BNP Paribas trumps the German competition

BNP Paribas trumps the German competition

Dhe French bank BNP Paribas maintains its position as the leading bank in the eurozone. Despite inflation and the energy crisis, it closed the past financial year with an increase in earnings of 9 percent to around 50.4 billion euros. Net profit rose 7.5 percent to a record 10.2 billion euros. “All engines of the group ran well,” said BNP boss Jean-Laurent Bonnafé at the press conference on Tuesday.

In fact, the French recorded growth across all sectors. Corporate customer business and investment banking showed the strongest growth, up 15.7 percent to EUR 16.5 billion. The private customer business including leasing grew by 9.3 percent to 28.3 billion euros. Like its peers, higher interest rates have boosted returns at BNP. The interest margin rose by 9.2 percent and thus significantly more risk costs, which increased only slightly at 1.4 percent.

On the stock exchange, the price of BNP shares fell slightly on Tuesday morning, recovering in early trading and trading around 2 percent higher. Analysts surveyed by the financial service “Bloomberg” had hoped for more from the final quarter of 2022 in particular. While they had assumed a profit of 2.3 billion euros on average, the BNP “only” presented a surplus of 2.2 billion euros on Tuesday. That is 6.7 percent less than in the same period last year and is also slightly less than the 2.3 billion euros generated by Santander.

Focus on Europe

With a profit of 10.2 billion euros for the year as a whole, BNP was slightly ahead of its Spanish competitor with 9.6 billion euros. The distance to the Swiss UBS, to Unicredit from Italy and to Deutsche Bank is significantly larger with annual profits equivalent to around 7.1, 5.2 and 5 billion euros. It is still unclear whether the French have done better than the British HSBC, as they will only be presenting their business figures for 2022 in two weeks. The American banks have already delivered, with JP Morgan at the top with annual profits equivalent to around 35 billion euros.

Even if the recent highs from early 2022 have not yet been reached, BNP shares have been popular with investors over the past few weeks. It has gained around 40 percent in value since last October. A share buyback program in the amount of 5 billion euros this year should also have a stimulating effect on the share price. At 4 billion euros, the lion’s share of this is related to the sale of the Californian subsidiary Bank of the West to the Bank of Montreal, which was completed a few days ago and which, at current rates, will bring more than 15 billion euros into the French coffers this year. The dividend of 3.67 euros last year should rise to 3.90 euros per share this year.

Despite rising risk costs for consumer credit and a weakening insurance business, BNP boss Bonnafé continued to raise profit targets. A year ago he was targeting average annual growth of more than 7 percent for the period up to 2025, but now it should be more than 9 percent. But even if, in view of the financial strength of the French, there is repeated speculation in politics and the financial world about a possible major merger with a German competitor such as Commerzbank: BNP emphasizes that its focus is on “targeted acquisitions” to increase value and not the purchase of an entire bank including the branch network. The purchase of Deutsche Bank’s hedge fund business recently fell into this category.

Unlike the German competitor, BNP has focused on the European market in recent years. Asia and North America still only account for 10 percent of activities. “We never acted as if we could keep up with the US competition,” said a BNP manager recently to the FAZ. In addition, the French saved costs earlier than the German competition by thinning out the branch network and operated stronger risk provisions. The latter is of course also the result of a billion-euro fine that the BNP had to pay nine years ago for circumventing global sanctions in the United States.

In Germany, BNP, whose largest single shareholder with 7.8 percent of the capital shares is the Belgian state, gained a foothold around 20 years ago with the acquisition of the direct bank Consors. Added to this was the acquisition of DAB (formerly Direkt Anlage Bank). It is now an established player in corporate banking, which includes the activities of its leasing subsidiary Arval. BNP is aggressively marketing its efforts to support companies in their “green” transformation and to exert pressure on more ambitious environmental goals. According to their own information, only 1.3 percent of the loans are for the production and processing of oil and gas.


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