BNP Paribas Cuts Profit Goal as European Banks Feel Heat From Low Rates

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02/05/2020 | 12:51 pm


By Pietro Lombardi



France's largest-listed bank by assets became the latest European lender Wednesday to cut its financial targets due to the impact of ultralow interest rates, despite a sharp uptick in trading revenues.



BNP Paribas trimmed its profitability goal for 2020, saying monetary policy changes had "led to a more unfavorable interest rate environment than anticipated at the beginning of 2019." The European Central Bank reduced its key rate by 0.1 percentage point to minus 0.5% and revived a bond-buying program in September.



The French lender's move highlights the headwinds buffeting European lenders and follows similar steps by Swiss banking giants UBS Group AG and Credit Suisse Group AG.



BNP Paribas now expects a return on tangible equity -- a key measure of profitability -- of 10% this year, down from previous expectations of more than 10.5%. It said that revenue in its domestic-markets division, which includes retail operations in Italy, France and Belgium, was expected to decrease moderately due to the impact of the low-interest rate environment.



The bank's guidance cut came despite it closing 2019 on a bright note, with fourth-quarter net profit and revenue significantly up, boosted by the strong performance of the corporate and investment banking unit.



Net profit for the period rose 28% to EUR1.85 billion ($2.04 billion), in line with analysts' expectations, according to a consensus forecast provided by FactSet.



Revenue rose almost 12% to EUR11.33 billion, boosted by the strong increase in global-markets revenue, which more than doubled. Fixed-income revenue rose almost 63% on the year, while equities revenue rose to EUR520 million from EUR145 million.



The bank said it would pay a dividend of EUR3.10 a share, 2.6% higher than the previous year.



BNP Paribas said revenue should grow in 2020 in its international financial-services unit -- which includes wealth management, consumer finance and insurance -- and the corporate-and-institutional banking arm.



No transformation costs are expected for this year, which should help the lender reduce spending by roughly EUR700 million from 2019, it said.



Write to Pietro Lombardi at Pietro.Lombardi@dowjones.com





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