BNP Paribas raises targets for profits after record year

BNP Paribas aims to return €5bn to shareholders by bumping up stock purchases this year and has lifted its profit forecasts as higher interest rates boost its business.

France’s biggest listed lender, which reported record annual profits for 2022 on Tuesday, is also benefiting from the recently finalised $16.3bn sale of its US retail unit Bank of the West. It said the disposal would help fuel greater-than-expected net income over the next two years as it starts reinvesting the cash, including through small acquisitions.

The bank had already flagged that it will buy back €4bn worth of its shares as it funnels back some of the gains from the US sale to investors. It said on Tuesday that it planned an additional €1bn in stock purchases in 2023 on the back of its earnings, hitting its goal for dividend payouts of 60 per cent of profits, including a cash component.

BNP added that it now expected net income to grow by more than 9 per cent annually to 2025, from a previous 7 per cent forecast, and after its profits rose 7.5 per cent in 2022 to €10.2bn.

Its return on tangible equity, a measure of profitability, would be more than 12 per cent by the end of the two years, BNP said, up from a previous 11 per cent goal.

Like many of its European rivals, BNP is benefiting as the European Central Bank raises interest rates to tackle rising inflation, lifting earnings from loans in many of its markets. The eurozone also appears on course to have avoided a recession at the end of 2022, and economic prospects are brighter than they were months ago despite an energy crisis and Russia’s war on Ukraine.

Yet BNP’s fourth-quarter revenues and profits slightly undershot analyst forecasts. The bank posted net income of €2.15bn in the period, down 6.7 per cent compared with a year earlier when it said one-off items had lifted earnings, and below the €2.37bn expected in a Refinitiv poll. Revenues came in at €12.1bn, slightly less than the €12.2bn Refinitiv forecast.

The bank notched up some additional IT spending and restructuring costs in its so-called corporate centre.

In some areas, BNP did better than expected. The bank, with a greater focus on large business clients, put in a resilient performance in its home market in the fourth quarter, while rivals more exposed to France’s mortgage market are expected to be hit by local constraints that limit how quickly banks can pass on rate rises to households.

And it outdid some Wall Street banks with better earnings in some parts of its investment bank, with revenues from fixed income, currency and commodities rising by a sharp 45 per cent year on year.