Bnp Paribas Spons Adr

Good afternoon, ladies and gentlemen, and welcome to the presentation of the BNP Paribas fourth quarter and full year 2025 results with Jean-Laurent Bonafé, Group Chief Executive Officer, and Lars Maschenil, Group Chief Financial Officer. For your information, this conference call has been 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 N1 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.

Good afternoon, ladies and gentlemen. Good afternoon. We are pleased to present today our strong fourth quarter results, and we'll provide some elements on our 28 trajectory, which we are revising upwards given the strong revenue momentum at the launch of a transformation plan of our support functions. We'll start with our results on slide four. So our fourth quarter results confirmed a sharp acceleration we had expected. Revenues posted a strong 8% growth. Joe's effect was high at 2.8 points and even reaches 3.9 points when excluding AXA-IM. Cost of freeze stayed low at 34 bps, well within our trajectory of below 40 bps. And this led to a very strong 28% increase in net profit, approaching 3 billion euros, which is a record for our fourth quarter. Our CT1 reached 12.6%, up 10 bps this quarter, and we remain committed to delivering on our target of 13%. For 2025, we will have paid a total dividend per share of €5.16, including the final dividend of €2.57 to be paid in May. If we focus on our revenues, they are up 8%. with well-balanced growth between the businesses. CLB revenues posted a strong performance up 1% from a high base, or up 4.8% at constant exchange rate. CPBS revenues accelerated sharply, as expected, and were up 5.5%. Q4 is a private quarter, largely helped by the red trajectory. and acceleration at Arval, thanks to the end of the base effect related to used car prices. Finally, IPS generated double-digit organic growth, but also benefited from the XRIM integration, which led to transformational 40% increase in revenues. Now moving to slide five, the fourth quarter showed sharp acceleration of revenues at CPBS of 5.5%. Within CPBS, we show here the revenue trajectory of the business, most sensitive to the interest rate scenarios, namely our Eurozone commercial banks and personal finance. The trajectory is expected to remain favorable throughout much of our next strategy plan. For personal finance, Margin improvement is driven by the natural runoff of loan originated in 22-23, which were impacted by higher funding costs. In contrast, new business generates a margin in excess of 5%. This supports an outlook of more than 5% revenue growth per annum over 24-28. For Eurozone commercial banks, the deposit mix that has been stabilizing since 24-28 as enabled to continue the reinvesting of low-cost deposits at the longer end of the yield curve, aligning with the maturity of the assets. This will continue well into the next plan, providing a supportive environment for revenue growth. CPBS will also be supported by strategic plans that are already underway or to be launched, aiming at increasing profitability on 80% of its risk rate. Moving on to slide 6, let me focus now on our 26 targets. After a strong end to 25, we reconfirm our 24-26 trajectory. We expect above 7% earnings and 8% EPS cargo over 24-26. This will lead to a return on tangible equity of 12% in 26, the first step towards our target of more than 13% in 28. Our strong Q4 reinforces our positive revenue outlook, and we will deliver our Jaws effect of 1.5 points. Cost of risk is expected to remain below 40 bps. We are making good progress towards our CT1 target of 13%. Let me now summarize the 28 trajectory on slide 7. We have increased our 28 return on tangible equity target from 13% to above 13%. One of the key levels is an improved cost income ratio outlook from around 58% to below 56%. This will be achieved thanks to the launch of our new structural transformation plan for our support functions. This will be a complete overall. I'll come back to this later. This initiative will lead to more than 10% net income and EPS CAGR over 2528, a new target, with a sharp acceleration when compared with our previous plan. It goes without saying, we obviously reconfirm our CT1 target of 13% and the distribution in excess of that level will be decided annually. Moving to slide eight, Let me elaborate on the key bricks behind this increased return on tangible equity target. As you can see on the left side, we have many strategic plans ongoing, notably within CPBS, to achieve levels of profitability in line with the group targets. As you can see on the right chart, these plans alone will help us bridge the profitability gap to 13%, which means that the growth from the other businesses including CIB, will enable the group to exceed 13%. 