Earnings

BNP Paribas posts slight profit beat, but trims outlook for 2020

Key Points
  • It reported a net income of 1.84 billion euros ($2 billion) for the final quarter of 2019, while analysts had forecast a profit of 1.73 billion euros, according to Refinitiv.
  • Shares of the French lender have risen 21% over the last 12 months.
VIDEO1:5901:59
A lot of liquidity locked into Europe, BNP Paribas CEO says

French lender BNP Paribas reported slightly better-than-expected profits for its fourth quarter, but trimmed its outlook for the year ahead.

It reported a net income of 1.84 billion euros ($2 billion) for the final quarter of 2019, while analysts had forecast a profit of 1.73 billion euros, according to Refinitiv.

Lars Machenil, the chief financial officer of BNP Paribas, said the bank had showed "solid results" with all divisions seeing increased revenues compared to the previous year. Its corporate and institutional unit registered the highest growth, up by more than 30% on the year. The bank now intends to pay a 3.10 euros per share dividend in cash.

More savings

BNP Paribas has now concluded a three-year transformation plan which cost 2.7 billion euros. The bank said Wednesday that the completion of this program will allow it to save 0.7 billion euros this year, in comparison with 2019.

The French bank is also confident it will generate 1.5 billion euros in additional savings this year, including about 500 million euros in real estate sales. But it noted some exceptional expenses of about 200 million euros, and trimmed its return on tangible equity ratio (ROTE) for 2020, to 10% from 10.5%.

Here are some of the highlights for fourth quarter:

  • Revenue hit 11.3 billion euros for the quarter, vs. 10.2 billion euros a year ago.
  • CET 1 ratio reached 12.1%, vs. 12% in the previous quarter.
  • Cost/income ratio dropped 4.7% compared to a year ago.
VIDEO1:5901:59
A lot of liquidity locked into Europe, BNP Paribas CEO says

'The main point of tension'

Speaking to CNBC's Charlotte Reed, the bank's CFO said the current low interest rate environment in the euro zone remains its biggest challenge. "If you look at the overall situation that we see in France, there is intrinsically a good business drive," Machenil said, despite recent public tension over President Emmanuel Macron's plans to change the French pension system.

"The main point of tension is the low interest rate environment, that is the one that we have to continue to address," he said.

The European Central Bank (ECB) introduced negative rates in 2014 on the back of the sovereign debt crisis. The central bank has since then kept an ultra-loose monetary policy. The ECB is currently conducting a strategic review aimed at assessing its toolkit and its inflation target.

"There is a lot of liquidity, which is locked-in in Europe and so one has to find a way to dispatch this but it is a tad too early (to know what the ECB will do)," Machenil said.

The strategic review is set to last until the end of the year. Shares of the French lender have risen 21% over the last 12 months.