PARIS, Nov 3 (Reuters) - BNP Paribas, the euro zone's biggest lender, posted a higher than expected net profit in the third quarter, with trading revenues helping offset rising costs and markdowns on some leverage financing deals.
Net income in the three months to end September rose by 10.3% from a year earlier to 2.76 billion euros ($2.73 billion), compared with an average of 2.36 billion euros expected in a Refinitiv poll of analysts. Revenues were up 8% at 12.3 billion euros.
The increase was driven mainly by a 14.7% rise in global markets revenues, with market volatility boosting in particular trading in commodity derivatives, rates, foreign exchange and emerging markets. The equity and prime services, an area in which BNP has been expanding, also posted a small revenue rise.
However, BNP said investment banking revenues had been hit by markdowns of unsold positions in leveraged finance. Rising interest rates and market turbulence have forced big lenders to hold debt on their books for longer than they would have liked, and incur losses on some financing packages.
Operating expenses also rose 6% from a year earlier, including the impact of restructuring and IT costs, BNP Paribas said, while a 34% jump in the cost of risk was due to a one-off 200 million euro charge in Poland, where a moratorium has allowed borrowers to suspend mortgage payments.
European banks including HSBC, Deutsche Bank and UniCredit have reported strong results for the quarter, helped by surging trading revenues and higher borrowing costs as central banks began raising interest rates this year to fight inflation.
However French lenders traditionally take longer than their continental peers to reap the benefits of rising interest rates.
This is because more than 90% of French mortgages are on fixed rates, the remuneration rate on popular savings accounts is linked to inflation and the government limits how quickly banks can reprice loans to customers.
Under pressure from the government, BNP Paribas and rival Societe Generale have also frozen their retail banking fees for 2023.
Still BNP said its net interest income - the difference between what banks receive from borrowers and pay out to depositors - rose by 4.7% in France, and that it would rise by 2 billion euros more than it had initially expected by 2025.
The French lender, which has a market value of 59 billion euros, last year sold its Bank of the West U.S. retail banking unit for $16 billion, fuelling expectations that it might use the proceeds for acquisitions in Europe.
BNP has said it does not plan to buy another bank, and will use the money only for small purchases in sectors where it is already present, technology investments and a share buyback.
($1 = 1.0126 euros)
Reporting by Silvia Aloisi and Matthieu Protard; Editing by Sudip Kar-Gupta