By Mathieu Rosemain and Matthieu Protard
PARIS (Reuters) -Shares in BNP Paribas fluctuated between red and green territory in early trading on Tuesday after the euro zone’s biggest bank raised its 2025 targets but missed market expectations for the fourth quarter.
BNP’s stock was edging up 0.6% at 0822 GMT, reversing course soon after market open.
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 to Morgan Stanley 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 Bonnafé 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.
The group cited higher inflation and rising interest rates to explain the hike in provisions for some of its less risky loans in 2022.
($1 = 0.9326 euros)
(Writing by Mathieu Rosemain;Editing by Ingrid Melander, Kirsten Donovan)