BNP Paribas CFO Machenil Talks Revenue, Risks, Geopolitics

Summary

Podcast Summary

Podcast: Bloomberg Talks
Episode: BNP Paribas CFO Machenil Talks Revenue, Risks, Geopolitics
Date: July 23, 2026
Guest: Lars Machenil, CFO, BNP Paribas
Host: Bloomberg

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Episode Overview

This episode features an in-depth interview with Lars Machenil, the Chief Financial Officer of BNP Paribas, following the bank's strong Q2 results. The discussion covers BNP Paribas’ revenue drivers, the performance of its various business lines, the impact of geopolitical and technology trends (including AI), risk management, and impending political uncertainties like the French elections.

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Key Discussion Points & Insights

1. Strong Q2 Performance Across Divisions

• All Divisions Contributing:
  Machenil emphasizes that BNP Paribas is "firing on all cylinders," with all three primary divisions—Corporate & Institutional Banking (CIB), Retail, and Asset Management/Insurance—showing strong, double-digit growth.
  • Top-line up 12%
  • Gross operating income up 16%
  • Bottom line up 33% (with a capital gain)
  • Common Equity Tier 1 ratio: 13%—“solid…18 months ahead of business”
• Quote:

  "So we are not that one trick pony. It is really the three divisions that are working collectively and that are boosting the result."
  — Lars Machenil (01:17)

2. Equities & Prime Services: A Global Reach

• Equities Outperformance:
  • Equity and prime services revenue hit €1.41 billion (+4.43% year-on-year).
  • Demand is up globally, but particularly strong in the U.S. and Asia in line with a ‘supercycle’.
  • BNP Paribas has a full product set (cash equities, derivatives, prime brokerage), and global reach, enabling it to capitalize across markets.
• Quote:

  "We are there to accompany that demand. And so that's what we've been seeing. And so we're very pleased to have that complete setup and to be able to follow our clients all around the world."
  — Lars Machenil (03:02)

3. Provisions, Risk, and Geopolitics

• Stable Underlying Risk, Precautionary Geopolitical Buffer:
  • Reported cost of risk: 39 basis points (vs. 38bps last year), considered “stable”.
  • The slight increase is due to a “prudential stand” and generic provisioning against unexpected geopolitical events.
  • Provisions serve as a buffer if future geopolitical tensions raise risk.
• Quote:

  "There is some geopolitical uncertainty and that allows us to take a generic provision for that uncertainty... If at some point in time the geopolitical situation would deteriorate... we would use this reserve."
  — Lars Machenil (04:03)

4. Technology Growth: AI, Datacenters, and Risk of Overheating

• Banking on Tech But With Caution:
  • Sees robust, global demand for tech investment; significant activity in Asia and US, but also Europe with infrastructure and energy transitions.
  • Cautions against reckless underwriting reminiscent of past bubbles (hints at early 2000s).
• Quote:

  "We see a lot of demand, but we have to be careful and to avoid that we would underwrite things that would make us think of what we saw back in 2002."
  — Lars Machenil (05:30)

• On Risk of a Bubble:
  • Stops short of calling the current environment a bubble.
  • Focuses on distinguishing real infrastructure growth from more speculative projects.
• Quote:

  "I'm not saying there is a bubble, but we're particularly careful to, to avoid it."
  — Lars Machenil (06:24)

5. AI Investment and Returns

• Disciplined Approach to AI:
  • Not indiscriminately deploying AI tools; focusing investments on end-to-end processes with clear, measurable returns.
  • Targeting >15% after-tax rate of return on AI projects, with emphasis on cost reduction and cybersecurity.
• Quote:

  "We're not handing out tools to everyone. We're really taking end to end processes, see where it can be plugged in and how it can deliver the savings."
  — Lars Machenil (07:04)

6. French Elections and Political Risk

• Business Momentum Intact, France-Specific Concerns:
  • Corporate and retail banking activity in France remains healthy; business picked up following earlier uncertainty related to the Middle East.
  • The main risk focus is the French Republic itself: possible impacts on financing costs and bond spreads.
  • BNP Paribas positions itself as “pan-European”, minimizing direct national exposure.
• Quote:

