaker 3: look at the cost of risk in our divisions, it
Speaker 3: is basically stable. So intrinsically with whatever that has been
Speaker 3: happening on the divisions, there is no pickup.
Speaker 1: It is stable.
Speaker 3: So what is that additional basis point coming from. Is
Speaker 3: because we took a prudence stand saying there is some
Speaker 3: geopolitical uncertainty and that allows us to take a generic
Speaker 3: provision for that uncertainty.
Speaker 1: So that is a provision that we took.
Speaker 3: If at some point in time the geopolitical situation would
Speaker 3: deteriorate and there would be higher cost of risk, we
Speaker 3: would use this reserve that we have created this quarter.
Speaker 4: And las, can I ask you about what's happening with
Speaker 4: the technology build out, the frenzy around AI and data
Speaker 4: center rollout, and how we see that evidence in the
Speaker 4: business that BNP pow about does We heard from somebody
Speaker 4: at Barclay's yesterday who was talking about a golden age
Speaker 4: for technology right now, so many trends happening at the
Speaker 4: same time, and so many companies wanting to tap markets
Speaker 4: as a result. Is this something that you think is
Speaker 4: happening outside of the European banking or is European banking
Speaker 4: intrinsic to these developments.
Speaker 3: You see demands a bit all over the world. If
Speaker 3: you go into Asia, the US, it is rather than
Speaker 3: the AI supercycle. If you go in Europe, there are
Speaker 3: also structural demands infrastructure, energy, So there are a lot
Speaker 3: of investments that are happening, and so we see that
Speaker 3: pickup and again with what we have both in the
Speaker 3: global markets but also in the financing activities, and given
Speaker 3: our capital position, we are there to support.
Speaker 1: The One thing is, you know, we are.
Speaker 3: A bank, We are prudent, so we have to be
Speaker 3: We see a lot of demand, but we have to
Speaker 3: be careful and to avoid that we would underwrite things
Speaker 3: that would make us think of what we saw back
Speaker 3: in two thousand and two. So that's a bitt So, yes,
Speaker 3: we see demand, Yes we're ready to support it, but
Speaker 3: we keep our eyes open as we always do.
Speaker 2: You seem to be saying that you think there's a
Speaker 2: risk here, how bubble like do you think the market
Speaker 2: is right now? Therefore around this.
Speaker 3: Space listen, I'm not going to qualify it as a bubble,
Speaker 3: but I'm telling you we are continuing to look very
Speaker 3: careful what it is to make sure that there is
Speaker 3: a difference between really infrastructure kind of things and things
Speaker 3: which are maybe not as under build. So I'm not
Speaker 3: saying there is a bubble, but we're particularly careful to
Speaker 3: avoid it.
Speaker 2: Just follow up on that. When you spend money, I'm
Speaker 2: going to ask the same question I asked the CFO
Speaker 2: of Santandre yesterday. What's your rate of return when you
Speaker 2: invest in AI at the moment, So you invest a
Speaker 2: euro in AI, what's your rate of return that you're
Speaker 2: seeing at the bank right now.
Speaker 3: Yes, I'll put it the other way around is to
Speaker 3: be very fair again, these kinds of things, if you
Speaker 3: implement AI. I'm exaggerating, but imagine you give every employee
Speaker 3: a tool that is going to cost a lot of
Speaker 3: money and that's not necessarily going to realize in any
Speaker 3: bottom line improvement.
Speaker 1: So the way we do it, we really focus on.
Speaker 3: All the investments that we do that they do have
Speaker 3: the ROI c that we go for so more than
Speaker 3: what we typically have fifteen percent after tax. We also
Speaker 3: want to make sure that it is focused on cost
Speaker 3: capturing and on cyber so we really look forward, so
Speaker 3: we're not handing our tools to everyone.
Speaker 1: We're really taking end to end.
Speaker 3: Processes see where it can be plugged in and how
Speaker 3: it can deliver the savings.
Speaker 4: Last, I don't need to tell you that we're heading
Speaker 4: towards a French election. Of course, when you look at
Speaker 4: the polling, are you preparing the business for any kind
Speaker 4: of particular outcome? Are you concerned about European cohesion on
Speaker 4: the other side of the election. Are you concerned about
Speaker 4: higher French bond market spreads on the other side of
Speaker 4: the election? How do you prepare the business?
Speaker 3: The point of attention if I talk to corporates and
Speaker 3: at this stage they picked up business, so they were
Speaker 3: a bit wait and see with what was happening, and
Speaker 3: at least they picked up. If you look at June,
Speaker 3: you saw business picking up. So from that point of you,
Speaker 3: it's fine. If I talk to our individual clients, you
Speaker 3: saw our result in French retail banking, they are doing fine.
Speaker 3: So the point of attention if I may say, is
Speaker 3: the French Republic, Yeah, what will happen? What will happen
Speaker 3: with the financing cost centralize? So that is a bit
Speaker 3: the point of attention, but intrinsically for us with respect
Speaker 3: to what we see.
Speaker 1: In the French clients.
Speaker 3: And let's not forget we are a bank which is
Speaker 3: Pan European. Yeah, I know we have twice Paris in
Speaker 3: our name, but we are mainly a Pan European bank.
Speaker 3: So from that point of view, on the day to
Speaker 3: day business, we see evolutions which are fine, but yes,
Speaker 3: there will be some uncertainty around the republic, around the
Speaker 3: financing around it. So that's what we will have probably
Speaker 3: until next summer.
Speaker 2: Yep, we're all going to watch with interest. I have
Speaker 2: to say, last it's a pleasure, thanks for the time
Speaker 2: this morning part about CFO Las Mastion Neil