BNP Paribas SA is in talks with the European Central Bank regarding the regulatory treatment of its acquisition of AXA SA’s investment unit, Bloomberg News reported.
The discussions centre on whether the transaction, carried out through BNP Paribas’ insurance arm, qualifies for a favourable capital framework known as the Danish Compromise. The ECB has questioned whether the deal should instead be classified as an asset management acquisition, which would not be eligible for that treatment.
“We’re having discussions with the ECB where the ECB is triggering the question, is this not an asset management kind of deal?” said BNP Paribas chief financial officer Lars Machenil on an earnings call Thursday.
BNP Paribas has warned that not being able to apply the Danish Compromise would result in a greater impact on its common equity tier 1 (CET1) capital ratio. In a statement, the bank said the hit could reach 35 basis points, up from a previous estimate of 25 basis points. The deal is expected to close in early July.
Claudia Buch, chair of the ECB’s Supervisory Board, told Bloomberg earlier this month that the Danish Compromise was “intended to be applied to the insurance sector and not to, for example, asset management undertakings.”
The regulatory talks come as BNP Paribas reported mixed first-quarter results. Revenue rose 3.8% year-on-year to €12.96 billion, driven by a strong performance in its corporate and institutional banking division. Revenues from equity and prime services rose by 42.1% to €1.19 billion, while fixed-income trading gained 4.4% to €1.68 billion.
Despite the revenue growth, the bank posted a 4.9% decline in net income to €2.95 billion, citing the reintegration of its Ukrainian operations. BNP Paribas reaffirmed its profit targets through 2026, including annual net income growth above 7% and a return on tangible equity of 12%.
The bank also reported a CET1 ratio of 12.4% and said it had achieved nearly a third of its €600 million cost-saving goal for 2025. The savings are part of a broader €3.3 billion programme through 2026.
Further details on the bank’s strategic plans, particularly for its French retail operations, are expected in June.
