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Following Sanctions Violations And A Resigned CEO, BNP Paribas Looking Less AttractiveDon Dion • Tue, Oct. 14
- Following a $9 billion penalty for violation of US sanctions, BNP Paribas announced that its Chairman Badouin Prot agreed to step down.
- New leadership is not expected to keep prior pace of international expansion; several other key bank leaders have also stepped down.
- BNP stock is down considerably in 2014; in Q2 net losses to equity holders totaled ~4,317 million euros.
- As it is unclear if or when BNP Paribas will right itself, we suggest investors look to other bank stocks in 2014.
BNP Paribas May Be Fined $10 Billion For Sanctions Violation, Stock Plummets, Heads Need To Roll
- BNP Paribas, France’s largest bank, is facing a potential $10 billion penalty for sanctions violations.
- This has raised concerns that the bank would need to be re-capitalized post-settlement, and that customers could begin to take their money elsewhere.
- We recommend investors sell BNP, given the uncertain outlook and stock decrease.
Mon, Jun. 23, 1:38 AM
- BNP Paribas (BNPQF) will most likely settle the U.S. investigation over its sanction violations for $8-9B, CNBC reports.
- The bank is said to have been involved with evading American sanctions by engaging in more than $100B of transactions with Sudan, Iran and Cuba.
- Some BNP Paribas officials have already resigned, after U.S. authorities demanded more than a dozen chosen bank employees leave as part of any settlement.
Sun, Jun. 15, 11:30 AM
- France's finance minister has announced that the negotiation between BNP Paribas (BNPQF) and the U.S. regarding the potential U.S. $10B fine on the bank for avoiding sanctions has moved to a "more equitable" level.
- "I think we have made progress towards more equitable penalties that do not impede in a strong way the future and the future of funding in particular," says French finance minister Michel Sapin.
- A $10B fine will cut the bank's 2014 earnings, and negatively affect dividends. It will also lower BNP's core equity tier one ratio 100 basis points from the current 10.6%.
Wed, Jun. 11, 4:35 PM
- Vivien Levy-Garboua was in charge of North American compliance from 2005-08 and is currently an adviser of senior bank execs, and Ben Lawsky - chief of New York's Dept. of Financial Services - wants him removed, along with at least a dozen others, including the bank's COO.
- The executive ousters, of course, are in addition to the $10B-plus fine being sought by the DOJ. Lawsky also wants to suspend BNP Paribas' (BNPQF) ability to transfer money through its New York branch - an idea being fiercely resisted by the bank which says it will cost it a good deal of business.
- Previously: BNP and Hollande should be thankful it's only $10B
Fri, Jun. 6, 10:42 AM
- Pushing back against French disgust over the possible $10B fine to be levied against BNP Paribas (BNPQF +0.6%), sources at Justice let leak to Reuters that they initially wanted a $16B penalty.
- To put the $10B in perspective, BNP earned about $11.2B last year, and getting a $2B slice of that $10B will be the NY State Dept. of Financial Services, whose annual budget is $552M. BNP has reserved $1.1B against the fine.
- Forgetting the Hollande government for a moment, bank executives are no doubt looking on in alarm at these massive fines being tossed about like nickels and dimes. "I think everyone realizes that it's an exuberant market," says a defense lawyer who has been involved in settlements with the DOJ. Maybe the banks should just take their chances at trial?
- ETFs: XLF, FAS, FAZ, UYG, VFH, IYF, IAI, SEF, IYG, FXO, FNCL, FINU, KCE, RWW, RYF, FINZ, KBWC
Fri, Jun. 6, 3:14 AM
- BNP Paribas (BNPQF) is looking into a potential management changeover after facing a possible $10B U.S. fine, with talks of COO Georges Chodron de Courcel leaving the bank. A few months ago, the U.S. Department of Financial Services urged Mr Chodron de Courcel be one of a dozen employees to leave the bank as part of any settlement.
- The bank's chairman Baudouin Prot is also in the spotlight, although it is reported that he has no plan to step down
Thu, Jun. 5, 10:57 AM
- "The president does not meddle in prosecutions," says President Obama ahead of a meeting with French President Hollande. Hollande, who instituted a 75% tax rate on earnings over $1M, is worried a rumored $10B fine against BNP Paribas (BNPQF) will damage the French economy, and his government is pressing U.S. prosecutors/regulators to ease off.
Tue, Jun. 3, 3:28 AM
- France's foreign minister Laurent Fabius has announced that the $10B fine on BNP Paribas (BNPQY) is excessive, and that the U.S. should deal with the issue as a partner and not unilaterally. BNP Paribas currently faces a penalty from the U.S. stating it has violated American sanctions on Iran, Sudan and other countries.
