BNP Paribas (BNPP.PA) reported an unexpected decline in its fourth-quarter income, leading to a more than 8% drop in the bank’s shares. CEO Jean-Laurent Bonnafe cited challenges in the euro zone economy, which he described as “in the process of slowing down.”
This decline was particularly evident in the revenue of its investment bank and consumer and commercial real estate businesses.
BNPP’s group net income fell by 50% year-on-year to 1.07 billion euros ($1.16 billion), missing analyst estimates of 1.74 billion euros.
JP Morgan analysts labeled these results as “disappointing,” attributing the shortfall mainly to corporate investment banking.
Despite the setbacks, BNPP announced an 18% increase in its full-year cash dividend to 4.60 euros per share and a plan to spend 1.05 billion euros on share buybacks.
The bank had generated more than 7 billion euros from the sale of its U.S. retail operations the previous year and had approximately 4.6 billion euros left to redeploy.
As a result of setting aside 645 million euros to cover losses related to “risk on financial instruments,” BNPP’s fourth-quarter group sales were up only 0.1% at 10.9 billion euros, falling short of the estimated 11.4 billion euros.
A significant portion of these provisions was related to a long-running case involving Swiss franc mortgages in Poland, which led to costly consequences for borrowers when the currency’s value surged against the zloty.
In addition to these challenges, BNPP reported a 2.6% decline in revenue at its investment bank, particularly in fixed income, currencies, and commodities trading.
The insurance and wealth management division also underperformed, with a nearly 13% decrease in sales.
The bank adjusted its 2025 target for return on tangible equity (ROTE) to 12%, extending the timeline to 2026 due to higher regulatory reserve requirements and pressure to increase deposit rates.
Profitability was further hampered by underperforming real estate and consumer finance businesses, which are expected to recover by 2026.
BNPP revised its ROTE projection for 2025 to be between 11.5% and 12% and reduced its average annual net income growth target for the 2022-2025 period to about 8%.
This decision was attributed to minimum reserve requirements from the European Central Bank and a Belgian bank levy.
The bank maintained other targets, including a payout dividend ratio of 60% and a Common Equity Tier 1 (CET1) capital of 12% by 2025.
However, the uncertain economic landscape and expectations of falling interest rates posed challenges for the bank’s future outlook.