PARIS (Reuters) – When the COVID-19 crisis hit Europe, businesses turned to one bank more than any other to set up emergency loans: BNP Paribas BNPP.PA.

The French lender profited from internal restructurings at its European rivals, at a time when US banks were concerned about the home bailouts. It increased its balance sheet by 23% to 2.7 trillion euros in the first quarter, extending multibillion sums to energy giant BP and automaker Daimler.

In comparison, competitors like Santander SAN.MC, German Bank DBKGn.DE and Credit Suisse CSGN.S barely increased their balance sheets by 5%.

BNP, the euro zone’s largest lender, has long aimed to become the dominant investment bank in Europe and intends to use the lending platform built during the crisis to pursue this ambition, according to several bankers and a source. close to BNP management.

BNP declined to comment for this story before its July 31 results.

“Can BNP take advantage of the quality and resilience of its profits to increase its (European) market share?” I think the answer is yes, ”said François Chaulet, Managing Director of Montségur Finance, whose funds invest in BNP.

However, capitalizing on loan growth to win higher margin business from clients it has loaned to, such as advice on equity issuances or mergers and acquisitions, has been difficult to resolve and still does not appear to be. not easy.

While the bank’s risk-weighted assets increased 5.5% between 2015 and 2019 and revenues increased 3.9%, its tangible return on equity – a measure of profitability – remained. stable at around 10%.

M&A TRAINING

In the first half of 2020, BNP edged Goldman Sachs, Deutsche Bank, Barclays and Credit Suisse in terms of merger mandates, ranking outside of the top 10 advisers, and ranked ninth on equity trading, unchanged from compared to a year ago.

“Just because you have loaned a lot of money doesn’t mean you can do everything the client wants to do for a large European company: it requires specific skills, and money is not everything,” he said. said a senior Paris-based investment official. banker with a foreign rival.

“The American competition is very tough … they (BNP) know they have a record, but it’s tough.”

BNP’s merchant banking activity combines M&A, ECM and syndicated loans, as well as trade finance and cash management. It represents more than a third of its banking revenues to companies and institutions, which also include markets and securities services.

For now, the increase in its loans allows BNP to shed its image as a solely French bank.

He was the sole underwriter on a $ 10 billion credit facility for Britain’s BP BP.L early April – an unusual move for such a large facility, especially in a sector like energy that is under pressure. The loan was then syndicated to 20 banks.

“The leaders of the BNP said: my first client is the French economy,” says a former close to the management of the bank. “More recently, they say my first client is the European economy.

INTERNATIONAL PRESS

By pushing to court more international clients, BNP – long the benchmark bank for the French establishment – has played hard for some rescues of companies in its domestic market, according to six banking and industrial sources close to the transactions.

He imposed stricter conditions on a state-guaranteed € 4 billion loan for flagship carrier Air France, for example, by extracting a larger guarantee from the French government following heated discussions with officials, people said.

“BNP Paribas has been particularly difficult,” said a legal source who worked on the deal.

France’s finance ministry declined to comment on the process, while Air France was not immediately available for comment.

The approach partly reflected prudent risk management.

But two investment banking sources said the fight was also a sign of BNP’s willingness to ensure it has enough resources to pursue its international growth strategy without being sucked in by local pressure to bail out. too many companies.

“It’s more about where BNP wants to allocate the capital,” said one of the sources, who was involved in the Air France bailout.

Nonetheless, BNP is still ready to lend large sums at home, having said this month that it received € 17 billion in requests for state-guaranteed loans – a higher proportion than its usual market share for such loans.

Bankers at rival banks have said BNP could take advantage, as a first step, of obtaining mandates to help companies in France that have received loans and need restructuring or capital injections.

Cementing that kind of work could be the key. As the government’s support programs begin to end, the risk of loans on its newly expanded books going sour could increase.

“BNP’s balance sheet continues to swell,” wrote Societe Generale analysts in June. “BNP is more sensitive than most to changes in credit quality.”

($ 1 = € 0.8786)