LONDON – BNP Paribas exceeded analyst expectations when it reported earnings on Friday, as its CFO spoke of a “gradual upturn” for the forward-looking economy.
The French bank reported net profit of Euro 1.59 billion ($ 1.90 billion) for the fourth quarter of 2020, exceeding analyst expectations of Euro 1.2 billion, Refinitiv said. It marked a 15.9% decline in profit from the previous three-month period.
The annual profit was 7 billion euros, a decrease of 13.5% from December 2019. Analysts polled by Refinitiv had forecast a net profit of 6.5 billion euros for 2020.
The French lender also said risk costs had risen as a result of the Covid pandemic, setting aside an additional 1.4 billion euros in loan loss provisions.
“Revenues are stable from the year before at 44 billion (euro), costs are down 1.1 billion (euro). So the gross operating income, the difference between the two, has increased in a very material way,” said Lars. Machenil, BNP Paribas CFO, Charlotte Reed told CNBC after the results were published.
Here are other highlights:
- Sales were 10.8 billion euros for the fourth quarter, down 4.5% from a year ago.
- For the financial year, revenues amounted to 44.2 billion euros, slightly lower than in 2019.
- The gross operating profit increased by 6.2% compared to the previous year.
- The CET 1 ratio – a measure of bank solvency – was 12.8%, an increase of 70 basis points from a year ago.
The CIB (Corporate and Institutional Banking) division saw revenues decrease 1.7% compared to the previous quarter, while domestic markets showed a 2.8% increase in revenues over the same period.
Dividends in May
Despite eurozone banks having imposed dividend restrictions in view of the severe economic crisis in the region, BNP Paribas will pay out a dividend of 1.11 euros per share in May, equivalent to 21% of its net profit for 2020.
The French lender also said 29% of net income for 2020 would be invested in share buybacks once the European Central Bank withdraws its current recommendation on dividends and share buybacks.
Machenil said the bank is nonetheless following the ECB’s recommendation by announcing a dividend within certain parameters advised by the central bank.
Going forward, the bank said its goal was to also distribute 50% of its net income by 2021.
“Looking at the year 2021, we assume there will be a gradual improvement,” Machenil said of the economic environment this year.
“So there could be some ups and downs for the summer,” he said, adding that he expects the rollout of the Covid-19 vaccine to lead to an economic improvement in the second half of 2021.
The bank’s stock is down nearly 3% since the beginning of the year.