BNP Paribas (BNPP.PA), France’s largest publicly traded banker, reported a higher-than-expected third-quarter profit on Friday, thanks to lower provisions for pandemic-related credit losses and a strong increase in equities trading.
BNP Paribas, like its American and European competitors, benefited from the economic recovery by releasing capital set aside for pandemic losses.
BNP Paribas reported a 32.2 percent increase in net income year over year to 2.50 billion euros ($2.92 billion), exceeding the median analyst projection of 2.23 billion euros in a Refinitiv poll.
Revenue increased by 4.7 percent to 11.40 billion euros, exceeding analysts’ expectations of 11.22 billion euros, while the cost of risk, which includes provisions for bad loans, decreased by 43.3 percent.
BNP Paribas, last year which surpassed British bank HSBC (HSBA.L) in becoming Europe’s largest bank by assets, revealed today the launch of a share buyback program of BNP Paribas S.A. ordinary shares for a total amount of €900 million, based on its proven growth potential and solid balance sheet and performance.
BNP Paribas gained authorization from the European Central Bank, and a contract was signed with an independent investment services provider who was entrusted with an irreversible command to buy shares.
The buyback, which has been announced on Friday, would begin on November 1 and end no later than February 8. That is the month in which BNP will publish its new strategic plan for the years 2022-2025. At a meeting last month, Chief Executive Officer Jean-Laurent Bonnafe hinted that the bank would explore larger returns and buybacks, but did not provide specific figures.
According to individuals familiar with the plans, the bank is considering options such as increasing its payout ratio to 60% of yearly earnings next year, up from 50% in 2021. According to the individuals, the scenarios being evaluated include a share repurchase component.
The lender benefited from a robust increase in stock trading activity in its corporate and investment banking activities, with revenue up 79.3 percent.
However, after a 43 percent loss in the second quarter, revenue in fixed income, currencies, and commodities trading fell by 28 percent.
BNP Paribas said in a statement:
“Customer engagement was lower on the rates and Forex markets in a more lackluster setting, but stayed strong on the commodities markets”
Due to a lower contribution from its insurance division, BNP Paribas reported revenue declined 3% in its international financial services divisions, which involve asset and wealth management, international retail banking, and insurance.
BNP Paribas’ stock has risen roughly 33% this year, compared to 36.53 percent for the Stoxx Europe 600 Banks index (.SX7P).
BNP Paribas forecasts good revenue growth this year as businesses and individuals become more optimistic about the economy.
Higher fees and sales growth at BNP’s specialized companies, such as auto leasing company Arval, boosted the domestic markets section, which includes BNP’s retail businesses in its main regions. International Financial Services saw a drop in revenue, owing in part to lower contributions from the insurance and personal finance companies.
As the economy strengthens, BNP joins competitors such as Deutsche Bank AG and UniCredit SpA in benefiting from lower provisions. BBVA, a Spanish bank, also announced on Friday that it will begin a 3.5 billion euro stock repurchase program.