BNP Paribas boosts cost-cutting plan by €400 million amid weak Q4 results

BNP Paribas financial results: BNP Paribas, the euro zone's largest bank, announced on Wednesday that it would intensify its cost-cutting efforts by €400 million ($437 million) following disappointing fourth-quarter results.

The bank aims to achieve the additional savings this year, elevating its total savings target for the 2022-2025 period to €2.7 billion.

According to slides from a presentation at a Morgan Stanley conference, the extra cost reductions will primarily arise from automation, reduced purchases, more cost-effective premises management, and improved task "mutualization" among outsourced employees.

BNPP's move comes amidst expectations of subdued deal flows, modest bonuses, and significant job cuts in 2024 across the banking sector. Earlier this year, its French competitor Societe Generale announced plans to cut 900 jobs at its Paris headquarters.

The bank also revealed that a dividend payout ratio of 60 per cent for 2024, 2025, and 2026 would equate to approximately €20 billion in shareholder payments.

Last month, BNP Paribas reported an unexpected decline in fourth-quarter income and deferred a key profitability target, leading to a more than 9 per cent drop in its share price.

Revenues from its investment bank, as well as its consumer and commercial real estate divisions, decreased compared to 2023. CEO Jean-Laurent Bonnafe expressed pessimism about the outlook, anticipating an economic slowdown in the euro zone.

Additionally, the bank reaffirmed its projection for higher net profit this year compared to 2023 but acknowledged that it would not achieve its target return on tangible equity (ROTE) of 12 per cent until 2026.

(With Reuters inputs.)