BNP Paribas beats Q3 profit forecasts, unveils €1.3 billion share buyback

BNP Paribas Surpasses Q3 Profit Forecasts, Reveals €1.3 Billion Share Buyback

BNP Paribas Q3 2023 Financial Performance and Market Context

By Mateusz Rabiega

Profit and Revenue Highlights

Oct 28 (Reuters) - BNP Paribas posted a forecast-beating rise in third-quarter profit on Wednesday, helped by strong performance in its investment banking division, as the lender announced a €1.3 billion ($1.45 billion) share buyback and played down the impact of soaring government bond yields.

France's BNP said quarterly net income climbed 14% to €3.46 billion, beating the €3.23 billion average forecast of analysts polled by the bank.

Revenue at the euro zone's biggest bank by assets rose year-on-year to €13.76 billion, slightly above expectations.

Share Buyback and Capital Strength

The bank also said it would launch a €1.3 billion share buyback in November after it met its Common Equity Tier 1 (CET1) capital ratio, a key measure of financial strength, at end-June, ahead of schedule.

RBC analysts said before the results they expected BNP to bring forward a buyback totalling €1.2 billion "to express confidence in its outlook".

Challenges Facing French Banks

French banks face further challenges, with soaring euro zone sovereign bond yields - especially in France given concerns about the country's fiscal position - reviving worries about lenders' exposure to government debt.

BNP’s Exposure to Sovereign Bonds

BNP said its exposure to French sovereign bonds was limited, roughly at €19 billion at end-September and that France accounted for under 10% of its pre-tax income last year.

Analyst Perspectives

J.P. Morgan said that while political and economic backdrop remains difficult with fluctuations in bond market spread pressuring French banks, BNP remains its top pick among French lenders.

European Banking Sector Overview

Banking Flurry

BANKING FLURRY

BNP is reporting alongside a flurry of European banks this week, with investors watching closely to see if lenders can sustain recent record profits.

HSBC on Tuesday disappointed investors with weak revenue growth, sending its shares down 5%, while rival Standard Chartered raised profitability targets after a profit beat.

UBS reported broadly in-line results, while Spain's Santander and Germany's Deutsche Bank both beat expectations.

Business Segment Performance

Equity Trading Jumps

EQUITY TRADING JUMPS

The French lender's results were helped for a second consecutive quarter by a record jump in equity and prime services revenue. The 50% rise year-on-year surpassed the average 37% gain in equities trading across the top five US players, according to a Reuters calculation from company statements.

Corporate and Institutional Banking

Overall sales at BNP's corporate and institutional banking unit, which long-time CEO Jean-Laurent Bonnafe has made critical to its success, rose 17% year-on-year.

Fixed-Income and Retail Banking

Fixed-income, currencies and commodities trading revenue was flat, reflecting an industry-wide weak quarter for fixed income.

BNP's retail business saw income rise 4%, boosted by higher interest rates.

($1 = 0.8961 euros)

(Reporting by Mateusz Rabiega; Editing by Tommy Reggiori Wilkes)