Bnp Paribas Spons Adr

Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas second quarter 2025 results with Jean-Laurent Bonafé, Group Chief Executive Officer, and Lars Maschineel, Group Chief Financial Officer. For your information, this conference call is being recorded. Supporting slides are available on BNP Paribas IR website, invest.bnpparibas.com. During today's presentation, you will be able to ask your questions by pressing star 1 on your telephone keypad. If you would like to ask a question, please make sure to be in a quiet area to maximize audio quality. I would like now to hand the call over to Jean-Laurent Bonafé, Group Chief Executive Officer. Please go ahead, sir.

Thank you. So, good afternoon, ladies and gentlemen. Lars and I are pleased to present today a summary of our strong second quarter results and how it confirms our 24-26 trajectory. For 25 specifically, we're also confident to announce that we expect more than 12.2 billion euros net profit for this year, as I will explain later. We will be relatively brief on divisional details as you have most of them in our documents. So moving to slide four. You can see that our year news are up 2.5% this quarter. CIB posted a 4% revenue growth despite an elevated base in the second quarter 24 and the U.S. dollar witness. For all three businesses, global banking, global markets, and security services, we had the best second year in 14 years, in 15 years. CPBS was marginally up year-on-year despite lower used car sales results at Aval. This is in line with our trajectory. The quarter confirmed the acceleration of the NII in our commercial banks in Eurozone, as expected, with a growth of more than 2%, and we anticipated the second half to show further acceleration. Yeoman once again posted very strong revenues growth at about 22%, thanks to strengthened performance in Turkey and Poland. Personal finance is starting to show acceleration and is up about 3%. Moving to IPS, it posted a 4.4% growth, particularly thanks to insurance and wealth management. We're pleased to welcome XRI employees in our group on the 1st of July. I will elaborate on XRIM later on. Finally, regarding the corporate center, we saw an improvement as mentioned during first quarter results. Our commitment to control, to cost control remains strong and we're on track to deliver our cost savings of Euro 600 this year, with Euro 190 of additional savings implemented in Q2. Overall, we generated positive Joe's effect of 1.7 points this quarter, above our ambition of 1.5. At 38 bps, our cost of risk remains without our guidance of less than 40 bps, despite a more challenging environment. Our cost of risk includes stage 3 provisions of 33 bps down 9 bps year-on-year. The second quarter of 24 saw stage 1 and 2 benefiting from 12 bps of releases compared to a small addition this quarter. All in all, our net profit was down 4%, due to a punctually low tax charge in the second quarter 24, without compromising our trajectory of profitability as this tax impact iron out over the full year 24. Our CT1 is stable quarter on quarter at 12.5%, and Lars will elaborate on this later. Finally, we confidently confirm our distribution policy of 60% and are pleased to announce our first interim dividend of 2.59 euros per share, which represents 50% of our EPS for the first half. Our 1.80 billion euro share buyback program was completed in June and the shares will be canceled. After solid performance in Q2, we expect a sharp acceleration in the second half, and I will explain on the next slide. So now moving to slide five, we're pleased to confirm that we expect our net profit for 25 to be above 12.2 billion euros, mainly driven by a strong acceleration in revenues in the second half of the year at more than 5%, excluding AXA-IM. This revenue growth is in the place that it will largely come from the acceleration of the NII in our Eurozone commercial banks and at personal finance or margins, reflecting the current rate environment. These additional revenues do not require much additional cost, which means they will feed directly to our gross operating income and profit before tax. We will also continue our cost savings measures, supporting jobs at roughly plus 2.5 points. Once we add to the strong growth in gross operating income, the first-time contribution from AXA, we expect that our net profit will exceed 12.2 billion euro for the full year, marking a sharp increase in the second half. Moving now to slide six. You are, of course, very familiar with the slide six, and I'm pleased to reiterate our trajectory for 25-26. Return on tangible equity of 11.5% in 25, 12% in 26, leading to more than 7% group net income growth CAGR, and more than 8% EPS growth CAGR. Our 26 return on tangible equity is only a stepping stone towards further improvement. Our targets will be achieved thanks to key levels that you will have in mind, starting with CIB. We'll continue to grow market shares in a capital-conscious manner, and we'll be ready for the Save and Investment Union thanks to our originate-to-distribute model. Moving to CPBS, we had two deep dives in June on CPBF and personal finance, demonstrating to you that these two businesses alone can add one full point of return on tangible equity by 20th. CBBS will, amongst others, benefit from the sharp acceleration in NII, both in the commercial banks and personal finance. We recently reinforced our governance of the commercial banks in the Eurozone in order to mutualize our investments, accelerate cross-selling, and continue our efforts on SRT. Moving to IPS, we will continue the dynamic organic growth, which will be amplified by the acquisition of HSBC Wealth Management Germany, and of course, AXA IL. Finally, we will continue our efficiency efforts with 600 Euro additional cost savings in both 25 and 26. And I now hand over to Lars, who will remind you of this quarter's achievements.

