RBC Capital has maintained its positive stance on BNP Paribas (OTC:BNPQY) SA (BNP: FP) (OTC: BNPQY) shares, reiterating an Outperform rating and a price target of EUR79.00.
The firm highlighted the bank's robust non-net-interest income (NII) revenues as an advantage in the context of declining interest rates.
The bank's transparency regarding its equities trading division was also noted as a positive factor, especially given that earnings momentum has been instrumental in driving the stock's performance.
According to RBC Capital, while the pace of earnings upgrades in Global Markets may be gradual, the improved performance in this sector is anticipated to contribute to the growth of the bank's book value and the generation of capital.
BNP Paribas has been focusing on providing more clarity about its equities trading business, an area that has previously led to positive revisions in the bank’s stock assessments. This move is seen as a response to investor demands for greater transparency and as a way to maintain confidence in the bank's revenue streams and financial health.
The bank's equities trading business has been identified as a key driver of share upgrades, and RBC Capital suggests that the bank's performance in this area is set to support its overall financial growth.
RBC Capital’s analysis indicates that BNP Paribas is well-positioned to benefit from its strategic focus on areas that are less dependent on interest rates.
In other recent news, Morgan Stanley (NYSE:MS) has raised its price target for BNP from €82.00 to €86.00, while maintaining an Equalweight rating. This adjustment comes after BNP Paribas' capital deployment from the recent sale of Bank of the West, expected to yield a return on equity greater than 16%. Despite the Common Equity Tier 1 ratio missing expectations in the recent quarter, it is projected to remain relatively stable.
The bank has utilized 55 basis points of the capital obtained through the sale, with the potential to improve profitability over time. However, Morgan Stanley analysts noted limited visibility into these profitability gains. The firm also highlighted that BNP Paribas' dividend and buyback yield remains 1% point below the sector average.
Turning to the French markets, the unexpected decision by President Emmanuel Macron to hold a snap election has unsettled financial markets. This has led to concerns about fiscal stability in France and potential implications for French banks, including BNP Paribas. The outcomes of the upcoming voting rounds are being closely watched by investors.
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