BNP Drops After Saying U.S. Sanctions Probe May Cost More

Photographer: Balint Porneczi/Bloomberg

Jean-Laurent Bonnafe, chief executive officer of BNP Paribas SA. Close

Jean-Laurent Bonnafe, chief executive officer of BNP Paribas SA.

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Photographer: Balint Porneczi/Bloomberg

Jean-Laurent Bonnafe, chief executive officer of BNP Paribas SA.

BNP Paribas SA, France’s largest bank, slid the most in two months in Paris trading after saying it may need to pay much more than the $1.1 billion it set aside for alleged U.S. sanctions breaches.

BNP Paribas fell as much as 4.2 percent and declined 3.3 percent to 54.06 euros by 9:40 a.m. The shares have fallen 4.7 percent in 2014 compared with a gain of 2.7 percent for the Bloomberg Europe Banks & Financial Services Index.

The company posted its smallest profit since 2008 in the fourth quarter after setting aside $1.1 billion tied to a review of payments to parties subject to the U.S. economic sanctions. BNP said today that talks took place in the first quarter and it “can’t be excluded” that the amount could be significantly larger than the amount provisioned.

“The inference is of heavier provisions for this litigation, but they should remain a very profitable bank in absolute terms,” said Jon Peace, a London-based analyst at Nomura Holdings Inc., who has a neutral rating on the stock.

BNP Paribas is at risk of being criminally charged by U.S. and state prosecutors, a person familiar with the matter said, signaling authorities are taking a tougher approach as they seek to resolve probes of major banks. Credit Suisse Group AG may also face charges, the person said. Spokesmen for BNP and Credit Suisse declined to comment.

“We know that Americans have no fear to levy multi-billion penalties on banks,” said Francois Chaulet, who helps manage 300 million euros at Montsegur Finance in Paris and owns shares in BNP. “The update from BNP is not reassurring.”

BNP made the statement on litigation costs as it reported first-quarter profit that unexpectedly rose 5.2 percent. Net income increased to 1.67 billion euros ($2.31 billion) from 1.59 billion euros a year earlier, it said in a statement today. Earnings beat the 1.44 billion-euro average estimate of eight analysts surveyed by Bloomberg.

Earnings were boosted by a 156 million-euro drop in payments to minority shareholders after BNP Paribas bought out Belgium’s 25 percent stake in its Fortis unit for 3.25 billion euros.

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net Mark Bentley, Keith Campbell

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