BNP Dividend Future Slides on Report Settlement Is Close

June 23 (Bloomberg) -- Otto Ditchl, managing director at Stifel Nicolaus Europe, discusses BNP Paribas approaching a deal with the U.S. government that could cost it $9 billion in fines to settle allegations it violated U.S. sanctions and what it means for the bank going forward. He speaks with Olivia Sterns on “The Pulse.”

Futures contracts that capture BNP Paribas SA (BNP)’s expected 2014 dividend fell the most in three weeks on news reports that the French bank is close to settling allegations it violated U.S. sanctions.

The futures, which reflect the payment expected from 2014 profit, fell 30 percent to 35 euro cents from 50 euro cents in the Eurex Deutschland exchange in Frankfurt. BNP Paribas is close to agreeing to plead guilty and to pay $8 billion to $9 billion in fines, according to a person with knowledge of the negotiations.

Futures traders have become increasingly pessimistic that France’s biggest bank can avoid cutting its 1.50 euro-a-share dividend. Analysts are even estimating a dividend increase, to 1.94 euros a share, according to the mean estimate from a survey compiled by Bloomberg.

BNP Paribas probably will plead guilty in early July to a criminal charge of conspiring to violate the International Emergency Economic Powers Act, the person said. Terms of a settlement aren’t final, although the two sides have reached a broad agreement in principle, said the person. Pascal Henisse, a spokesman in Paris for the bank, declined to comment on the dividend outlook.

Dividend Yield

Eva Olsson, Mitsubishi UFJ credit strategist, said in a note that BNP Paribas could manage fines of as much as $9 billion without “any substantial fundamental impact.” She expects BNP will cut the dividend for a year to absorb some of the impact.

The shares fell 23 euro cents to 50.96 euros in Paris, giving the company a market value of 63.5 billion euros ($86.3 billion). At that price the stock yields 2.9 percent, matching the average yield in a group that includes 15 of its closest peers, according to data compiled by Bloomberg.

Some 1,400 futures contracts traded today, the most since May 30, the day after the Wall Street Journal reported people familiar with the matter saying U.S. authorities were seeking $10 billion -- far exceeding the $1.1 billion the bank had set aside to settle with U.S. authorities.

To contact the reporter on this story: Todd White in Madrid at twhite2@bloomberg.net

To contact the editors responsible for this story: Paul Dobson at pdobson2@bloomberg.net Cindy Roberts, Marco Bertacche

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