BNP Paribas’s good news for fixed income traders (and compliance staff, and DCM bankers)

BNP Paribas’s history as a fixed income trading house is ‘mixed’. As a reminder, the French bank embarked on a big fixed income hiring spree in 2010, which was still going three years’ later despite doubts over its timing. Then in late 2014, the fixed income trading business was combined with (and brought under the control of) the equities trading business, and last May 100 global markets jobs were put at risk, most of them reportedly in fixed income trading.

Since then, there’s been speculation that BNP Paribas will make big cuts to fixed income as part of its plan to restructure its corporate and investment bank (CIB). Today, however, that CIB restructuring plan has been announced, and BNP’s fixed income traders are fine. More to the point, the bank might even be hiring in the area.

The chart below helps explain why.

BNP Paribas had an exceptional year in fixed income trading in 2015: only UBS did better. The French bank says it’s been, “gaining market shares from peers’ retrenching context”, which we suppose means that it’s boosted revenues as the likes of Credit Suisse and Deutsche Bank and Morgan Stanley have pulled back.

Even better, traders let go by retrenching peers might be able to find work at BNP Paribas. BNP says it wants to invest in, “businesses with competitive edge or supporting the Group franchises (derivatives, credit, FX,…)”. This sounds like hiring.

Today’s presentation suggests that BNP might also want to recruit for debt capital markets (DCM): the bank says it wants to increase its structuring of ‘debt solutions and further grow corporate bonds origination’.

There’s also the usual crazy compliance hiring. In 2015 alone, BNP says it added 1,033 compliance staff – a massive 60% increase in its compliance headcount.

Needless to say, however, there will be losers. All these additional compliance costs mean extra cuts elsewhere: BNP raised its cost savings target from €3.0bn to €3.3bn to counteract increased regulatory costs. It says the cuts will come from, “Industrialisation and deep changes in terms of set up”. More prosaically, it wants to simplify business lines, develop shared technology platforms in India, Portugal and Canada, automate processes, and be very disciplined about expenses.

Curiously, however, the chart below suggests that BNP plans to spend most of the cost savings in its CIB as it makes them: €500m will go into growth and another €500m will go to covering regulatory costs and inflation.

Cutting and spending at BNP: