EuroBusiness Media (EBM): BNP Paribas, one of Europe’s largest banks, reports 2019 full year results. Jean-Laurent Bonnafé welcome! You are the CEO of BNP Paribas.
Jean-Laurent Bonnafé: Thank you!
What are the highlights of the Group’s 2019 full year results?
In 2019, BNP Paribas delivered a very good overall performance.
This confirms the strength of our diversified and integrated model. It also confirms our capacity to create value in a continuously evolving environment.
Group
revenues increased by 4.9% on last year, with each of the three operating divisions delivering revenue growth.
With
costs up 2.5% on 2018, the Group operated with
positive jaws, these jaws delivered once more in each of the three operating divisions. This was achieved on the back of the continued implementation of the cost saving measures, whilst accompanying the business development.
Group
cost of risk was low, standing at 39 basis points over outstandings.
As a result, Group
operating income was up 9.7% on last year.
The Group’s
net result for the full year came in at 8.2 billion euros, up 8.6% on 2018.
The
Return on Tangible Equity clocked in at 9.8%, up 20 basis points on 2018.
The
Common Equity Tier 1 ratio marked a 40 basis point increase since 1
st of January 2019, reaching 12.1% on the back of the Group’s sustained capital generation.
Finally, we have proposed a dividend payment of 3.10 euros per share, up 2.6% on last year, which equates to a payout ratio of 50% in line with our plan.
Moving to the operating divisions now. With interest rates in the Eurozone having gradually decreased over 2019, how have your Domestic Markets businesses fared in this environment?
In 2019, Domestic Markets saw increased business activity with
loan growth in the retail networks, in particular in France and in Belgium, as well as in the specialised businesses. Net asset inflows in Private Banking were also up on last year, at 5.6 billion euros.
Domestic Markets has continued to expand its footprint in
digital banking services as evidenced by its 9.7 million digital customers as well as its 5.1 million active customers on its mobile apps, up 31% year-on-year. Usages on mobile apps have also been on the rise, with over 97 million monthly connections in the last quarter of 2019, up 23% year-on-year. Besides, Domestic Markets has continued to simplify and digitalise its key customer journeys, including on-boarding, mortgage loan and investment products.
In terms of P&L,
revenues of Domestic Markets were up 0.8% at 15.8 billion euros on the back of increased activity and growth in specialised businesses which were partly offset by the impact of low interest rates.
Operating costs were up just 0.3% on last year, thus generating a positive jaws effect. This was achieved thanks to the ongoing implementation of cost saving measures and the adaptation of our operational models as a result of the digital transformation.
Cost of risk remained low with a continued decrease at BNL.
Pre-tax income was up 3.7% on last year at 3.8 billion euros.
To wrap up, Domestic Markets showed continued business drive, thus confirming the strength of its franchises in an integrated model. It delivered positive operating jaws as well as a rise in pre-tax income in a challenging context of low interest rates.
Looking at International Financial Services, what are the main highlights of your different business lines?
In 2019, IFS confirmed its sustained business growth with
loans up 8.1% in particular in Personal Finance and Europe-Med and a 9.3% rise in
assets under management.
IFS businesses have continued to implement their digital transformation. This is illustrated by the increasing number of digital clients in international retail banking which has reached 3.9 million in 2019. Besides, over 85% of transactions by customers in Personal Finance are undertaken in self-care mode and BNP Paribas Cardif has successfully introduced a new customer journey in personal creditor insurance in France with 90% immediate responses.
IFS has continued to enjoy leading positions in its franchises and pursues its business development, including through partnerships. This is illustrated by the agreement between Personal Finance and Ford in several European countries and the strategic alliance of our insurance business with Scotiabank in 4 countries in Latin America.
How about the financial performance of IFS in 2019?
Revenues were up 6.9% at 17.2 billion euros and 4.7% on a like-for-like basis.
Costs were up 4.5% and 1.5% on a comparable basis, thus generating positive jaws. This led to a
pre-tax income of 5.2 billion euros, up 4.5% on last year and 6.7% on a like-for-like basis.
Let me now zoom quickly on the main entities of IFS:
Starting with
Personal Finance, it continued to show business growth with loans up 9.2% thanks to a strong demand in Europe and the beneficial effect of new partnerships. Revenues were up 4.8%, with costs evolving at a slower pace of 3.3%, thus generating positive operating jaws. Pre-tax income was down 2.7% on last year due in particular to a non-recurring item within an associated company.
Switching to
Europe-Med, loans were up 1.4% on a comparable basis, with increases in particular in Poland and Morocco. On a constant scope and exchange rate basis, revenues were up 6.8% thanks to a rise in margins and fees. Costs were up 1.0% with the successful integration of Raiffeisen Bank Polska delivering cost synergies. Thus, Europe-Med delivered a positive jaws effect. Cost of risk was up and pre-tax income increased by 23.1% compared to last year on a like-for-like basis.
Turning to
BancWest, on a like-for-like basis it showed moderate loan growth compared to last year. Revenues were down 1.8% on last year due to a less favourable interest rate context. Costs were down 3.6% on the back of headcount rightsizing and cost savings initiatives, thus generating positive jaws. With cost of risk up on 2018, pre-tax income was down 10% on a like-for-like basis.
