The real reason BNP Paribas' fixed income traders are SO hot

Something special has happened at BNP Paribas. While most banks struggled to generate revenue growth in fixed income sales and trading in the first quarter of 2019, BNP Paribas' fixed income traders achieved a monumental growth rate of 29% (actually 32.4% when structural changes relating to the creation of a new capital markets platform are excluded).  However you look at it, the first quarter was exceptional.

As the chart below shows, this put BNP Paribas' fixed income traders far, far ahead of the pack when it came to seizing fixed income sales and trading market share in the first three months of the year. By comparison, Deutsche Bank and JPMorgan were the biggest losers.

What made the first quarter in fixed income so exceptional at BNP? Insiders point to a combination of the French bank's excellent macro strategy and research function, and some outstanding recent hires.

BNP Paribas' fixed income business is macro (FX and rates) focused. Accordingly, the bank pointed to 'particular strong growth in rates and forex' and to a rebound in emerging markets revenues as the source of Q1's success in the presentation accompanying today's results.  

Insiders say the macro sales and trading business at BNP benefits from excellent leaders in the form of Laurence Mutkin, the global head of G10 rates strategy and chief interest rate strategist, and Michael Sneyd, the head of macro quant and derivatives strategy. Mutkin joined from Morgan Stanley in 2013. Sneyd has been at BNP since 2011, but has risen rapidly up the ranks recently. He was promoted to head of FX and cross asset strategy in August 2017 and then promoted again to head of macro quant and derivative strategy in October 2018. In the same month, Sam Lynton Brown, an FX strategist, was promoted to head of FX strategy for Europe.

Insiders say that Sneyd in particular has helped recalibrate BNP's macro strategy products, thereby assisting the French bank in the winning of business with macro hedge funds. Another ex-Morgan Stanley man, Kaushik Banerjee (who joined in 2010), holds BNP's EMEA hedge fund relationships.

With the reinvigorated strategy function and existing strong sales team bringing the flow into BNP, insiders say the bank successfully converted this into pnl using its equally well-endowed trading team. Goldman Sachs veteran Baris Temelkuran arrived in July 2018 to head G10 FX trading. Subsequently, the bank added emerging markets trader Serdar Baykal from HSBC and James Harris, an FX spot trader, from Credit Suisse.

The first quarter's impressive revenue growth rate came after the French bank laid off around 40 people last year, predominantly in fixed income sales and trading. Insider says BNP's macro business made a succession of good calls in the first quarter of 2019, although performance may also have been flattered by a weak start to 2018, when revenues in the fixed income business were historically low.... In February 2019 BNP outlined plans to cut an extra €350m in costs from its corporate and investment bank by 2020. 

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