The Swiss unit of French bank BNP Paribas swung to a loss in 2020, largely due to closure of its commodity financing business.

BNP Paribas’ (Suisse) net income plummeted to a loss of around 362 million francs ($403 million) in 2020 from a profit of around 14 million francs in 2019, the bank said Tuesday after being hit hard by the discontinuation of commodity financing.

Big Hit from Commodity Financing Exit

The Geneva-based bank said the ending of the commodity financing business was also a key factor in the 13.8 percent drop in its banking income to 421 million francs.

«Taken against a backdrop of upheaval in the industry, this decision reflects our strategic aim of being perfectly aligned with our group’s CIB [Corporate and Investment Banking] business model,» CEO Monique Vialatou said in the bank’s annual report.

Credit Risks

The bank added that its performance had been severely affected by non-recurring items, which made a negative contribution of 359.9 million francs in 2020, compared with a positive contribution of 7.0 million francs in 2019, chiefly as a result of the negative changes in value adjustments for credit risks and losses on four specific commodities finance transactions.

Excluding non-recurring items, the 2020 consolidated net loss was 1.7 million francs, down from a profit of 6.9 million in 2019.

Its total consolidated assets were 16.5 billion francs as of December 31, 2020, down 2.2 billion from a year earlier.

Liabilities Lower

On the liabilities side, those due to banks -- mainly to the BNP Paribas Group -- were 4.9 billion francs, down 3.0 billion from the end of 2019 as a result of the reduction in loans and advances to customers. Customer deposits rose 1.1 billion francs to 9.1 billion.

Off-balance sheet items, contingent liabilities, irrevocable commitments and credit commitments under documentary credits related to commodities finance, came to 5.6 billion francs at the end of 2020, down 2.9 billion francs, or 33.7 percent year on year as a result of the withdrawal from this business.

Long History in Commodities

BNP Paribas in Switzerland reportedly pioneered and grew big on so-called letters of credit to oil traders including Marc Rich beginning in the 1970s. Rich, a legendary commodities trader whose family office eventually became Glencore, had fled the U.S. for Switzerland in 1983 to escape U.S. prosecution for tax evasion and trading with Iran during hostage crisis.