BNP Paribas: Accelerated Savings & €20B Distribution Ahead

The French financial giant, BNP Paribas (FR:BNP) (BNPQY) (DE:BNP) (DE:BNPH), is ramping up its cost-cutting plan by nearly €400 million. The heightened focus on cost savings comes in the wake of BNP’s weak fourth-quarter numbers last month.

BNP is presenting at the Morgan Stanley conference today. The additional savings now increase the bank’s cumulative savings targets between 2022 and 2025 to nearly €2.7 billion. BNP’s share price has declined by over 11% over the past month after the company’s fourth-quarter bottom line tanked by around 50%, owing to charges related to risk on financial instruments.

BNP Forecast

The company anticipates an increase in net income for 2024 compared to 2023. Key factors driving this forecast include additional efficiency measures, anticipated reductions in short-term rates starting in the second half of 2024, and projected gains in market share for Corporate & Institutional Banking (CIB) divisions. However, challenges in the form of stabilizing used-car prices, a dim economic outlook for the Eurozone, and regulatory decisions by entities like the ECB regarding mandatory reserves and Belgian bond/tax policies are expected to pose significant obstacles in the year ahead.

Furthermore, the bank plans to distribute nearly €20 billion between 2024 and 2026. Additionally, it expects to deploy nearly half of the excess capital from the sale of Bank of the West by the end of H1 2024. Importantly, its Personal Finance business is projected to exceed its cost of capital in 2026.

Is BNP Paribas a Good Buy?

The optimistic targets have pushed BNP shares almost 3% higher today. Overall, the Street has a Moderate Buy consensus rating on the stock alongside an average price target of €70.96. This points to a further 15.2% potential upside in BNP Paribas shares over the coming periods.

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