EuroBusiness Media (EBM) : BNP Paribas, one of Europe's largest banks, just reported full-year earnings for 2004. Baudouin Prot, welcome. You are the CEO of BNP Paribas. What are your general comments on your 2004 annual earnings in your 3 main lines of business: retail, investment banking, and asset management?
Baudouin Prot (BP) : First, our revenues went up 5%, which I think is good. Second, the cost-income ratio improved by 1.3%. Third, the group profits are up 24.1%, to €4.6 bn. Overall, we have had a very significant increase of our pre-tax income for all three of our core businesses. The highest increase is for asset management services, which are up 37.3%. Corporate and investment banking also did very well : +30.3%. And retail banking altogether had a nice double-digit 12.6% growth in pre-tax profits.
EBM : Revenue growth was supported by an increase in credits to both consumers and enterprises. Is the trend in credit growth going to continue at the same pace, and will it continue to remain a main driver for organic growth ? And if so, should we be concerned about the future level of your margins, in particular since you're perceived as very aggressive in the home loan market?
BP : Regarding the domestic home loan market, the decline in our net interest margin is mainly due to the fact that our loans have grown faster than our deposit base. Apart from that, we are still paying close attention to the level of our overall margins. Let me remind you first that net interest revenue for French domestic retail is up 2.8%. Secondly, we had a very strong year last year. We added 128,000 new customers in terms of checking accounts. And we also had a very strong year in deposits. Altogether, I believe that we have a dynamic in the French retail network, which is very positive, and I am optimistic on the revenue trends that we will have in the next few quarters.
EBM : What's your next step in the US ? Do you plan to extend your coverage of the Western United States ? Are you looking at targets with the same acquisition criteria as previously?
BP : At the moment, we really find that the prices that are expected by sellers of US regional banks are really at the high end. We'll certainly continue to be disciplined in our acquisitions there. So, at the moment, we emphasize organic growth for BancWest as the main driver. Let me remind you that loans have been growing 11% and deposits 7% in 2004. We're certainly going to be looking at acquisitions but, again, we're very eager to pay only the right price for acquisitions in the US, as always at BNP Paribas.
EBM : What is your view on cross-border bank mergers in the current environment, after the recent merger between SCH and Abbey National in the UK ? Should Europeans think defensively about consolidation, at a time when US consolidation is much further advanced and US players may be looking at targets in Europe?
BP : Regarding consolidation in Europe, we consider that the hurdles in combining large banks in Europe are still very significant. They are not only cultural, but also due to a lack of harmonization of the retail markets and the retail regulations in key countries in Europe. The amount of synergies that you can extract is still very limited. So, considering the high value that BNP Paribas can create on a stand-alone basis -- by combining organic growth and acquisitions -- I still believe that it is highly unlikely that we would have a major transaction involving BNP Paribas in the near future.
EBM : Why do you want to increase the dividend?
BP : We want to increase the dividend because it is one of the four levers of dynamic capital management. The first lever is obviously organic growth, and we are eager to have strong organic growth. The second is disciplined but opportunistic acquisition strategy. Then comes the dividend. Regarding the dividend, we want to increase the pay-out ratio because we felt it had its place in a dynamic capital management. And the last thing is share buy-backs and here, we are only going to neutralize the new share issues for employee schemes.
EBM : What are the highlights of the 2007 project?
BP : This project, which we call "Vision 2007", is really about getting BNP Paribas -- starting from the very strong profitable base that we have in our main core businesses - to accelerate its growth and its pace of development, by emphasizing organic growth, and also opportunistic but disciplined acquisition strategy. Keeping in mind that, even if we do very much stress the importance of growing revenues, we also want to keep the return on equity at group level above 15% every year, unless there is a major crisis.
EBM : Baudouin Prot, CEO of BNP Paribas, thank you very much.
