BNPQF - BNP Paribas SA (BNPQF) Full Year 2023 Earnings Call Transcript

2024-02-01 13:54:02 ET

BNP Paribas SA (BNPQF)

Full Year 2023 Earnings Conference Call

February 01, 2024 8:00 AM ET

Company Participants

Jean-Laurent Bonnafé – Chief Executive Officer

Lars Machenil – Chief Financial Officer

Yann Gérardin – Chief Operating Officer, Corporate and Institutional Banking

Conference Call Participants

Stefan Stalmann – Autonomous Research

Anke Reingen – RBC

Delphine Lee – JPMorgan

Tarik El Mejjad – Bank of America

Geoff Dawes – S&G

Chris Hallam – Goldman Sachs

Jacques-Henri Gaulard – Kepler Cheuvreux

Samuel Moran-Smyth – Barclays

Giulia Miotto – Morgan Stanley

Pierre Chedeville – CIC

Kiri Vijayarajah – HSBC

Presentation

Operator

Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas 2023 Full Year Results with Jean-Laurent Bonnafé, Chief Executive Officer; Lars Machenil, Chief Financial Officer; and Yann Gérardin, Chief Operating Officer, Corporate and Institutional Banking. For your information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website at invest.bnpparibas.com. [Operator Instructions]

I would like now to hand the call over to Jean-Laurent Bonnafé, Group Chief Executive Officer. Please go ahead, sir.

Jean-Laurent Bonnafé

Thank you. So, good afternoon, ladies and gentlemen, and I'm pleased to welcome you alongside Lars and Yann for the presentation of our 2023 results. We'll be pleased to take your questions at the end of the presentation. So we are halfway through our GTS 2025 plan. We'd like to share with you through five key messages that I take away from our 2023 results, our 2025 outlook, our model, our long-term strategy, and finally, our long-term value creation policy. My first message, looking here at Slide 4, this was our intrinsic performance in 2023, which I would call very good. BNP Paribas delivered an 18% increase in distributable earnings per share in 2023 compared to 2022. Distributable net income, which stands at €11.2 billion, was up 10.2% compared to 2022 and was in line with our announced objectives for 2023, despite the fourth quarter that was more challenging than usual.

Lars will give you all the necessary details for each division and will comment on the one-off items booked in particular in Q4 2023, which we absorbed over the full year and through distributable net income in order to reflect the Group intrinsic performance. What you should also keep in mind is that they will not vet easier on future results. Overall, on a distributable basis, our revenues rose by 3.3% in 2023 compared to 2022 and our operating expenses decreased by 1%. The jaws effect is therefore positive. The cost of risk was low and came in at 32 basis points, driven by the structural improvement in our risk profile over the past 10 years.

Many of you have asked us about the redeployment of capital freed up by the sale of Bank of the West. The process is well underway based on the disciplined approach. As of the end of 2023 where we deployed €3 billion, or 40 bps, one-third in organic growth and two-thirds through targeted partnerships and bolt-on acquisitions, 70 bps remains to be redeployed. Our financial structure is solid, and our CET1 ratio trajectory is on track to absorb the new CRR3 requirements by 2025. I will come back to this point in a moment. Distributable earnings per share came to €9.21, an 18% increase versus 2022 reported. We confirmed our 60% shareholder return policy and will propose a €4.6 dividend per share at the Annual General Meeting on May 14. We have also requested the ECB's approval to launch €1.05 billion share buyback programs. One last thing, in 2023 we continued to invest in technology and in artificial intelligence based on the same type of industrial approach that made our platform so successful. I will come back to this point in a moment. Beyond the very good results we achieved despite the headwinds, 2023 was a pivotal year. Now with that in mind, I would like to send out a message of confidence in our medium-term outlook.

Looking now at Slide 5, my second message today is about our 2025 outlook. The economic outlook in Europe and geopolitical uncertainties have obviously made us cautious. However, despite these headwinds, BNP Paribas should continue to grow faster than its underlying economy, serve clients and get market shares across all phases of the business cycle. These all phases of the business cycle is important. Personal finance and real estate have been particularly affected from the current cycle, but we are dealing with that. We have set up some robust adaptation plans, which should pay off as early as 2026. In 2023, we also took note of several decisions by public authorities, the end of ECB remuneration of minimum reserves, the new Belgium tax and the issue of Belgium government bonds. For the sake of transparency, we cannot avoid mentioning the temporary tax they have. In the end, taken together, these measures could bring our projected ROTE by 2025 in the range of 11.5% and 12% and translate into a CAGR 2022-2025 in net income group share of circa 8%. Thanks to our diversified and integrated model and the adaptations underway. We are confident in our ability to deliver a return on tangible equity of 12% by 2026. Last, we'll detail further the growth targets by operating division in this presentation.

Looking now at Slide 6, this is a good way to transition to my third message, which is a reminder of what makes our client-centric, integrated, diversified and model at scale so valuable. The new figures in Slide 6 illustrates quite simply the resilience of our model, which can generate long-term growth, our discipline in allocating capital between our businesses, one third to CAB, one third to commercial and personal banking, one third to – for specialized businesses and IPS, the continuous evolution of our risk profile and the steady improvement in our cost income ratio....

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