By Mathieu Rosemain

PARIS (Reuters) – French bank BNP Paribas (OTC:) missed quarterly earnings expectations on Thursday after a string of one-off losses and declining sales at its consumer and commercial real estate businesses, leading it to push back its 2025 profit target.

Fourth-quarter net income fell by 50% year on year on a reported basis to 1.07 billion euros ($1.16 billion), short of the 1.74 billion euro average of 15 analyst estimates compiled by the company.

The euro zone’s biggest bank by assets had excess capital of more than 7 billion euros after selling its U.S. retail operations last year and said it would increase its full-year cash dividend by 18% to 4.60 euros per share and spend a further 1.05 billion euros buying back shares.

The bank has already used 3 billion euros of capital, leaving it with about 4.6 billion euros to redeploy, the company said in its earnings presentation.

The earnings miss was driven in part by the French lender setting aside 645 million euros to cover losses tied to “risk on financial instruments”.

Half of that sum relates to a long-running case involving Swiss franc mortgages in Poland, which turned out to be costly for borrowers when the currency soared against the zloty.

Europe’s top court ruled last year in favour of the mortgage holders, empowering them to pursue lawsuits to reclaim some of the payments.

BNP’s fourth-quarter group sales were up 0.1% at 10.9 billion euros, against a 11.4 billion euro average analyst estimate.

INTEREST RATE BOOST

Euro zone banks have been reporting a surge in profits and payouts to shareholders in recent quarters, thanks to rising interest rates. However, the outlook for lenders is clouded by economic uncertainty and expectations that interest rates will fall this year.

BNP Paribas also reported a 2.6% fourth-quarter decline in revenue at its investment bank, dragged down by a 32% slide in revenue from trading in fixed income, currencies and commodities (FICC).

The bank’s insurance and wealth management IPS division performed worse than expected, with sales down nearly 13% in the quarter.

The bank also reduced its 2025 target for return on tangible equity (ROTE) – a measure of profitability – saying it would not hit its 12% target until 2026 because of higher regulatory reserve requirements and pressure to increase deposit rates.

BNP now sees its ROTE in 2025 in the range of 11.5% and 12%, down from about 12%. It also reduced its average annual net income growth target over the 2022 to 2025 period to about 8% from more than 9%.

The bank confirmed its other targets, including a payout dividend ratio of 60% and Common Equity Tier 1 (CET1) capital of 12% in 2025.

Euro zone banks have been reporting a surge in profits in recent quarters, buoyed by rising interest rates.

($1 = 0.9256 euros)