Annual profits

BNP raises payment target after jump in annual profits

BNP Paribas has raised its profit targets and pledged to boost shareholder returns as the French lender pursues a plan to strengthen its investment bank and benefit from an economic recovery.

The bank said net profit jumped by more than a third in 2021 to a record 9.5 billion euros, helped by lower charges related to the coronavirus pandemic and as lenders in the eurozone have benefited from a broad economic recovery and government support programs that have shielded many businesses from default. .

BNP said on Tuesday the momentum continued into the fourth quarter, when net profit beat analysts’ expectations, although pre-provision earnings fell short of consensus forecasts and earnings from fixed income trading have fallen sharply.

Buoyed by its performance, the lender joined European peers such as BBVA and UniCredit in promising higher payouts to shareholders as it released an update to its strategy for 2022 to 2025.

The bank said it aims to return 60% of profits to shareholders each year through a combination of cash payouts and share buybacks. Its policy was previously set at 50% of earnings, although it rose to 60% last year through a buy-back scheme.

He also said he aims to increase net profit by 7% per year between 2022 and 2025.

BNP has been striving to become the dominant investment bank in Europe, rivaling larger US rivals in the region. It has expanded its equity division, including through acquisitions in areas such as prime brokerage, which serves hedge funds. It has also boosted lending to large corporations at the height of the pandemic, in part in hopes of retaining those customers when they turn to fundraising or finding deals.

It has also sought to close the gap with rivals in M&A advisory, hiring heavily to help grow the business.

The past two years have been “a moment of truth in our relationship with our customers and with society and the economy,” chief executive Jean-Laurent Bonnafé told a press conference, adding that BNP was well positioned for continued growth.

BNP’s fixed income division suffered in the fourth quarter of 2021, however, with revenue down nearly 25% – far more than some US peers – in what it said was a tough rate market.

The decline offset a rebound in earnings from its equity business. Corporate and investment banking revenue fell 1.5% overall in the last quarter of the year.

BNP shares fell more than 2% in morning trading in Paris. Analysts said fourth-quarter revenue of 11.2 billion euros, slightly lower than expected, was cause for disappointment.

“At the divisional level, most of the misfires occurred in global markets with both below-consensus revenue and higher costs,” RBC analyst Anke Reingen said in a note.

Along with new profit targets, BNP said it was aiming for revenue growth of more than 3.5% a year. The bank also raised its target for return on tangible equity, a measure of profitability, to more than 11% by 2025, from 10% last year.

Bonnafé said BNP, which like some peers has created a dedicated team of advisers to help clients with their energy transition strategies, would embed environmental criteria into its business “on an industrial scale” and planned to increase loan and debt issues related to green goals.

BNP became the latest European bank to exit the US retail market last December with the $16.3 billion sale of Bank of the West. He said on Tuesday that he would gradually invest the remaining proceeds from that disposal.