BNP Paribas plans €900m buyback as equities surge buoys results

BNP Paribas announced a €900m share buyback plan on Friday morning after France’s largest listed bank revealed it was one of the biggest winners from a surge in equities trading over the past three months.

The size of the buyback programme — which will run from November to February — is about 1.3 per cent of BNP’s market capitalisation and caught analysts off-guard. Most eurozone banks have taken a more cautious approach to shareholder returns as they emerge from the pandemic.

BNP posted a 32 per cent rise in net income from a year earlier to €2.5bn, beating analyst expectations of €2.2bn. That also represented a 29 per cent increase versus 2019 levels.

But the group suffered a bigger fall in fixed income trading over the third quarter compared with other global investment banks.

Shares in BNP were up 1 per cent in early trading on Friday to €58, having doubled over the past 12 months.

“We expect the main focus for investors to be on the increase on the new buyback, the outlook for revenues,” said Azzurra Guelfi, an analyst at Citigroup. She added there would also be a focus on the outlook for the investment bank and the retail business.

The European Central Bank lifted a cap on dividends and share buybacks at eurozone banks this summer, following similar reversals of pandemic policies by the US Federal Reserve and the Bank of England.

Since then, Swiss and UK banks have shown the most appetite among European lenders to release more cash to shareholders. This week, UBS said it expected to repurchase $2.6bn of shares this year, while HSBC announced a $2bn buyback.

BNP has benefited from lower provisions against bad loans in recent quarters, after it booked higher charges when the pandemic hit in 2020, and its cost of risk dropped more than 40 per cent from a year earlier. An economic turnround after lockdowns lifted and government programmes to help stave off small business bankruptcies also boosted its retail banking division.

“BNP Paribas’ results are solid and confirm the potential for growth beyond the rebound that has already occurred,” said chief executive Jean-Laurent Bonnafé.

In its investment bank, BNP Paribas’ performance was more mixed. A dealmaking boom boosted its fee income and echoed gains at US peers, but earnings fell in some parts of its trading business. Revenue in the division was up 6.4 per cent year on year to €3.6bn.

The bank said activity was weaker in rates and foreign exchange trading, with revenues in its fixed income, commodities and currencies unit down 28 per cent compared with the third quarter of 2020.

Its equities business shone, with equity and prime services revenue up 79 per cent to €835m on the back of strong derivatives volumes and contributions from Exane, the investment company it took over this year.

By contrast, revenue from fixed income trading at large US banks was down 13 per cent in the third quarter, though equities revenues were up 35 per cent, on average.

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