(Bloomberg) -- BNP Paribas SA joined European peers in getting a lift from rising interest rates, with higher income from lending and debt trading propelling earnings past analysts’ estimates. 

Net interest income at the Paris-based bank rose 9.6% from a year ago, and fixed-income trading jumped 25%, just ahead of the average for the biggest Wall Street firms. Equities trading, a focus of Chief Executive Officer Jean-Laurent Bonnafe in recent years, held its own in a third quarter where rivals posted declines.

While higher provisions for credit losses, a slowdown in dealmaking and writedowns on leveraged loans weighed on earnings, BNP’s 10% increase in net income to €2.76 billion still beat estimates for a small decline.

The results mirror the performance at other European lenders, which are enjoying a sweet spot where they earn more on loans while funding costs are still low and volatile markets fuel trading results. BNP, which gets more than half of its revenue from its extensive retail and commercial banking operations, said it now expects more than €2 billion in additional interest income by 2025.

BNP shares rose 1.1% at 9:20 a.m. in Paris trading, paring losses this year to 20%.

Bonnafe, in the CEO role for 11 years, has used the stability afforded by the bank’s diversified model to capitalize on stumbles by other investment banks and bulk up in equities trading. After agreeing to sell BNP’s US retail arm for about $16 billion, he has vowed to use some of that money for more acquisitions and buybacks.

His recent deals -- taking on hedge fund clients from Deutsche Bank AG and Credit Suisse Group AG -- paid off in the third quarter as BNP’s stock traders managed to eke out a 3.3% gain in revenue, during a period where the largest Wall Street banks on average saw a 13% decline.

BNP had also shown initial interest in Credit Suisse’s securitized products group, which trades securities backed by pools of mortgages and other assets, Bloomberg reported. Last week, the Swiss bank announced that it had signed an exclusivity agreement with a group of other investors led by Apollo Global Management Inc.

BNP Paribas is already a top debt underwriter in Europe, including for leveraged loans. Yet rising interest rates and volatile markets have prompted writedowns on such debt at rivals including Deutsche Bank and Barclays Plc.

BNP’s global banking unit, which houses the advisory and capital markets operations, saw revenue drop by a relatively modest 7.9% from a year earlier. That reflected the sharp drop in stock and bond issuance, as well as writedowns on leveraged loans that it helped arrange for clients and then couldn’t sell on. BNP didn’t specify how big those writedowns were.

The European Central Bank has indicated it may impose higher capital requirements on several firms over their leveraged lending activities, in an effort to force them to rein in the business.

Rising interest rates and the deteriorating economy also prompted BNP to set aside more money to cover potentially souring loans. Provisions increased to €947 million, from €706 million a year ago.

Even so, revenue and operating income at the retail and commercial lending business, and at the insurance and asset management arm, outpaced the investment bank in the third quarter.

BNP’s Commercial, Personal Banking and Services unit, which includes its retail operations, saw its revenue top estimates with a 9.6% gain, driven by growing loans and deposits. Rising sales at the wealth management and insurance operations allowed the bank to post 8.9% higher revenue at its Investment and Protection Services unit.

(Updates with share reaction in fifth paragraph)

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