Credit update: What you need to know about BNP’s FY25 results

• BNP delivered decent 4Q25 and FY25 results, with revenue growth outpacing costs to generate positive jaws and higher pre-provision income. The broadly credit-positive earnings highlight a diversified revenue base, while guidance points to stronger medium-term growth underpinned by disciplined capital management.

• Asset quality remains robust, with a low NPL ratio of 1.6% at end-December, well-provisioned loans, and a diversified loan book showing few signs of stress. Capitalization is strong, with a CET1 ratio of 12.6%, comfortably above the 10.52% SREP requirement and on track toward the 13% target by 2027.

• Liquidity position remains strong, with a coverage ratio of 134% at end-December, supported by a substantial liquidity reserve. The Group maintains a healthy loan-to-deposit ratio of approximately 83%, underpinned by a stable and well-diversified deposit base.

• We view BNP’s bonds as "quality" plays within the fixed-income universe, offering stable and durable income, particularly in a declining interest rate environment.

• Resilient earnings engine. BNP has demonstrated an ability to grow organically while absorbing integration costs tied to AXA IM. Its diversified revenue base — across both business lines and geographies — continues to underpin earnings stability and limit volatility.

• Improving earnings mix. The gradual shift to fee-based income (from IPS) should dampen BNP’s earnings volatility while the improving net interest revenues (from CPBS) restores a stable, core banking revenue stream that had been a drag in the previous quarter.  

• Stronger medium-term growth target, anchored by capital discipline. Management has upgraded its net income CAGR target to above 10% for 2025–2028 (from above 7% previously), signaling increased confidence in the earnings trajectory. Importantly, this is coupled with a higher CET 1 ratio target of 13.0% by 2027, demonstrating a prudent capital discipline while growing earnings.

• Efficiency gains expand loss-absorption capacity. Management targets a lower cost-to-Income ratio below 56%, suggesting an ongoing focus on further improving operating efficiency. This supports the case for higher pre-provision income, thereby enlarging the cushion available to absorb credit costs.

Chart 2: As of 31 Dec '25, CET 1 ratio was 12.6% and comfortably above the 10.52% SREP requirement

• We favour BNP’s 2033 senior non-preferred bonds, trading around 4.7% yield-to-worst (“YTW”), offering investors the opportunity to lock in attractive yields within a higher credit rating bucket. 

• Those seeking shorter tenors can consider BNP’s 2027 subordinated bonds, which trade around a YTW of around 4.0%. The above senior and subordinated bonds offer yields at the upper end among European banks with a strong credit rating (above “A-” by Fitch), relative to their respective tenors. 

• BNP’s AT1s appear broadly fairly valued and trade in line with peers. For shorter time-to-next-call exposure, BNP's 8.000% and 7.750% perpetuals offer yield-to-worst in the mid-5.0% to 6.0% range, with relatively wide reset margins of 400–490bps (wider reset spreads tend to provide stronger economic incentive for the issuer to exercise the call).

• For investors willing to extend interest rate and call risk for higher carry, BNP's 6.875% perpetual offers a yield-to-worst of around 6.7%, with nearly eight years to next call, albeit with a lower reset margin of 285bps.

• We like BNP’s 2034 and 2035 subordinated bonds, which trade at a YTW of around 2.8%–3.0%, broadly in line with subordinated bonds from major European banks. We also find these bonds good hold-to-maturity options and offer decent pick up over Singapore government securities. 

• Among SGD AT1 instruments, we view BNP’s 5.900% perpetual as attractively priced relative to peers. With a relatively short two years to the next call date, it stands out as one of the higher-yielding options for that call horizon, offering higher carry for investors comfortable with the structural features of AT1 securities.