February 1, 2024
Despite the higher interest rates, both BNP Paribas and ING disappointed investors with their annual figures. ING underperformed its fourth quarter revenues, while BNP Paribas set aside extra money for problem loans and lowered a number of targets for this year.
If the results of the European banks remain somewhat below the bar, confidence will disappear completely. However, the results that the Dutch ING and the French BNP Paribas released on Thursday seem more than decent at first glance.
Solid profit growth
recorded a net profit of 7.2 billion euros for the whole of 2023, almost double the 3.7 billion euros that the Dutch group had reported a year earlier.
This strong profit jump is largely due to a mix of higher interest rates and lower costs. ING saw its interest income increase by 15 percent to 2.7 billion euros last year and at the same time managed to keep its costs under control. The group also set aside significantly less money to cover possible losses on loans not repaid or repaid late. In total, these additional provisions were almost three-quarters lower last year than a year earlier.
You see the same dynamics at ING Belgium. The Belgian subsidiary, which also houses the activities in Luxembourg, recorded a third more interest income in 2023 than a year earlier, while the provisions for problem loans were 40 percent lower. This meant that ING Belgium was able to present a net profit of 888 million euros for the whole of 2023, more than double what the group had booked a year earlier. “This is the strongest result in the history of ING Belgium,” CEO Peter Adams said during a press conference.
ING proposes to pay a gross dividend of 0.8 euros per share for the entire 2023 financial year. This is in addition to the interim dividend of 0.35 euros gross per share, which was already paid in August last year. The bank still expects an attractive interest rate environment for 2024. But income will be slightly lower than in 2023.
Still, investors were not satisfied with those results. The reason was that net interest income in the last quarter amounted to only EUR 3.9 billion, which represented a decrease compared to the second quarter (EUR 4.1 billion). And as a result, total revenues remained slightly below expectations.
Also on the results of the French bank BNP Paribas
was met with disappointment. The biggest disappointment was the net profit of the last quarter. At 1.07 billion euros, this was more than half lower than a year earlier, because the bank set aside 645 million euros in provisions. The provisions increased by 39 percent to 972 million euros in 2023. In addition, BNP Paribas recorded extraordinary expenses to cover costs related to French and Polish mortgages in Swiss francs.
Partly as a result, the prospects for 2025 were also adjusted downwards. For example, the return on equity would fall to 12 percent in both 2025 and 2026.
Some consolation for investors: BNP Paribas plans to offer a gross dividend of 4.60 euros per share and will launch a 1.05 billion euro buyback program this year.