(8 February 2016 – France) On Friday, BNP Paribas (BNP) reported fourth quarter earnings below expected forecasts and said it would revamp its Corporate and Institutional Banking (CIB) unit to assist in coping with regulatory changes.
Net income came in at €665 million (A$1.04 billion) in the last quarter of 2015, a 51.7 percent drop from the same period last year. The French bank recorded one-off transformation and restructuring costs related to acquisitions, as well as a €69 million contribution to a dedicated fund for the resolution of four Italian banks.
The bank said in a statement that: “The division is generating best in class profitability among its European peers,” however “a new step in CIB's adaptation is now needed in order to cope with new constraints.”
The French bank wants to achieve €1 billion in cost savings by 2019 and reduce risk-weighted assets by €20 billion.
Speaking to CNBC, Chief Financial Officer Lars Machenil said the overall business evolution in CIB was good, with 13 percent revenue growth for the unit across 2015.
“Nevertheless, we know that there are some headwinds ahead…and so we started to embark on a transformation to confront these headwinds,” Manchenil said.
According to the Manchenil, the plan was needed in order to cope with “restraints” such as capital ratio requirements and new banking regulations in Europe.
“The change basically aims to improve by 2019 the pre-tax return on equity by 8 points, and we do this along three levers: focus, improve and grow.” Included in the aim were plans to focus on freeing up capital, improving cost efficiency and growing strategic initiatives, he said.