BNP Paribas has moved to reassure investors with a more robust capital target and a new €1.15bn share buyback plan in November, after legal woes and domestic turmoil left France’s biggest bank trailing rivals.
Shares in BNP have risen by close to 20 per cent this year, but the bank has missed out on the sharp rally enjoyed by many of its European peers amid concerns that it could be on the hook for billions of dollars in damages to Sudanese refugees.
Its stock jumped about 6 per cent on Thursday, however, after BNP said its core tier one ratio, a key measure of capital strength, would hit 13 per cent by 2027, up from a previous goal of 12.5 per cent.
Some of the excess capital over that level would be returned to shareholders at the end of every year, BNP added, in a boost to overall payouts set at 60 per cent of profits.
BNP has been at pains to boost investors’ confidence in its capital outlook, including after integrating its hefty €5.1bn acquisition of Axa Investment Managers into its accounts in the third quarter without making a dent in the ratio.
But the bank’s latest results were overshadowed by rising loan loss provisions, which included a €190mn hit from a fraud case.
BNP’s shares also dropped sharply after a Manhattan jury last month found the bank liable for more than $20mn in damages to three Sudanese refugees over its banking role in the country during dictator Omar al-Bashir’s regime, which was under US sanctions.
The ruling, which BNP will appeal against, raised concerns the French bank could be hit by more related cases, wiping more than €7bn off its market value in one day.
BNP said on Thursday its new capital target came on the back of improving profitability at the group, a moderate rise in its risk-weighted assets and an acceleration in disposals of non-core assets.
“Delivery remains key especially on the capital distribution plan given the litigation overhang,” said Anke Reingen, an analyst at RBC Capital Markets, adding the announcements were welcome.
The bank also said it would keep a tight lid on costs and aimed to reach a return on tangible equity, a measure of profitability, of 13 per cent by 2028, up just over two percentage points from 2024 levels.
BNP has regularly launched buybacks, including a hefty €5bn programme a few years ago after returning some of the proceeds of its sale of Bank of the West in the US to investors.
