BNP Paribas projects record profit of over €11B in 2023 after strong Q1

BNP Paribas SA is projecting to deliver record-breaking profits of more than €11 billion for 2023 after the bank exceeded expectations in the first quarter, according to CFO Lars Machenil.

The French banking giant recorded a first-quarter profit of €2.85 billion, up more than 54% year over year. BNP Paribas provided guidance for it to match that level of distributable income in each of the remaining quarters, which would bring its year-end total to about €11.2 billion.

"[W]e feel comfortable that the rhythm at which we are, we will deliver," Machenil said during a first-quarter earnings call. "So it's nothing particular that we anticipate, it's just the run-of-the-mill performance in the first quarter confirms that overall trend [expected for the rest of the year]."

The bank also completed the sale of Bank of the West in the first quarter, for which it booked a capital gain of €2.95 billion on top of its underlying profits.

"Bank of the West is just gone, and we basically already overperformed versus when we had it," Machenil said. "We not only compensate, but we do better than that."

CIB sets the tone

The first-quarter performance was driven by a record-breaking quarter for its corporate and institutional banking (CIB) division, which generated €1.43 billion in pretax income from €4.87 billion in revenue.

The CIB division was boosted in the first quarter by a strong rebound in bond markets in Europe, the Middle East and Africa, which increased revenue 92% quarter on quarter and 7% year on year from a "high base," according to company filings.

The improvement helped the CIB's global banking business generate more than €1.45 billion of revenue in the quarter.

The CIB's global markets business also logged a strong performance, recording more than €2.76 billion in revenue, slightly down year on year from a record €2.81 billion.

BNP's commercial, personal banking and services division also grew in the quarter as revenue increased year on year to more than €6.66 billion and pretax income rose by 7.7% to almost €1.47 billion. The growth was driven by a strong increase in net interest income, which is the difference between interest revenues and interest expenses.

The bank's third division, investment and protection services, grew revenue 0.6% year over year to €1.41 billion. Pretax income fell by 7% to €578 million.

Eurozone stability

Addressing recent turmoil in the banking sector, Machenil said he did not expect eurozone banks to see the same problems experienced in the US. Several midsize US banks, including Silicon Valley Bank, Signature Bank and First Republic Bank, have failed since March due to huge outflows of customer deposits sparked by concerns about the banks' stability.

"What we saw in the US is different from what we have in Europe," Machenil said. The eurozone banking sector benefits from much more widespread and comprehensive supervision than the US, which should prevent the problems that arose in the US from happening in the eurozone, Machenil said.

"[Will eurozone] banks run into whatever kind of systemic issue? That is not what we anticipate in Europe," Machenil added.

BNP Paribas' deposits increased in March as a result of the market turmoil that struck the banking sector following the collapse of Silicon Valley Bank and the emergency takeover of Credit Suisse Group AG by UBS Group AG, according to Machenil. BNP's deposits rose about 1% year over year to €568 billion.

"Something pivotal happened in March, where whatever happened around us basically triggered a flight to quality," Machenil said. "Corporates that [had deposits in] several banks, they basically decided that they would move all of them to us. And the same thing is true on the retail side."