Lastly, our
savings businesses saw assets under management rise to over 1.1 trillion euros, up 9.3% versus end of December 2018.
Our
Insurance business continued to show growth, with revenues up 14.5%, costs progressing as a result of the underlying business development and pre-tax income up 16% on last year.
Turning to
Wealth & Asset Management, revenues were up 1.0% with a continuous improvement over the year. Costs were up 1.7% and pre-tax income was up 2% on last year.
To sum up, IFS, our engine of growth, showed continued business growth and rise in income in 2019.
Turning to your Corporate and Institutional Banking division, have you continued to gain market share and where?
Over 2019, CIB has continued to strengthen its leading positions and market share gains. Thus, in EMEA, it is now ranked third CIB based on 9-month overall revenues and first European CIB behind two US institutions. This is further evidenced in EMEA, by its number 1 ranking in all bonds, syndicated loans, corporate banking, cash management and trade finance.
Since the beginning of the plan, CIB has successfully developed its corporate franchise with over 260 new large corporate clients in target countries (Germany, UK, Netherlands and Scandinavia) and close to 1,500 new relationships with subsidiaries of multinational corporate clients in 2019. It also continues to develop its corporate franchise in Asia Pacific and in the Americas on the back of intensified co-operation with BancWest. In 2019 major initiatives have also been undertaken to further develop our institutional franchise. Thus, with the agreement with Deutsche Bank in
prime brokerage and electronic execution, which was signed in November, CIB will continue to strengthen its footprint with fund managers. Besides, CIB pursued the
optimisation of its activities, as evidenced by the signing of the agreement with
Allfunds in November.
CIB has also stepped up the implementation of its transformation plan, with over 11,500 corporate clients on the Centric electronic platform, over 21 million electronic orders processed for Global Markets clients in 2019 and over 6,000 institutional clients on the Securities Services’ Neolink electronic platform. Lastly, Global Markets has become a leading player in multi-dealer electronic platforms, with a top 3 position in euro denominated credit derivatives, a top 3 position in local currency denominated emerging markets bonds and a top 5 position in swaps and euro denominated bonds.
How about the financial performance of CIB in 2019?
CIB
revenues clocked in at 12.1 billion euros in 2019, marking an 11.6% increase on 2018.
Taking the CIB businesses one at the time,
Global Markets’ revenues were up 20.7% excluding the effect of the creation of the new Capital Markets platform with Corporate Banking.
FICC revenues were up 36.0% on the back of a sharp rise in primary markets and credit as well as a rebound in forex and emerging markets and a very good performance in rates.
Equities revenues were stable on last year with a good performance in equity derivatives, in particular in structured products.
Looking at
Corporate Banking, revenues increased by 6.5% excluding the effect of the creation of Capital Markets platform with Global Markets, thanks in particular to a strong business development in Europe.
Finally, in the
Securities Services business line, revenues were up 3.0% on last year excluding the effect of non-recurring items on the back of increased volumes and a strong business drive in Asia.
Switching to CIB
costs, they were up 6.1%, as they continued to accompany business growth whilst benefitting from the cost saving measures as well as from the implementation of end-to-end digitalised processes and the automation of operations. Thus, CIB delivered a very positive operating jaws effect of +5.5 points.
Cost of risk remained low and CIB generated a
pre-tax income up 19.6% on last year.
In a nutshell, CIB delivered a very good performance in 2019, with strong revenue growth, a positive jaws effect and a rise in pre-tax income.
With respect to cost of risk, what can you tell us regarding its evolution?
Group
cost of risk remained low at 39 basis points over outstandings thanks to strong discipline at origination, low interest rates and the continued decrease of the cost of risk in Italy.
It was low in each of the 3 operating divisions.
Year 2020 marks the last year of the Group’s transformation plan. Could you give us an update on cost savings?
To date, we have achieved 1.8 billion euros of recurring cost savings, of which 0.7 billion was achieved in 2019. As planned these recurring cost savings will reach 3.3 billion euros by the end of 2020.
Besides, one-off transformation costs reached 0.7 billion in 2019, in line with targets. As planned, there will be no transformation costs in 2020.
Looking ahead, what are your expectations for 2020?
In 2020, BNP Paribas is expected to pursue business growth in all operating divisions by leveraging its strong business drive as well as its diversified and integrated model.
The reinforcement of the franchises is expected to continue, in particular with the strong business drive in CIB which should keep strengthening its European leadership.
With the transformation plan delivering its full impact this year, we expect lower operating expenses in absolute terms and the bank should have positive jaws in 2020.
Besides, the Group is expected to continue to strengthen its leadership in sustainable finance and lead an ambitious policy of engagement in society.
The Group’s return on tangible equity should thus reach 10% with a pay-out ratio of 50%.
Hence, BNP Paribas is expected to continue to confirm the strength of its diversified and integrated model as well as its capacity to create value in continuously evolving economic, environmental, technological, regulatory and societal environments.
- EuroBusiness Media (EBM): Jean-Laurent Bonnafé, CEO of BNP Paribas, thank you very much!
- Jean-Laurent Bonnafé: You’re welcome!
