Capital concerns hit BNP Paribas on report of $10 billion U.S. fine

Fri May 30, 2014 12:26pm EDT
 
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By Alexandre Boksenbaum-Granier and Lionel Laurent

PARIS/LONDON (Reuters) - Fears that a looming U.S. fine on BNP Paribas BNPP.PA could be big enough to force it to raise capital and restrict its dividends hit France's biggest bank on Friday, driving its shares sharply lower.

France's central bank said it was following the case "with the utmost attention" after a report in the Wall Street Journal said the U.S. Justice Department wanted $10 billion from the bank - double the amount previously reported and more than 20 percent more than BNP's 2013 pre-tax income.

BNP declined to comment on the report.

Shares in BNP dropped as much as 6 percent 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 percent since Feb. 13, when the bank first took a 1.1 billion euro ($1.5 billion) provision for a potential sanctions fine as part of a total litigation provision of 2.7 billion euros.

There was also a rise in the cost of its debt insurance.

Analysts at Citigroup noted a fine of the magnitude reported would cut BNP's capital ratio to below 10 percent - a level seen as key to staying out of the danger zone as the European Union carries out "stress tests" of banks' financial health.

"This is not good news as we approach the stress tests ... A capital increase may very well be a solution," said Yohan Salleron, a fund manager at Mandarine Gestion in Paris who cut his exposure to the bank at the start of the year.

"Potentially the bank may not pay a dividend for the next two years ... There is a very real reputation risk."   Continued...

 
The logo of BNP Paribas is seen on top of the bank's building in Fontenay-sous-Bois, eastern Paris, May 30, 2014.    REUTERS/Charles Platiau