Shares In Banking Giants BNP, ING Fall Despite Hefty Profits

Shares in European banking giants BNP Paribas and ING tumbled on Thursday as disappointing fourth-quarter results took the shine off bumper annual profits.

French lender BNP said its net profit rose 11.4 percent to almost 11 billion euros ($11.8 billion) in 2023 -- reaching a record for a third year in a row.

Its annual results were driven by rising interest rates, its investment services and the $16.3 billion sale of US unit Bank of the West.

"BNP Paribas achieved a very good performance in 2023," chief executive Jean-Laurent Bonnafe said in a statement.

He pointed to "the solidity of our diversified model, the efficiency of our platforms, and the group's ability to continue its development in order to address the needs of its individual, corporate and institutional clients."

But BNP shares were down seven percent in afternoon deals on the Paris stock exchange as its fourth quarter earnings disappointed.

Its fourth-quarter report "missed on lower revenues and slightly higher costs," RBC bank analyst Anke Reingen said in a note.

BNP also lowered its 2025 target for its return on tangible equity (ROTE), a measure of profitability in terms of share capital.

The "downgrade to 2025 targets is disappointing," Reingen said.

The bank lowered its ROTE from 12 percent to somewhere between 11.5 percent and 12 percent.

The performance was hit by weaknesses in the consumer credit and real estate business.

Bonnafe told reporters the two services are "undergoing a rehabilitation, a redeployment of their 'business model', in circumstances which are different for both but which make their lives quite difficult".

European banks have been reporting strong results as they have raised their interest rates after central banks increased borrowing costs to combat inflation.

But the US Federal Reserve and the European Central Bank have kept their rates on hold and are expected to start cutting them in the coming months as inflation has cooled.

Dutch bank ING said its net profit nearly doubled to 7.3 billion euros last year on the back of higher interest rates and a "benign economic environment".

"In many respects 2023 was a challenging year, as geopolitical and economic shocks affected many of our clients and the societies we operate in," ING chief executive Steven van Rijswijk said in a statement.

"At the same time, most economies proved resilient with low unemployment, inflation coming down, and rates turning positive at an unprecedented pace," he said.

ING said it added 750,000 customers in retail banking, bringing the total to 15.3 million, with the growth driven by Germany, Spain and the Netherlands.

The bank posted revenue of 22.6 billion euros in 2023, up 21.6 percent from the previous year.

But investors were also unimpressed by its four-quarter results, sending its shares down 6.8 percent on the Amsterdam stock exchange.

The bank reported a net interest income -- a key indicator of earnings on loans minus the cost of deposits -- of 3.88 billion euros in the last three months of the year.

An RBC analyst note said the "worst-than-expected" net interest income was "only partially offset by slightly better-than-expected costs".

ING said its total income this year would be "somewhat lower than in 2023".