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BNP Paribas has unveiled a new three-year strategy to invest €3bn on adapting its operations to the digital age after outstripping analyst expectations with a 15 per cent jump in annual net profits.
By doubling its investment in digitisation, France’s biggest bank aims to achieve €3.4bn of cost savings, of which €2.7bn will be recurring.
While many of Europe’s biggest banks are still in the midst of painful restructurings, BNP Paribas has rebounded strongly, raising its dividend and boosting profits since being fined almost $9bn by US regulators in 2014. Its shares have risen 44 per cent over the past year.
But the bank’s inability to rein in its cost base, which was inflated by €1.3bn of unexpected regulatory costs, led to its failure to meet one of its previous six targets: to cut its operating costs to no more than two-thirds of revenue.
The French bank said on Tuesday it aimed to lower costs as a proportion of revenues from 66.8 to 63 per cent by 2020, helped by planned investments in automation, improved data usage and artificial intelligence.
Its net profits rose from €7bn to €7.7bn last year, as revenues outpaced costs, while provisions for bad loans fell and it booked fewer one-off charges. It raised its dividend from €2.31 to €2.70 per share, giving investors a yield of 4.6 per cent.
The bank’s top performing division was its international financial services arm, which includes its consumer finance, insurance, asset management and US retail banking. This unit reported a 4 per cent rise in pre-tax profits.
The domestic retail unit, which has a network of branches in France, Belgium and Italy, was held back by low interest rates, but still managed a 1.4 per cent rise in pre-tax profits. The corporate and investment bank suffered a 1.2 per cent decline in pre-tax profits, but this was blamed on currency movements and one-off items.
Alongside a relatively ambitious 2.5 per cent annual revenue growth target for the next three years, the bank aims to raise its dividend payout ratio from 45 per cent to 50 per cent.
It also aims to lift its return on equity from 9.4 per cent last year to above 10 per cent by 2020, and to increase its common equity tier one ratio — a vital benchmark of financial strength — from 11.5 per cent to above 12 per cent.