BNP Paribas SA announced a new share buyback and higher-than-expected dividend after a surge in trading revenue in the final months of last year lifted profit above its targets.
The French lender on Tuesday reported a 30% jump in equities trading in the fourth quarter and 34% higher revenue from fixed income, better than analysts had expected.
That allowed BNP Paribas to exceed its full-year targets for revenue and profit, and boost the dividend to €4.79 a share. It also plans a buyback worth €1.08 billion ($1.11 billion) as part of a pledge to return 60% of profit to investors.
The investment bank is “a powerful growth engine that continues to gain market share”, Chief Executive Officer Jean-Laurent Bonnafe said in a statement.
In the role since 2011, Bonnafe has built up the equities business and last year announced the biggest acquisition of his tenure when he agreed to buy Axa SA’s fund unit in a €5.1 billion deal. With just a few years left until he reaches the mandatory retirement age, he said he’s now embarking on a new strategic plan for the commercial and retail banking unit that struggled in recent years.
BNP Paribas plans to provide more details on the strategy for the commercial and retail business in June. Income at the unit rebounded in the fourth quarter, rising 4.7% from a year earlier despite a drop in income at the leasing unit, where lower used car prices weighed on earnings.
BNP Paribas confirmed a key profitability target for the next year while slightly lowering it for 2025. It outlined new goals including average net income growth of more than 7% for the period 2024 to 2026. It also plans to save €600 million this year and next.
Deutsche Bank AG last week also signaled that it was working on further cost reductions, saying it plans to reduce management roles and cut headcount over coming years, after higher-than-expected costs marred its results in the final months of last year.
BNP Paribas lost its position last year as the biggest banking market capitalization in Europe, as local regulations governing rates on savings accounts meant it missed out on the boost from higher interest rates. The stock also suffered from France’s political uncertainty, after President Emmanuel Macron called snap elections.
A drop in the interest rates for the hugely popular regulated savings accounts in France this February may help lower funding costs for BNP Paribas and its French peers this year.
The bank’s CET1 ratio, a key measure of its financial strength that is closely watched by analysts and investors, stood at 12.9% as of December.
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