BNP Paribas sees potential for more M&A in 2024 due to market turmoil

BNP Paribas SA could invest more of its excess capital in mergers and acquisitions in 2024 if economic growth slows and market turmoil presents takeover opportunities.

The French banking giant is currently redeploying €11.6 billion in capital gains from its €16.3 billion sale of US lender Bank of the West. BNP is returning €4 billion to shareholders through share buybacks, while the remaining €7.6 billion is assigned to investments in organic growth and "bolt-on" acquisitions through to the end of 2025.

BNP had planned to invest €6 billion in existing businesses and €1 billion in bolt-on acquisitions as recently as July. A deterioration in the macroeconomic environment in the coming quarters could shift the bank's investment plans "a bit toward bolting-on," CFO Lars Machenil said during a third-quarter earnings call.

"If economic growth is a bit more timid, which is probably what we're going to see next year, then our [investment in] natural, organic growth will be a tad slower," said Machenil. "But, at the same time, there will be more turmoil in the market, so probably more kind of activities will be available to do deals with."

'All kinds of discussions'

BNP is currently in "all kinds of discussions" around bolt-on acquisitions, said Machenil. "We're not going to rush in. We're going to make sure every 'i' is dotted and every 't' is crossed," said Machenil. "We see the pipeline, we see them evolving."

In July, BNP completed the €120 million acquisition of UK financial technology company Kantox, which specializes in the automation of currency risk management.

It also recently entered exclusive negotiations with Orange Bank to acquire 800,000 of the online lender's customers. The deal is estimated to cost about €80 million to €100 million, according to a note from Jefferies.

Any market turmoil could also affect the execution of acquisitions, Machenil warned. This could delay the benefit of any investments beyond the current strategy's 2025 time frame, he added.

"If the full effect will not be entirely in 2025, but some will spill into 2026, so be it," Machenil added.

BNP is targeting investment toward its insurance, asset management and global markets businesses, Machenil said during a second-quarter earnings call in July.

BNP recorded a 4.3% year-on-year growth in revenues to €11.63 billion in the third quarter. The bank's profit increased 2.6% year on year to €2.71 billion.

The lender's performance was again driven by its corporate and institutional banking division, where revenues grew 3% year on year to €3.90 billion and pretax income rose 13.6% to €1.56 billion.

BNP's shares were 2.9% lower near the close of trading.