BNP plans US$1.1 billion buyback as trading strength lifts profit
It’s part of a pledge to return 60% of profit to investors
BNP announced a new share buyback and higher-than-expected dividend after a surge in trading revenue in the final months of last year lifted profit above its targets.
The French lender on Tuesday (Feb 4) reported a 30 per cent jump in equities trading in the fourth quarter and 34 per cent higher revenue from fixed income, better than analysts had expected.
That allowed BNP Paribas to exceed it full-year targets for revenue and profit, and boost the dividend to 4.79 euros a share. It also plans a buyback worth 1.08 billion euros (S$1.51 billion) as part of a pledge to return 60 per cent of profit to investors.
The investment bank is “a powerful growth engine that continues to gain market share”, chief executive officer Jean-Laurent Bonnafe said in a statement.
In the role since 2011, Bonnafe has built up the equities business and last year announced the biggest acquisition of his tenure when he agreed to buy Axa’s fund unit in a 5.1 billion euro deal. With just a few years left until he reaches the mandatory retirement age, he said he’s now embarking on a new strategic plan for the commercial and retail banking unit that struggled in recent years.
BNP Paribas plans to provide more details on the strategy for the commercial and retail business in June. Income at the unit rebounded in the fourth quarter, rising 4.7 per cent from a year earlier despite a drop in income at the leasing unit, where lower used car prices weighed on earnings.
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BNP Paribas confirmed a key profitability target for the next year while slightly lowering it for 2025. It outlined new goals including average net income growth of more than 7 per cent for the period 2024 to 2026. It also plans to save 600 million euros this year and next.
Deutsche Bank last week also signalled that it was working on further cost reductions, saying it plans to reduce management roles and cut headcount over coming years, after higher-than-expected costs marred its results in the final months of last year.
BNP Paribas lost its position last year as the biggest banking market capitalisation in Europe, as local regulations governing rates on savings accounts meant it missed out on the boost from higher interest rates. The stock also suffered from France’s political uncertainty, after President Emmanuel Macron called snap elections.
A drop in the interest rates for the hugely popular regulated savings accounts in France this February may help lower funding costs for BNP Paribas and its French peers this year.
The bank’s CET1 ratio, a key measure of its financial strength that is closely watched by analysts and investors, stood at 12.9 per cent as of December. BLOOMBERG
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