On October 29, when BNP Paribas has just published excellent quarterly results, analysts from JPMorgan specify in a note that the French bank “Surprised with an unexpected share buyback of 900 million euros”. This operation consists for a company in buying back its own securities and then destroying them. This automatically favors the shareholders: the capital and the number of shares having decreased, the earnings per share increase and the stock market price rises. This method of remunerating shareholders complements the annual payment of a dividend.
Among BNP Paribas employees, the surprise may have left a bitter taste. “The announcement of the share buyback was very badly received internally, says Richard Pons, CFDT union representative at BNP Paribas. A few days earlier, we had concluded the compulsory annual negotiation [NAO] on salaries with management, without this element being brought to our attention. ” The management granted a salary increase of 0.6% over one year for employees receiving up to 80,000 euros gross annually, as of 1er April 2022. “If we had known about the 900 million euros, that could have called into question our signature”, underlines the trade unionist.
Absence of dividends
All of the major French financial institutions, having left the crisis behind, are resuming share buyback programs this year. Crédit Agricole SA had unveiled earlier in the year devoting nearly 560 million euros to it. Between the last days of October and the beginning of November, the reinsurer SCOR announced a program of 200 million euros, Societe Generale of 470 million euros and Axa of 1.7 billion euros – which should be followed by a second wave of 500 million euros in 2022.
“These share buybacks compensate for the absence of dividend payments during the health crisis. At some point, you have to pay the shareholders, explains a banker, who wishes to remain anonymous. Banks need investors to be there when they need to raise capital. “
“The message they send to the markets is: we have too much capital, we are in very good health” David Benamou, Managing Partner at Axiom
In spring 2020, the European Central Bank (ECB), which supervises the 117 largest banks in the euro area, and the European Insurance and Occupational Pensions Authority (Eiopa) had in fact asked financial institutions not to pay dividends in order to strengthen their reserves to face the crisis. In early October, the French supervisor, the Prudential Control and Resolution Authority (ACPR), lifted these restrictions.
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