BNP Paribas is the bank that companies turned to get emergency loans more than any other in Europe whet he novel coronavirus pandemic struck the continent.
Compared to BNP, its closest rivals including Santander, Deutsche Bank and Credit Suisse had managed to expand their balance sheet and credit payout by only about 5 per cent.
It has been the long standing target of BNP, the largest lender of the euro zone, to become the dominant bank of Europe and now with the pandemic hitting the world and Europe, it plans to use the lending platform that it has built during the pandemic to further this ambition, said reports quoting sources close to the management of the lender.
There were no comments available from BNP, which is set to announce results on July 31.
“Can BNP take advantage of the quality and resilience of its profits to grow (European) market share? I think the answer is, yes,” said Francois Chaulet, managing director at Montsegur Finance, whose funds invest in BNP.
However the bank has found it hard to crack into and capitalize on lending the growth to generate greater margins from the business from those customers that it has lent to, such as from advising on equity issuance or mergers and acquisitions.
While there was a 5.5 per cent growth in the bank’s risk-weighted assets between 2015 and 2019, and a 3.9 per cent growth in revenue, it however recorded a flat 10 per cent rate in the return on tangible equity – which is a measure of profitability.
In terms of merger mandates, BNP has trailed Goldman Sachs, Deutsche Bank, Barclays and Credit Suisse in the first half of 2020. BNP was also outside of the top 10 advisors and ion terms of equity deals it retained its ninth position in the European market.
“Just because you have lent a lot of money does not mean that you can do for a large European corporate client everything that the client wants to do: it takes specific skills, and money is not everything,” said a senior Paris-based investment banker at a foreign rival, according to reports.
“American competition is very tough … they (BNP) know they have the balance sheet, but it’s hard.”
M&A, ECM activity and syndicated loans, as well as trade finance and cash management are part of the corporate banking business of BNP. These businesses units make up more than one third of the total corporate and institutional banking revenue of the bank. It also includes markets and securities services.
BNP has been able to shed its image as a French-only bank for now with the increased lending.
For Britain’s BP in early April, BNP was also the only underwriter on a $10 billion credit facility which was an unusual move for such a large facility. It was more prominent because of it happened in a sector like energy where there is enough stress and strain under the current conditions. The loan was then syndicated to 20 banks.
“The leaders of BNP used to say: my first client is the French economy,” said a person who used to work close to the top management of the bank. “More recently, they say my first client is the European economy.”
(Adapted from Nasdaq.com)