LONDON – BNP Paribas exceeded analysts’ expectations when it reported earnings on Friday, as its CFO spoke of a “gradual build-up” for the forward-looking economy.
The French bank reported net income of 1.59 billion euros ($ 1.90 billion) for the fourth quarter of 2020, beating analysts ’expectations of 1.2 billion euros, according to Refinitiv. It marked a 15.9% fall in profits from the previous three months.
Annual profit reached 7 billion euros, down 13.5% from December 2019. Analysts surveyed by Refinitiv had forecast a net income for 2020 of 6.5 billion euros.
The French lender also said its cost of risk had gone up as a result of the Covid pandemic, and set aside another 1.4 billion euros in loan loss preparations.
“Revenue is stable compared to the previous year at 44 billion (euros), costs are down 1.1 billion (euros). So the total operating income, the difference between the two something, up in a very substantial way, “Lars Machenil, CFO of BNP Paribas, told Charlotte Reed at CNBC after the results were announced.
Here are some other key events:
- Revenue stood at 10.8 billion euros for the fourth quarter, a fall of 4.5% from a year ago.
- For the fiscal year, revenues stood at 44.2 billion euros, slightly lower than in 2019.
- Total operating income rose 6.2% from the previous year.
- The CET 1 ratio – a measure of bank solvency – was at 12.8%, up 70 basis points from a year ago.
The CIB (Corporate and Institutional Banking) sector saw a 1.7% fall in revenue from the previous quarter, while domestic markets saw a 2.8% increase in revenue over the same period.
Benefits in May
Despite the fact that euro zone banks have restrictions on shares due to the severe economic crisis in the region, BNP Paribas will pay a share of 1.11 euros per share in May, equivalent to 21% of 2020 net income .
The French lender also said it would be 29% if its 2020 net income were invested in the purchase of shares once the European Central Bank recalls its current proposal on shares and purchase of shares.
Machenil said the bank nevertheless follows the ECB’s recommendation by announcing a split within certain parameters advised by the central bank.
Going forward the bank said it also aimed to distribute 50% of its 2021 net income.
“Looking at the year 2021, what we have assumed is that construction will be gradual,” Machenil said of the economic environment this year.
“So before the summer, there may still be some ups and downs,” he said, adding that he expects the release of Covid-19 vaccine to lead to economic development in the second half of 2021.
Bank stock is down almost 3% from the beginning of the year.