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BNP Paribas Is Said to Shut $3 Billion Prop Trading Arm

Donal Griffin, Harry Wilson and Alastair Marsh
BNP Paribas Is Said to Shut $3 Billion Prop Trading Arm

(Bloomberg) -- BNP Paribas SA, the biggest French bank, is shuttering its 2.5 billion euro ($2.9 billion) proprietary trading arm, according to people with knowledge of the matter.

The Opera Trading Capital division of the lender, which makes risky bets with shareholders’ funds, struggled to make a profit last year amid market volatility, one of the people said, declining to be identified as the details are private. BNP Paribas, based in Paris, told employees and has begun informing prime brokers and counterparties about the plans to close Opera, the people said.

Regulators have clamped down on proprietary trading -- or prop trading, for short -- since the financial crisis. While the practice isn’t banned for European banks, it has become less economic under new rules. In France, for example, lenders must place their riskiest trading businesses into separately-capitalized subsidiaries, crimping their profitability.

Opera struggled in 2018, one of the people said. Volatility returned to markets last year, whipsawing investors amid a brewing global trade war and fears over economic growth. Natixis SA, BNP Paribas’ smaller Paris-based rival, reported losses and provisions of 260 million euros on Asian equity derivatives in December. Hedge funds, meanwhile, slumped that month and ended the year down 4 percent, their biggest decline since 2011.

Richard Newman, a spokesman for BNP Paribas in London, declined to comment.

Opera is wholly-owned by BNP Paribas and funded with 600 million euros of capital, according to accounts filed last year. Based in Paris, it employs teams of traders in London and Hong Kong too. According to the U.K. Financial Conduct Authority, the unit had 16 authorized employees.

Executives in BNP Paribas want to close Opera Trading so they can reallocate resources to businesses that focus on clients, one of the people said. Prop trading generated a small part of the firm’s overall corporate and investment banking revenues, the person said.

Overall profit at Opera was 650,000 euros in 2017, compared with 46 million euros a year earlier, according to accounts.

(Adds details and background on Opera.)

To contact the reporters on this story: Donal Griffin in London at dgriffin10@bloomberg.net;Harry Wilson in London at hwilson57@bloomberg.net;Alastair Marsh in London at amarsh25@bloomberg.net

To contact the editors responsible for this story: Ambereen Choudhury at achoudhury@bloomberg.net, Marion Dakers, Dale Crofts

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