Thanks, all. If you can swipe to slide 10, where you can see that the second quarter of 25 was driven by solid business performance within each division. Overall group revenues were up 2.5% year on year, and we expect more than 5% in the second half. If we look at the divisions, CIB had a record second quarter, as Jean-Laurent said, up 4% year on year. driven by a very good performance across all three business lines. If we look at global banking, which was stable at a record high, reflecting strong commercial dynamism, but also some degree of wait and see, also the U.S. dollar impact and the negative impact of lower rates. Our pipeline within global banking is strong for the remainder of the year. If it is, we turn to global markets, where revenues were up 5.6%, driven by a very strong performance of FIC when compared, in particular, to our US peers, and FIC is up 27%. FIC was indeed strong in all regions, particularly driven by effects, but also credit. Equity and prime services was down about 15% due to the high base effect a year ago and compared with our U.S. peers who are more exposed than us to the flow business, which was very strong this quarter on the other side of the Atlantic. We were also impacted by lower demand for structured products in the context of the uncertainty post-liberation date. However, if you look at the first semester results, at 2.2 billion, they represent a record for EPS driven in particularly by prime and cash. If we now turn to the third division, security services, it was up 7.6%, driven by strong balances and transactions as well as resilient interest margin. If we now turn to the second division, which is CPBS, which illustrated and demonstrated the pivotal performance. If you look at it, the revenues are up 0.4%, but what is worth mentioning are the two main divisions within it. If we start with the commercial banks, they were basically up 5% this quarter, stronger than the trajectory for the next three years. We look at the commercial banks in the Eurozone. They grew their revenues 1.2%, and we reiterate our target of more than 3% this year. Indeed, why do we say this? Because on one hand, the rebound of net interest revenues will accelerate in the second half of this year as the lag from deposit mix has taken off. Moreover, the lower rates environment should be supportive of a stabilizing deposit mix, and the shape of the yield curve should enable us to continue our reinvestment on the long end of the curve, leading to a progressive net interest income pickup, as we have announced and as the second quarter illustrates this pivot. If with this, after the Eurozone banks, we look at Europe Mediterranean, and so the revenues were up 22.7%. This is due to improved margins, both in Poland and Turkey, as well as an increase in fees, and this in particular payments in Turkey. Of course, the environment in Turkey going forward could potentially be less favorable due to a slowing decrease in interest rates. So this is then basically the commercial banks. If we then turn to the specialized businesses, they were down 7% year on year. And this impacted by the ongoing normalization, as you know, of used car prices, and as you know, as we have flagged it before. If you look organically, Arval performed extremely well again this quarter, so up 8.3%. The growth is reported by fleet growth of 4.6%, and outstandings growing by 11.2%. If you look at personal finance, where you see a solid commercial performance with loan growth of 2.7%, combined with margin improvements coming from repricing. We have described this in our deep dive for PF, personal finance, and we are confident that the margin improvement will accelerate in the second half of the year. Last, within CPVS, a very good performance from the new digital businesses and personal investors, up organically 11% this quarter, thanks to further growth in client acquisition, as well as a high level of transactions in the light of Liberation Day. If it is, we move to the third division, IPS. We saw strong growth in fees, thanks to a high level of transactions. If we look at assets under management, they were boosted by strong inflow and strong performance effects, but were significantly impacted by the strengthening of the euro. IPS is about to become a sizable driver of our growth with the acquisition of AXA-EM, which we closed early July. If we look at insurance revenues, they were up 8.2%, driven particularly by a healthy savings in France, the increased contribution from Adidas, and the impact of recent acquisitions. Wealth management was up 6.1% on strong inflow and strong fee growth. If we turn to asset management, which was down 1.8%, despite strong inflow and transactional activity due to financial income, and in particular, real estate, you know, our asset management division includes the activity real estate, which continued to weigh. Let me add, finally, a comment on the corporate center. As we highlighted at the first quarter, the revenues can be volatile from one to another. but you see that the second quarter is in line with our full-year guidance of about zero revenues, excluding the impact of insurance-related defects. If with this, we turn to slide 11, where we show that our cost discipline is paying off. At group level, the draws stand at 1.7 points, consistent with our stated trajectory for 2026 of 1.5. We continue to allocate cost growth to fund development while we offset inflation by cost savings. If you look at CIB, positive JAWS, 0.7 points, with cost growth driven mainly by increased activity. CPVS, also positive JAWS, 0.5 points, and JAWS are positive in all activities except ARVAL, as we mentioned before. So the latter will face a significantly lower base effect from car sales revenues in the second half as previously stated. And so the tapering down of the resale had the highest impact in the first half of the year and will be materially lower in the second half. Finally, IPS reported positive goals of 5.2 points with a drop in cost of 0.7% even with our ongoing investments in the business. So goals are positive in insurance and wealth management. if we look at slide 12 where we focus on the cost savings and efficiency measures which