Bnp Paribas Spons Adr

So good afternoon, ladies and gentlemen. Welcome to BNP Paribas results presentation for the first quarter of 2020. Before we get into the specifics of the first quarter performance, I'd like to say that our thoughts go to the most affected by the current health crisis and the ones mobilized to support them. Now in today's presentation, we will update you on how the BNP Paribas group navigates this environment and will focus on group results, division results, and the outlook for 2020, which will conclude our presentation. First, I will take you through the summary of our group results, then Lars Machinil will comment on the results by division, and then I will update you on the outlook for 2020. As usual, at the end, Lars, Phyllis, and myself will be pleased to take your questions. So before going into key messages and results, I invite you to move to slide three, where we remind that BNP Paribas has entered this crisis with a very solid balance sheet, capital and liquidity-wise, a diversified and resilient business model, a strict risk discipline at origination, and long-term client relationships combined with high-performance digital solutions. As such, we are well equipped to accompany our clients through this crisis. Switching to slide four, I would like to highlight some of the ways we are responding to this health crisis. The group's teams have mobilized around the world to support the functioning of the economy and its financing. Our concerns have been to protect our employees who are fully mobilized to ensure banking services to quickly implement solutions to support the financing of our clients. To illustrate this, some figures. First, over 130,000 employees worldwide are working remotely while close to 90% of our branches remain open with a suitable public health setup. Second, close to 70,000 applications have been received for state-guaranteed loans, notably in France, where it was launched earlier than in other countries. It is important to mention that we were very active in accompanying our clients globally across loan, bond, and equity markets with over €115 billion raised with an exceptional mobilization of the group. Last but not least, BNP Paribas Group has demonstrated its social engagement through a global plan of emergency financial aid of over €50 million, as well as €100 million in investments to support SMEs, mid-caps, and the health care sector. Now turning to slide 6, with our first set of key messages. Clearly, the acceleration of the health crisis towards the end of the quarter resulted in extreme shocks on financial markets and in a major shift in the microeconomic outlook. These triggered several negative impacts on the Group's financial performance, which was otherwise in line with its 2020 objectives. A negative €502 million impact on the group's cost of risk mainly due to the ex-ante provisioning of expected losses. Second, two one-off negative impacts on revenues totaling €568 million in the first quarter. The first one-off item consisted in a negative €184 million impact in revenues in our equity and prime services business resulting from the unexpected and sudden restrictions on 2019 dividends by European authorities. The second one-off item was a negative €384 million accounting impact in our insurance revenues related to the valuation at fair market value of certain portfolio as at March 31, bearing in mind that such impact is reversible with market recovery as demonstrated in the first quarter 2019. In this context, if we move to slide seven, we can see that at the end of a quarter supported by an excellent business drive in line with our 2020 objectives, our results were impacted by the harshness of the health crisis. Group revenues at 10.9 billion euros showed resilience despite an extreme market shock at the end of the quarter with a decrease of 2.3% on last year. When excluding the two one-off revenue impacts, we have just talked about, this would have translated into a 2.8% increase. Costs, on the other hand, were significantly down by 3.5%, 292 million euros, in line with our objectives and a testimony to the continued success of our transformation plan. They included, as anticipated, 45 million euros of restructuring and adaptation costs, as well as 34 million euros of IT reinforcement costs, and As planned, no transformation costs. Our cost of freeze rose to 67 basis points, out of which 23 basis points were due to the effect of the health crisis on credit and counterparty risk. And 85.4% increase in our cost of freeze this quarter, mainly for ex-ante provisioning of expected losses. Our net income for the first quarter stood at 1.3 billion euros, down 33% on