Share buyback announced in the billions – targets increased

BNP Paribas

The Pariser Bank announces a significant share buyback.

(Photo: Bloomberg)

Paris, Frankfort 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 boss Jean-Laurent Bonnafé spoke of a “very solid” result in Paris on Tuesday. “All the engines in the group worked well,” he said.

The bank managed to increase 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 same quarter of the previous year. The result was also below the forecasts of the analysts, who had expected around 2.37 billion euros.

Not wanting to attach too much importance to the slightly weaker fourth-quarter figures, Bonnafé pointed out that the bank is raising its business targets: BNP now expects average annual growth in net profit of more than 9 percent until 2025, instead of more than 7 percent previously .

The French institute plans to buy back shares for around five billion euros in the current year. Around four billion euros come from the recently completed sale of the US subsidiary Bank of the West. Almost one billion euros is part of the planned program to return capital to shareholders.

Chief Financial Officer Larsmachenil said the first tranche of the €2.5 billion share buyback would come in the first half of the year, with 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 the share buyback to begin “around the end of March.”

The news was well received by investors, and the share rose by a good one percent in the morning.

Like many other banks, BNP Paribas benefits from the monetary policy of the central banks. Since last summer, the ECB has raised interest rates in the euro area five times in a row, most recently to three percent last Thursday.

The Commercial, Personal Banking & Services unit, which also includes the bank’s private customer business, will benefit from this. Thanks to the interest rate increases, BNP Paribas was able to bring in 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 given fears of inflation and recession, particularly in interest rates, foreign exchange and commodity derivatives. The Commercial & Institutional Unit (CIB) benefited from this. Here, the pre-tax profit increased by 16 percent compared to the previous year to 5.4 billion euros.

Sale of US subsidiary Bank of the West completed

BNP Paribas completed the deal to sell its US subsidiary Bank of the West last week after US regulators gave the go-ahead in January.

According to the French bank, this will result in a positive special effect of 2.3 billion euros in the first quarter of the current year. Overall, the purchase price for the US branch agreed with the Bank of Montreal at the end of 2021 is more than $16 billion.

BNP Paribas has available funds of more than seven billion euros, which the financial institution intends to use for investments in technology and acquisitions. According to Bonnafé, no major takeovers 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 exited retail banking in the United States with the sale of California’s Bank of the West, but remains present in the US market with its investment banking business. According to Bonnafé, the US should remain a “strategic pillar” of the bank. In November, BNP Paribas announced that it would be expanding the activities of its equity research firm Exane in the United States.

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