BNP Paribas has today nudged up its 2028 profitability target and pledged more cost cuts, after reporting a better-than-expected fourth quarter profit despite a mediocre performance at its investment bank.
The euro zone's largest lender by assets will be hoping that growth in its insurance and asset management division and an uptick in retail banking will support the numbers and help revive investor confidence, amid concerns about the impact of ongoing litigation in the US related to Sudan.
BNP reported net income of €2.97 billion for the three months ending in December, up 28% year-on-year and beating the €2.84 billion average estimate of 16 analysts compiled by the company.
"Overall, a decent set of results, which should reassure," Citi analysts said. Royal Bank of Canada analysts called the Q4 beat "reassuring also as partially driven by good revenue momentum across a number of divisions that had disappointed."
The bank is targeting a return on tangible equity (ROTE), a key measure of profitability, of more than 13% by 2028, up from its previous target of 13%, although the new target is lower than at many European rivals. It also aims to lower its cost-to-income ratio to less than 56% versus an earlier target of around 58% by 2028.
The bank expects average annual net income growth of more than 10% over the 2025-2028 period, with cost reduction as a key driver.
It plans "additional measures" in 2026 of about €600m, bringing total recurring cost savings for the 2022-2026 period to €3.5 billion, above the €2.9 billion initially projected.
The investment banking division saw revenues rise 1% year-on-year to €4.58 billion, marking a record quarter. Yet revenue from trading in fixed income, currencies and commodities grew just 0.8%, significantly less than Credit Agricole, Deutsche Bank, and Wall Street rivals.
By contrast, net interest margin in retail rose 6.3% in France and 17% in Belgium in the fourth quarter.
The new targets offer a glimpse of BNP's next three-year strategic plan, the bank said, to be presented in early 2027. It will include a "comprehensive review of processes," the French lender said, suggesting artificial intelligence tools would be involved.
BNP's shares have recovered sharply since hitting lows of around €65 in early November, rebounding to about €91, a roughly 40% gain.
But the bank's shares have underperformed peers over the longer term, gaining about 110% in the past five years, less than half the wider European sector .SX7P, as CEO Jean-Laurent Bonnafe struggled to boost profitability.
Meanwhile, BNP continues to face uncertainty related to litigation in the US.
The bank said it will appeal a New York jury's October ruling that it helped Sudan's former government commit genocide by providing banking services in breach of US sanctions, and expects to file by February 9.
The bank maintained its dividend policy, announcing a cash dividend of €5.16 per share for 2025, with the final payment of €2.57 to be distributed in May.