last year. On excluding the negative measure impacts on the health crisis on revenues and cost of risk, net income was up 6.7% in line with the group's 2020 objectives. Our core equity tier 1 ratio stood at 12%. Finally, the return on tangible equity reached 8% in the first quarter as a result of the impact of the health crisis this quarter. Moving to slide 10, for a zoom on revenues in the operating divisions. Overall, revenues in the operating divisions were down 3.1%, while excluding the negative one-off revenue impacts of the health crisis, they were up 2%. Looking at divisions individually, domestic markets revenues were resilient, with a small decrease of 1.2% of last year, due to the persisting impact of low interest rates in the networks, which was partially offset by the increased activity in specialized businesses. International financial services saw a decrease of 5.4% year-on-year, with revenue growth in personal finance, Bankwest and Euromed, but penalized by the negative one-off accounting impact in our insurance business from the sharp fall in stock markets. Excluding this one-off impact, IFS revenue would have been up 3.6%. Revenues in corporate and institutional banking went down 1.9% on the back of a very good performance in FIC, corporate banking, and security services, and a one-off negative revenue impact in equity and private services. Excluding this one-off impact, CIB saw an increase of 4.3% in its top line. Switching to slide 11 on cost in the operating divisions. Domestic markets deliver a 0.5% reduction in costs, with a 1.5% decrease in the net worth, and a content increase in specialized businesses. When excluding the effect of taxes, subject to 321 taxes, the division saw a positive Joseph effect. IFAS saw a 2.9% increase in costs as it continues to develop its businesses, and CIB reduced significantly in costs by 2.8%. due in particular to its continued cost of plants. Moving to cost of free starting with slide 12. The impact of the effect of the health crisis was 502 million euros or 23 basis points. It reflects the change in macroeconomic anticipations based on several scenarios. It reflects as well the specificities of our portfolios and product risk management standards throughout the cycle. The macroeconomic anticipations take into account the specific features of the dynamic of the crisis and in particular the impacts of the lockdown measures on economic activity as well as the anticipated effects of government support measures and authorities' decisions. Finally, The impact also includes a sector-specific component based on the review of certain sensitive sectors, including hotels, tourism, leisure, transport and logistics, non-food retail, and oil and gas. You can see from this slide, the majority of the impact is borne by CIB and IFAS. Looking at the different business, one at a time, starting with corporate banking on slide 13, cost of risk was up, mainly related to the anticipated impact of the health crisis. Turning to the other business line, on slide 14 and 15, cost of risk remained low in French retail, continued to decrease at Biennale in Italy, and increased more directly in Belgian retail due to the anticipated effects of the health crisis. In the other retail businesses, the anticipated impact of the health crisis as a result of the moderate increase of the cost of risk in Euromate and an increase in banks. The increase in personal finance is mainly on the back of the anticipated effects of the health crisis as well. Turning to slide 16, the financial structure, you can see that our common equity tier 1 ratio remains stable at 12%, mainly due to the support of the economy and combined effects of the health crisis. Our Basel III leverage ratio clocked in at 3.9% and the Group's immediately available liquidity reserve totaled €339 billion, up €30 billion from last quarter. On slide 17, you can see that our net book value per share was stable at €69 as at March 31. At €69.7, Our tangible net book value per share has grown at an annual rate of 7.2% since 2008, highlighting our continued value creations through the cycle. Finally, I remind you that the resolution to suspend the payment of the initially planned dividend has been submitted to the Annual General Meeting. Besides, after the 1st of October 2020, and subject to the then prevailing circumstances, the Board of Directors may convene a general meeting in order to proceed with the distribution of reserves to shareholders in place of the dividend. You will find on slide 18 some key points on the continuous enforcement of the group's internal control and compliance system. And now, hand over to Lars for the divisional results.

