Morgan Stanley (NYSE:MS) updated its price target for BNP Paribas (OTC:BNPQY) SA (BNP: FP) (OTC: BNPQY), increasing it from €82.00 to €86.00 while it maintained an Equalweight rating on the stock.
The adjustment, which came on Friday, follows BNP Paribas' capital deployment from the recent sale of Bank of the West, which is expected to yield a return on equity greater than 16%.
The analyst from Morgan Stanley noted that the Common Equity Tier 1 (CET1) ratio, a key measure of bank solvency, missed expectations by 10 basis points in the recent quarter due to the early incorporation of model updates scheduled for 2025.
Despite this, the CET1 ratio is projected to remain relatively stable, as the impact of the Fundamental Review of the Trading Book (FRTB) has been deferred to 2026 in its analysis.
BNP Paribas has utilized 55 basis points of the capital obtained through the sale of Bank of the West. The capital deployment is anticipated to imrove the bank's profitability over time. However, the analyst pointed out that the current visibility into these profitability gains is limited.
The Morgan Stanley note also mentioned that BNP Paribas' dividend and buyback yield is still 1% point below the sector average -- one of the primary reasons for maintaining the Equalweight rating on the shares, indicating a neutral stance on the stock's current valuation relative to its peers.
InvestingPro Insights
BNP Paribas SA's (BNP:FP) (OTC: BNPQY) recent financial performance and market metrics offer a mixed picture for investors considering Morgan Stanley's updated price target. According to InvestingPro data, the company has a market capitalization of $79.14 billion and a compellingly low price-to-earnings (P/E) ratio of 6.98. The adjusted P/E ratio for the last twelve months as of Q1 2024 is slightly higher at 8.59, still indicating potential value. Additionally, the company's dividend yield as of May 2024 stands at an attractive 5.94%, which is significant for income-focused investors.
InvestingPro Tips highlight that BNP Paribas has increased its dividend for four consecutive years, signaling a commitment to returning value to shareholders. Moreover, two analysts have revised their earnings upwards for the upcoming period, suggesting a positive outlook on the bank's financial prospects. On the flip side, the company's quick cash burn and weak gross profit margins are areas that warrant caution. With BNP Paribas being a prominent player in the Banks industry, these metrics and tips should be weighed by investors looking to balance risk and reward.
For those seeking further insights, there are additional InvestingPro Tips available at https://www.investing.com/pro/BNPQY. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and unlock a comprehensive analysis to inform your investment decisions.
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