Awards for Excellence 2016
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Also shortlisted: |
BBVA |
DBS |
Nine years on from the financial crisis, and as so many banks stumble to restructure their business models, a key lesson has been lost. The most important thing, the crisis showed, wasn’t whether a bank had a good business model or a bad business model. Rather, there were good management teams and poor ones. Some monoline investment banks failed. Some monoline retail banks failed. Others in both camps survived. Some universal banks had to be nationalized. Some didn’t.
Euromoney recalls this lesson because more than global scale or market dominance, it is quality of management that differentiates our world’s best bank in 2016. The executive team running BNP Paribas, led by CEO Jean-Laurent Bonnafé, has served the bank for an average of 20 years. Loyal, technically proficient, not given to boasting or to grand visions, this team has delivered better returns on tangible common equity than many of the big US banks, while building capital, reducing risk and boosting its customer market share.
At a time when most European banks seem incapable of satisfying any of the three external groups to which they are answerable – customers, shareholders and regulators – BNP Paribas stands out for doing a good job for each of them.
It delivered a 10.1% return on tangible common equity last year, far better than its European peer group, better too than some of the large US banks now cast as winners in global financial services such as Bank of America Merrill Lynch and Citigroup. It also maintained a 45% dividend payout ratio, and analysts calculate that the second largest bank in the eurozone by market capitalization (after Santander) is on track to pay out 30% of its capitalization to shareholders by the end of this decade. It managed this while boosting its Basel III common equity tier-1 ratio up to 11% by the end of last year from 10% a year earlier and improving its leverage ratio to 4% from 3.4%.
Regulators may yet require more capital. This remains a large and complex bank with diverse geographic exposures – present in 75 countries, with 20,000 employees in the US, 10,000 in Africa and 12,000 in Asia, where it has banking licences in 12 countries, $57 billion of deposits and pulled in €3.2 billion of revenues last year – and diverse business lines. Though its executives decline to call it a global bank, BNP Paribas runs several global customer franchises. It is big in retail banking in the US, as well as six countries in Europe. It has a strong corporate and institutional banking business which is starting to excel in transaction services. And it operates large specialist businesses such as consumer finance.
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Jean-Laurent Bonnafé's management team has a terrific record on delivering to stakeholders. |
If it does need to retain more capital, at least this is a bank that generates plenty of it. And the numbers suggest this does not come from excessive risk taking. Sure, CIB earnings can be volatile as for every bank. But its most recent financial reports in the first quarter of this year showed BNP Paribas’ cost of risk was just 43bp, down from a quarterly average of 57bp across 2015. Customers are benefiting too. Last year when RBS decided to withdraw from international cash management, it proposed to its customers that they switch to BNP Paribas. This was an impressive win but also a heavy undertaking that required on-boarding 1,700 new clients, which can be a six to nine-month process. Those customers come to a bank that is serving customers well, according to leading surveys. Ranked ninth globally in Euromoney’s benchmark cash management poll 10 years ago, BNP Paribas had moved up to fourth in our 2015 survey. In Europe it ranked fifth as recently as 2011 but had risen to second by October 2015, with more recent Greenwich Associates surveys suggesting it may now rank first in market penetration among top-tier and large European corporates.
It is also winning customers in retail banking with an impressive digital offering in Europe. Since BNP Paribas rolled out Hello bank! in 2013 it has won 2.4 million customers across Belgium, France, Germany, Italy and Austria. Some of those came through the acquisition of Germany’s DAB Bank in 2014, but Hello bank! also acquired 400,00 customers in 2015.
At a time when all banks are grappling with their digital strategies, BNP Paribas already derives 9% of all individual client revenues from Hello bank!
It also owns Bank of the West, one of the top 30 US banks, which it is folding into an intermediate holding company along with its US CIB businesses, in a strong signal of commitment to the US following the $8.9 billion settlement over sanctions-busting in 2014.
A big contributor to group profits, Bank of the West, headquartered in San Francisco, shares the BNP Paribas culture of digital innovation and has been a pioneer in the US, where it launched the first snap-to-pay feature in the country last year, enabling customers to pay bills via a mobile banking app and capture essential bill information using their smartphone cameras.