BNP Paribas: a chorus line

French TV has screened globally popular dramas — such as crime drama Lupin — via streaming platforms recently. Its banks have been garnering less applause. BNP Paribas had some good lines to offer its audience with Friday’s full-year results. The French bank has above average returns on equity (6.7 per cent). Yet BNP persistently trades at half or less its rising book value.

BNP’s dependence on its investment bank may be what is worrying investors. Even ebullient chief financial officer Lars Machenil doubts whether the powerful debt trading desk can produce a repeat performance in 2021.

The lender produced a rerun of that seen at Europe’s other aspiring universal banks, such as Deutsche Bank or Barclays. The investment bank unit generated 41 per cent of profits in 2020 and was the only division to improve year on year. Nevertheless, analysts had pencilled in a higher out-turn for its fixed income and equities teams than was reported.

As a group, BNP topped what bullish brokers such as UBS had expected in the quarter. Net profits of roughly €7.1bn for the full year beat expectations, including those set by the bank at the start of the pandemic. Back then, the thought of a bank giving an outlook on the rest of the pandemic year was seen as unusual, even comical.

While the top line fell slightly (0.7 per cent), overheads dropped at five times that rate last year. BNP Paribas’s tangible book value per share has increased in every year bar one since 2008. Last year was no exception. While US bank investors might well shrug, in Europe that trend merits some attention.

A 3 per cent pop in BNP’s share price might suggest better ratings to come. Yet it was just part of high kicking by the rest of the French chorus line. Both Société Générale and Crédit Agricole bounced the same percentage on the day. Share ratings persistently lower than for any daytime TV pottery show reflect deep scepticism among investors.

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