PARIS, Feb 4 (Reuters) - BNP Paribas reported stronger than expected quarterly earnings driven by increased trading activity, boosting the struggling French bank's stock price amid ongoing cost-cutting efforts to enhance profitability.
For CEO Jean-Laurent Bonnafe, who has focused on the investment bank while competitors scaled back, the results are a relief after a challenging year in the retail sector in France and Belgium.
BNP's shares rose 1.9% at 1110 GMT, outperforming France's CAC 40 index and European banks.
The euro zone's largest bank by assets posted a 15.7% increase in net income to 2.32 billion euros ($2.39 billion) in the quarter ending in December, surpassing analyst estimates.
Revenue also climbed by 10.8% to 12.1 billion euros, exceeding expectations.
These results enabled BNP to announce a dividend of 4.79 euros per share, up 4.1% from 2023, along with a 1.08 billion-euro share buyback program to commence in the second quarter of this year.
Nevertheless, BNP adjusted a key profit target for 2025 downward and pledged further cost reductions.
Barclays analysts viewed the fourth-quarter results positively, highlighting the bank meeting key targets, including return on equity.
Bonnafe has placed his confidence in BNP's investment bank to fill gaps left by retreating European rivals and to compete with dominant U.S. peers.
The investment banking sector has helped offset BNP's sluggish retail performance, as inflows into high-interest savings pressured French banks' margins while competitors in the euro zone benefited from higher rates.
BNP's market share in investment banking in Europe, the Middle East, and Africa increased to 4.9% in 2024 from 4.6% in 2023 in terms of revenue, according to data firm Dealogic.
However, BNP struck a cautious tone on the future, revising a key profitability target for 2025 downward and announcing additional cost savings of 600 million euros in 2026.
The bank is now aiming for a return on tangible equity of 11.5% for this year, with a target set to reach 12% in 2026, supported by the pending 5.1 billion-euro acquisition of AXA's asset management arm.
Regarding further acquisitions, Bonnafe reiterated his intent to avoid large cross-border deals while expressing openness to domestic mergers among European banks.
BNP anticipates an average annual growth in net income of over 7% from 2024 to 2026, compared to a previous forecast, staying above the European banking average in terms of the cost-to-income ratio.
($1 = 0.9712 euros)