BNP Paribas may now reconsider all those fixed income hires

BNP Paribas has just revealed its second quarter results and, by and large, they're very good.

Second quarter profit came in at €2.1bn, a 31% increase year on year and a performance which beat consensus analyst expectations of €1.9bn as most divisions stepped up to the plate.

Unfortunately, the same can't be said for its corporate and investment banking (CIB) division, which was hit by declining trading revenues due to extreme volatility around concerns related to swollen budget deficits in the eurozone.

BNP Paribas errs against year-on-year comparisons due to what it calls an "exceptional" first half of 2009. But year on year, CIB revenues slumped by a rather nasty 37.5%, to stand at €2.6bn.

In June, the French bank was in a bullish mood, and outlined plans to build front office headcount in its fixed income division by 10%, which amounts to around 200-250 people.

It's also been hiring for its rates business, due to reportedly high turnover.

But the second quarter results are likely to make it decidedly more reticent about such expansion. Revenues in fixed income were down 33% compared to the first quarter and 44% from the €2.2bn generated this time last year.

Its equities division, however, suffered the largest decline in revenues - 68% quarter on quarter to stand at €268m. This was down to extreme volatility, reduced liquidity and increased cost of hedging positions, according the bank.

Also in June, BNP Paribas stated its aim of breaking into the top ranks of investment banking something that would result in an "ambitious growth plan in Europe", according to Alain Papiasse, head of BNP's CIB division.

Obviously, one bad quarter doesn't necessarily mean these plans will be shelved, but a more cautious approach is likely to be adopted until an obvious improvement can be seen down the line.

BNP's CEO, Baudoin Prot, said that he remained convinced of the CIB divisions "ability to perform well in more normalised markets".