On February 4, 2025, BNP Paribas, Europe’s largest bank by assets, said its fourth-quarter net profit jumped 15.7% as investment banking activities rose sharply. The increase in earnings helped the French lender lift its stock price, which has had a rough year for the bank’s retail operations in France and Belgium. The results have been termed as a success, especially as BNP Paribas continues to work towards improving profitability through cost-cutting measures.
Key Financial Figures
In the three months through December 31, 2024, BNP Paribas generated a net income of €2.32 billion ($2.39 billion), beating the analysts’ average estimate of €2.24 billion. Revenue for the quarter was also higher than expected, climbing 10.8% to €12.1 billion from the average forecast of €11.6 billion. BNP declared a dividend of €4.79 per share, an increase of 4.1% from last year.
The most significant announcement was the share buyback program worth €1.08 billion, which is set to be launched in the second quarter of the year. This buyback program is part of BNP’s strategy to reward shareholders and further stabilize the bank’s stock performance.
Investment Banking Revenue Climbs
One of the bright spots during BNP’s Q4 quarter was the incredible performance of investment banking, increasing revenue by as much as 20% quarter over quarter. Trading activity experienced a 34% increase particularly in the area of FICC, which are Fixed Income, Currencies and Commodities products. Equity prime services also expanded by 30%, which marked a strong boost in trading operations.
The performance in FICC trading exceeded expectations and surpassed the growth rates seen at major Wall Street banks, which averaged a 26% increase in this area. This strong performance in investment banking has been attributed to BNP’s strategic decision to invest heavily in this segment while European rivals have pulled back.
Stock Price Surge and Investor Sentiment
The bank’s impressive earnings saw its shares jump 1.9%, which is above France’s benchmark CAC 40 index and the broader European banking sector. The positive performance has helped boost investor confidence, especially after BNP’s shares underperformed in the previous year, losing nearly 7% while European rivals saw their stock prices soar.
For BNP’s CEO, Jean-Laurent Bonnafe, these were some much-needed victory results, considering the challenges it has been facing in the bank’s retail business. Retail activities in France and Belgium have suffered from squeezed margins due to record inflows into government-regulated high-interest savings accounts. This is in stark contrast to what banks in other parts of the eurozone have been enjoying-from higher interest rates.
Cost-cutting measures and profitability targets
Despite the strong performance, BNP Paribas has lowered its key profitability target for 2025, signaling a cautious outlook for the coming years. The bank now expects a return on tangible equity (ROTE) of 11.5% for 2025, down from its previous target of 11.5%-12%. This adjustment reflects the ongoing challenges faced by the bank in its retail and corporate operations.
As part of improving profitability, the bank also plans to have extra €600 million in cost-cutting measures during 2026, thereby having a total amount of €1.2 billion by the end of 2026. Included in this measure is the cost-cutting €600 million allocated for 2025, through which it expects to benefit positively on the bank’s cost-income ratio and, in general, efficiency.
Further, the bank has projected average annual growth in net income of more than 7% for the period 2024-2026. While this was less than 8% average growth forecasted earlier as 2022-2025, analysts expect that it actually sets a reasonable target in light of the economy currently.
Accenture Acquisition Strategy
Another significant development in operations has been the acquisition of AXA’s asset management arm for €5.1 billion, which is expected to close mid-year. The acquisition will add some positivity to the profitability of the bank, but Bonnafe reiterates that the bank does not want large cross-border acquisitions at this point. According to Bonnafe, large mergers between banks from different countries are difficult to integrate, but domestic mergers could present opportunities for growth.
BNP Paribas’ Strategy Moving Forward
Looking ahead, BNP Paribas remains committed to its growth strategy, particularly in the areas of investment banking and asset management. Although the bank has had its challenges in retail, it is optimistic that the improvement in its cost-to-income ratio, coupled with strategic acquisitions, will help shore up profitability in the coming years. BNP will also continue to benefit from its decision to double down on investment banking, as European rivals continue to retreat from the sector.
BNP Paribas’ Q4 results for 2024 are a strong performance, driven primarily by the bank’s investment banking division. With impressive revenue growth, a share buyback program, and a solid dividend increase, BNP is in a strong position to continue navigating the challenges in its retail business. However, the bank’s cautious outlook for 2025 and the decision to revise its profitability targets downward reflect the ongoing uncertainty in the European banking sector.
As BNP looks towards the future, it will likely be relying on the delicate balancing of savings from costs, strategic acquisitions, and growth in investment banking to maintain its place at the head of Europe’s largest bank.
Frequently Asked Questions (FAQs)
What drove BNP Paribas’ Q4 net profit up?
BNP Paribas’ Q4 net profit increased by 15.7% mainly due to a strong trading activity within the investment banking division of the bank. A particularly strong performance in the FICC (Fixed Income, Currencies, and Commodities) sector, which saw a 34% increase, contributed significantly to the bank’s revenue growth.
What is BNP Paribas’ current profitability target for 2025?
For 2025, BNP Paribas has reduced the key profitability target downward to aim for a return on tangible equity (ROTE) of 11.5%. This is below its prior target of 11.5%-12%.
What amount does BNP Paribas intend to spend on share buybacks in 2025?
BNP Paribas intends to implement a €1.08 billion share buyback program that is set to start in the second quarter of 2025. The intention is to help shareholders and promote the bank’s share price.
What strategy is in place at BNP Paribas to drive profitability?
There are cost-cutting measures and strategic acquisitions making their way in the list of BNP Paribas to enhance profitability. The bank has already announced €1.2 billion in cost savings by the end of 2026 and has made a significant acquisition of AXA’s asset management arm. Moreover, BNP is focusing on the growth of its investment banking division side by side with efforts in the retail business to reduce costs.
How is BNP Paribas performing compared to other European banks?
In Q4 2024, BNP Paribas reported a 20% revenue gain in its investment banking division. The increase came from FICC and equity prime services, the bank said. Its shares climbed 1.9%, leading both the French CAC 40 index and the European banking sector. But BNP’s retail business remains a challenge, at least in comparison with some of its eurozone peers.
I am Aparna Sahu
Investment Specialist and Financial Writer
With 2 years of experience in the financial sector, Aparna brings a wealth of knowledge and insight to Investor Welcome. As an accomplished author and investment specialist, Aparna has a passion for demystifying complex financial concepts and empowering investors with actionable strategies. She has been featured in relevant publications, if any, and is dedicated to providing clear, evidence-based analysis that helps clients make informed investment decisions. Aparna holds a relevant degree or certification and is committed to staying ahead of market trends to deliver the most up-to-date advice.