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Revenues rebound at French banks

* RESULTS

* BNP Paribas (LSE: 0HB5.L - news) and SG investment banks gain market share

By Christopher Spink

LONDON, May 5 (IFR) - France’s two biggest banks took market share from investment banking rivals in the first quarter, led by a revival in equities revenues for BNP Paribas.

BNP Paribas reported a 20% rise in revenues at its corporate and institutional banking division, in line with US peers and better than most European rivals.

"In global markets there was a general rebound in activity, more so among US banks than European ones," said Philippe Bordenave, chief operating officer at BNP Paribas. "We have been gradually gaining market share in each quarter."

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First (Other OTC: FSTC - news) -quarter CIB revenues were €3.22bn, compared with €2.69bn in the first quarter of 2016, when the French bank reported a 41% fall in equities revenues to €428m. That bounced back by 36% to €580m in the latest first quarter, although that is still below the €725m level recorded two years ago.

The group’s larger fixed income, currencies and commodities arm also recovered, with revenues surging by 32% to €1.17bn, roughly the same level as two years ago. Like others, BNP (Paris: FR0000131104 - news) Paribas has benefited from strong activity in rates. It also said FX was good, unlike the falls reported by many rivals.

The lender differs from most others by also including fees from primary debt capital markets in its FICC division. That has been strong across all banks at the start of the year.

“BNP’s market share progress looks markedly stronger when compared with other European IB firms. FICC looks healthy but it is successive quarters of progress in equities that is driving the firm-wide gains,” said Kiri Vijayarajah, analyst at Barclays (LSE: BARC.L - news) .

Societe Generale (Swiss: 519928.SW - news) had a more mixed performance. Its FICC revenues rose 12.8% to €777m, which was against a tougher first quarter in 2016 than many rivals. It was its highest quarterly FICC revenues for five years.

Across its investment bank revenues rose 5.4% to €2.48bn. All parts of the division saw revenues increase except for financing and advisory, where they fell 2.6% to €557m.

Within the unit, weaker asset financing in a competitive market offset better performances in DCM (KSE: 024090.KS - news) and ECM underwriting as well as advisory fees, the bank said.

"Our first-quarter revenues were encouraging, continuing on from 2016 when we managed to increase our market share," said Didier Valet, deputy chief executive and head of corporate and investment banking. "We were in line with most European banks."

Results last week from BNP Paribas, SG and HSBC left Europe's major investment banks showing a broadly similar performance in the first quarter to their US rivals, to ease concern they were losing significant share.

LIBYA SETTLEMENT

SG's results were overshadowed by the French bank’s agreement to pay €963m to settle a civil claim brought by the Libyan Investment Authority relating to €2.1bn of transactions in 2007.

A London High Court hearing in the dispute had been scheduled to start this week but has now been cancelled following the confidential agreement between the two parties.

“By settling this dispute ... we avoid a long trial that would have demanded a lot of resources,” said SG chief executive Frederic Oudea.

The bank took an additional €350m charge against a possible settlement, meaning it was fully covered for the cost.

Both BNP Paribas and SG are expected to see a strong recovery in markets trading if Emmanuel Macron becomes French president. SG echoed other banks, which said rates trading was strong in January before tailing off somewhat in February and March.

“The resurgence of political uncertainty around the elections in Europe and the direction of US policy led to a certain 'wait-and-see' attitude in the markets,” said the bank.

In equities, SG said stronger investor appetite for structured products in Asia and Europe helped revenues improve 4.1% to €562m. Flow products, including cash equities, remained less active with low volatility.

Prime services revenues rose 9.3% to €176m as the integration of Newedge paid off. SG said it had increased market share here by 1.9 percentage points to 14.8%. Across all investment banking divisions it said it has increased market share since 2013 by 30bp to 3.8%.

“SG’s market share is relatively static despite the inherent volatility in this business line,” said Vijayarajah. (This story will appear in the May 6 issue of IFR Magazine. Reporting by Christopher Spink)