A tale of two banks as Deutsche and BNP diverge
Deutsche Bank and BNP Paribas are two banks, both in the eurozone markets with a similar footprint, but two very different outcomes to recent quarterly earnings.
The German bank, Deutsche, reported a 30% drop in fourth-quarter profit, due to restructuring costs and other one-off expenses, but that was better than forecasts. Net profit attributable to shareholders was €1.26bln in Q4, compared to a profit of €1.8bln a year earlier, however, again, better than analyst expectations for profit of around €700mln. The bank also announced plans for €1.6bln in share buybacks and dividends, and it raised its outlook for revenue growth. In comparison, while French bank BNP Paribas is also initiating a buyback, it reported Q4 net income down by 50% year over year to €1.07bln, below €1.7bln estimated by analysts. The earnings miss was driven in part by the French lender setting aside €645Mln to cover losses tied to "risk on financial instruments". This dominated the share price performance this morning with the stock down almost 9%, with traders disregarding excess capital of more than €7Bln after selling BNP’s its US retail operations last year. As a result of this surplus, BNP announced this morning hiking its full-year dividend paid in cash by 18% to €4.60, and will spend another €1.05bln buying back shares.
(AI Video Summary)
Deutsche Bank
Deutsche Bank, one of the major banks in Europe, reported good financial results in the last quarter. Although their profits dropped compared to the previous year, they still exceeded expectations. This positive news led to a rise in their stock price and they are now close to reaching a level they haven't seen in almost a year.
On the other hand, BNP Paribas, the biggest bank in France, had a tough quarter. Their shares took a big hit after they missed their earnings targets. Their net income dropped by half compared to the previous year, even though sales did go up. Unfortunately, the increase was not enough to meet projections. BNP Paribas also had to lower its target for Return on Tangible Equity (ROTE) for the next few years. Even though the bank has a good amount of excess capital that it plans to give back to its shareholders, the negative earnings results caused their stock to decline significantly.
BNP Paribas
BNP Paribas has been struggling in the French markets throughout the year, and these latest earnings results made things even worse. If we look at a chart of their stock performance, we can see a clear decline. It's now at a level that is about 61.8% lower than where it was a few months ago. Although the bank's plan to return capital to shareholders might seem like a positive move, investors are still worried about the bank's overall outlook. They question whether the bank can afford to pay out funds to its shareholders given the current situation.
Overall, Deutsche Bank had a more positive quarter with rising profits and stock prices, while BNP Paribas had a disappointing quarter with dropping profits and stock prices.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
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