13% is only a first step in our profitability improvement. By 2028, we will be well on track for 2030 targets, which will be discussed at our Capital Market Day in early 2027. We are presenting plans to improve the pre-tax return of CPBF and personal finance to above 17% in 2028, We have also presented the BNP Paribas Bond Post-Cap Plan, which is already a very profitable entity. With this plan, we are looking to raise the profitability to the highest standards amongst Polish banks at 20% return on tangible equity in 2030. In the next few months, we'll present the strategic vision for asset management with the AXA-IM Integration Plan. We intend to generate 20% return on equity in 29, which is the equivalent of over 600 million of additional net earnings. CPBB will present its strategic plan targeting 20% pre-tax return in 28. Subject to successful acquisition of Athlon, we will also present the integration plan with a target return on equity of 18% in 28, adding about 200 million to group earnings. Finally, We present the strategic vision for the next chapter at BNL, which has significantly improved its profitability already thanks to well-managed loan costs and the low cost of risk. I'd like now to discuss our cost income trajectory on slide nine. We have now set out to lower our cost income ratio from 58% to less than 56% in 28. Part of this journey will come from the strong revenue trajectory described earlier, but we will also be even more disciplined on costs. At the end of 26, we will have completed our 3.5 billion cost savings program, contributing to the sharp prediction of six points in cost income ratio we have seen since 21. These savings have allowed us to develop our platforms at marginal cost and are well balanced between divisions. We will continue to generate incremental savings going forward, but we want to go one step further. Today, we are announcing a new structural transformation plan for support functions, which I will discuss on the next slide. Why a new plan now? We are nearing the end of our GTS plan, and we are positioned to build on its momentum. Recent acquisitions have expanded our scale and created opportunities for optimization. Reregulation, which brought in layers of complexity and costs, is now coming to an end, freeing up resources, and finally, many of our businesses are or will present transformation plans and are ready for the next step. What is the guiding principle of our plan? The plan will rely on mutualizing and standardization, as well as on new industrialization opportunities enabled by the widespread strategic development of AI in the group. The plan will cover all entities and all geographies. Efficiency gains will be greater in activities most affected by the regulatory wave of recent years, such as compliance and risk, as well as in IT that constitutes the largest proportion of the identified cost space. It will also include a transversal approach across the group through operational functions, HR, finance, procurement, communication, and facilities. You will probably ask what this new plan to overall our support functions means for the P&R. We will provide details at our CMD in early 27, but I can make the following comments. The initiative will optimize spendings on about half of our cost base, or 15 billion. First benefits, will start in 27 and will be amplified as the plan progresses. In contrast, the benefits are anticipated to be negligible in 26. We look to invest regularly throughout the plan as the initiatives are medium-term, ensuring that the investments are covered by the savings from inceptions. Ultimately, the plan will also help revenues as it will improve customer experience and refocus our employees on value-added tasks. Some but obviously not all the savings will be reinvested to support our future growth. This initiative will transform BNP Paribas into a more agile, efficient, and value-driven organization, better equipped to deliver long-term success and sustainable growth. Moving now to slide 11. Our transformation plan will be assisted by AI, but will also facilitate its use, including generative AI. Indeed, having more standardized and mutualized platforms will facilitate its implementation with speed and scale. The value created by AI was focused so far on revenues for the most part, but now it will increasingly benefit costs and risks, including operational risk. We've already quantified benefits at approximately 600 million to date, and we anticipate reaching 750 by 26. According to the evident AI index, BIN PIPAEBA has emerged as the leading Eurozone bank in AI. I will now explain what this all means for shareholders on slide 12. We enter 26 in good shape with ambitious targets. We expect to generate more than 10% earning growth schedule over 2025-2028, and acceleration from the previous plan largely helped by much stronger revenue growth than cost growth as explained earlier. EPS will obviously grow faster than earnings given the buybacks. Our current distribution policies confirm at 60% for 2026, and for the plan 2027-2030, we will announce a new policy at our CMD that it will not be less than 60%. Let's now focus on our capital path on slide 13. We're progressing fast toward our new CT1 target of 13%. We've already announced disposal for 13 VIPs net of the proposed add-on acquisition. We'll continue to reassess our portfolio with a view to release at a total of 30-50 pips. Organic capital generation will benefit from accelerated earnings and control risk-weight growth at 2%, including securitization and credit insurance. Finally, we expect the re-regulation cycle to end with the FRTB implementation. We are hopeful that the European regulators will ensure a living playing field with banks in other jurisdictions, and we believe they are encouraging signs of possible watering down or delayed implementation, which would neutralize some of the impact. For now, the still factor of 30 bps impact in the trajectory, but it then to reach 13% by the end of 27 after FRTB and the distribution of the accessible 13 would be decided only starting in 27. Let me now hand over to Lars, We will present our Q4 results from slide 17 last.

