BNP Paribas shares fall on fears of $10bn fine for sanctions-busting

Analysts believe US fine could cut French bank’s capital ratio to below 10 per cent

The logo of BNP Paribas is seen on top of the bank company’s building in Fontenay-sous-Bois, eastern Paris. Photograph: Charles Platiau/ Reuters

The logo of BNP Paribas is seen on top of the bank company’s building in Fontenay-sous-Bois, eastern Paris. Photograph: Charles Platiau/ Reuters

 

Shares in France’s biggest bank BNP Paribas fell sharply today on concerns a possible US fine for alleged sanctions-busting could be big enough to restrict its dividends and force it to raise money to boost its capital.

France’s central bank said it was following the case “with the utmost attention” after a report in the Wall Street Journal said the US justice department wanted $10 billion from the bank - double the amount which had been previously reported.

BNP declined to comment on the report. Shares in BNP dropped as much as 6 per cent today to their lowest in more than eight months, slashing almost $5 billion off the bank’s stock market value.

The decline took its loss to 18 per cent since February 13th, when the bank first took a €1.1 billion provision for a potential sanctions fine as part of a total litigation provision of €2.7 billion.

“We don’t dare accumulate more (shares) at this stage,” said Yohan Salleron, fund manager at Mandarine Gestion in Paris, who cut his exposure to the bank at the start of the year.

Analysts at Citigroup noted a fine of the magnitude reported would cut BNP Paribas’ capital ratio to below 10 per cent - a level seen as key to staying out the danger zone under tighter post-financial crisis guidelines. The latest round of European Union “stress tests” of banks’ financial health are under way with results due in October.

“This is not good news as we approach the stress tests, which BNP cannot afford to fail. A capital increase may very well be a solution,” said Mr Salleron. “Potentially the bank may not pay a dividend for the next two years ... There is a very real reputation risk here. It could spook certain counterparties into staying away from BNP,” Mr Salleron added. The US justice department’s investigation is a criminal probe into allegations that the French bank evaded US sanctions against Iran and other countries for years.

Reuters