BNP Paribas jumps as bank raises div­i­dend, cost cuts

The Pak Banker - - COMPANIES/BOSS -

BNP Paribas jumped as the French len­der raised its div­i­dend to the high­est in eight years and pledged to cut costs at the in­vest­ment bank to help free up cap­i­tal.

France's big­gest len­der pro­posed a div­i­dend of 2.31 euros a share for 2015, up from 1.50 euros a year ear­lier, it said in a state­ment on Fri­day. Fourth-quar­ter net in­come fell 52 per­cent to 665 mil­lion euros ($744 mil­lion) from 1.38 bil­lion euros, hurt by a good­will write­down at its Ital­ian unit. That missed the 864 mil­lioneuro av­er­age es­ti­mate of five an­a­lysts.

Europe's largest banks are un­der pres­sure to shrink their se­cu­ri­ties units and fo­cus on the most prof­itable busi­nesses as reg­u­la­tors toughen scru­tiny of riskier ac­tiv­i­ties. Un­der its over­haul, BNP is seek­ing to cut risk-weighted as­sets at the in­vest­ment bank by 20 bil­lion euros and trim 1 bil­lion euros in costs by 2019 as it seeks to fo­cus on busi­nesses that gen­er­ate higher fees and use less cap­i­tal. "Their so­lid­ity is a nice sur­prise com­pared with the very bad re­sults of banks like Deutsche Bank and Credit Suisse," said Jerome Forneris, who helps man­age about $9 bil­lion at Banque Martin Mau­rel in Mar­seille. "They've iden­ti­fied growth sec­tors in which they can win mar­ket share and other un­der­per­form­ing sec­tors that they're go­ing to re­duce."

The shares jumped as much as 5.6 per­cent, the big­gest in­tra­day gain since Au­gust, and were up 4.5 per­cent at 42.79 euros at 12:28 p.m. in Paris. They have de­creased about 18 per­cent this year. Deutsche Bank AG, which runs Europe's largest in­vest­ment bank, and Credit Suisse Group AG both had losses at their se­cu­ri­ties units in the fourth quar­ter. At UBS Group AG, which over­hauled its busi­nesses in 2012 to fo­cus on wealth man­age­ment, the se­cu­ri­ties unit re­ported a profit drop of 63 per­cent.

BNP said it plans to re­duce and re­al­lo­cate more than 10 per­cent of risk-weighted as­sets at its cor­po­rate and in­sti­tu­tional bank­ing unit through 2019 as the busi­ness ex­pands. The unit is seek­ing an­nual rev­enue growth of at least 4 per­cent be­tween 2015 and 2019, an im­prove­ment in the costin­come ra­tio, a mea­sure of ef­fi­ciency, by 8 per­cent­age points and 1.6 bil­lion euros of ad­di­tional pre­tax profit com­pared with 2015. "The ob­jec­tive we have is to re­ally im­prove op­er­a­tional ef­fi­cien­cies," Chief Fi­nan­cial Of­fi­cer Lars Mache­nil said in an in­ter­view with Bloomberg Tele­vi­sion's Caro­line Connan. "We've adapted in the past, but there are some head­winds po­ten­tially ahead, par­tic­u­larly around regulation."

In the fourth quar­ter, CIB, which houses the se­cu­ri­ties-trad­ing ac­tiv­i­ties, said that pre­tax profit slipped 9.2 per­cent to 574 mil­lion euros from a year ear­lier. Global mar­kets re­ported rev­enue of 1.18 bil­lion euros, up 8.9 per­cent, with pre­tax profit down 12 per­cent.

The se­cu­ri­ties unit's re­vamp "has more sub­stance than might have been an­tic­i­pated and com­mit­ment to rein in cap­i­tal con­sump­tion is sig­nif­i­cant," said Piers Brown, an an­a­lyst at Mac­quarie, who rates the stock out­per­form. Mache­nil said in the in­ter­view that BNP is win­ning mar­ket share as banks in­clud­ing Royal Bank of Scot­land Group Plc are cut­ting se­cu­ri­ties busi­nesses. "Part of that growth is stem­ming from mar­ket-share grab­bing be­cause some of the other banks have re­tracted out of some ac­tiv­i­ties and we have taken on their clients," he said. "Even though the growth might not be as spec­tac­u­lar as it used to be, there is a dif­fer­ence be­tween some re­tract­ing out of the busi­ness and we have def­i­nitely adapted."

Rev­enue from equity and prime ser­vices jumped 29 per­cent, helped by a "sharp rise" in de­riv­a­tives, while fixed-in­come trad­ing rose 1.3 per­cent, helped by a "good per­for­mance" in for­eign ex­change, credit and rates, the bank said. BNP said in the state­ment that it seeks to strengthen its "Euro­pean lead­er­ship, cap­i­tal­ize on longterm re­gional growth in Asia-Pa­cific and bet­ter align the plat­form in the Amer­i­cas with the group's strat­egy and clients."

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