BNP Paribas announced reduction in profit in Q4
2023.02.07 04:04
BNP Paribas announced reduction in profit in Q4
By Ray Johnson
Budrigannews.com – (OTC:) BNP Paribas, The largest lender in the Eurozone reported a fourth-quarter net loss that was lower than anticipated due to an increase in its cost of risk and an increase in its operating expenses that was offset by an increase in its trading sales.
However, in 2023, the bank announced a 5 billion euro share buyback program and increased its targets for 2025.
Net income decreased by 6.7% from the previous year to 2.15 billion euros ($2.31 billion) in the three months ending in December. This fell short of Refinitiv’s six analysts’ mean estimate of 2.37 billion euros.
The cost of risk, which is money set aside for failing loans, increased by 52% from the previous year to reach 773 million euros, which led to the significant decrease.
According to the bank, exceptional operating expenses for IT enhancement and restructuring costs also impacted earnings in the fourth quarter.
The group explained the 2022 increase in provisions for some of its less risky loans by citing the current context of higher inflation and interest rates.
However, BNP Paribas noted that its core tier one ratio, which is a measure of a bank’s capacity to withstand shocks, stood at 12.3% at the end of December, indicating that the company’s cost of risk was still low.
The sale of the group’s U.S. retail business Bank of the West for $16.3 billion has significantly improved the solvency ratio. The French bank stated that the majority of the 5 billion euro share buyback will be funded by the transaction, which closed on February 1.
According to BNP’s statement, the buyback will be completed in two parts, the first of which will be 2.54 billion euros and will be submitted to the European Central Bank.
BNP Paribas raised its 2025 goals in response to the proceeds from the Bank of the West sale and the expectation of more than 2 billion euros in additional revenue from the rise in interest rates.
From its previous forecast of more than 7%, it now anticipates an average annual growth in net income of more than 9% between 2022 and 2025. In addition, it anticipates a return on tangible equity (ROTE) of around 12 percent, as opposed to the previous goal of more than 11 percent.
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