LONDON – BNP Paribas exceeded analysts’ expectations when it released its earnings on Friday, when its CFO spoke of a “gradual recovery” for the economy in the future.
The French bank posted a net profit of 1.59 billion euros ($ 1.90 billion) in the fourth quarter of 2020, exceeding analysts’ expectations of 1.2 billion euros, according to Refinitiv. It marked a 15.9% drop in profit compared to the previous three-month period.
Annual profit reached 7 billion euros, a drop of 13.5% compared to December 2019. Analysts surveyed by Refinitiv predicted net profit for 2020 of 6.5 billion euros.
The French lender also said that its cost of risk increased as a result of the Covid pandemic and set aside an additional 1.4 billion euros in loan loss provisions.
“Revenues are stable compared to the previous year at 44 billion (euros), costs fell by 1.1 billion (euros). Therefore, gross operating revenue, the difference between the two, has increased quite significantly, ”Lars Machenil, CFO of BNP Paribas, told Charlotte Reed of CNBC after the results were published.
Here are other highlights:
- Revenue stood at 10.8 billion euros in the fourth quarter, down 4.5% from the previous year.
- For the fiscal year, revenue was 44.2 billion euros, slightly lower than in 2019.
- Gross operating revenue increased by 6.2% over the previous year.
- The CET 1 ratio – a measure of bank solvency – stood at 12.8%, an increase of 70 basis points over the previous year.
The CIB (Corporate and Institutional Banking) division showed a 1.7% drop in revenues compared to the previous quarter, while the domestic markets showed a 2.8% increase in revenues in the same period.
May dividends
Although eurozone banks have dividend restrictions due to the severe economic crisis in the region, BNP Paribas will pay a dividend of 1.11 euros per share in May, equivalent to 21% of its 2020 net income.
The French lender also said that 29% of 2020 net income would be invested in the share buyback, once the European Central Bank revoked its current recommendation on dividends and share buybacks.
Machenil said the bank is, however, following the ECB’s recommendation, announcing a dividend within certain parameters recommended by the central bank.
Further on, the bank said the goal was to distribute 50% of its 2021 net income as well.
“When we look at the year 2021, what we assume is that there will be a gradual recovery,” said Machenil of the economic environment this year.
“So before the summer there may still be some ups and downs,” he said, adding that he hopes that the launch of the Covid-19 vaccine will lead to an economic improvement in the second half of 2021.
The bank’s stock fell almost 3% since the beginning of the year.