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PARIS: BNP Paribas on Thursday signaled lower revenue at its cash cow French retail operation as it feels the pinch from low interest rates and declining product fee income.
Chief Executive Jean-Laurent Bonnafe said France's biggest bank will adapt in line with other retail banks that are trying to boost efficiency and develop digital strategies.
Bonnafe said those retail banks which depend on making a margin by taking deposits and passing them on as loans face trouble in the current environment.
"Banks today that operate in such activities are already almost non-profitable, they can fall into losses. There are geographies where some banking systems will fall into losses," Bonnafe said, adding that BNP has a bigger market share in Europe in consumer credit than in deposits.
BNP Paribas nevertheless reported higher than expected second-quarter net income, as stronger corporate and institutional banking (CIB) revenues and a lower cost of risk offset weakness in retail.
Like other banks in Europe, BNP Paribas has been hampered in its bid to boost retail banking revenue by low rates that have eaten into margins, and by a decline in financial fees as customers balk at investing in weak equity markets.
BNP Paribas says its strength is in its diversified and integrated business model that shows resilience in changing environments, as no business unit accounts for more than 16 percent on allocated equity.

RESILIENT PERFORMANCE
Its shares rose as much as 2.4 at the opening, but later backtracked to trade down 0.8 percent versus a 1.2 percent decline in Europe's banks as a whole.
Bonnafe said it expects French retail revenue to decline by between 2 and 3 percent this year, compared with its previous guidance of stable revenue in the business.
Pretax income in domestic markets covering France, Italy and Belgium fell 2.1 percent in the second quarter despite an 11 percent fall in the cost of risk, a measure which reflects how much is set aside for bad loans.
"Resilient performance in retail banking, decent CIB revenue and progress on capital should reassure the market particularly given the currently low valuation," UBS analysts said in a note.
In France, BNP Paribas' retail banking revenue fell 3.6 percent and pretax income dropped 10 percent.
It posted a 0.2 percent rise in net profit to 2.56 billion euros ($2.8 billion) during April to June, including exceptional items such as the sale of Visa Europe shares.
Excluding exceptional items, the bank said net profit fell 4.8 percent to 2.19 billion euros.
Analysts in a Reuters poll had forecast on average a 1.4 percent fall in net profit to 2.52 billion euros.
BNP Paribas set out plans earlier this year to cut costs and shed low-yielding CIB assets, reinvesting in activities that tie up less capital, as it seeks to keep its return on equity at 10 percent beyond 2016.
CIB revenue rose 1.4 percent in the second quarter, thanks to a pick-up in client volumes in its global markets division.