Thank you, Jean-Laurent. Fine ladies, gentlemen, good afternoon. Today, I will walk you through the results of each operating division, starting with the first, domestic markets, if I can ask you to swipe to slide 20. You can see that it showed good business drive with solid loan growth, in particular in the French and Belgian retail networks, as well as in the specialized businesses. It also showed a steady rise in deposits in all retail networks, as well as good net asset inflows in private banking. Domestic markets adapted very quickly to the new environment and showed an extraordinary mobilization of its teams to support customers during the health crisis. For instance, around 90% of branches remained open across its retail networks to ensure continuity of service and support customers, for example, with state-guaranteed loans that were applicable. The strength of our digital platforms, illustrated in particular by a steady increase in the number of customers active on mobile apps, as well as in the number of daily connections, was also critical in ensuring smooth continuity of service. If we now focus on the P&L, top line showed resilience with a slight decrease year on year as guided. Indeed, the impact of persisting low rate environment was partially offset by the increase in volumes and the rise in fees, in particular at Consorzbank in Germany. Operating costs were 0.5% down year-on-year, which, when excluding the effect of taxes subject to IFRIC 21, translated into a 2.3% decrease in positive jobs. Pre-tax income was down 5.5% year-on-year, but up 2.6%, excluding the anticipated effect of the health crisis on the cost of risk, which was described earlier by Jean Laurent. Also, if you look at pre-tax income, excluding the effect of taxes subject to IFRIC 21, it was up 1% on last year. Looking now at the different businesses part of domestic markets, which you can find on slides 21 to 24, I'd like to highlight in particular. In French retail banking, loans were up 5%, with a positive evolution across all customer segments and margins holding up well while deposits were up 8.3%. Revenues were down 4.4% due to a high base effect in the first quarter of 2019 and the impact of the low rate environment. Costs were slightly down with the ongoing impact of cost optimization measures. Pre-tax income was down 27% year-on-year and down 14%, excluding the effect of taxes subject to IFRIC 21. Thanks to its digital transformation and the strong mobilization of its teams, French retail banking was able to roll out very quickly the state-guaranteed loan program in France. FRB received 44,000 applications for a total of more than 11 billion, and this at the end of April. If we now go to Italy with BNLBC, which showed a 2.5% decrease in revenues due to the impact of the low interest rate environment, as well as the positioning on clients with a better risk profile, something we have been doing now since several quarters. Costs were down 1.2% year-on-year thanks to the effect of cost-saving measures. Thanks to a sharp drop in cost of risk all over the year, pre-tax income more than doubled year-on-year. BNL has been fully mobilized to help customers overcome the effects of the health crisis and rolled out very rapidly adapted measures like loan moratorium. If we now go north, we go to Belgian Retail Banking, was really active in supporting their clients and, for example, approved 74,000 modifications of repayment schedules as of April 24, and this across all customer segments. Belgian Retail Banking showed a sustained business activity with loans up 5% and deposits up 5.4%. Revenues were down 3.3% due to the impact of already mentioned the low interest rates. which was only partly offset by higher volumes and the rise in fees. Costs were down 1.6% on the back, cost reduction measures, and down 5%, excluding the effect of taxes subject to IFRIC 21, thus generating positive jobs. Pre-tax income was slightly negative as a result mainly of the strong impact of IFRIC 21 taxes, which I remind you have both a European and a Belgian component. Excluding taxes subject to this IFRIC 21, pre-tax income was only down 3.8% compared to last year. Finally, the last part in domestic markets, the specialized businesses, continue to deliver very good business drive, with in particular a strong growth of 8.7% in the finance fleet at Arval and a significant increase in orders and number of clients at personal investors, in particular with Consorzbank in Germany, with an increase of 172% year-on-year. Revenues were up 9% year-on-year, with a positive Jaws effect thanks to a contained increase in costs stemming from business development. Pre-tax income rose sharply, 16%. To wrap up this first quarter, domestic markets showed its intrinsic capacity to deliver on the Group's 2020 objectives and be very mobilized for the road ahead. With this, if I can invite you to swipe to slide 25, you will see that our second domain, international financial services, showed sustained business activity with loans up 4.5%, with good growth in particular at personal finance and Europe Med. Besides, IFS reported good net asset inflows, while assets under management were down 3.5% due to the drop in the markets at the end of the quarter. If we now look at the P&L, revenues were down 5.4% year-on-year, mainly due to the one-off accounting impact on our insurance revenues for €384 million, a negative impact related to the accounting valuation of certain insurance portfolios at market value. Excluding such an impact, IFS revenues would have been up 3.6%. I'll come back to that. Now, if we look at operating costs in IFS, they evolved by 2.9% year-on-year on the back of business development contained by cost savings. With the combined effect of the one-off impact in our insurance revenues and the anticipated effect of the health crisis on the cost of risk, IFS free tax income was down 50% year-on-year, but it would have been down 3% without these two negative impacts. If we now look at the different business lines building the IFS, and this is in slides 26 to 31, I'd like to highlight the following. First of all, when we look at personal finance, It continued to show steady growth momentum in the first quarter with a 4.4% increase in loans, which was nonetheless impacted towards the end of the quarter with points of sale closing as the pandemic spread. Personal finance reallocated its resources towards customer relationships in order to proactively put together solutions, including deferrals on a case-by-case basis for those customers whose financial situation was justifiably affected by the health crisis. Revenues were up 3.4%, with growth in particular in Italy and Germany, and costs increased at a slower pace of 2.3%, so delivering positive jobs. If we now turn to EuropeMed, which reported good business growth, in particular in Turkey, Morocco, its loans were up 5.5%, deposits 6.6% across the region. The support to clients during the health crisis was fantastic, facilitated by apps enabling individual and SME clients to report financial concerns, and this in particular in Poland and Turkey. Overall, on a comparable basis, revenues were up 1.6%, impacted by the regulatory environment, while costs evolved by 5.9%, due, amongst others, to wage drifts. If we now cross the Atlantic and even more go to California with BankQuest, where we saw an overall increase in business activity with loans up 1.5% and deposits 8.5%, in each case on a comparable basis. Besides, the number of accounts opened online grew sharply, and Bankwest adapted quickly to the new environment with 99% of branches remaining open and over 70% of employees working remotely. It is also actively involved in the implementation of the Payroll Protection Programme the federal support program aimed at small businesses. On a comparable basis, revenues were up 3.4%, thanks to the repricing of deposits and higher transaction fees, where costs were up limited to 1.4%, thus generating positive jobs. If we now turn to insurance, it maintained a good level of activity in the first two months, but witnessed a slowdown in savings inflow in Europe and Asia with the spread of the health crisis. Revenues were affected negatively by a 1 of 384 million euros accounting impact stemming from the drop in financial markets at the end of the quarter. As a reminder, part of the assets in insurance business are marked at fair value. As such, this effect may be reversed in the event of a stock market recovery. Costs were slightly up due to the continued business development initiatives and pre-tax income was down 62% year-on-year, excluding the one-off impact. It was up 11.8%. If we now turn to wealth and asset management, revenues were down 3% due to the impact of the health crisis on performances of asset management and real estate services. And this on the back of, for example, the suspension of construction works only partially affected offset by the increase in fees in wealth management. Costs were quasi-flat on last year due to the combined effect of development costs in wealth management, in particularly Germany, and the transformation plan, so the reduction of costs in particularly asset management. So with this, it completes the retail banking and services business, so domestic markets and IFS. And if I can now draw your attention to slide 32 on corporate and institutional banking. CIB, showed strong business drive in the first quarter, further accentuated by the intense mobilization to support the economy in the context of the COVID-19 crisis, and that occurred towards the end of the quarter. For example, with over 150 billion euros of capital raised for clients across loan, bond, and equity markets, the activity was indeed very sustained, and CIB consolidated its leading positions in EMEA with a number one ranking in volume and market share in syndicated loans and Euro-denominated bonds. If we now look at the P&L, starting with the revenues, they were slightly down by 1.9% on the back of a very strong growth in corporate banking and security services with double-digit increases compared to last year and offset by a one-off negative effect of €184 