BNP Paribas (BNPP.PA), opens new tab nudged up its 2028 profitability target on Thursday and pledged more cost cuts after reporting a better-than-expected fourth quarter profit that analysts said was reassuring despite a disappointing investment bank performance.
The euro zone's largest lender by assets will be hoping growth in its insurance and asset management division and an uptick in retail banking will support the numbers and help revive investor confidence, amid concerns about ongoing litigation in the U.S. related to Sudan.
BNP reported net income of 2.97 billion euros ($3.51 billion) for the three months to December, up 28% year-on-year and above a company-compiled 2.84 billion euro average estimate of 16 analysts. Shares opened up 3%.
"Overall, a decent set of results, which should reassure," Citi analysts said. Royal Bank of Canada analysts also called the fourth-quarter beat "reassuring", flagging "good revenue momentum across a number of divisions that had disappointed".
The bank is targeting a return on tangible equity (ROTE), a key profitability measure, of more than 13% by 2028. It also aims to lower its cost-to-income ratio to less than 56% versus an earlier target of around 58% by 2028.
BNP Paribas CEO Jean-Laurent Bonnafe said the bank still has room to step up cost savings. It plans "additional measures" in 2026 of about 600 million euros, bringing total recurring cost savings for 2022-2026 to 3.5 billion euros, above the 2.9 billion euros initially projected.
The bank expects average annual net income growth of more than 10% over the 2025-2028 period. The investment banking division saw revenues rise 1% year-on-year to 4.58 billion euros, a record quarter. Yet revenue from trading in fixed income, currencies and commodities grew just 0.8%, significantly less than Credit Agricole, Deutsche Bank and Wall Street rivals.
By contrast, net interest margin in retail rose 6.3% in France and 17% in Belgium in the fourth quarter.
The new targets offer a glimpse of BNP's next three-year strategic plan, the bank said, to be presented in early 2027. It will include a "comprehensive review of processes", it said, suggesting artificial intelligence tools would be involved.
BNP's shares have recovered sharply since hitting lows of around 65 euros in early November, rebounding to about 91 euros, a roughly 40% gain. But they have underperformed peers over the longer term, gaining about 110% in the past five years, less than half the wider European sector (.SX7P), opens new tab. Meanwhile, BNP continues to face uncertainty related to the U.S. litigation. The bank said it will appeal a New York jury's October ruling that it helped Sudan's former government commit genocide by providing banking services in breach of U.S. sanctions, and expects to file by February 9.
The bank announced a cash dividend of 5.16 euros per share for 2025, with the final payment of 2.57 euros to be distributed in May.
