Paris - Shares in BNP Paribas posted their biggest advance in a year in Paris yesterday after the French bank said a record $8.97 billion (R95bn) fine for breaking US sanctions would not force it to reduce its dividend or derail growth plans.
The shares rose as much as 4.4 percent, the largest intraday gain since July 4 last year, and were 4 percent higher at e51.50 (R746) by 11.36am in Paris. The gain trimmed this year’s decline to 9.1 percent.
While the US fine would result in a e5.8bn charge in the second quarter, BNP Paribas said it intended to pay a dividend of e1.50 a share this year, matching last year’s payout. The bank also stuck with three-year growth targets and said it did not plan to raise capital.
“The dividend is the true surprise,” Jerome Forneris, a fund manager at Banque Martin Maurel in Marseille, said.
France’s largest bank agreed to plead guilty in court documents on Monday to processing almost $9bn in banned transactions involving Sudan, Iran and Cuba between 2004 and 2012.
The company will be temporarily barred from handling some US dollar transactions.
The settlement ends a years-long US probe, which in recent weeks has drawn top French government officials, including President François Hollande, to the bank’s defence and fanned commercial tensions between the two countries.
Monday’s penalty dwarfs the combined $4.9bn fines levied against 21 other banks for transactions tied to sanctioned countries since US President Barack Obama took office.
“The irony is we should be staggered by the size of the fine, but of course we have got used to it over the past few weeks,” Christopher Wheeler, an analyst at Mediobanca in London, said.
In announcing the accord on Monday, US attorney-general Eric Holder said : “BNP Paribas went to elaborate lengths to conceal prohibited transactions, cover its tracks and deceive US authorities. If sanctions are to have teeth, violations must be punished.”
Most 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.
France’s central bank said after the deal that BNP Paribas could withstand the fine and the dollar-clearing ban.
BNP Paribas said it would retain its licences and expected “no impact” on its operational or business capabilities.
The ban on dollar transfers, known as dollar clearing, will take effect on January 1 next year. BNP Paribas will use the six-month grace period to set up alternative payment systems for clients to keep them from taking their business elsewhere.
While the use of third parties to handle transactions will cost BNP Paribas millions of dollars, the bank would face greater damage if it lost clients.
To avert that, it would seek to establish a system as seamless as possible so customers could not tell that a part of the business was being handled by a different bank, Jean-Pierre Lambert, an analyst at Keefe, Bruyette & Woods, said.
Under the US settlement, BNP Paribas agreed not to clear transactions from its oil and gas departments in Geneva, Paris, Singapore and Rome or from its trade finance business in Milan for a year.
It also agreed not to serve as a dollar-clearing correspondent bank for other lenders based in New York and London for two years, New York state’s Department of Financial Services said. – Bloomberg