BNP Paribas' Strategic Path to a 13% ROTE by 2028: Operational Efficiency and Capital Allocation in Focus

BNP Paribas, one of Europe's largest banking groups, has set an ambitious target of achieving a 13% return on tangible equity (ROTE) by 2028. This goal, announced as part of its long-term strategic roadmap, hinges on a dual focus: operational efficiency and disciplined capital allocation. While the bank has made strides in cost control and shareholder returns, external risks-particularly litigation tied to its historical activities in Sudan-pose significant headwinds.

Operational Efficiency: A Pillar of Profitability

BNP Paribas' operational efficiency strategy centers on reducing its cost/income ratio, a critical metric for profitability in the banking sector. The bank has outlined a clear trajectory: a cost/income ratio of 61% in 2026 and 58% by 2028. These targets reflect a disciplined approach to cost management, particularly in high-impact business lines such as Corporate & Institutional Banking (CPBF), Personal Finance, Corporate & Personal Banking (CPBB), and Asset Management. These segments account for one-third of the Group's risk-weighted assets, making their efficiency gains pivotal to the 13% ROTE target.

Cost-cutting measures are being implemented across these divisions, though specific details on technology investments remain sparse. While the bank has not explicitly outlined 2025 technology expenditures, its analysts have shown interest in AI and data center infrastructure, as evidenced by a recent commentary on Nvidia's Blackwell GPU roadmap. This suggests BNP Paribas is monitoring technological advancements that could enhance operational efficiency, even if direct investments are not yet detailed.

Capital Allocation: Share Buybacks and CET1 Strengthening

Capital allocation is another cornerstone of BNP Paribas' strategy. In November 2025, the bank launched a €1.15 billion share buyback program, authorized by the European Central Bank (ECB), as part of its commitment to returning capital to shareholders. This move aligns with a broader focus on improving the Group's capital ratios. BNP Paribas has raised its CET1 ratio target to 13% by 2027, a year ahead of its original schedule. This acceleration underscores the bank's confidence in its capital generation capabilities, even as it navigates regulatory and litigation risks.

The Group's disciplined distribution policy-balancing shareholder returns with capital preservation-has been emphasized by CEO Jean-Laurent Bonnafe, who has sought to reassure investors amid recent setbacks. For instance, the bank's retail banking division is expected to see a recovery, with its ROTE projected to rise to 12% in 2026 from 10.9% in 2024. Such improvements in core businesses are critical to achieving the 13% ROTE target by 2028.

Risks and Uncertainties

Despite these strategic initiatives, BNP Paribas faces significant challenges. A U.S. court ruling in October 2025 awarded $20.75 million to former Sudanese refugees, reigniting concerns about potential lawsuits and costly settlements. Deutsche Bank has downgraded BNP Paribas to "hold" from "buy," citing the uncertainty surrounding these litigation risks and their potential impact on capital ratios. The bank's historical exposure to sanctions violations-most notably a $9 billion penalty in 2014-heightens the stakes, as investors remain wary of similar liabilities emerging.

Conclusion: Balancing Ambition and Risk

BNP Paribas' path to a 13% ROTE by 2028 is underpinned by a robust operational efficiency strategy and a capital allocation framework that prioritizes shareholder returns. However, the success of these efforts depends on the resolution of litigation risks and the bank's ability to maintain cost discipline in a volatile regulatory environment. While the Group's CET1 ratio improvements and share buybacks signal confidence, investors must weigh these positives against the potential drag from unresolved legal challenges. For now, BNP Paribas' strategic clarity and financial resilience offer a compelling case, but caution remains warranted in a sector where external shocks can swiftly disrupt even the most well-laid plans.