A sign above an entrance to the headquarters of BNP Paribas SA bank, in Paris, France, on Monday, Feb. 6, 2023. BNP Paribas kicks off earnings season for French banks, reporting quarterly numbers Tuesday before the market opens in Paris. Photographer: Nathan Laine/Bloomberg
Paris, Frankfurt The major French bank BNP Paribas posted a record profit of 10.2 billion euros in 2022, up 7.5 percent on the previous year. BNP CEO Jean-Laurent Bonnafé spoke of a "very solid" result in Paris on Tuesday. "All the group's engines worked well," he said.
The bank succeeded in increasing profits last year despite a weaker final quarter. From October to December, the bank earned 2.15 billion euros, 6.7 percent less than in the prior-year quarter. The result was thus also below analysts' forecasts, who had expected around 2.37 billion euros.
Bonnafé did not want to attach too much importance to the slightly weaker fourth-quarter figures, pointing out that the bank was raising its business targets: BNP now expects average annual net profit growth of more than nine percent until 2025 instead of more than seven percent as before.
The French institution plans to buy back shares for around five billion euros in the current year. Around four billion euros will come from the recently completed sale of the U.S. offshoot Bank of the West. Just under one billion euros is part of the planned program to return capital to shareholders.
Chief Financial Officer Lars Machenil said that the first tranche of the share buyback, amounting to 2.5 billion euros, would come in the first half of the year, and the second after the summer. BNP still needs approval from the European Central Bank (ECB) for the program, but this is considered a formality. Machenil expects that the share buyback could start "around the end of March".
The news was well received by investors, with the share price rising by a good one percent in the morning.
BNP Paribas, like many other banks, is benefiting from the central banks' monetary policy. Since last summer, the ECB has raised interest rates in the euro zone five times in a row, last Thursday to three percent.
The Commercial, Personal Banking & Services unit, which includes the bank's private customer business, benefited from this. Thanks to the interest rate increases, BNP Paribas was able to generate a pre-tax profit of eight billion euros in this segment, around 24 percent more than in the previous year.
Trading activity on the markets was also strong in the face of inflation and recession fears, particularly in interest rates, foreign exchange and commodity derivatives. The Commercial & Institutional unit (CIB) benefited from this. Here, pre-tax profit increased by 16 percent year-on-year to 5.4 billion euros.
BNP Paribas closed the deal to sell its U.S. arm Bank of the West last week after U.S. regulators gave the go-ahead in January.
According to the major French bank, this will result in a positive special effect of 2.3 billion euros in the first quarter of the current year. In total, the total amount to be paid out at the end of 2021 with the Bank of Montreal agreed purchase price for the U.S. branch was more than 16 billion dollars.
BNP Paribas has free funds of more than seven billion euros, which the bank intends to use for investments in technology and acquisitions. According to Bonnafé, however, no major acquisitions are planned. Instead, the bank wants to grow "organically". Acquisitions in the insurance sector or of "small companies in the asset management sector" are conceivable.
BNP Paribas has exited retail banking in the United States with the sale of California-based Bank of the West, but retains a presence in the U.S. market with its investment banking operations. According to Bonnafé, the USA remain a "strategic pillar" of the bank. In November, BNP Paribas had announced that it would expand the activities of its equity analysis firm Exane in the USA.
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