BNP Paribas Shares: All Unprotected (OTCMKTS:BNPQF)

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Before the third quarter release, we concluded that:

  • Following our assessment of the ECB rate hike, we forecast an uptick in BNP Paribas (OTCQX:BNPQY) (OTCQX:BNPQF) NII sensitivity with a clear growth in earnings trajectory
  • The Wall Street consensus was not forecasting the French bank business plan
  • On the valuation side, BNP Paribas ranked highest for performance (including dividends and buybacks) and lowest for tangible book value (ex-SocGen).

Our summary of the purchase case was also based on seven additional macro-to-micro reasons. You can take a look at our previous post called “we reiterate our buy rating on BNP Paribas”. So, today we return to comment on the quarterly accounts.

third quarter results

BNP Paribas posted higher-than-expected revenue and profit in the third quarter of 2022, benefiting, like other European banks, from rising interest rates. The French giant closed the July-September period with a net profit 10.3% higher than the same period in 2021, which stood at 2,760 million euros. According to the analyst consensus provided by FactSet, this result beat expectations by almost 20%. Revenues increased by 8% to €12.3 billion, above consensus expectations of €12.0 billion, of which €5.721 billion correspond to net interest income, +9.6%, and commissions on a total amount of 2,500 million euros, 1.2% less. Despite an unfavorable market environment, turnover in the corporate and institutional banking segment, which includes investment banking operations, increased by 5.9% to €3.7 billion, thanks to the global markets division. Looking at the nine-month aggregate, blue-chip sales rose 9.4% to €38.31 billion and net profit rose to €8 billion. However, it should be noted that the bank’s cost of risk increased by 34% in the year, reaching 947 million euros, including a specific impact of 204 million euros due to the suspension of mortgages in Poland. At the end of the quarter, the bank’s RoTE stood at 11.4% with a Common Equity Tier 1 ratio of 12.1%. The solvency ratio was 10 basis points lower in quarterly terms and BNP reiterated its expectation of an 11 billion euro capital gain from the sale of Banco de Occidente.

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BNP Paribas fin.  relationship

BNP Paribas fin. relationship

Conclusion and Assessment

After analyzing the quarterly report, our internal team confirms the buy rating with a target price of €72 per share. The company once again posted better-than-expected earnings across all divisions, particularly at the commercial banking level as well as the corporate investment arm. We are not surprised to see a positive market reaction given the strong revenue performance and bottom line. Our buy recommendation is confirmed and is also supported by continued growth in its tangible book value.

Tangible book value of BNP Paribas

Tangible book value of BNP Paribas

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