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Fixed income unit boosts BNP Paribas revenues

French bank BNP Paribas's revenues from corporate and investment banking (CIB) nearly doubled in the second quarter as robust investor demand boosted revenues from the bank's fixed income business unit.

BNP Paribas's CIB revenues totaled €3.351 billion ($4.82 billion) for the quarter, up 81% from the second quarter of 2008, and following record revenues of 3.696 billion euros in the first quarter of 2009.

"Once again, fixed income revenues were exceptional," said David Thebault, head of quantitative sales trading, at Global Equities, in Paris.

"They managed to capture a big chunk of the boom in the corporate bond market that saw a lot of companies coming to this market to refinance their debt, while on the other side, investors rushed to the asset class," he said.

The fixed income business unit, already behind the bank's robust results in the first quarter, reported revenues of €1.931 billion for the second quarter, as strong investor appetite for the asset class continued, and as credit spreads tightened while bid/offer spreads remained wide.

"The question is: when the bond market boom abates around the fourth quarter or next year's first quarter, will BNP be able to prevent its CIB revenues from falling?" Thebault said.

Revenues from the equity and advisory business, which were barely positive in the first quarter of the year, were "back to normal" in the second quarter, totaling €710 million, driven by demand from institutional investors and a pick-up in hedge fund activity.

The bank also benefited from the buoyant equity origination market, where BNP Paribas won book runner mandates for a number of issues.

Revenues from the financing businesses unit, which totaled €710 million, were stable compared to the second quarter 2008, the bank said, citing strict credit selection policy and better client and country risk profile.

The cost of risk surged to €744 million, up €658 million compared to the second quarter 2008.

BNP said the cost of risk in capital markets was "significantly below" the levels it had reached at the peak of the financial crisis in 2008, while the cost of risk in the financing businesses unit, affected by the slowdown in the economy, was €447 million, hit by provisions of €109 million related to LBOs and €103 million related to the Gulf countries.

Overall, the CIB's pretax income totaled €1.145 billion compared to €523 million in the second quarter 2008 and €1.229 billion in the first quarter 2009.

On Monday, UK-listed peers HSBC and Barclays reported buoyant investment bank earnings after taking advantage of resurgent debt and foreign exchange trading. (Reuters)