million for equity and prime services businesses. This stemming from the unexpected and sudden restrictions by European authorities on 2019 dividends. Excluding this one-off impact, revenues would have been up 4.3%. Thanks to cost-saving measures, costs were down 2.8%, so generating positive jobs. Overall, CIB's pre-tax income was down 60% year-on-year when excluding the one-off negative impact on revenues and a component of the cost of credit and counterparty risk stemming from the health crisis, they would have been up 18.8% compared to a year ago. If we now turn to the components of CIB, we turn to the next three slides, 33 to 35. Let's go into more detail. If we start with global markets, slide 33, revenues were down 14% on the back of a very strong growth in FIC impacted by the external shocks on European markets towards the end of the quarter on equity and prime services. Indeed, FIG revenues were up 34.5%, with a very steep rise in crying volumes, in particular on electronic platforms, and a prompt recovery of market liquidity and a swift resumption of primary bond activity after the outbreak of the crisis. Equity and prime services revenues were sharply down on the back of the one-off impact of dividend restrictions and extreme market shocks. The diversification continued with the progressive integration of Deutsche Bank's prime brokerage and electronic execution, and the first client transfers have already been achieved. If I now ask you to swipe to the next slide, 34, corporate banking showed a very strong business activity with a sustained growth in loans and higher utilization under existing revolving credit facilities, to the tune of close to €25 billion in March. Between mid-March and mid-April, capital markets arranged more than €75 billion of syndicated loans, with aggregate final holes not exceeding 15% of deal size, and let more than 50% of all investment-grade bonds in EMEA. At the same time, deposits grew by 14% year-on-year, Finally, the business consolidated its number one positions in syndicated loans and corporate banks in Europe, while strengthening positions in Asia, where it achieved for the first time a top five position in cash management and corporate banking. As a result, corporate banking revenues grew by 10%, with fees up 18%. A 24% increase in revenues on the capital markets platform and a good resilience of transaction businesses worldwide. Now finally, if I can ask you to glance at slide 35 on the third part of CIB, namely security services, where the revenues were up 11.8% thanks to the increase in average of outstandings and transaction volumes. Besides, the business benefited from a strong growth in Asia Pacific to the tune of 35% as well as in the Americas to the tune of 40%. Finally, security services pursued its strategic development with the announced acquisition of Banco Sabadell's depository business in Spain and the setup of strategic alliance with BlackRock to provide asset management with integrated services through the Aladdin platform. So, ladies and gentlemen, this concludes the division results. I now hand back to Jean-Laurent for the last part of the presentation.

Thank you, Olaf. Let's now look at slide 37. which will conclude today's presentation and give us the opportunity to share the outlook for 2020. There are a lot of moving parts. The global health crisis leads to a drastic revision of the 2020 macroeconomic scenario. We can currently anticipate that once lockdown measures cease to apply, the current recession will give way to a very gradual recovery. But a return to normalised health conditions should not be expected before the end of the year and a return to the 2019 GDP level is not anticipated before 2022. In this context, the unprecedented measures taken to mitigate the impact of the crisis on the economic and social fabric by governments and monetary authorities are critical. BNP Paribas is taking an active part in these economic support initiatives. Going forward, it should result in an increase in net interest income, which could mitigate at least in part the likely decrease in fees affected by the crisis. Parallel, the group anticipates to amplify the initially planned decrease in operating expenses, but this decrease could be offset by the increase in the cost of risk. This moving context, and unless new crisis and new developments of the crisis occur, Net income for 2020 could be about 15% to 20% lower than in 2019. This concludes today's presentation. As a takeaway, I would like you to keep in mind the excellent business drive in the first quarter in line with our 2020 objectives is not badly impacted by this unprecedented health crisis. This context The good resilience of revenues and results confirms the robustness of our diversified and integrated business model and the strength of our franchises. The strong mobilization of our teams around the world to contribute for the resilience of the economy and ensure its financing. Ladies and gentlemen, thank you for your attention. And together with Philippe and Lars, we now be pleased to take your questions.