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BNP Q3 Earnings Beat Expectations; Bank Launches 900 Mln Euro Share Buyback

BNP Q3 Earnings Beat Expectations; Bank Launches 900 Mln Euro Share Buyback
A better than expected third-quarter profit was reported on Friday by BNP Paribas, France's largest publicly traded lender, as a decline in insurance revenue was more than offset by reduced provisions for pandemic-related credit losses and a significant increase in equities trading during the quarter.
The economic recovery benefited BNP Paribas, just like its American and European competitors, as it was able to release capital that it had set aside to account for potential pandemic losses, which largely remained unused because businesses were helped to remain afloat because of exceptional government support throughout the coronavirus pandemic.
BNP Paribas will also begin a 900-million-euro share repurchase program from Monday, said the bank that last year surpassed HSBC to become the largest bank by assets in Europe.
"BNP surprised with an unexpected 900-million-euro share buyback, signaling the group’s intention to pay part of the unpaid full-year 2019 dividend," analysts at JP Morgan said in a note, as banks had been ordered last year to retain capital during the epidemic.
In the third quarter, the bank's cost of risk, which includes provisions for bad loans, was down 43.3 per cent, the bank said.
The French economy was doing well, said the bank’s Chief Operating Officer Thierry Laborde, who is in charge of the retail banking business, and added that "demand is very strong."
Even as European countries grapple with rising energy prices, the bank does not foresee a substantial spike in inflation he said.
As France, the second-largest economy of the eurozone recovers from the Covid-19 pandemic, preliminary data from the statistics agency INSEE showed the Frnech economy expanded at 3 per cent in the third quarter which was higher than the expected rate, powered by an uptick in consumer spending and exports.
A rise of 32.2 per cent year over year in net income was reported by BNP Paribas to 2.50 billion euros ($2.92 billion), exceeding the average analyst projection of 2.23 billion according to a Refinitiv poll.
Revenue increased by 4.7 per cent to 11.40 billion euros, which was also above analysts' expectations of 11.22 billion euros.
The company benefitted from robust increase in share trading activity in its corporate and investment banking business, with revenue up 79.3 per cent.
However, following a 43 per cent loss in the second quarter, revenue in fixed income, currencies, and commodities trading also dropped by 28 per cent in the third quarter.
"In a more lackluster context, customer activity was lower on the rates and forex markets but remained strong on the commodities markets," BNP Paribas said in a statement.
BNP Paribas reported revenue declined 3 per cent in its international financial services business, which comprises asset and wealth management, international retail banking, and insurance, due to a smaller contribution from its insurance business due to fewer capital gains.

Christopher J. Mitchell

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