  "The point of attention... is the French Republic. Yeah. What will happen, what will happen with the financing costs and like. So that is a bit the point of attention..."
  — Lars Machenil (08:08)

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Notable Quotes & Memorable Moments

• “We are really firing on all cylinders and ready to continue to support the economy.” (01:17)
• “We are one of the few banks in Europe that have the full scale [in equities].” (03:02)
• “We see a lot of demand, but we have to be careful... to avoid that we would underwrite things that would make us think of what we saw back in 2002.” (05:30)
• “We're not handing out tools to everyone. We're really taking end to end processes…” (07:04)
• “The point of attention... is the French Republic. Yeah. What will happen... So that's what we will have probably until next summer.” (08:08)

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Timestamps for Key Segments

• 00:37: Introduction to BNP Paribas’ quarterly performance
• 01:17: CFO Machenil on broad-based bank strength
• 02:14: Deep dive into equities and prime services performance
• 04:03: Discussion of provisions and geopolitical risk management
• 05:30: Technology investment, AI, and risk of market overheating
• 06:24: Assessing potential for a tech bubble
• 07:04: Approach to AI investment and returns
• 08:08: Managing risk and opportunity with French elections ahead

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Tone & Final Thoughts

The episode is brisk, data-driven, and pragmatic. Machenil consistently stresses caution, discipline, and prudent risk management—even while celebrating strong results. The discussion is forthright, with answers grounded in operational detail rather than broad generalizations.

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This summary provides a comprehensive account of the topics, insights, and memorable moments from the interview with BNP Paribas’ CFO.

Transcript

[A]

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[B]

Bloomberg Audio Studios Podcasts, Radio news

[C]

so let's talk about our next guest. BNP Paribas has reported better than expected revenue and profit for the second quarter. Its stock traders, its equity traders, absolutely smashing expectations. Joining us now is Lars Machine Neil, the Chief Financial Officer, the CFO at BNP Paribas. Always a pleasure. I feel like I'm going to ask you the same question that I asked you last time around, which is is BNP just an equity story? Now, is the rest of the bank performing as you would like it to or the equity guys just doing what they need to do to keep this bank delivering these kinds of amazing numbers that you're delivering right now?

[D]

Well guys, if you, if you look at the results, it's basically all engines are firing on, all are basically firing. If you look at it, I mean all the growth, all of the lines are basically double digit. So top line is up 12% gross operating income, so revenues minus cost, minus cost of risk up 16%. Bottom line given a capital gain up 33%. And again it is CIB which is doing fine. But it's also the retail activities which are doing fine and also the IPs or the asset management and insurance activities which are doing very fine. And moreover our common equity T1 is solid 13%. We are there 18 months ahead of business. So we really firing on all cylinders and ready to continue to support the economy. So we are not that one trick pony. It is really the three divisions that are working collectively and that are boosting the result.

[C]

Okay, let's just, let's just kind of absorb all of that but talk a little bit about what is happening in equities. The equity numbers are strong and are well ahead of expectations. Q2 equity and prime services revenue 1.41, that's plus 4.43percent year on year. Can you just give me a bit of detail though? I'm curious as to how this breaks down Equity and prime services loss. What are you getting on the prime services side of things? What a hedge funds doing? Where are you seeing the expansion when it comes to the hedge fund? Some of The Wall street banks like Goldman Sachs were talking about a really strong demand for leverage coming out of Asia. Where are you seeing the prime services business doing well? And how does it compare with the rest of the equities business within that portfolio?

[D]

Yeah, well, if you look our equity and prime services, we are one of the few banks in Europe that have the full scale. So we have cash equities, derivatives and prime brokers, as you said, and that basically having a reach all around the world. And if you look at the demand, the demand probably related to the supercycle that we see has been stronger both in the US and in Asia, but it has been strong overall. And as we are present in all of those domains and we have the capital, the liquidity, the leverage to do so, we are there to accompany that demand. And so that's what we've been seeing. And so we're very pleased to have that complete setup and to be able to follow our clients all around the world. Actually.

[B]

Last. Good morning. So that's the revenue side of things. I wonder what you're doing on provisions. One line in our report this morning suggests that maybe your provisions have been on the rise, maybe higher than had been estimated. And citing geopolitical risk, what is it that you are increasingly provisioning for?

