BNP Paribas profit rises in third quarter, launches share buyback

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BNP Paribas Q3 profit and buyback

Highlights

BNP Paribas reports third-quarter net income up 14% year on year to 3.46 billion euros, beating the 3.23 billion-euro analyst forecast.
Equity and prime services revenue jumps 50% year on year, outpacing top U.S. peers, while corporate and institutional banking sales grow 17%.
BNP Paribas announces a 1.3 billion euro share buyback for November after hitting its CET1 capital ratio target early, signaling capital strength.

Third-quarter earnings and capital return plan

As reported by Reuters, BNP Paribas says net income for the third quarter rises 14% year on year to 3.46 billion euros, above the 3.23 billion euro average forecast from analysts polled by the bank. Revenue at the euro zone's biggest bank by assets reaches 13.76 billion euros, also slightly ahead of expectations.

The French lender says its results are supported for a second consecutive quarter by a record jump in equity and prime services revenue. That business rises 50% from a year earlier, above the average 37% increase in equities trading across the top five U.S. players, based on a Reuters calculation from company statements.

Overall sales at BNP's corporate and institutional banking unit rise 17% year on year, while fixed-income, currencies and commodities trading revenue is flat in what the bank describes as a weak quarter for the broader industry. BNP also says income in its retail business rises 4%, helped by higher interest rates.

The bank says it will launch a 1.3 billion euro share buyback in November after meeting its Common Equity Tier 1 capital ratio target at end-June, ahead of schedule. RBC analysts say before the results they expect BNP to bring forward a buyback totaling 1.2 billion euros to signal confidence in its outlook.

Bond market concerns and wider sector pressure

BNP reports alongside a busy week for European lenders including Deutsche Bank, UBS and Santander, as investors assess whether record profit levels can be sustained. The sector is also reacting to HSBC's weaker-than-expected revenue growth, which sends its shares down nearly 7% on Tuesday.

French banks are also dealing with renewed concern over exposure to government debt as euro zone sovereign bond yields climb, especially in France amid worries about the country's fiscal position. BNP says its exposure to French sovereign bonds is limited, at about 19 billion euros at the end of September, and adds that France accounts for less than 10% of its pre-tax income last year.

Our earlier coverage of France’s deficit-reduction path focused on how political uncertainty and higher borrowing costs were pushing French government bond (OAT) yields to multi-decade highs. We explained that investors were closely watching whether Paris can pass a budget consistent with its deficit targets, and that renewed bond-market stress was reviving concerns about potential spillovers to broader euro zone stability and financial-sector sentiment.

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