BNP Paribas struggled to increase profit in the second quarter as its cash cow French retail banking business suffered a sharp fall in pretax income due to low interest rates and declining financial fees. Like other banks in Europe, BNP Paribas has been hampered in its bid to boost retail banking revenues by low rates that have eaten into margins, and a decline in financial fees stemming from weak equity markets.
Pretax income in domestic markets covering France, Italy and Belgium fell 2.1 percent in the second quarter despite an 11 percent fall in the cost of risk, a measure which reflects how much is set aside for bad loans.
In France, BNP Paribas' retail banking revenue fell 3.6 percent and pretax income dropped 10 percent, raising questions over its earlier guidance of stable revenues in 2016 from its retail "cash cow".
Ranked France's biggest listed bank, BNP Paribas said its April to June performance left it on track to hit its 2014 - 2016 profitability target.
It posted a 0.2 percent rise in net profit to 2.56 billion euros ($2.83 billion) during April to June, including exceptional items such as the sale of Visa Europe shares.
Excluding exceptional items, the bank said net profit fell 4.8 percent to 2.19 billion euros.
BNP Paribas set out plans earlier this year to cut costs and shed low-yielding assets at its corporate and institutional bank (CIB) while reinvesting in activities that tie up less capital, as it seeks to keep its return on equity at 10 percent beyond 2016.
The bank said it had already sold or securitised 6 billion euros in risk-weighted assets as of June 30, out of a target of 20 billion euros by 2019, as part of the plan. CIB revenue rose 1.4 percent in the second quarter, thanks to a pick-up in client volumes in its global markets division.