basically allow the jaws effects and this quarter you see that we implemented 190 million of new cost savings totally consistent with our full year target and broadly offsetting the impact of inflation having looked at the those three uh first elements of the p l let's now look at the cost of risk on slide 13. On this slide, you can see that our diversified balance sheet enables us to protect profitability. Our cost of risk of 38 basis points over outstanding is at the moderate level across our activities with a base effect a year ago in the second quarter. Indeed, in the second quarter of 24, the group released stage one and two provisions for 275 million euros, notably in global banking. In particular, if we go back to the Stage 3 provisions, which have improved nine basis points year on year. So the Stage 3 are nine basis points lower than they were a year ago, and they stand at 36 basis points. And so they reflect the good quality of our portfolio despite a challenging economic environment. So if we now talk about the stages one and two, our overall stock of provisions for these is stable, and it stands at 4 billion, 4.1 billion euros, equivalent to more than one year worth of the current stage three run rate. If we now look at it by division, we know there's normalization from a low base at global banking, as we previously mentioned, Europe Med and BNL, and from a high base in France. So PF continues to represent close to 50% of group cost of risk, and the drop of stage three provisions there confirms our expectation of gradual structural improvement. If we now move to the impact of U.S. tariffs, while we observe a certain wait and see attitude among clients, mainly due to the ongoing uncertainty around these tariffs, and this is expected to ease once greater clarity emerges. In the meantime, we maintain a strong focus on high-quality counterparties, so 75% is investment rate, and continue to closely monitor liquidity, credit, and market risks. So, having looked at the P&L, let's now look at the balance sheet and, in particular, capital management on slide 15. If we start from the second quarter in 25, our financial communication will be based on the phased-in capital ratios. This, to align with the regulatory requirements comparison, so the phased-in metric is the base for MDA calculations, so the calculation that would eventually limit dividends. Secondly, it reflects the group's 2030 horizon, and thirdly, it matches the standard used by the peer group. Looking at the second quarter, our common equity tier one phased-in is stable quarter-on-quarter and stands at 12.5%. This quarter reflects the typical 10 basis points of organic capital generation, which was compensated punctually by, amongst others, model updates. Additionally, we offset our limited organic RWA growth by RWA optimization. So the quarter confirms our intrinsic capital generation and us being well on track to be above our orientation of 12.3% CET1 pre-FRTB. I don't have to remind you that our CET1 has shown little volatility through this cycle, demonstrating a tight control of our trajectory. This on the back of our diversified business model enabling us to be less cyclical than many other banks. If we now turn to slide 16, where you can see our progress on SRT. Since we started, we have a cumulative benefit of 44 billion euros on our risk-weighted assets, equivalent to 65 basis points of common equity T1. During the first half of this year, we implemented around 20 transactions for around 12 billion euros of gross RWA savings. We now expect more than 10 basis point benefits from optimization in 2025 and 2026. And so all this is within the current regulatory environment. If we move a second, looking forward to the Save and Invest Union, SIU, it should support revenue growth in CIB via securitization services and increased ABS trading volumes, as well as IPS through higher margin investment products, while, of course, also helping reduce our own, so BNP Paribas, RWAs, and improving BNP Paribas common equity T1 ratio. Although it is too early to quantify the exact impact of SAU pending final regulatory details, we believe a successful implementation could add several tens of basis points to our ROT. If with this, you can look at slides 20 and 21 where we look at the strong track record of our CIB division reaching a record level in the second quarter. We also provided you with a focus on our security services businesses, which continues its fantastic journey of growth, both organic and through acquisition, including the recently announced acquisition of HSBC custody and depository activities in Germany. Security services has expertise, has scale, and is a significant contributor to the ability of our CIB to produce revenues that are not volatile and show steady growth through the cycle. Having talked about CIB, let's turn to slide 22, 23 on CPBS. First, as we indicated last quarter, we are working hard to improve the divisions not delivering adequate returns, and we demonstrated during our deep dives on personal finance and CPBS that the target in excess of 17% RONE by 2028 will be reached. As expected, you can see the start of a sharp acceleration of the net interest income in our commercial banks in the Eurozone, thanks to a stabilization of current accounts, as mentioned before, and we expect further progress in the second half. If we now turn to slide 24-25 on IPS, this division will represent the biggest growth driver for the group for the next few years, and we welcome AXA-IM employees on our group on the 1st of July. The integration has been launched, and we will provide you with synergistic targets during our third quarter results. By year end, we aim for the legal merger of BNP Paribas Asset Management, AXA-IM, and BNP Paribas RIME, and we will follow up with a deep dive in the first quarter of 26. AXA-IM will enable us to have a greatly reinforced distribution network, a broader product range, a platform at scale enables us to take full benefit of the Save and Invest Union, a core building block in our integrated business model of originate and distribute. So having given an update on the businesses, I'll now hand it back to Jean-Laurent for the conclusion.