BNP warns U.S. fine may 'far exceed' $1.1 billion provision

BNP warns U.S. fine may 'far exceed' $1.1 billion provision

French bank BNP Paribas (BNPP.PA) has warned it might be hit with a fine far in excess of the $1.1 billion (652.29 million pounds) that it set aside last year to cover litigation costs linked to potential breaches of U.S. sanctions on countries including Iran, Reuters reported on April 30.

The warning from France's biggest bank comes as the global banking industry faces mounting legal woes due to investigations into a string of alleged misdeeds, including fixing benchmark interest rates and manipulating foreign-exchange markets.

A big U.S. fine could have ramifications for BNP beyond the immediate financial hit, as the bank is targeting expansion in North America as a key plank of a new strategy to raise revenue and profits outside traditional European markets.

"There is uncertainty with respect to the amount and the nature of penalties the U.S. will impose," Chief Financial Officer Lars Machenil told Reuters Insider television. "It's not impossible that the fine is far in excess of the ($1.1 billion) provision."

A report in the Wall Street Journal said the fine would be close to $2 billion. BNP declined to comment.

Asked if the fine could reach $2 or $3 billion, BNP's Machenil told Reuters Insider: "There is nothing more to say."

Machenil told analysts on a conference call that the bank had already set aside around 2.7 billion euros ($3.73 billion) for litigation costs, including the specific $1.1 billion provision.

His comments came after BNP posted a higher-than-expected 5.2 percent rise in first-quarter net income.

Shares in the bank were down 3.8 percent at 53.80 euros by 1434 GMT, having fallen as low as 53.55 euros, not far from their lowest of the year so far. The European banking sector .SX7P was down 0.8 percent.

U.S. federal prosecutors are considering criminal charges against BNP for doing business with countries subject to U.S. sanctions, such as Iran, Sudan and Cuba, a person with knowledge of the matter has said.

Regulators may consider suspending the bank's ability to conduct dollar clearing in New York - the process by which transactions are quickly settled and cleared within the banking system - and are looking at possible penalties for individual employees, the person said.

BNP declined to comment. The bank has said it wants North America to account for 12 percent of revenue by 2016, up from 10 percent in 2013, and wants to improve cross-selling between its U.S. investment bank and retail bank unit BancWest.

OPERATIONAL SANCTION

"The risk is that some form of operational sanction may undermine the bank's ability to meet these targets," analyst Jean-Pierre Lambert at brokerage Keefe, Bruyette & Woods said.

"There does not seem to be a serious likelihood that BNP will lose its banking license outright, but there may be consequences for its current activities if its ability to clear U.S. dollar transactions is limited," Lambert said.

Past U.S. settlements have ensnared rivals such as Standard Chartered (STAN.L), which agreed in 2012 to pay $327 million to resolve allegations that it violated U.S. sanctions against Iran, Sudan, Burma and Libya. The bank was separately fined $340 million by New York's banking regulator over Iranian sanctions.

JPMorgan Chase (JPM.N) agreed to pay $13 billion in 2013 over mortgage-related charges, while HSBC (HSBA.L) agreed to pay $1.9 billion to settle a multi-year U.S. criminal probe into money-laundering lapses.

Meanwhile BNP's results showed the effects of its full takeover of Belgian subsidiary Fortis last year, which helped offset writedowns on assets exposed to the Ukraine crisis and rising loan losses in Italy.

The bank has a robust capital base relative to peers, with a core Tier 1 ratio of 10.6 percent at end-March. Machenil said BNP has "excess capital" but would not use this to buy back shares at their current valuation.

"Today we are (trading) somewhere around book value," he said. "You're going to do share buybacks when your share price is substantially below book value."

These comments, coupled with the uncertainty over the U.S. fine, undermined BNP's appeal to investors, Jefferies analyst Omar Fall said.

"The guidance for a higher-than-expected fine on dealings with sanctioned countries and management backing away from a buyback are unhelpful for the capital return story," Fall wrote in a note to clients.

