BNP Paribas to ramp up growth in Asia
PARIS (Reuters) – BNP Paribas said a three-year efficiency drive would bring annual cost savings of two billion euros ($2.69 billion) and it would ramp up growth in Asia after fourth-quarter profits were hit by Europe’s weak economy.
BNP is relatively robust and well-capitalised after spending a year paring its balance sheet and reducing holdings of risky eurozone sovereign debt. But France’s biggest listed bank is still heavily exposed to mature European markets and is under pressure to show investors new paths to growth.
BNP said on Thursday the savings would come from simplifying its reporting structure and investing in better technology, which would cost a total of 1.5 billion euros. It said none of its businesses would be shut down.
The announcement lifted BNP’s shares 2.9 per cent, outperforming a flat STOXX Europe 600 banks index and offsetting the bank’s weaker-than-expected quarterly results. Investors penalised its arch-rival Societe Generale, which posted a fourth-quarter loss on Wednesday without giving a target for cost cuts. SocGen shares fell 3.4 per cent.
“BNP has an attractive story for the market now,” said Yohan Salleron, a fund manager at Mandarine Gestion in Paris. “It’s going to be hard to offset weakness in Europe in the short term… But at least we are being given a long-term plan.”
BNP said it was eyeing expansion in Asia, where it wants to lift revenue from investment banking and its asset-gathering Investment Solutions division to over three billion euros ($4 billion) by 2016 from two billion in 2012. It also plans to hire 1,300 people in the region through to 2015.
“We see a low-growth scenario in Europe (in 2013),” BNP Chief Executive Jean-Laurent Bonnafe told Reuters Insider television. No acquisitions were planned for now, he said.
Like SocGen, BNP has avoided the kind of radical job cuts and product exits seen at Switzerland’s UBS and Britain’s Barclays. Analysts say it could lift pre-tax profits by 15 per cent if its cost plans are successful. A union source had flagged BNP’s cost drive last month, without saying how much it planned to save.
BNP reported a one-third drop in net profit for the fourth quarter of 2012, to 514 million euros. Analysts had been expecting closer to one billion, according to a Thomson Reuters I/B/E/S average forecast.
Among the trouble spots were Italy – where BNP took a 300 million-euro goodwill writedown on its BNL subsidiary in an effort to raise its capital strength – and investment banking, where a rebound in revenues was hampered by a rise in loan losses tied to one unidentified loan.
BNP said it would propose a cash dividend of 1.50 euros per share and said its focus on balance-sheet strength in 2012 had lifted its Basel III Core Tier 1 Ratio to 9.9 per cent in December from 8.9 per cent in June.
Asked whether BNP might seek to grow in Italy with an investment in scandal-ridden bank Monte Paschi. BNP’s Bonnafe said no acquisitions were planned and that BNP had never been contacted on the subject of Monte Paschi.
Half of BNP’s planned two billion-euro savings will come from retail banking, where cuts are seen as long overdue now that an economic slowdown and state austerity measures have started to hit core markets like France. Profits at the bank’s French, Belgian and Italian retail operations fell in the fourth quarter, with growing loan losses in Italy almost halving BNL’s earnings before tax.