France’s BNP Paribas is the latest bank to face US regulatory sanctions over its record-keeping of electronic messages used by employees to discuss business matters, following a swath of fines across Wall Street.
The eurozone’s biggest bank by market value said on Thursday it had reached “proposed resolutions” with the enforcement divisions of the Securities and Exchange Commission and the Commodity Futures Trading Commission. The regulators had been investigating its compliance with requirements to keep records linked to the “use of unapproved electronic messaging platforms for business communications”, it added.
BNP, which reported forecast-beating second-quarter results on Thursday, also disclosed a new €125mn charge linked to unspecified litigation. It declined to confirm whether that was linked to the messaging probes, which shook the banking industry after investigations began to emerge last year.
Lenders have since cracked down on unauthorised use of encrypted messaging services such as WhatsApp and Signal, while some bankers have been dismissed as a result. Britain’s HSBC fired a trader last year for using messaging services inappropriately. It was among the banks imposed with sanctions, paying a total of $45mn to the SEC and CFTC this year.
Goldman Sachs, Morgan Stanley and Barclays also agreed collectively to pay more than $1.8bn in fines last year.
BNP said in its filing on Thursday that its “proposed resolutions” had yet to be finalised.
The bank beat profit forecasts in the second quarter as charges on bad loans fell and it kept a tight leash on costs, countering a mixed performance in its investment bank as earnings from debt trading fell.
It posted a near 5 per cent drop in net profit from a year earlier to €2.8bn, while revenue was down 1.5 per cent to €11.4bn, though it still beat analysts’ expectations on both counts. It said that without charges linked to litigation and restructuring costs, profits would have risen from a year earlier.
BNP shares rose 4 per cent in early trading. The bank’s operating expenses were up 1.6 per cent from a year earlier, less than analysts had expected, while its cost of risk fell just over 9 per cent from a year earlier to €689mn, reflecting a low level of provisions set aside on souring loans.
RBC Capital Markets analyst Anke Reingen said against a backdrop of high inflation in the eurozone, a “beat on better cost control is rare and reassuring”.
Under chief executive Jean-Laurent Bonnafé, BNP has sought to position itself as Europe’s go-to corporate and investment bank, outside dominant US rivals. It has long vaunted a diversified model that is now helping it ride out some of the highs and lows of historically elevated interest rate rises.
In the second quarter, BNP benefited from underlying momentum across businesses, including in its Arval car leasing unit, and in its European businesses including in Italy.
Like its Wall Street peers, the French bank had a mixed quarter in its corporate and investment bank, which posted a 2.3 per cent fall in revenues. Earnings were weaker in its markets business in particular, with a 18 per cent drop in fixed-income, currencies and commodities revenues.
That was steeper than the average 12 per cent drop across US rivals, analysts said, though Goldman Sachs and Morgan Stanley also had rocky quarters.
But BNP did well in bond issuance, sustaining a much stronger performance in what it calls its global banking unit.
The bank is now looking to improve its profitability and expand revenues, including as it reinvests some of the gains from its $16.3bn sale of Bank of the West, though Bonnafé has excluded making big acquisitions with his war chest.
Part of the funds are going to share buybacks, including another €2.5bn chunk out of a total €5bn that the bank said it would launch in August.
BNP’s return on tangible equity reached 13.6 per cent in the second quarter, hitting its longer-term goal of above 12 per cent to 2025.
