The banking sector including BNP Paribas shares has become synonymous with perhaps most of the worst aspects of the financial markets in which they operate, especially since the time of the Global Financial Crisis and the Credit Crunch in 2008.
However, in its latest update, rather than tales of woe regarding debt, provisions and losses, the BNP shares were able to beat analysts expectations and the worse traumas induced by the COVID-19 pandemic.
In this way the BNP share price has echoed the Q3 2020 updates offered by many of its European counterparts. Government intervention such as furlough schemes and assorted stimulus packages has ensured that household debt has been contained and avoided damaging retail banking.
In contrast, BNP Paribas shares have witnessed a surge in trading income associated with the volatility created in the immediate aftermath of the pandemic in Q1 2020, when there were sharp movements in many of the major asset classes.
At the same time, corporates moving to shore up their balance sheets in the face of COVID-19 offered fat fees to investment bankers.
BNP Paribas shares: ECB reining in risk
All of this has meant that while there has naturally been a lessening of business activity, mirroring sharp falls in GDP, those holding BNP Paribas shares have been left surprisingly unscathed.
Part of the credit for this can go to sector regulators and the ECB who reined in risk after 2008. Indeed, the market will be looking to the ECB to decide whether banks such as BNP Paribas who would now be able to resume dividend payments, and are keen to do so to attract investors to the BNP share price, should be allowed to.
The BNP Paribas share price and the Q3 update
What has been most interesting about the Q3 update is that the management of BNP Paribas have barely been able to conceal their delight at the relatively strong performance, given the severe pandemic headwinds, and indeed, the run up to a second series of lockdowns.
As far as the headline numbers at BNP Paribas the highlight was certainly the 17.4% rise in the investment banking division and indeed, if one strips out fixed income, the gain was as high as 36%.
However, net income still slightly down across the whole group, with the main surprise being the way that analysts had earned significantly on the pessimistic side - €1.57bn versus the actual €1.89bn.
Indeed, one could argue that it was the estimates being so lowball that allowed BNP Paribas shares to rise relatively sharply as the results were unveiled. Ironically, the analysts consensus zone was effectively what the company had guided, a 15% - 20% reduction to the bottom line at the Q2 stage.
The key going forward will be the retail side of the BNP Paribas business and the issue of consumer debt ballooning once the pandemic fades. If such debt emerges it may be that the cushioning effect of investment banking revenue is not enough to offset losses in the retail space.
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BNP Paribas share price daily chart
BNP Paribas shares gapped up on their daily chart following the Q3 update and have now rebounded enough to be in close proximity of the 200 day moving average now at €35.
In fact, the stock has not been above its 200 day line - in technical bull mode since the end of February just before the COVID-19 crisis struck.
What will be key for the rest of 2020 is whether BNP Paribas shares can end the year above the 200 day line, something which could be accompanied by the resumption of the dividend payment, or positive quarterly revenues as an average across all divisions.
How to trade BNP Paribas shares
1. Register for an account or log in to your existing account
2. Open MT4 either on your desktop or mobile
3. Search for BNP Paribas share in the market watch or symbols window
4. Choose your position size
5. Hit buy or sell, and then confirm the trade