Thanks, Jean-Laurent. Before presenting our pivotal fourth quarter results and 2020 trajectory, I just wanted to make a very short statement regarding our Sudan litigation. As a reminder, in a decision made public on January 8, 2026, the court granted BNP Paribas request to proceed with its appeal. We welcomed the court decision and announced yesterday that the appeal will be filed by February 9th. The proceedings are therefore progressing as expected and we are thoroughly prepared and confident in the strength of our arguments. Let's now move to slide 17 on the solid and pivotal results. So on slide 17, you can see a revenue growth during the quarter. As you know, our business model is based on solid platforms that have a strong focus on cross-selling between these platforms and those cross-sells are accounting for about a third of group revenues. So if you look at CIV revenues, they were up 1% or almost 5% at constant scope. given the USD evolution. And so this is a very good performance given a high base a year ago in the fourth quarter of 2024 that included a capital gain in FICC for almost 80 million, which we mentioned at the time. It's nothing new, I just reminded. So, of course, global banking was impacted by lower margins in transaction banking due to lower rates, but we had strong capital markets activities, particularly in the Americas. We also had very strong performance of global markets, both FICC and equity and prime services, as well as security services. We remained the number one European investment bank in India in 2025 in a very competitive market. So that's CID. If you now look at the second division, CPBS, posted a sharp 5.5% revenue growth, helped on one hand by the strong performance of the Eurozone commercial banks, and the margin improvements at personal finance. And all this consistent with the acceleration we had guided for last year in our deep dives. Next to those, there is also Arval, which is growing thanks to the now negligible headwinds from car sale results, which means that in 2026, the strong organic growth, will become fully visible than it was compared to 2025. Moreover, as Jean-Laure mentioned, it will be amplified if we successfully acquire Adlon. So that's the second. So if I end up thirdly with IPS, we generated a very high 11% revenue growth, and this is excluding AXA-IM. And so if I include it, well, it is included, it reached almost 40% of growth. Now, we will present the asset management trajectory in more detail at our March deep dive, but the integration, I can already give you the heads up, is fully on track with the anticipated timeline. In IPS, all businesses posted top-line growth around the 10% mark to give high fee level. They saw good inflow, and they saw very good market activity and levels. We also consolidated HSBC Wealth Management in Germany. So having looked at these strong revenues, let me now look on slide 18 on the costs. You see basically that all divisions have positive jewels. That's what you see at the top left. If you look at the bottom left, you can see that August grew with 5.2% in the last quarter, which you might consider high. But if you look through it and you basically look at the cost evolution excluding XIM, you see it is 0.9%. So the different structuring cost which should phase out over time. Now, this will be further accelerated through the review of our support functions as outlined by Jean-Laurent earlier. These functions represent approximately half of our total cost base. and therefore provide a significant opportunity for optimization and efficiency gains. Let's remind, I mean, coming out of a period of a lot of integrations, it is time to do this end-of-end review. We've done that in 2012 as well, and so this is a similar exercise. Now, if I look since 2021, we have generated $2.9 billion of cost savings, equivalent to about 10% of our cost base, and helping our cost-income ratio for six points over the period. Our three operating divisions posted positive JOLS effects during the quarter, as I mentioned before, and for the second half of 2025, we generated 2.7 points of JOLS, exceeding the 2.5 points targets we had shared with you. So we enter 2026 with confidence about our ability to grow revenues and improve the cost-income ratio despite the integration efforts and costs at AXA-EM. While we're at that, let's look at slide 19 and look at the asset quality. So we saw that during the quarter, cost of risk remained low at 34 basis points overall standing, well within the guidance of being below 40 basis points, and this despite lower releases of Stage 1 