PARIS
BNP Paribas SA posted fourth-quarter profit that missed estimates as earnings fell at the French consumer-banking business. The lender also laid out a multi-year plan to lower costs and boost investment in technology.
Net income doubled to 1.44 billion euros (Dh5.67 billion, $1.55 billion) from a year earlier, the Paris-based bank said in a statement Tuesday, falling short of the 1.63 billion-euro average estimate of seven analysts surveyed by Bloomberg. BNP Paribas raised the dividend to 2.70 euros a share, and will target an average annual increase of more than 9 per cent until 2020.
Record-low interest rates and sluggish economic growth have held back consumer-banking profits at BNP Paribas and European peers. The bank, led by Chief Executive Officer Jean-Laurent Bonnafe, said it will spend 3 billion euros spread over the next three years to upgrade digital-banking services and increase automation while also seeking to squeeze out 3.4 billion euros in costs companywide.
“It’s not just an effort we are doing in cost reduction,” Chief Financial Officer Lars Machenil said in an interview with Bloomberg Television. “It’s really on making the interaction with the customer different, to digitalise it.”
BNP Paribas’s stock has posted the second-best performance in the EURO STOXX Banks Index over the past year, and touched a post-crisis peak in January.
Earnings at the French consumer-banking unit fell 36 per cent from a year earlier to 177 million euros as loan losses increased and revenue fell. BNP Paribas also had about 130 million euros in costs related to job reductions in Belgium and Italy, and booked a 127 million-euro goodwill write-down at its Polish unit. In the US, the BancWest division reported a 2.3 per cent decline in profit.
Investment bank
At the corporate and institutional banking unit, an 8 per cent increase in revenue helped drive a 51 per cent jump in pretax profit. Revenue from fixed income, currencies and commodities — BNP’s biggest source of trading income — rose 23 per cent to 838 million euros, missing the 939 million-euro average of three estimates compiled by Bloomberg News. Sales at BNP Paribas’s equities and prime-services business rose 20 per cent.
BNP Paribas “has looked to take advantage of peers who have been pulling back quite aggressively in some areas of investment banking in Europe,” Jonathan Fearon, who helps manage about 300 billion pounds ($373.5 billion) at Standard Life Plc in Edinburgh said before the earnings release.
For 2016, the French bank earned 7.7 billion euros, the most in six years, even as some of its biggest European competitors struggled. Deutsche Bank AG last week reported a second straight annual loss, hurt by legal costs, while Italy’s UniCredit SpA said it will post a 2016 loss of about 11.8 billion euros and tap shareholders for the third time since 2010.
As BNP Paribas speeds up digital investments, new spending measures will outpace cost reductions this year before evening out starting next year. The bank is aiming for a return on equity of 10 per cent in 2020 with a common equity tier one ratio of 12 per cent. It also aims for total revenue to grow at least 2.5 per cent on average each year, led by the international finance services and the investment bank. The bank expects profit to rise by more than 6.5 per cent annually and is targeting a dividend payout ratio of about 50 per cent.
The CET1 ratio, a key measure of financial strength, rose to 11.5 per cent at the end of 2016 from 11.4 per cent three months earlier.
