Fabio Benedetti-Valentini and Elisa Martinuzzi Paris and Milan
BNP Paribas said its $8.97 billion (R95.5bn) fine for violations of US sanctions would not disrupt its dividend or growth plans, but some investors are not so sure.
France’s biggest bank, facing a year-long ban on certain transactions in dollars as part of the settlement, remained committed to increasing sales by at least 10 percent by 2016, chief executive Jean-Laurent Bonnafé said on Tuesday. BNP Paribas is relying on North America to grow about twice that fast and generate at least $1bn in increased revenue.
In the US, “they were not that competitive before, and the business expectations are even worse after the penalty”, said Lutz Roehmeyer, a fund manager at LBB Invest in Berlin. “The financial damage is high, but the reputation has been hit more than the balance sheet.”
BNP Paribas, which is seeking to be among the top 10 US corporate and investment banks, is one of the few European lenders with a consumer branch network and securities operations in the country.
Bonnafé is relying on growth in the US, Asia and Germany as the bank’s main European markets – France, Italy and Belgium – struggle to bounce back from recession. The penalties threaten to repel clients and hamper its ability to hire US bankers.
BNP Paribas admitted that it processed almost $9bn in banned transactions from 2004 to 2012 involving Sudan, Iran and Cuba. Its penalty dwarfs the combined $4.9bn levied against 21 other banks for transactions tied to sanctioned countries since US President Barack Obama took office.
The Paris-based bank had to pay more because its violations were worse and it did not co-operate fully, US authorities said.
New York’s top banking regulator required BNP Paribas to stop employing some people, including Dominique Remy, the former head of structured finance for the corporate and investment arm, and Christopher Marks, the former group head of debt capital markets.
From January 1, the bank will be barred from US dollar-clearing operations for one year at business lines where the misconduct occurred.
“The long-term issue is the earnings outlook, which is poor,” Omar Fall at Jefferies International in London said. In particular, “corporate financing revenue growth may be difficult to achieve as rainmakers in the division have left”.
Paul Vrouwes of ING Investment Management said margins would be affected by the temporary outsourcing of some dollar transfers, but “this is rather small in the group context and the pain will be negligible”. – Bloomberg