Turkmenistan, Russia to sign memorandum on cooperation in energy sector
Turkmenistan, Russia to sign memorandum on cooperation in energy sector
Azerbaijan increases import of cars from Turkey
Azerbaijan increases import of cars from Turkey
Russian locomotives producer to send passenger wagons to Kazakhstan
Russian locomotives producer to send passenger wagons to Kazakhstan
Loading Bars
Latest
Food price index slightly increases in Azerbaijan
Pedestrian bridge being constructed in Uzbekistan's Navoi city
Uzbekneftegaz continues to increase gas production in Uzbekistan's Bukhara region
Turkmenistan, Russia to sign memorandum on cooperation in energy sector
Iranian Foreign Ministry congratulates Azerbaijani people on Republic Day
Turkmenistan, OSCE discuss measures to combat terrorism financing
Azerbaijan increases import of cars from Turkey
Uzbekistan to build modern greenhouse in Tashkent region
Production in Azerbaijan's chemical industry grows
Oil production in Turkmenistan's Cheleken Peninsula grows
Iran launches first data center for satellite information
Uzbekistan simplifies entry procedure for foreign civil aviation operators
Azerbaijan’s Fostanpak to expand manufacturing of plastic products
Kazakhstan to supply locally produced electricity to Kyrgyzstan
Uzbekistan aims to reboot its tourism industry
Russian locomotives producer to send passenger wagons to Kazakhstan
Azerbaijan boosts import of grain and legumes from Turkey
Uzbekistan sales its share in hotel to Singaporean company
Azerbaijani president, first lady inaugurate Gobu Park-3 residential complex for IDPs (PHOTO)
Azerbaijan, Belarus could arrange joint oil refining and sale
Deutsche Bank ready to expand presence in Turkmenistan
Georgian bank offers its shares in Uzbekistan
UAE allocates aid to Tajikistan to support its COVID-19 battle
Kazakhstan to up its renewable energy output before year-end
TAP intends to proceed with subsequent phases of market test
Kazakhstan’s oil producing company to buy welding equipment via tender
Turkmenistan, French Total discuss prospects for cooperation in oil, gas industry
Kazakhstan's national sea carrier reveals oil transportation volume via Caspian Sea
Kazakhstan slightly increases import of ready-made clothes from Turkey
Petrofac extends contract for Iraq Crude Oil Export Expansion Project
Import of ready-made clothes by Azerbaijan from Turkey surges
Georgian government eyes to reduce budget expenditures
Commission for economic growth restoration set up in Kazakhstan
Iranian president: import of basic goods increases
Consumer spending on pharmaceutical products greatly increases in Azerbaijan
Turkey discloses details of Lapis Lazuli Route Agreement
Georgian banks may finish 2020 with losses
Azerbaijani oil prices slump
President Ilham Aliyev visits monument to Azerbaijan Democratic Republic (PHOTO)
Kazakhstan, Russia trade drops slightly in 1Q2020
Eurogas: Europe needs more integrated energy infrastructure
Overview of Azerbaijani manat against major currencies for 1Q2020
First Vice-President Mehriban Aliyeva: May our independence last forever! May Almighty God bless our native Azerbaijan! (PHOTO)
Georgian Airways to launch charter flights to Amsterdam, Tel Aviv
Tehran former mayor elected new speaker of Iranian parliament
Turkey sees drastic fall in number of tourists from France
Georgia to subsidize mortgage loans to citizens
Kazakh national atomic company's subsidiary to buy DC motor via tender
Number of Uzbek tourists visiting Turkey in April 2020 sharply down
Uzbek Commodity Exchange receives record net profit
Kazakhstan's KazMunayGas to double its dividend payments for 2019
Number of Turkmen tourists visiting Turkey in April 2020 shrinks
President Ilham Aliyev: I am sure that our independence development will be continuous and Azerbaijan`s state independence will live forever (PHOTO)
MEDEF: Azerbaijani and French companies have tangible business opportunities in at least 4 sectors
Georgia negotiating with Czechia to resume direct flights
Volume of cargo transited from France through Turkey disclosed
Iran's gold industry needs support
Armenia violates ceasefire with Azerbaijan 23 times
Iranian government looks to sell shares on stock exchange
5 million beating hearts of Azercell! (PHOTO/VIDEO)
Geostat: Georgia increases fruit exports
US Secretary of State congratulates Azerbaijani people on Republic Day
Uzbek-Korean JV buys waterproofing materials via tender
Kyrgyzstan reports 74 new COVID-19 cases
New COVID-19 cases registered in Kazakhstan
S.Korea reports 79 more COVID-19 cases, 11,344 in total
Azerbaijan marks Republic Day
Chinese mainland reports no new domestically transmitted COVID-19 cases
Trump promises to veto FISA bill if it is passed by House of Representatives
English Premier League's coronavirus positive cases rise to 12
WHO reports daily increase in coronavirus cases worldwide by over 84,000
UK COVID-19 deaths hit 37,460 after another 412 patients die
Boeing restarts 737 Max factory in step to jet’s comeback
NASA, SpaceX postpone historic astronauts launch for weather reason
U.S. coronavirus deaths top 100,000 as country reopens
Singapore reports 533 new COVID-19 cases, 32,867 in total
US clamps down on waivers tied to Iran's nuclear cooperation
Trump threatens social media shutdown over Twitter fact-check label
Boeing cutting more than 12,000 U.S. jobs with thousands more planned
111-year-old woman recovers from coronavirus in Chile
Germany reports 362 new COVID-19 cases, total now at 179,364
Floods kill at least 285 in Kenya
Saudi Arabia registers 1,815 new COVID-19 cases
Putin gets invitation from UK's Johnson on coronavirus vaccine summit: Kremlin
Azerbaijan discloses number of coronavirus tests
EU needs to focus on Brexit negotiations - UK negotiator
Ukraine’s President Volodymyr Zelensky makes phone call to Azerbaijan’s President Ilham Aliyev
EU warns against overloading pandemic relief package for banks
175 Azerbaijani citizens returned via charter flight from Moscow to Baku (PHOTO)
France bans hydroxychloroquine to treat COVID-19 patients
Netherlands reports 15 new COVID-19 deaths
Cement export from Turkey to Georgia down
Export of Turkish clothing to Uzbekistan falls significantly
Azerbaijan increases import of chemicals from Turkey since start of 2020
Turkmenistan's Turkmennebitonumleri launches gas station repair in Lebab region
Balance crumbles, as Iran's export to China drops, imports increase
Turkey's export of wood, furniture to Azerbaijan increases
Annual income of FINCA Azerbaijan Non-Bank Credit Organization soars
Georgia's furniture import from Turkey drops significantly
Turkey's export of ready-made clothing to Italy drops
All news