BNP still suffering from a severe stockmarket discount

It would be an understatement to say that France's leading bank-and Europe's second-largest-has not been getting good press lately, especially abroad.

Maximum political instability in France, legal woes in the US—in what increasingly resembles a genuine vendetta by the US government, which seems to be hitting BNP every time it disapproves of France's position in the Middle East—maximum economic uncertainty with the issue of customs duties, etc.: there is no shortage of stress peaks.

These are the factors that have caused BNP's recent plunge on the stockmarket and led to the bank being severely downgraded once again, as its market capitalization represents two-thirds of the value of its tangible equity, despite the latter's profitability now being firmly back in double digits.

This illustrates how BNP is suffering from investor disfavor, steering when compared to peers such as HSBC and UniCredit, which are trading at multiples of their equity twice as high. See HSBC benefits from elite management, but retains the shortcomings of its qualities and Strong results for UniCredit.

The same is true when looking at dividend yield, which is in fact the new benchmark that institutional investors use to approach the banking sector in Europe. The stock's yield is 8%, which means it is trading at its crisis ceiling, as it was five years ago at the height of the Covid panic.

On a more positive note, however, recent news has been marked by the emergence of BNP as a heavyweight in asset management in Europe following the acquisition of AXA IM, which places the banking group in third position behind Amundi and UBS.

This "strategic lever for transformation"—to use the management's own words—will bring the group's insurance and asset management segment to a fifth of its consolidated profit, with expertise in so-called "real" assets—such as real estate and infrastructure—credit, and alternative management, which Amundi still largely lacks. See Amundi still waiting in the wings on this subject.

So is all the bad press about BNP really justified? Probably not. The bank rightly points out that, since the end of the euro crisis in 2012, it has increased the value of its tangible equity by an annualized average of 4.4% and increased its returns to shareholders by an annualized average of 10.2%.

In the same vein, its cost structure continues to improve significantly, now aligning itself with the best performers in the sector on the Old Continent. Further savings are expected with the rationalization of the group's network, which recently announced that it would close a third of its branches by 2030.

As for its Q3 results, published yesterday, they show a 5.5% increase in pre-tax profit compared with the same period last year, with all segments performing well—including, of course, the investment banking segment, which has been a remarkable and consistent contributor to BNP Paribas' strong consolidated results for several years now.