BNP Paribas Q3 profit rises 14% to beat estimates; announces €1.3 billion buyback

ETMarkets.com

BNP Paribas' net income rose 14% year-on-year to €3.46 billion, exceeding the average analyst forecast of €3.23 billion. Revenue increased to €13.76 billion, marginally ahead of market expectations.

The results come as European banks report quarterly earnings this week, with investors assessing whether lenders can sustain their recent record profits amid economic uncertainty and volatile financial markets. Deutsche Bank, UBS and Santander are among the major lenders reporting results. HSBC's disappointing revenue growth on Tuesday weighed on sentiment across the banking sector, sending its shares down nearly 7%.

French sovereign debt exposure in focus

Rising euro zone government bond yields, particularly in France, have renewed concerns about banks' sovereign debt exposure. Investors have been increasingly focused on France's fiscal position and the potential implications for financial institutions holding its government bonds.

BNP Paribas sought to reassure investors about these risks, reporting that its exposure to French sovereign bonds stood at approximately €19 billion at the end of September. The bank also noted that France accounted for less than 10% of its pre-tax income last year.

The increase in bond yields has raised broader questions about how market volatility affects banks' balance sheets and financial strength. BNP's comments indicate that the lender considers its direct exposure to French sovereign debt manageable.

Equity trading drives investment banking growth

Investment banking remained a key contributor to BNP Paribas' performance, with equity trading revenue recording another strong quarter. Revenue from equity and prime services jumped 50% year-on-year, marking a second consecutive quarter of record growth.

According to a Reuters calculation based on company statements, the increase exceeded the average 37% rise in equity trading revenue reported by the five largest US investment banks.

BNP Paribas' corporate and institutional banking division, a central component of Chief Executive Jean-Laurent Bonnafé's strategy, recorded a 17% year-on-year increase in sales.

However, revenue from fixed-income, currencies and commodities trading remained flat, reflecting weaker conditions across the broader fixed-income market during the quarter.

The bank's retail business also delivered growth, with income rising 4%, supported by higher interest rates.

BNP Paribas announces €1.3 billion share buyback

BNP Paribas said it would launch a €1.3 billion share buyback programme in November after achieving its Common Equity Tier 1 (CET1) capital ratio target at the end of June, ahead of schedule.

The CET1 ratio is a key measure of a bank's financial resilience, indicating its ability to absorb losses relative to its risk-weighted assets. Meeting the target earlier than expected gives BNP greater flexibility to return capital to shareholders.

The buyback announcement also signals management's confidence in the bank's financial position and earnings outlook.

Before the results, RBC analysts had anticipated that BNP Paribas would bring forward a share repurchase programme worth approximately €1.2 billion, reflecting confidence in its outlook.

With earnings exceeding expectations and equity trading providing a significant boost, BNP Paribas delivered a strong quarterly performance despite concerns over sovereign bond yields and uneven conditions in financial markets.

Investors will now assess whether the bank can maintain its earnings momentum as European lenders navigate fiscal uncertainty, market volatility and changing interest rate expectations.