(Bloomberg) -- BNP Paribas SA lowered performance targets for 2025 citing factors including the European Central Bank’s end to payments on reserves, and booked a slump in fourth-quarter profit driven partly by legal provisions. 

The Paris-based bank said its return on tangible equity target would be lower than previously planned for 2025, and return to about 12% by the following year. Net income for the three months to December fell 50% from a year earlier to €1.07 billion, driven by €645 million in extraordinary charges including legal provisions.

Bond and equities traders at France’s largest bank saw a volatile end to the year, with a surge in equities revenue overshadowed by a performance at the bond unit that undershot Wall Street peers.  

BNP Paribas shares were down 8.5% at 9:08 a.m. in Paris, having fallen as much as 9.8%.

European banks are facing a more uncertain outlook as the boost from rising interest rates comes to an end and the region’s economy flirts with recession. Since the end of September, lenders are also no longer enjoying a roughly €5 billion annual boost from ECB interest on their minimum reserves.

Read More: ECB Scraps Interest on Reserves in $6 Billion Hit to Banks

The lender’s revenue from the trading of equities and prime brokerage services soared 69% to €658 million in the quarter, surpassing estimates. By contrast, fixed-income, currency and commodity trading fell 32%.

Chief Financial Officer Lars Machenil said in an interview with Bloomberg TV on Thursday that the slowdown in FICC trading mostly reflects a normalization in activity, after a volatile quarter in commodities trading in the last three months of 2022. The business is off to a “good start” this year, he said.

BNP Paribas’ Chief Executive Officer Jean-Laurent Bonnafe has made equities trading a priority in recent years, beefing up its dedicated unit by taking over businesses and clients that peers Deutsche Bank AG and Credit Suisse shed as they sought to reduce their risk profiles. 

The lender’s Global Banking unit, which includes advising companies on selling bonds and stocks, saw its revenue gain 1.7% to €1.54 billion. The performance was driven by the capital markets business, particularly in the Americas, and an increase in transaction banking in EMEA. 

BNP Paribas’s Commercial, Personal Banking & Services unit, which houses the bank’s retail banking operations, saw its revenue inch up 1.8% to €6.25 billion. Net interest income in France was down 4.6% because of inflation hedges.

Provisions soared 39% to a total of €972 million as the lender had to set aside money for risks on non-performing loans. On top of that the lender booked extraordinary charges to cover costs linked to French and Polish Swiss-franc-denominated mortgages.

Read More: BNP to Pay Up to €600M in Swiss Franc Loan Case: Parisien (1)

Revenue from BNP’s Investment & Protection Services unit, home of its asset management and insurance operations, fell 12.9% to €1.33 billion, missing estimates. The decline was driven by the woes of the bank’s real estate and private equity divisions which are both facing a difficult operating environment.

The lender intends to offer a €4.60 cash dividend, and will launch, pending regulatory approval, a €1.05 billion buyback program for this year.

The bank’s CET1 ratio, a key measure of its financial strength, stood at 13.2% as of end December. 

(Adds share in fourth paragraph, CFO comment in seventh paragraph)

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