The Board of Directors of BNP Paribas met on 5 February 2018. The meeting was chaired by Jean Lemierre and the Board examined the Group’s results for the fourth quarter and endorsed the 2017 financial statements.
Good performance of the Group in 2017 and promising start of the 2020 business development plan
In 2017, BNP Paribas got off to a good start of its 2020 plan. In a lacklustre interest rate and market environment, the business activity of the Group developed vigorously sustained by a gradually stronger European growth.
Revenues totalled 43,161 million euros, down by 0.6% compared to 2016, which included an exceptional impact of +597 million euros in capital gains from the sale of Visa Europe shares while it only included this year +233 million euros in capital gains from the sale of Shinan and Euronext shares. Separately, the Own Credit Adjustment (OCA) and own credit risk included in derivatives (DVA) totalled -175 million euros (compared to -59 million euros in 2016). Excluding these exceptional items, revenues were up by 0.5%.
Revenues were up by 1.5% in the operating divisions despite an unfavourable foreign exchange effect (+2.6% at constant scope and exchange rates): they were stable in Domestic Markets(1) (-0.6% at constant scope and exchange rates) due to the low interest rate environment, despite good business development; they were up by 2.7% at International Financial Services (+4.8% at constant scope and exchange rates), driven by the development of the businesses; they rose by 2.1% at CIB (+3.8% at constant scope and exchange rates) thanks to good business growth and despite the lacklustre market environment in the second half of the year.
The Group’s operating expenses, which amounted to 29,944 million euros, were up by 1.9% compared to 2016. They included the exceptional impact of 101 million euros in the acquisitions’ restructuring costs(2) (158 million euros in 2016) and 856 million euros in transformation costs (539 million euros in 2016). They included in 2016 a 52 million euro compulsory contribution to the resolution process of four Italian banks.
The operating expenses of the operating divisions rose by only 0.5% compared to 2016 thanks to the effects of the cost saving measures: they were down by 0.4% for CIB(3) where the transformation plan was launched as early as 2016, declined by 0.1%(4) for Domestic Markets1 thanks in particular to the decrease in the retail banking networks and rose by 1.9%(5) for International Financial Services as a result of increased business. The jaws effect was positive in all the operating divisions.
The Group’s gross operating income was thus down by 5.8%, at 13,217 million euros. It was up by 3.8% for the operating divisions (+4.9% at constant scope and exchange rates).
The cost of risk was down again (-10.9%) at 2,907 million euros (3,262 million euros in 2016) or 39 basis points of outstanding customer loans. This low level is due in particular to the good control of risk at loan origination, the low interest rate environment and the continued improvement in Italy thanks to the repositioning on better corporate clients.
The Group’s operating income, which totalled 10,310 million euros (10,771 million euros in 2016), was thus down by 4.3% but up by 9.0% for the operating divisions.
Non-operating items totalled 1,000 million euros (439 million euros in 2016). They included this year, in addition to a higher income contribution from the associated companies, the exceptional impact of the +326 million euro capital gain resulting from the initial public offering of SBI Life(6) as well as the full impairment of TEB’s goodwill for -172 million euros. They included in 2016 -127 million euros for BGZ’s full goodwill impairment.
Pre-tax income, which came to 11,310 million (11,210 million euros in 2016), was thus up by 0.9%. It was up by 13.4% for the operating divisions: +4.7% at Domestic Markets(7), +18.2% at International Financial Services and at +14.6% at CIB.
Net income attributable to equity holders was 7,759 million euros, up by 0.7% compared to 2016. Excluding exceptional items(8), it came to 8,149 million euros (+4.4%). The return on equity was 8.9% (9.4% excluding exceptional items). The return on tangible equity came to 10.5% (11.0% excluding exceptional items). The net earnings per share was at €6.05.
As at 31 December 2017, the fully loaded Basel 3 common equity Tier 1 ratio(9) was 11.8% (11.5% as at 31 December 2017). The fully loaded Basel 3 leverage ratio(10) came to 4.6%. The Liquidity Coverage Ratio was 121% as at 31 December 2017. Lastly, the Group’s immediately available liquidity reserve was 285 billion euros, equivalent to over one year of room to manoeuvre in terms of wholesale funding.
The net book value per share reached 75.1 euros, equivalent to a compounded annual growth rate of 5.7% since 31 December 2008, illustrating the continuous value creation throughout the cycle.
The Board of Directors will propose at the Shareholders’ Meeting the payment of a dividend of €3.02 per share (+11.9% compared to 2016) to be paid in cash, equivalent to a 50% pay-out ratio which is in line with the plan.
The Group is actively implementing the 2020 transformation plan, an ambitious programme of new customer experiences, digital transformation and operating efficiency.
The good overall performance of the operating divisions this year illustrates the promising start to the plan. The Group thus confirms its 2020 targets and aims at a return on equity above 10% at that time.
The Group continues to strengthen its internal control and compliance systems. It also pursues an ambitious corporate social and environmental responsibility policy designed to have a positive impact on society: it thus created this year a Company Engagement Department in order to reinforce its actions in this field.
(1) Including 100% of Private Banking in the domestic networks (excluding PEL/CEL effects)
(2) In particular, LaSer, Bank BGZ, DAB Bank and GE LLD
(3) +1.8% at constant scope and exchange rates
(4) -0.8% at constant scope and exchange rates
(5) +3.7% at constant scope and exchange rates
(6) Sale of a 4% stake in SBI Life at a price of 700 rupees per share
(7) Including 2/3 of Private Banking in the domestic networks (excluding PEL/CEL effects)
(8) Effect of exceptional items after tax: -390 million euros (-100 million euros in 2016)
(9) Ratio taking into account all the CRD4 rules with no transitory provisions
(10) Ratio taking into account all the CRD4 rules at 2019 with no transitory provisions, calculated according to the delegated act of the European Commission dated 10 October 2014