After outshining some of Wall Street’s biggest and best this year, trading results at France’s largest banks are crashing back to earth.
Leading the declines were Credit Agricole SA and Societe Generale SA, which both posted a revenue slump of about 25 percent, while BNP Paribas SA’s earnings from all trading activities—including bonds, equities and currencies—fell 15 percent. Only Natixis posted better results than Wall Street peers, registering a 9 percent fall compared with the US average of 15 percent.
After emerging relatively unscathed from the financial crisis, some French banks have taken advantage of the pullback from some businesses of European rivals such as Deutsche Bank AG to expand in investment-banking. While their focus on exotic products and equity derivatives paid off with stellar results earlier this year, they were unable to escape the deadening effect of low volatility and muted demand that’s characterised recent trading conditions.
“It’s a return to reality,” said Karim Bertoni, who helps manage about $10 billion at Bellevue Asset Management AG in Switzerland. “There is some disappointment.”
At SocGen, a global leader in equity derivatives that plans to announce new targets later this month, total trading sales fell by about a quarter. At BNP Paribas, long a leader in equity derivatives and structured products, the drop in trading revenue was on a par with that of the Wall Street banks on a constant currencies basis. The bank had outperformed in the second quarter, restricting declines at the global markets division to 2.3 percent, compared with a 10 percent drop on Wall Street. Revenue at Credit Agricole rose 10 percent in the second quarter. Natixis reported the smallest trading decline of the French banks in the third quarter. BNP Paribas, France’s biggest bank, managed to post an increase in sales from equities and prime services for hedge funds, but couldn’t escape a 26 percent bond-trading slump.