[D]

Yeah, listen, if, if I express the cost of risk as what fraction of my loans do I impair? So I express this in basis points, you have a fraction of percentage. We clocked in this quarter at 39 basis points compared to 38 a year ago. But if you look at the cost of risk in our divisions, it is basically stable. So intrinsically with whatever that has been happening on the divisions, there is no pickup, it is stable. So what is that additional basis point coming from is because we took a prudent stand saying there is some geopolitical uncertainty and that allows us to take a generic provision for that uncertainty. So that is a provision that we took. If at some point in time the geopolitical situation would deteriorate and there would be higher cost of risk, we would use this reserve that we have created this quarter.

[B]

And last. Can I ask you about what's happening with the technology? Build out the frenzy around AI and datacenter rollout and how we see that evidence in, in the business that BNP Paribas does. We heard from somebody at Barclays yesterday. He was talking about a golden age for technology right now. So many trends happening at the same time and so many companies wanting to tap markets as a result. Is this something that you think is Happening outside of the European banking or is European banking intrinsic to this, to these developments?

[D]

You see demands a bit all over the world. If you go into Asia, the US it is rather than the super cycle. If you go in Europe, there are also structural demands, infrastructure, energy. So there are a lot of investments that are happening and so we see that pick up. And again we with what we have, both in the global markets, but also in the financing activities and given our capital position, we are there to support. The one thing is, you know, as we are a bank, we are prudent. So we have to be. We see a lot of demand, but we have to be careful and to avoid that we would underwrite things that would make us think of what we saw back in 2002. So, so that's with it. So yes, we see demand, yes, we ready to support it, but we keep our eyes open as we always do.

[C]

You seem to be saying that you think there's a risk here. How bubble like do you think the market is right now, therefore around this space?

[D]

Yeah, listen, I'm not going to qualify it as a bubble, but I'm telling you we are continuing to look very careful what it is to make sure that there is a difference between really infrastructure kind of things and things which are maybe not as underbuilt. So I'm not saying there is a bubble, but we're particularly careful to, to avoid it.

[C]

Just, just to follow up on that, when you spend money, I'm going to ask the same question I asked the CFO of Santander yesterday. What's your rate of return when you invest in. In AI at the moment? So you invest a Euro in AI. What's your rate of return that you're seeing at the bank right now?

[D]

Yes, I'll put it the other way around is to be very fair. Again these kind of things. If you implement AI. I'm exaggerating, but imagine you give every employee a tool that is going to cost a lot of money and that's not necessarily going to realize in any bottom line improvement. So the way we do it, we really focus on all the that we do that they do have the ROIC that we go for. So more than what we typically have. So like 15% after tax. We also want to make sure that it is focused on cost capturing and on cyber. So we really look forward. So we're not handing out tools to everyone. We're really taking end to end processes, see where it can be plugged in and how it can deliver the savings.

[B]

Last, I don't need to tell you that we're heading towards a French election. Of course. When you look at the polling, are you preparing the business for any kind of particular outcome? Are you concerned about European cohesion on the other side of the election? Are you concerned about higher French bond market spreads on the other side of the election? How do you prepare the business?

[D]

The point of attention, if I talk to corporates and at this stage they picked up business. So they were a bit wait and see with what was happening in the Middle East. They picked up, if you look at June, you saw business picking up. So from that point of view, it's fine if I, if I talk to our individual clients. You saw a result in France, reit, retail banking, they are doing fine. So the point of attention, if I may say, is the French Republic. Yeah. What will happen, what will happen with the financing costs and like. So that is a bit the point of attention, but intrinsically for us with respect to what we see in the French clients. And let's not forget we are a bank which is pan European. Yeah, I know we have twice Paris in our name, but we are mainly a pan European bank. So from that point of view on the day to day business, we see evolutions which are fine. But yes, there will be some uncertainty around the Republic a around the financing around it. So that's what we will have probably until next summer.

[C]

Yep. We're all going to watch with interest. I have to say last, always a pleasure. Thanks for the time. This morning, BNP Paribas cfo, Last Machine.

[B]

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