BNP Paribas lifts core capital goal amid investor concerns

By Dimitri Rhodes and Mathieu Rosemain

(Reuters) -French bank BNP Paribas on Thursday raised its core capital buffer, known as CET1, to 13% by 2027, up from 12.5% just two months ago, as it aims to reassure investors and narrow the gap with some European rivals.

The increased forecast reflects stronger group profitability, moderate annual growth of about 2% in risk-weighted assets and faster disposals of non-strategic businesses, the euro zone’s biggest lender by assets said in an unscheduled statement.

Shares in BNP were up about 5% at 1003 GMT, although the stock continues to lag European rivals.

Chief Executive Jean-Laurent Bonnafe has come under pressure to act as the bank's shares have risen 19% this year, compared with a 62% gain in the STOXX Europe 600 Banks index and more than doubling of the value in Societe Generale's stock.

BNP was on track for its biggest one-day gain since March 2022.

Jefferies called the new target "a significant turning point for investor perceptions" and "a statement of strength", while Citi said the move aimed to "draw a line under the capital debate".

Analysts added that the shift brought BNP more in line with peers: Deutsche Bank is targeting a core capital ratio of 13.5% to 14% in the period through 2028, while SocGen is steering toward about 13% by 2026.

BNP said it would decide at the end of each year how much of the capital above the new target would be returned to shareholders.

The group has also received authorization from the European Central Bank to proceed with a 1.15 billion euro ($1.32 billion) share buyback programme, which it aims to launch before the end of November, BNP said.

The bank confirmed its target for a return on tangible equity of 13% by 2028.

It faced a series of setbacks in October, after worries of a U.S. regional banking exposure to two auto bankruptcies spilled over to European and Asian banks, followed by a Sudan-related litigation in the U.S. and a third-quarter profit miss due to rising bad loans.

"BNP is addressing market concerns with raising its CET 1 target to peer level, updating its distribution plan to distribute potentially more capital, redefining its cost targets to a cost income ratio and trying to send a message of confidence on capital by moving earlier with its FY2025 share buyback," analysts from RBC said in a note to investors.

BNP shares have seen less than half the gains the average European bank has enjoyed in the past three years, as investors questioned whether the lender could improve its profitability versus rivals.

($1 = 0.8680 euros)

(Reporting by Dimitri Rhodes in Gdansk and Mathieu Rosemain in Paris, editing by Milla Nissi-Prussak)