BNP outpaces European peers

With some of Europe’s largest banks still struggling to boost profitability and raise dividends, BNP Paribas is doing both. That helps explain why investors have driven the shares to the highest in almost a decade.

The Paris-based lender will probably report on Tuesday that fourth-quarter net income more than doubled to €1.63bn, according to analysts surveyed by Bloomberg, helped by a rebound in debt trading. For 2016, earnings probably totalled €7.6bn, the most in six years.

Some of its biggest European peers are still in clean-up mode. Deutsche Bank just reported a second straight annual loss, while Italy’s UniCredit is facing a 2016 deficit of about €11.8bn.

BNP Paribas is one of the few continental banks with a large consumer-banking footprint in several European countries and the US, alongside extensive trading and corporatelending operations.

“Their strategy is paying off,” said Robert Jakobsen, an analyst at Jyske Bank in Denmark who has a buy rating on the stock. “Their diverse model has helped a lot. It’s like a wall against adverse interest rates and any shocks in investment banking.”

That said, record-low rates and sluggish economic growth have squeezed the retailbanking operations and CEO Jean-Laurent Bonnafe will probably announce a plan for additional cost savings soon.

The French bank’s biggest source of trading revenue is its fixed-income business. While Deutsche Bank, Europe’s largest investment bank by income, lost ground to Wall Street firms in the fourth quarter, BNP Paribas “will probably reinforce its market share in Europe and maybe preserve it in the US,” said Neil Smith, an analyst at Bankhaus Lampe who has a hold rating on the French bank.

BNP Paribas has said it expects to meet a 10% target for return on equity in 2016, even as rivals including HSBC Holdings, Britain’s largest bank, have pushed back or watered down profitability goals.