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Fundamental View
AS OF 19 May 2025BNP’s financial strength is based on its strong franchises across retail, commercial and investment banking, and its wide business and geographic diversification. Profitability is sound and fairly resilient, while asset quality has held up well.
Uncertainty around the financial health of the French sovereign and its ratings have the capacity to weigh on BNP’s stock price and its credit spreads.
Capital ratios are run tightly considering BNP’s balance sheet size, although this is in the context of its liquid and well-managed risk profile.
Business Description
AS OF 19 May 2025- BNP is one of the most diversified banking groups in Europe, having been created from a merger of the retail/commercial bank BNP and the corporate/investment bank Paribas in 2000.
- Domestic Markets (DM) comprises the Group's four retail banking networks in the eurozone and its three specialised business lines (including leasing and digital banking). The retail banks are French Retail Banking (FRB), BNL in Italy, BNP Paribas Fortis in Belgium and BGL BNP Paribas in Luxembourg.
- International Financial Services (IFS) includes consumer finance, asset management and private banking, and subsidiaries in non-eurozone countries, including TEB in Turkey and BNP Paribas Bank Polska.
- Corporate & Institutional Banking (CIB) is a global provider of financial solutions to corporate and institutional clients and includes BNP's extensive trading and investment banking businesses.
Risk & Catalysts
AS OF 19 May 2025BNP Paribas remains the subject of various claims concerning the Madoff matter; amongst other claims. Litigation provisions on the balance sheet stood at €841 mn at 30 June 2024. BNP says the latest claims against it stand at $1.1 bn as of June 2024.
If there was a negative rating action on the sovereign via an outlook change or notch downgrade, it is possible that BNP’s ratings will be impacted but it is difficult to say with any uncertainty. France represents around 30% of revenues and gross commitments on balance sheet and sovereign bond holdings are moderate; we discuss more below.
There were signs of modest asset quality deterioration in 1Q25, although the bank has not revised its guidance, which targets cost of risk of 40 bp in 2025 and 2026.
Key Metric
AS OF 19 May 2025| mn | Y21 | Y22 | Y23 | Y24 | 1Q25 |
|---|---|---|---|---|---|
| Return On Equity | 8.2% | 8.2% | 9.0% | 9.3% | 9.1% |
| Total Revenues Margin | 1.8% | 1.7% | 1.7% | 1.8% | 1.9% |
| Cost/Income | 67.3% | 60.7% | 62.6% | 61.8% | 63.7% |
| CET1 Ratio (Transitional) | 12.9% | 12.3% | 13.2% | 12.9% | 12.4% |
| CET1 Ratio (Fully-Loaded) | 12.9% | 12.3% | 13.2% | 12.9% | 12.4% |
| Leverage Ratio (Fully-Loaded) | 4.1% | 4.4% | 4.6% | 4.6% | 4.4% |
| Liquidity Coverage Ratio | 143.0% | 129.0% | 148.0% | 137.0% | 133.0% |
| Impaired Loans (Gross)/Total Loans | 3.3% | 2.9% | 2.9% | 2.8% | n/a |
CreditSight View Comment
AS OF 09 May 2025BNP remains one of the more diversified bank names in Europe. Its strong business and geographic diversification has helped it maintain good profitability and asset quality. It has extensive operations in Italy via its subsidiary BNL. Earnings have been resilient, with CIB a stand-out performer. Liquidity and funding metrics look sound. Asset quality has held up well, although an outlier is the group’s personal finance business. The latter is being restructured, to focus more on auto finance rather than personal lending. BNP’s capital position strengthened in 2024 but it will weaken in 2025/6. It is looking to expand now in insurance and asset management, likely to grow fee income. Despite global uncertainty, BNP has not amended any of its target for 2025/2026.
Recommendation Reviewed: May 09, 2025
Recommendation Changed: October 30, 2018
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