LONDON – BNP Paribas exceeded analysts ’expectations when it reported its profits on Friday as its chief financial officer spoke of a“ gradual recovery ”for the economy looking to the future.
The French bank posted a net profit of 1.59 billion euros ($ 1.901 billion) during the fourth quarter of 2020, exceeding analysts’ expectations of 1.2 billion euros, according to Refinitiv. It meant a 15.9% drop in profit over the previous three-month period.
The annual profit reached 7 billion euros, 13.5% more than in December 2019. Analysts surveyed by Refinitiv had predicted a net profit for 2020 of 6.5 billion euros.
The French lender also said its cost of risk had risen as a result of the Covid pandemic and spent € 1.4 billion more on provisions for loan losses.
“Revenues are stable compared to the previous year by 44 billion euros, costs have fallen 1.1 billion euros. Therefore, gross operating income, the difference between the two, increases very materially ”Lars Machenil, chief financial officer of BNP Paribas, told CNBC’s Charlotte Reed after posting the results.
Here are some other highlights:
- Revenue reached 10.8 billion euros for the fourth quarter, a drop of 4.5% over the previous year.
- For the fiscal year, revenues stood at 44.2 billion euros, marginally lower than in 2019.
- Gross operating income 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 recorded a drop in revenue of 1.7% over the previous quarter, while domestic markets recorded a 2.8% increase in revenue during the same period.
Dividends in May
Although euro area banks have restrictions on dividends given 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 net income from 2020.
The French lender also said 29% if its 2020 net profit would be invested in stock rewards once the European Central Bank repeals its current recommendation on dividends and stock rewards.
Machenil said the bank follows, however, the ECB’s recommendation announcing a dividend within certain parameters advised by the central bank.
In the future, the bank said the goal was to distribute 50% of its 2021 net income as well.
“When we look at 2021 what we have assumed is that there will be a gradual pick-up,” 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 deployment of the Covid-19 vaccine will lead to economic improvement in the second half of 2021.
Bank shares fall nearly 3% since the beginning of the year.