SPY376.70-4.72 -1.24%
DIA309.58-3.41 -1.09%
IXIC12,723.47-274.28 -2.11%

UPDATE 2-Loan charges weigh on BNP Paribas profits amid COVID-19 crisis

· 02/05/2021 01:20
UPDATE 2-Loan charges weigh on BNP Paribas profits amid COVID-19 crisis

Adds FICC warning, equity and prime services revenue and governance

- Charges linked to the COVID-19 pandemic ate into BNP Paribas' BNPP.PA net profit in the fourth quarter as the lender set aside more provisions for loans that could turn sour.

Rivals such as Santander SAN.MC have also been setting aside funds as lenders brace for loan repayment problems, although the crisis has also yielded a trading bonanza for some.

A surge in fixed income trading business boosted Q4 earnings but BNP Paribas warned that level of market activity was unlikely to persist this year.

The eurozone's largest listed lender struck a more upbeat note for 2021, saying it expected its cost of risk, which reflects provisions for bad loans, to fall this year as the outlook improves in the second half.

The lender expects costs to be flat while revenue should slightly increase.

Its cost of risk rose by 65.5% to 1.59 billion euros ($1.90 billion) in the October to December period versus a year earlier.

Net income fell 13.9% to 1.59 billion euros - though this was higher than the average profit forecast by a poll of four analysts. Revenue fell by 4.5% to 10.83 billion euros, broadly in line with expectations.

Revenue at its corporate and institutional banking business rose 6.9% in the quarter as fixed-income, currencies and commodities (FICC) trading revenue jumped by 22%, echoing gains at some peers including in the United States.

"FICC is unlikely to experience the same magnitude of revenue that it generated in 2020 on the back of exceptionally intense client activity," BNP Paribas said in a statement.

At its equity and prime services unit, revenue fell by 4.5%, underperforming most of its rivals who got an earnings boost from share trading in the final part of the year.

Last month, Wall Street investment banks reported blockbuster results, helped by a trading boom amid market volatility linked to the pandemic, although consumer-oriented lenders exposed to economic hiccups, including Bank of America BAC.N, took a hit to their business.

BNP Paribas said it planned to pay a dividend of 1.11 euros per share in May, based on a 21% payout ratio - within limits set by the European Central Bank for lenders to preserve capital amid the crisis.

It is considering paying out more in the fourth quarter, it said, which would see it reach its 50% payout target.

In a separate statement, BNP Paribas said it has named Thierry Laborde and Yann Gerardin as chief operating officers to succeed its COO Philippe Bordenave.

Laborde will be in charge of retail banking activities while Gerardin will remain head of corporate and investment banking.

($1 = 0.8359 euros)

(Reporting by Matthieu Protard and Marc Angrand; editing by Sarah White and Jason Neely)

((matthieu.protard@thomsonreuters.com; +33-1-49495381;))