BNP Paribas Earnings: Solid Results With no Signs of U.S. Contagion

BNP Paribas BNP reported a rather messy quarter with several restatements. Normalised earnings increased by 55% year on year and 33% compared with the final quarter of 2022. Helpfully, BNP Paribas included some slides in its presentation highlighting its solid liquidity and limited exposure to commercial real estate. BNP Paribas did indicate that it expects to exceed its guidance for revenue, earnings, and profitability over the next three years. In a further sign of confidence, it confirmed that it would execute a EUR 5 billion (7% of its current market value) share buyback in two equal tranches this year. We expect to increase our fair value estimate of EUR 67 by more than 10% after incorporating the results into our model.

We could not see any evidence of contagion from the difficulties being experienced by U.S. regional banks in the results. BNP Paribas has liquidity of EUR 324 billion parked at the European Central Bank—this cash covers just over 30% of its deposits. By contrast, Silicon Valley Bank had cash reserves equal to only 8% of its deposits. BNP Paribas also improved its liquidity coverage ratio to 139% from 129% at the end of 2022. BNP Paribas said it benefited from a flight to quality in March as depositors with multiple banks chose to concentrate all their deposits at BNP Paribas . Before the March banking turmoil, BNP Paribas saw some clients switching to higher-yield savings products. According to BNP Paribas, there is no price competition for deposits in the markets it operates in. The lack of competition for deposits aligns with what we are hearing from other eurozone banks. We believe that because banks are tightening their lending criteria and there is low demand for credit, there is still ample liquidity in most of the eurozone. We do not see a meaningful increase in deposit pricing when there is still excess liquidity.