Are BNP Paribas’ fixed income traders the best in the world?
In their deepest unspoken fantasies, BNP Paribas's corporate and investment bankers probably feel that they deserve some pretty reasonable bonuses this year. Sure, their employer has just revealed the largest loss in its entire 14 year history ($5.8bn) after incurring a nearly $9bn fine for violating sanctions in the U.S. Sure, banking bonuses at BNP aren't known for being generous, especially at junior level, but BNP's corporate and investment bankers are actually doing pretty well. In fact, its sales and trading business just put in one of the best performances of any bank, anywhere.
In the second quarter of 2014, revenues in BNP's fixed income sales and trading business rose by 22% compared to the second quarter of 2013. Revenues in BNP's combined equities and advisory business rose 20%.
Source: BNP Paribas
That fixed income result looks particularly impressive when you consider that Goldman Sachs' fixed income revenues fell 11% year-on-year in the second quarter, that JPMorgan's fell 18%, that Deutsche's were pretty flat, and that revenues in Barclays' credit trading business and macro trading business fell 14% and 35%% year-on-year in the first half respectively. Only UBS (up 9% year-on-year in the second quarter), Credit Suisse (up 4%) and Nomura (up 1%) had positive comparables year-on-year, and they were blown out of the water by BNP.
Even more remarkably, the French bank attributed its fixed income success to its rates, credit and FX businesses. Other banks have done well in credit, but so far this year rates and FX trading desks have been about as dynamic as a dehydrated mollusc.
Will BNP's fixed income traders - many of whom have been hired in over the past few years - get the credit they seemingly deserve? Maybe. Earlier this month, the bank's finance director said BNP will be paying bonuses irrespective of the U.S. fine.
However, BNP may not feel inclined towards excessive generosity. The French bank has been making redundancies in its fixed income business. It's being forced to hire 475 extra compliance people and is attempting to cut costs. Although its fixed income traders did impressively well, the bank itself says that they did so from a low base (Q213 was pretty bad). Moreover, after years of trying to expand its fixed income sales and trading business, BNP still doesn't have much to show for it. - Compared to the second quarter of 2010, BNP's fixed income sales and trading revenues were down 32% in the second quarter of 2014. Despite their recent efforts, BNP maybe inclined to decide that its traders aren't so deserving after all.