BNP Paribas: Attractive Despite French Political Risk
No-moat BNP Paribas reported solid second-quarter 2024 results, somewhat ahead of company-compiled consensus expectations. As expected, the corporate and investment banking operation stood out, growing revenue by 12% year on year with a strong equity trading performance. Looking at the strong growth in underwriting fee income booked by BNP’s US peers, BNP should be slightly disappointed by its performance in this area. There was no indication of a hit to earnings from the recent volatility around the French elections. If anything, BNP’s securities trading business has benefited from increased client activity and wider bid-ask spreads. However, the spread of French bonds only started to widen in the last few weeks of the quarter. Therefore, we think it is too early to tell what the impact of higher funding costs will be. After recording a net income of EUR 6.5 billion for the first half of 2024, BNP remains on track to achieve its guidance of net income above the EUR 11 billion it booked for 2023. Credit quality remains sound, with loan-loss provisions coming in below guidance, although one specific situation inflated the impairment charge in France for the quarter. We maintain our EUR 85/share fair value estimate.