BNP Paribas shares edge down after missing Q4 expectations

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PARIS (Reuters) -Shares in BNP Paribas (OTC:BNPQY) fell 1.2% in early trading on Tuesday after a lower-than-expected net profit in the fourth quarter overshadowed a rise in its 2025 targets and a 5 billion-euro share buyback program for 2023.

The euro zone’s biggest lender’s earnings were dragged down by a jump in the funds it set aside for bad loans and higher costs offset a boom in trading sales.

The bank’s more profitable trading business performed well, with a 24% rise in global markets revenue, as market volatility boosted trading in commodity derivatives, rates, foreign exchange and emerging markets.

Under Chief Executive Jean-Laurent Bonnafe, BNP has been growing securities trading, in part taking advantage of rivals’ retrenchment as Wall Street firms from Goldman Sachs (NYSE:GS) to Morgan Stanley (NYSE:MS) axe jobs amid a slump in dealmaking.

BNP’s solvency ratio has notably benefited from the $16.3 billion sale of the group’s U.S. retail business Bank of the West. The transaction, closed on Feb. 1, will fund the bulk of the share buyback, that will be carried out in two tranches.

With the proceeds from the U.S. sale and expectations of more than 2 billion euros in added revenue from interest rate rises, the bank now sees average annual growth in net income of more than 9% between 2022 and 2025, up from a previous 7% forecast.

It also expects a return on tangible equity (ROTE) of around 12%, compared to a previous target of more than 11%.

“We are setting ambitious financial targets and pursuing our technological advances,” Chief Executive Jean-Laurent BonnafĂ© said.

In the three months to end December, BNP Paribas’ net income fell by 6.7% from a year earlier to 2.15 billion euros ($2.31 billion), missing the 2.37 billion-euro mean estimate of six analysts compiled by Refinitiv.

The decrease notably stemmed from a 52% jump from a year earlier in the cost of risk — money set aside for failing loans — as well as exceptional operating expenses on restructuring costs and IT reinforcement.

($1 = 0.9326 euros)