BNP Paribas raises profit target and share buyback after record year

BNP Paribas aims to return 5 billion euros to shareholders by ramping up share purchases this year and has raised its profit forecast as higher interest rates boost business.

France’s largest listed lender, which reported record annual profits for 2022 on Tuesday, is also benefiting from recently completed a $16.3 billion deal of the US retailer Bank of the West. It said the disposal will help drive larger-than-expected net income over the next two years as it begins reinvesting cash, including through small acquisitions.

The bank has marked that it will buy back its €4 billion worth of shares as it recoups some of the profits from the sale in the United States to investors. On Tuesday, the company said it planned to buy an additional 1 billion euros of shares by 2023 based on its earnings, meeting its goal of paying a dividend of 60% of profits, including the cash component. .

BNP added that they now expect net income to grow by more than 9% annually through 2025, from a previous forecast of 7%, and after their profits grow 7.5% in 2022 to 10.2 billion euros.

BNP said return on tangible equity, a measure of profitability, will be 12% higher at the end of two years, up from its previous 11% target.

Like many of its European rivals, BNP is benefiting as the European Central Bank interest rate hike to address rising inflation, increasing loan income in many of its markets. The euro area also appears to have avoided a recession by the end of 2022 and the economic outlook is brighter than in previous months despite the energy crisis and Russia’s war with Ukraine.

However, BNP’s fourth-quarter revenue and profit were slightly below analysts’ forecasts. The bank posted net income of 2.15 billion euros for the period, down 6.7% from a year earlier when it said one-time purchases boosted earnings and were lower than 2.37 billion euros expected in a Refinitiv poll. Revenue came in at €12.1 billion, slightly below Refinitiv’s €12.2 billion forecast.

The bank recorded some restructuring costs and additional IT spending in its so-called corporate hub.

In some areas, the BNP did better than expected. The bank, with a greater focus on large corporate clients, posted solid performance in its home market in the fourth quarter, while rivals with more exposure to the French mortgage market were expected to be affected by local constraints limits how quickly banks can transfer interest-increasing money to households.

And it overtook some Wall Street banks with better earnings in some parts of investment banking, with revenue from fixed income, currencies and commodities soaring 45% year-over-year.

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