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Business News/ Market / Stock-market-news/  BNP sticks with dividend, growth plans despite fine; shares rise
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BNP sticks with dividend, growth plans despite fine; shares rise

Shares rose as much as 4.4%, the firm's largest intraday gain since 4 July 2013, despite facing a $8.9 billion US fine

France’s largest bank agreed to plead guilty in court documents on Monday to processing almost $9 billion in banned transactions involving Sudan, Iran and Cuba from 2004 to 2012. Photo: AFPPremium
France’s largest bank agreed to plead guilty in court documents on Monday to processing almost $9 billion in banned transactions involving Sudan, Iran and Cuba from 2004 to 2012. Photo: AFP

Paris: BNP Paribas SA posted the biggest advance in almost a year in Paris trading after saying a record $8.97 billion (about 53,500 crore) fine for breaking US sanctions won’t force it to reduce its dividend or derail growth plans.

France’s largest bank rose as much as 4.4%, the largest intraday gain since 4 July 2013, and was 4% higher at €51.50 by 11.36am in Paris. The gain trimmed this year’s decline to 9.1%.

While the US fine will result in a €5.8 billion charge in the second quarter, BNP said it intends to pay a 2014 dividend of €1.50 a share, matching last year’s payout. The bank is also sticking with three-year growth targets and said it doesn’t plan to raise capital.

“The dividend is the true surprise," said Jerome Forneris, who helps manage $9 billion at Banque Martin Maurel SA in Marseille.

France’s largest bank agreed to plead guilty in court documents on Monday to processing almost $9 billion in banned transactions involving Sudan, Iran and Cuba from 2004 to 2012. The company will be temporarily barred from handling some US dollar transactions.

The settlement ends a years-long US probe that in recent weeks drew top French government officials, including President Francois Hollande, to the bank’s defence and fanned commercial tensions between the two countries. Monday’s penalty dwarfs the combined $4.9 billion levied against 21 other banks for transactions tied to sanctioned countries since US President Barack Obama took office.

‘Elaborate lengths’

“BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks and deceive US authorities," US attorney general Eric Holder said on Monday in announcing the accord. “If sanctions are to have teeth, violations must be punished."

The majority of the illegal payments were made on behalf of sanctioned entities in Sudan, which came under a US trade embargo for abusing human rights and aiding terrorists, the justice department said.

The Bank of France said after the deal that BNP Paribas can withstand the fine and dollar-clearing ban. The firm said in a statement that it will retain its licences and expects “no impact" on its operational or business capabilities.

“The irony is we should be staggered by the size of the fine, but of course we’ve got used to it over the past few weeks," said Christopher Wheeler, analyst at Mediobanca SpA in London.

French government spokesman Stephane Le Foll said on i-Tele television that BNP’s legal case in the US has come to an end, and declined to comment further on the matter.

‘No impact’

BNP will use a six-month grace period before the start of its dollar clearing ban to set up alternate payment systems for clients to keep them from taking their business elsewhere. The ban on dollar transfers, also known as dollar clearing, will go into effect on 1 January 2014, giving the firm time to devise alternatives.

While the use of third parties to handle transactions will cost BNP Paribas millions of dollars, the Paris-based bank faces greater damage if it ends up losing clients. To avert that, it will seek to establish a system as seamless as possible so customers can’t tell that a part of their business is being handled by a different bank, according to Jean-Pierre Lambert, a Keefe, Bruyette and Woods Ltd analyst in London.

BNP said in a statement on Monday that it “expects no impact on its operational or business capabilities to serve the vast majority of its clients".

Under the settlement with US regulators and prosecutors, BNP agreed not to clear transactions from its oil-and-gas departments in Geneva, Paris, Singapore and Rome and by its trade-finance business in Milan for a year. The firm also agreed not to serve as a dollar-clearing correspondent bank for other lenders based in New York and London for two years, according to a statement on Monday from the New York state department of financial services. Bloomberg

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Published: 01 Jul 2014, 04:23 PM IST
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