BNP Paribas Bets on Technology to Cut Investment Banking

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BNP Paribas
PARIS, FRANCE - JULY 23, 2011: Person visits BNP Paribas Bank branch in Paris, France. Formed through merger in 2000, the bank is currently largest worldwide by assets ($2.68 trillion USD).

BNP Paribas (EPA) is planning to cut back on jobs through the use of “big data.” The goal of the company is to use technology to cut back on costs while identifying customer needs in a more refined manner. It is believed that the company will cut back on back-office jobs and attempt to cut costs in the future.

Tightening regulation in the United States and Europe is causing many investment banks to cut back on costs in any way that they can. Major overhauls within the banking system are underway, with several banks attempting to gain confidence in their investment units.

The goal of the company is to reduce the cost of its corporate and institutional banking division. A strategy to reduce these costs by 20% will include a mixture of refining the company’s internal workings and reducing the company’s massive staff of 29,000 people.

Using technology, the company hopes to do what asset managers and insurers have been doing for years. Through the use of data analyzation, the company will be helped in several ways, including being able to propose next transaction opportunities based off of data and determining if clients have read research that has been provided to them.

All of this information will lead to a reduction in the company’s back-office and middle staff. The amount of sales people that will be needed will be reduced as a result of understanding customer needs based off of data that is already present within the organization.

Despite the call for job cuts in the company, the French bank’s Q3 2015 reports indicate an increase of profits of nearly 15% year-on-year. International operations were the biggest contributors to the profit increase, the pretax income drop at 21% as a result of greater expenses in the United States due to new regulations.

BNP Paribas would need to cut approximately 6,000 jobs if the company were to reduce costs by 20% through job cuts alone.

Axiom Alternative Investment’s Gildas Surry, the portfolio manager, states that BNP has not refined or streamlined their investment banking operations in the past years. The major issue, according to Surry, is that the company is trading in Paris, London and Brussels, which are all expensive markets to trade in at the same time.

Company stock has done relatively well in the last month. Stock prices on October 5, 2015 were €54.01 and have now risen to €55.95, up 1.1% on the day, and currently has an YTD return of 13.54%.

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