and Stage 2 provisions compared to the fourth quarter of 2024. So, we recorded lower Stage 3 provisions than the fourth quarter of 2024, which have been burdened by a one-off specific file, but we remain confident that our cost of risk will stay amply below the 40 basis points threshold this year. You can see the breakdown by division on slide 20, but that's all basically variations on the theme of low or normalized levels. So in a synthesis, our portfolio is well positioned in the current environment. So having looked at the elements of the P&L, let's now look at capital on slide 21. So we reached 12.6%. compared to what we announced at the beginning of 25, the 12.3. And so this 12.6% is up 10 basis points during the last quarter of 25. And this, after the fact that during that quarter, we set aside 20 basis points for distribution to shareholders. So Q4 confirms the trajectory we had indicated, that regulatory impacts are receding, An organic RWA growth net of SRTs is very well contained. Note that our CET is not sensitive to the U.S. dollar weakness, as it's in fact both the numerator and the denominator of this ratio. As you can see at the bottom, we continue to make good use of SRTs with the cumulative CAT1 ratio benefit of 80 basis points built over the years. Moreover, in 2025, we set up 42 transactions for 27 billion of gross savings, and most of our businesses were active with highlights of significant expertise and discipline. So a payout of at least 60% is confirmed. So in synthesis, you see that we generate free capital and are on track of stepping up our common equity D1 ratio. Finally, let me take you through the corporate center on slide 22. And in particular, given that the corporate center performance was below expectations in the second half of 25, and particularly in the third quarter, as we mentioned, we wanted to provide a more nuanced understanding of the factors at play and offer guidance for 2026. This to ensure to have a clear view of our prospects. As a quick reminder, the corporate center is basically made up of two parts. The first part, which you see on the top of the page, pertains to restatements related to insurance activities, with basically revenues and costs broadly offsetting each other, and therefore the gross operating income should be close to zero annually. That's the first thing. The second part, which you see at the bottom, it basically pertains to restructuring costs, what we call central shareholder costs that cannot be allocated, and that involves then also liquidity costs and other volatile elements like the DVA. So we expect revenues to be around zero every year. In 2025, the outcome was a little worse, but we have taken measures to return towards the zero mark in 2026. So that's the top line. If you then look at the cost line, the first part is the restructuring charges. That should amount to 800 million in 2026, after 600 million in 2025. I remind you that, on average, we have been having 400 million restructuring, and they are impacted both in 2025 to get to 600 and in 2026 to get to 800 through the AXA-IM integration costs. And then there is the last part of the so-called central cost that, well, shareholder cost that cannot for tax reasons be allocated are expected to be around 600 million in 2026. So, in a nutshell, we forecast a gross operating loss of approximately 1.4 billion euros in 2026. And this is already factored in into our overall expectation and we remain comfortable with your current consensus forecast for gross operating income at group level. This is the gross operating income line. If we look below that, we tend to book in that line in the corporate center, the revaluation of stakes, which are intended to offset, to a significant extent, the restructuring charges. For 2026, we anticipate recognizing an 800 million gain from the AGI transaction. And in 2027, not in 2026, the 400 million gain from orphans. So if I can sum up my intervention with what you see on slide 27, where you see that BNP Paribas is driven by three powerful engines that are integrated as well. And so on one hand, you see a high return CID, which will continue to grow. On the other hand, you see at the bottom, a capital light and scalable IPS, which will be transformed thanks to AXA-IEM, and thirdly, an accelerating CPBS, where you saw the pivot and the step-up in the fourth quarter. Together, these businesses give the group visibility, resilience, and upside to deliver our targets. So having said that, I'll now hand it back to Jean-Laurent, who will offer some final remarks and conclude our presentation.