BNP Paribas slumps after missing earnings estimates
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 higher 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 will increase its full-year cash dividend 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 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 franc 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. It 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 reduced its 2025 target for return on tangible equity (ROTE) a measure of profitability saying it would not reach 12% until 2026 due to higher regulatory reserve requirements and pressure to grow deposit rates.
BNP Paribas now sees its ROTE in 2025 in the range of 11.5%-12%, down from about 12%. It reduced its average annual net income growth target for 202225 to about 8% from more than 9%, linking it 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%.
THE OUTLOOK [FOR EUROZONE BANKS] IS CLOUDED BY ECONOMIC UNCERTAINTY AND EXPECTATIONS THAT RATES WILL FALL