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Investing.com -- Fitch Ratings has confirmed the Long-Term Issuer Default Rating (IDR) of ’A+’ for BNP Paribas SA (ETR:BNPP), BNP Paribas (OTC:BNPQY) Fortis (NYSE:FTS) SA/NV (BNPP Fortis), and BGL BNP Paribas S.A. (BGL BNPP). The Viability Rating (VR) for each entity was likewise upheld at ’a+’. The outlook on all Long-Term IDRs remains stable.
BNPP’s ratings are supported by its steady and diversified business model, which yields moderate but resilient profitability. This offsets the bank’s slightly weaker capitalization and asset quality compared to similarly rated global trading and universal banks (GTUBs) and large French peers.
Capital market activities contribute 15%-20% to BNPP’s group revenue, more than most large French banks but less than most GTUBs. The bank’s revenue diversification helps manage earnings volatility from these activities. The VR is one notch above the implied VR of ’a’ due to the strong business profile diversification supporting the resilience of financial metrics.
BNPP has an extensive presence in commercial and retail banking across Europe. It has significant consumer-finance, wealth-management, and insurance operations. The bank has gradually diversified its leading European investment banking franchise and its wealth- and asset-management businesses through organic growth and acquisitions. This diversification has led to an increase in non-interest and non-domestic revenue. Less than 13% of the bank’s revenue came from French commercial and retail banking in 2024 and the first quarter of 2025.
BNPP’s business diversification and strong centralized risk controls support its moderate risk profile. The bank’s tightened underwriting standards in more vulnerable asset classes and geographies, along with a focus on lower-risk jurisdictions, have improved asset quality.
Fitch expects BNPP’s asset quality to remain resilient to the challenging environment in France and globally, due to its conservative underwriting standards and diversified exposure. France-based counterparties account for about a quarter of the bank’s total credit exposures, which is moderate compared with other large French banks.
BNPP’s revenue base is more diverse than most European banks and has proven resilient to economic shocks. Despite pressure on net interest margins, especially in French retail banking, the group’s operating profit/risk-weighted assets (RWAs) ratio rebounded to 2.1% in 2024 and 2.2% in 1Q25, supported by continued strong performance in corporate and institutional banking amid very supportive markets.
BNPP’s common equity Tier 1 (CET1) ratio has declined since 2024 as excess capital from the sale of Bank of the West, its US subsidiary, was used for acquisitions and organic growth. The CET1 ratio is lower than most GTUBs’ and large French peers’, but buffers over regulatory requirements are satisfactory, given BNPP’s above-average business diversification, improved earnings, solid capital management capabilities and high financial flexibility.
BNPP’s European retail and commercial deposit franchise benefits its diversified funding profile. Its sound loans/deposits ratio of less than 90% is at the higher end of the GTUBs peer group’s but materially lower than large French peers’. BNPP’s liquidity reserves more than cover short-term financing needs, including net interbank and repo borrowings and medium- to long-term debt due within the next 12 months.
A downgrade of BNPP’s ratings could occur if operating profit falls durably below 2% of RWAs, its impaired loan ratio rises materially and sustainably above 3%, or if the bank’s flexibility to maintain a CET1 ratio durably in line with its 12.3% guidance is diminished.
An upgrade is unlikely given the negative outlook on the operating environment (OE) score and France’s Long-Term IDR. However, if the OE outlook is revised to stable at the current level, BNPP’s ratings could be upgraded if its CET1 ratio durably rises above its target and, at the same time, if its impaired loans ratio declines to below 2% and its operating profit/RWAs ratio improves toward 3%.
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