1372019 Universal registration document and annual financial report - BNP PARIBAS
32019 review of oPerations
3
Outlook
Group. Buoyed by these initiatives, the division is anticipating continued revenue growth sustained by new market share gains. While supporting business growth, the effect of cost saving measures should enable the division to generate a positive jaws effect.
TRANSFORMATION PLAN: A CONCRETE TRANSFORMATION GENERATING COST SAVINGS The exceptional transformation costs under the 2020 plan totalled EUR 2.7 billion in three years. There will be no transformation costs in 2020, which will enable to reduce spending by EUR 0.7 billion in 2020 compared to 2019.
The recurring savings generated by the plan at the end of 2019 totalled EUR 1.8 billion in line with the objectives. The Group expects to generate an additional EUR 1.5 billion in additional recurring savings in 2020, thereby attaining the target of EUR 3.3 billion in cumulative recurring cost savings.
2020 EXCEPTIONAL ITEMS The ramp-up of remote work and flex office makes it possible to adjust the property portfolio. It is thus expected that the sales of buildings by the Group will generate, in 2020, c. EUR 500 million in real estate capital gains.
On another note, in 2020, the Group envisions exceptional costs up EUR 200 million for the reinforcement of the information system as well as EUR 100 million for restructuring measures and 100 million for adaptation measures early departure plans.
A POLICY OF ENGAGEMENT IN SOCIETY WITH THE AMBITION TO BE A LEADER IN SUSTAINABLE FINANCE The Group has an ambitious Corporate Social Responsibility (CSR) policy and is committed to making a positive impact on society with concrete achievements. At the end of 2019, BNP Paribas reaffirmed its ambition to be a global leader in sustainable finance.
The Group is taking strong positions, as a founding member of the United Nations Principles for Responsible Banking, which commits it to align its strategy with the Paris Agreement and the Sustainable Development Goals (SDGs). Its objective in 2020 is to provide EUR 185 billion in financing to sectors contributing to the SDGs. It also promotes a more inclusive economy and business models for society.
It is accompanying the acceleration of the energy and environmental transition by making the commitment to support the preservation of the ocean, which includes EUR 1 billion to finance the ecological transition of ships by 2025, by taking the decision to reduce to nil its outstanding loans to companies related to thermal coal by 2030 in the European Union and 2040 in the rest of the world, and by raising its target of supporting renewable energy development by EUR 18 billion by 2021. The Group stopped financing companies whose principal business activity is related to the unconventional oil & gas sector and stopped financing of new coal projects since 2017.
The Group is also a very significant tax payer with a total amount of taxes and levies of EUR 5.9 billion paid in 2019, including EUR 2.5 billion in France.
CAPITAL The Group s capital generation is regular and solid. Between 2014 and 2019, average growth of the common equity Tier 1 ratio was 35 basis points a year on average despite the impacts of the change in accounting standards, in particular in 2018 and 2019.
The target announced in 2017 to reach a 12% common equity Tier 1 ratio by the end of 2020 was already achieved in 2019. At 12.1% as at 31 December 2019, the Group s common equity Tier 1 is thus well above the requests notified by the SREP.
The finalisation of Basel 3 is in the process of being transposed in European Union law. After estimates of the European Banking Authority regarding the impact on capital requirements of banks, the European authorities reminded that this transposition is not expected to significantly increase these requirements for the banking industry taken as a whole. To this end, it is very probable that the exemptions decided during the vote of the CRD5 will be maintained. With this assumption and, to the extent necessary, by taking management actions, BNP Paribas deems that it will limit to 10% the inflation of its risk-weighted assets as a result of this transposition.
This inflation is assumed to be at least partly offset by expected adjustments by the supervisor (European Central Bank (S.S.M.)) with respect to Pillar 2: the application of article 104a of CRD5 should authorise the partial coverage of P2R by hybrid securities (AT1 and T2) and no longer by common equity Tier 1. The requests of Pillar 2 themselves, based on the supervisory process and in particular stress tests, could be recalibrated. As a reminder, BNP Paribas is one of the banks whose CET1 ratio is the least affected by the stress tests.
It therefore appears that with a CET1 ratio well above current requests as notified and a regular and solid capital generation, BNP Paribas is favourably positioned to face the finalization of Basel 3.
2020 OBJECTIVES SUMMARY In 2020, the Group anticipates continuing to grow business in all the operating divisions, by leveraging a strong business drive and the contribution of the diversified and integrated model.
The Group will be able to leverage an ever more efficient and more digital operating model serving customers and employees.
The reinforcement of the franchises within the integrated model should continue, in particular for CIB with the ongoing development of its businesses and the strengthening of its European leadership.
The Group forecasts to benefit from the 2020 transformation plan and cost saving measures that should enable a decrease in absolute value of the operating expenses and a positive jaws effect.
The Group should continue to reinforce its leadership in sustainable finance and pursue an ambitious policy of engagement in civil society.
