(Reuters) – BNP Paribas reported second-quarter net profit on Wednesday that beat expectations, driven by a jump in investment banking revenue, but a drop in interest income at its French retail bank worried investors.

The largest bank in the euro zone recorded a 21% increase in its net profit attributable to the group in the second quarter, to 3.4 billion euros, above analysts’ expectations, who had been counting on a result of 2.91 billion euros in a consensus compiled by BNP Paribas.

The group’s net banking income rose by around 8% to 12.3 billion euros, also above analysts’ expectations of 11.9 billion euros.

The cost of risk, which measures BNP’s potential exposure to non-repayment of loans, stands at -752 million euros and is also better than expected by analysts.

The French bank’s results were notably driven by a 58% jump in revenues in “equity & prime services”, which consist of facilitating the purchase, sale and lending of shares and providing other services to clients such as alternative funds.

BNP reported an overall 12% increase in net banking income for its investment banking (CIB) business in the second quarter, to 4.48 billion euros.

On the Paris Stock Exchange, BNP Paribas shares fell by 1.9% to 63.46 euros at around 09:15 GMT, while the CAC 40 fell by 1.47% at the same time.

Several analysts considered the results “solid” and highlighted the performance of the trading activities on shares, but those of Barclays considered the accounts “mixed”, highlighting in particular the weakness in retail banking in France and Italy.

In France in particular, retail banking was weighed down by an 11% drop in interest income – the difference between profits made through loans and amounts paid out in interest-bearing accounts.

BNP suffered from the cessation of remuneration of the European Central Bank’s (ECB) mandatory reserves and the cost of inflation hedges linked to the regulated remuneration rate of the Livret A, the latter effect expected to fade in the third quarter, the bank said.

Furthermore, revenues from interest rate, currency and commodity (FICC) activities fell by 7%, notably due to weaker demand in Europe for commodities.

BNP, which forecasts an average increase of 7.5% in revenues from its market activities over the period 2021-2025, nevertheless delivered a better performance in the second quarter than some of its Wall Street competitors with regard to its equity trading activities.

In France, the year 2024 saw a gradual return of IPOs, including Exosens and Planisware, for which BNP played a coordinating role.

BNP confirmed its full-year targets, including revenue growth of more than 2% compared to 2023 and net income attributable to the group of more than 11.2 billion euros.

(Written by Augustin Turpin, with Mathieu Rosemain, edited by Blandine Hénault)

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