There's more bad news for BNP Paribas' U.S. sales and trading business. Only months after laying off some of its U.S. bankers, including senior sales and trading professionals, it's being widely reported that the French bank will have to pay a $5bn fine in the U.S. for breaking trade sanctions with Iran and Sudan. Worse, it's being suggested that BNP might be subject to a temporary ban on transfers of money into and out of the U.S. something which could drive many of its corporate clients especially to take their services elsewhere. Shares at the bank are down 4% this week and may fall more.
The $5bn charge could spell bad news for BNP's U.S. fixed income trading business, which has grown and contracted in recent years as BNP first hired ferociously and then pared back again. In February, the French bank let go of former co-heads of U.S. fixed income Kip Testwuide and Christian Mundigo. Mallory Brooks, head of U.S. interest rate sales, left in March. Julia Sands, an institutional FX saleswoman left in November 2013, one year after arriving from Morgan Stanley. In May, Evan Malik, BNP's head of U.S. mortgage and asset backed sales, left just 16 months after joining from CRT Capital Group.
Like most other banks, BNP's fixed income sales and trading revenues fell in the first quarter of 2014, with revenues down 22% year-on-year. Like rival European banks, BNP faces a capital hurdle in the form of new U.S. rules requiring that foreign banks put more capital behind their U.S. businesses. As with Credit Suisse, the $5bn fine has come at the wrong time. And, as at their Swiss rival, BNP's capital-hungry fixed income traders have most to lose if the bank looks at allocating capital to its American operation more effectively.
So, who are the key names at BNP's U.S. fixed income business? Try Bob Hawley, who heads fixed income in the Americas, George Nunn, global head of fixed income change, Wendy Rosen, head of FX asset manager sales, or Debra Solomon, a director in FX sales. Many of BNP's U.S. fixed income team have joined in the past few years and may not stick around if the business comes unstuck. Fortunately for BNP, however, it's clear where they could go to.
Introducing you to BNP Paribas’s quiet global prop trading business
Why would BNP Paribas be laying off U.S. investment bankers right now?
Heinous pay for Deutsche Bank MDs. And other Deutsche compensation facts