The ratings of BNP Paribas reflect the Group’s sound and stable credit fundamentals, supported by its well-balanced universal bank business model, which gives the Group exposure to different businesses and geographies.

Retail banking accounted for 36% of Group revenues in 2016, and only 30% of pre-tax profit, highlighting the relative inefficiency of this business, not just in France but elsewhere in its European domestic markets and in the US. Margin pressures and added regulatory compliance costs in recent years have helped to keep the overall cost/income ratio in the high 60s, and higher than that of many European peers.

A key challenge for BNP Paribas is the need to invest upfront in an increasingly digital banking model while at the same time tightening cost control, as set out in the bank’s 2017-2020 business plan. Taking into account transformation costs up until the end of 2019, targeted recurring annual savings are not expected to feed through in full until 2020. 

Actions taken to boost the effectiveness of compliance functions appear adequate. These follow BNP Paribas reaching a painful USD 8.97bn settlement with US authorities in 2014 over money-laundering offences. Investment in compliance remains a key focus into 2017, and the bank remains subject to added regulatory scrutiny.

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