The Board of Directors of BNP Paribas met on 27 July 2016. The meeting was chaired by Jean Lemierre and the Board examined the Group’s results for the second quarter 2016 and endorsed the interim financial statements for the first half of the year.
GOOD RESULTS AND SOLID ORGANIC CAPITAL GENERATION
Thanks to the diversity of its geographical presence and of its businesses all focused on serving clients, BNP Paribas reported this quarter again a good overall performance in a still challenging environment. The Group showed this quarter again the strength of its integrated and diversified
business model which results in strong resilience in changing environments.
Revenues totalled 11,322 million euros, up by 2.2% compared to the second quarter 2015. They included the exceptional impact of +597 million euros of the capital gain from the sale of Visa Europe shares as well as the -204 million euros in Own Credit Adjustment (OCA) and own credit risk included in derivatives (DVA) (+80 million euros in the second quarter 2015).
Revenues of the operating divisions were down slightly by 0.5% compared to the second quarter 2015 due to an unfavourable foreign exchange effect but were up by 0.7% at constant scope and exchange rates: they held up well at Domestic Markets (1) (-1.4% [2]) despite the low interest rate environment, grew by 1.3%2 at International Financial Services, and rose by 3.6% (2) at CIB compared to an already high base the same quarter a year earlier. Contrary to the usual seasonal effect, CIB’s business and revenues, are this year higher in the second quarter than in the first
quarter.
At 7,090 million euros, operating expenses were stable (+0.1%) compared to the second quarter 2015. They included the exceptional impact of the acquisitions’ restructuring costs (3) and the CIB transformation plan’s costs for a total of 108 million euros (62 million euros in the second quarter 2015). They no longer included this quarter any Simple & Efficient transformation costs (155 million euros in the second quarter 2015): in line with the objective, the last costs related to this plan were booked in the fourth quarter 2015.
Operating expenses were up by 1.1% (2) for Domestic Markets (1), by 2.6% (2) for International Financial Services and by 5.5% (2) for CIB as a result of business growth this quarter. They benefited from the success of the Simple & Efficient savings plan, which offsetted the natural costs drift, but factored in the implementation of new regulations and the reinforcement of compliance.
The gross operating income of the Group was thus up by 5.9%, at 4,232 million euros. The cost of risk was down 12.4% due in particular to the good control of risks at loan origination, the low interest rate environment and the continued improvement recorded in Italy. It came to 791 million euros (903 million euros in the second quarter 2015) or 45 basis points of outstanding customer loans.
Non-operating items totalled +84 million euros (+592 million euros in the second quarter 2015 due in particular to the exceptional impact of the capital gain from the sale of a 7% stake in Klépierre-Corio and a dilution capital gain from the merger between Klépierre and Corio).
Pre-tax income thus came to 3,525 million euros compared to 3,685 million euros in the second quarter 2015 (-4.3%).
Net income attributable to equity holders was thus 2,560 million euros, up by 0.2% compared to the second quarter 2015. Excluding exceptional items (4), it came to 2,190 million euros (-4.8%).
As at 30 June 2016, the fully loaded Basel 3 common equity Tier 1 ratio (5) was 11.1%, up by 10 basis points compared to 31 March 2016, illustrating the solid organic capital generation. The fully loaded Basel 3 leverage ratio (6) came to 4.0% (stable compared to 31 March 2016).
The Liquidity Coverage Ratio stood at 112% as at 30 June 2016. Lastly, the Group’s immediately available liquidity reserve totalled 291 billion euros (compared to 298 billion euros as at 31 March 2016), equivalent to over one year of room to manoeuvre in terms of wholesale funding.
The net book value per share reached 71.8 euros, equivalent to a compounded annual growth rate of 6.2% since 31 December 2008, illustrating the continuous value creation throughout the cycle.
Lastly, the Group is actively implementing the remediation plan agreed as part of the comprehensive settlement with the U.S. authorities and is continuing to reinforce its compliance and control procedures.
