By Mathieu Rosemain
PARIS (Reuters) -BNP Paribas' shares slipped on Thursday, amid a wider European banking sector sell-off, after weaker-than-expected French retail and consumer finance results from the lender.
While broadly in-line with market expectations, BNP's mixed quarterly results failed to reassure investors as banks navigate rising interest rates and an uncertain economic outlook.
Shares of the euro zone's biggest bank fell by more than 5% in early Paris trading and were down about 4% at 0914 GMT.
Third-quarter earnings at BNP's retail business in France and Italy missed expectations on weaker revenues and higher provisions, analysts at Jefferies and JP Morgan said.
"Revenues were slightly ahead but showed unexpected weakness in France & Italy retail banking," Jefferies noted, adding that BNP's car-leasing company Arval and the lender's consumer finance unit also disappointed.
BNP said in a statement that its third quarter net interest revenue, its revenue on loans minus deposit costs, for French retail operations were down by 5.9% from a year earlier.
Pre-tax earnings for BNP's consumer finance unit fell by 42% over the period.
Overall, the French lender's third-quarter net income dropped by 4% from a year earlier on a reported basis to 2.66 billion euros ($2.81 billion), almost matching the 2.64 billion-euro analyst consensus compiled by the bank.
Group sales over the three-month period ending in September rose by 4% to 11.58 billion euros, slightly above the 11.52 billion euro consensus.
Under CEO Jean-Laurent Bonnafe, BNP retreated in U.S. commercial lending while bolstering its global investment bank, a move that has benefited the lender as market volatility in the wake of Russia's invasion of Ukraine propelled trading.
The bank now joins competitors which have posted steep falls in sales stemming from fixed-income and currency trading, as clients have pared back activity.
BNP's overall revenue from trading fell by more than 9% in the third quarter, as FICC sales (fixed income, currencies and commodities) fell 14.3% excluding the boost from a business the bank moved from equities to FICC.
Germany's Deutsche Bank reported a 12% drop in such revenue for the period, while Britain's Barclays reported a 13% fall.
By contrast, BNP's global banking business, which comprises bond issues, syndicated loans and cash management, saw sales jump by about 20% in the third quarter.
BNP set aside 734 million euros for credit losses in the third quarter, below the 815 million euros expected by analysts. The group's operating expenses, up 3.4% over the period, grew at a slower pace than sales, also supporting earnings.
The group posted a 12.7% return on tangible equity (ROTE), setting it on course to meet a target it set of 12% by 2025.It has also completed more than 85% of a 5 billion euro share buyback programme for 2023, equivalent to about 7% of its market capitalisation.
($1 = 0.9463 euros)