BNP Paribas slumps after missing earnings estimates
French banking giant also delays profit target by a year, though full-year dividend to rise 18%
01 February 2024 - 12:33
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
Paris — BNP Paribas reported a surprise drop in fourth-quarter income and pushed back a key profitability target, sending the French bank’s shares 8% lower on Thursday.
Revenue at its investment bank, which CEO Jean-Laurent Bonnafe has been expanding, fell from a year earlier as did sales at its consumer and commercial real estate businesses.
Fourth-quarter group net income dropped 50% year on year on a reported basis to €1.07bn, short of the €1.74bn average of 15 analyst estimates compiled by the company.
JPMorgan analysts described the results as “disappointing” despite more shareholder payouts. The “top line was weaker in all divisions except corporate banking, but the miss mainly came from CIB (corporate investment banking),” they said in a note.
BNP Paribas said it would increase its full-year cash dividend by 18% to €4.60 a share and spend a further €1.05bn buying back shares.
The eurozone’s biggest bank by assets said it has already used €3bn of excess capital from more than €7bn euros generated from the sale of its US retail operations last year, leaving it with about €4.6b to redeploy.
BNP Paribas shares were down 7.9% at €57.64 by 8.25am GMT, putting them on track for the biggest one-day fall since March.
Eurozone banks have been reporting a surge in profits and payouts to shareholders in recent quarters, thanks to rising interest rates. However, the outlook is clouded by economic uncertainty and expectations that interest rates will fall.
Shares in Dutch bank ING also fell sharply on Thursday after it forecast lower total income for 2024.
BNP Paribas’ miss was in part due to it setting aside €645m to cover losses tied to “risk on financial instruments”.
Half of that amount relates to a long-running case involving Swiss franc mortgages in Poland, which turned out to be costly for borrowers when the currency soared against the zloty.
Europe’s top court ruled last year in favour of the mortgage holders, empowering them to reclaim some of the payments.
BNP Paribas' fourth-quarter group sales were up 0.1% to €10.9bn compared with analysts’ €11.4b average.
Trading revenue tumbles
BNP Paribas also reported a 2.6% decline in revenue at its investment bank, dragged down by a 32% slump in revenue from trading in fixed income, currencies and commodities.
The bank’s insurance and wealth management division performed worse than expected, with sales down almost 13%.
It also reduced its 2025 target for return on tangible equity (ROTE) — a measure of profitability — saying it wouldn’t reach its 12% target until 2026 because of higher regulatory reserve requirements and pressure to increase deposit rates.
BNP Paribas now sees its ROTE in 2025 in the range of 11.5% and 12%, down from about 12%. It also reduced its average annual net income growth target over the 2022 to 2025 period to about 8% from more than 9%, linking that to minimum reserve requirements from the European Central Bank and a Belgian bank levy.
The bank confirmed its other targets, including a payout dividend ratio of 60% and Common Equity Tier 1 capital of 12% in 2025.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
BNP Paribas slumps after missing earnings estimates
French banking giant also delays profit target by a year, though full-year dividend to rise 18%
Paris — BNP Paribas reported a surprise drop in fourth-quarter income and pushed back a key profitability target, sending the French bank’s shares 8% lower on Thursday.
Revenue at its investment bank, which CEO Jean-Laurent Bonnafe has been expanding, fell from a year earlier as did sales at its consumer and commercial real estate businesses.
Fourth-quarter group net income dropped 50% year on year on a reported basis to €1.07bn, short of the €1.74bn average of 15 analyst estimates compiled by the company.
JPMorgan analysts described the results as “disappointing” despite more shareholder payouts. The “top line was weaker in all divisions except corporate banking, but the miss mainly came from CIB (corporate investment banking),” they said in a note.
BNP Paribas said it would increase its full-year cash dividend by 18% to €4.60 a share and spend a further €1.05bn buying back shares.
The eurozone’s biggest bank by assets said it has already used €3bn of excess capital from more than €7bn euros generated from the sale of its US retail operations last year, leaving it with about €4.6b to redeploy.
BNP Paribas shares were down 7.9% at €57.64 by 8.25am GMT, putting them on track for the biggest one-day fall since March.
Eurozone banks have been reporting a surge in profits and payouts to shareholders in recent quarters, thanks to rising interest rates. However, the outlook is clouded by economic uncertainty and expectations that interest rates will fall.
Shares in Dutch bank ING also fell sharply on Thursday after it forecast lower total income for 2024.
BNP Paribas’ miss was in part due to it setting aside €645m to cover losses tied to “risk on financial instruments”.
Half of that amount relates to a long-running case involving Swiss franc mortgages in Poland, which turned out to be costly for borrowers when the currency soared against the zloty.
Europe’s top court ruled last year in favour of the mortgage holders, empowering them to reclaim some of the payments.
BNP Paribas' fourth-quarter group sales were up 0.1% to €10.9bn compared with analysts’ €11.4b average.
Trading revenue tumbles
BNP Paribas also reported a 2.6% decline in revenue at its investment bank, dragged down by a 32% slump in revenue from trading in fixed income, currencies and commodities.
The bank’s insurance and wealth management division performed worse than expected, with sales down almost 13%.
It also reduced its 2025 target for return on tangible equity (ROTE) — a measure of profitability — saying it wouldn’t reach its 12% target until 2026 because of higher regulatory reserve requirements and pressure to increase deposit rates.
BNP Paribas now sees its ROTE in 2025 in the range of 11.5% and 12%, down from about 12%. It also reduced its average annual net income growth target over the 2022 to 2025 period to about 8% from more than 9%, linking that to minimum reserve requirements from the European Central Bank and a Belgian bank levy.
The bank confirmed its other targets, including a payout dividend ratio of 60% and Common Equity Tier 1 capital of 12% in 2025.
Reuters
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.
Most Read
Published by Arena Holdings and distributed with the Financial Mail on the last Thursday of every month except December and January.