For the first half of the year, revenues showed good resilience despite the particularly unfavourable environment in the first quarter and totalled 22,166 million euros, up by 0.1% compared to the first half of 2015. They included the exceptional impact of +597 million euros of the capital gain from the sale of Visa Europe shares as well as the +161 million euros in Own Credit Adjustment (OCA) and own credit risk included in derivatives (DVA) (+117 million euros in the first half of 2015).
The revenues of the operating divisions held up well compared to the first half of 2015 at Domestic Markets (7) (-1.4%) (8), they were up at International Financial Services (+1.5% [8]) but down by 7.7% (8) at CIB due to a particularly challenging market environment in the first quarter.
Operating expenses, at 14,717 million euros, were well contained and down by 1.2% compared to the first half of 2015. They included the exceptional impact of the acquisitions’ restructuring costs (9) and CIB transformation plan’s costs for a total of 154 million euros (82 million euros in the first half of 2015). They no longer included this semester any Simple & Efficient transformation costs (265 million euros in the first half of 2015).
Operating expenses rose by 1.3% (8) for Domestic Markets (7) and by 3.4% (8) for International Financial Services but were down by 2.3% (8) for CIB as a result of lower business in the first quarter. Pursuant to the IFRIC 21 “Levies” interpretation (10), they included the entire amount of the increase in 2016 of banking taxes and contributions (+1.2% impact on the operating expenses of the operating divisions). They benefited from the success of the Simple & Efficient savings plan, which offsetted the natural costs drift, but factored in the implementation of new regulations and the reinforcement of compliance.
The gross operating income of the Group rose by 2.7%, at 7,449 million euros.
The cost of risk was significantly lower (-20.5% compared to the first half of 2015) due in particular to the good control of risks at loan origination, the low interest rate environment and the continued improvement recorded in Italy. It came to 1,548 million euros (1,947 million euros in the first half of 2015).
Non-operating items totalled +262 million euros (+931 million euros in the first half of 2015 due to the exceptional +364 million euro impact of the capital gain from the sale of a 7% stake in Klépierre-Corio, a +123 million euro dilution capital gain from the merger between Klépierre and Corio and a +94 million euros capital gain from the sale of a non-strategic stake).
Pre-tax income thus came to 6,163 million euros compared to 6,237 million euros in the first half of 2015 (-1.2%).
Net income attributable to equity holders was thus 4,374 million euros, up by 4.1% compared to the first half of 2015. Excluding exceptional items (11), it came to 3,796 million euros (-1.3%).
The annualised return on equity, excluding exceptional items (12), equalled 9.7% (+50 basis points compared to the whole of 2015). The annualised return on tangible equity, excluding exceptional items (12), was 11.6% (+50 basis points compared to the whole of 2015). The annualised return on equity (12) excluding exceptional items calculated on the basis of a CET1 ratio of 10% stood at 10.5%, in line with the target set out in the 2014-2016 plan.
(1) Including 100% of Private Banking in the domestic networks (excluding PEL/CEL effects)
(2) At constant scope and exchange rates
(3) LaSer, Bank BGZ, DAB Bank, General Electric LLD
(4) Effect of exceptional items after tax: +370 million euros in the second quarter 2016, +255 million euros in the second quarter 2015
(5) Ratio taking into account all the CRD4 rules with no transitory provisions
(6) Ratio taking into account all the rules of the CRD4 rules at 2019 with no transitory provisions, calculated according to the delegated act of the European Commission dated 10 October 2014
(7) Including 100% of Private Banking in the domestic networks (excluding PEL/CEL effects)
(8) At constant scope and exchange rates
(9) LaSer, Bank BGZ, DAB Bank and General Electric LLD
(10) Booking in the first quarter of the full amount of banking taxes and contributions for the year
(11) Effect of exceptional items after tax: +578 million euros in the first half 2016, +358 million euros in the first half 2015
(12) Effect of exceptional items after tax: +578 million euros in the first half 2016, -644 million euros for the full year 2015