- "The fine has to be proportionate and reasonable," Fabius says. "These figures are not reasonable."
- Previous coverage
Thu, May. 29, 3:15 PM
- At issue are charges BNP Paribas (BNPQY -4%) for years evaded U.S. sanctions against Iran and other sweetheart countries, and the $10B the WSJ reports as being sought by the DOJ would represent one of the largest-ever fines against a bank.
- BNP reportedly is looking to pay far less than that, and a figure of around $8B has been tossed about, but sources close to the bank deny offering an amount that high. Prosecutors also want a guilty plea and point to the muted market reaction over Credit Suisse doing so earlier this month.
- Another - maybe more important - sticking point in negotiations is whether BNP will temporarily lose the ability to move money in and out of the U.S. BNP executives note the bank has many businesses - including its investment bank and corporate-finance unit - which would suffer from this restriction, possibly destabilizing the overall bank.
Wed, May. 21, 3:36 AM
- U.S. authorities want BNP Paribas (BNPQF) to pay over $5B in fines and plead guilty to settle federal and state probes into the French bank's dealings with sanctioned countries, including Sudan and Iran, Bloomberg reports.
- The figure is notably above the $3.5B that Bloomberg bandied about just last week and the more than $1.1B that BNP has set aside.
- A deal could be announced next month.
- Shares are -2.05% in Paris.
Wed, May. 14, 1:31 PM
- It was about two weeks ago when BNP Paribas (BNPQF, BNPQY, BNPZY) warned the $1.1B it set aside for fines relating to violating sanctions wasn't going to be nearly enough, and Bloomberg today reports U.S. authorities want more than $3.5B (plus a guilty plea) to settle the charges.
- Initially down sharply on the news, BNP closed just marginally lower in Paris action as it appears management's guidance from late April prepped investors for the news.
Tue, May. 6, 12:27 PM
- Germany's growth premium in comparison to Europe is shrinking, impacting 25% of Germany’s equity market revenues, says global equity strategist Andrew Garthwaite, moving to a benchmark weighting in German stocks from overweight.
- He also notes the country's competitiveness and funding-cost advantages are on decline, and it has three times more export exposure to China than Europe as a whole.
- German's DAX 30 Index closed -0.7% today.
- German ETFs: EWG, BUND, EWGS, DBGR, GERJ, DXGE, BUNL, FGM, BUNT, GGOV, HEWG
- France, on the other hand, is moved to overweight as a play on ECB launching QE. "Bond spreads are consistent with outperformance, and France stands to benefit more than Germany from any ECB easing," says Garthwaite.
- P/E valuations are 5% below average, and 75% of the companies in CAC 40 have restructuring potential, he says.
- Particularly cheap are the French banks: CRARY, SCGLY, BNPZY. Also looking good: Renault (RNSDF), AXA (AXAHY -1.6%), and Total (TOT -0.4%).
- The CAC 40 closed -0.8% today.
- French ETFs: FXE, EUO, ERO, DRR, EUFX, ULE, URR
Mon, May. 5, 11:16 AM
- "It is fully possible to criminally sanction companies that have broken the law, no matter their size," says Attorney General Eric Holder in a video on the DOJ website, suggesting criminal charges for at least a couple of lenders are getting near (CS and BNPZY are the leading candidates).
- After 5-plus years of shying away from criminal action against banks on the apparent worry of ruffling the economy's feathers, Holder's feeling his oats now, and says the DOJ is working closely with regulators to assure criminal prosecutions don't affect banks' day-to-day operations.
- The change of heart was leaked to the NYT last week.
Wed, Apr. 30, 7:34 AM
- Confronting the belief that the big banks are too big to charge, federal prosecutors have met with regulators about how to criminally punish lenders without putting them out of business, reports the NYT.
- Credit Suisse (CS) and BNP Paribas (BNPQF, BNPQY) are looking like test cases, with prosectors seeking guilty pleas - from Credit Suisse on aiding tax evasion and from BNP for doing business with blacklisted sweethearts like Sudan.
- The new push comes after the outcry when HSBC two years ago somehow escaped criminal charges and paid just a relatively small fine over laundering money for years for drug gangs and terrorists.
- Earlier today, BNP said the $1.1B it has set aside for fines over sanction violations may not be nearly enough. It's lower by 3.9% in Paris.
Tue, Apr. 29, 9:39 AM
- Capital shortfalls will need to be covered within six months for those lenders failing under the EBA's baseline stress test scenario, while banks failing under the adverse scenario will have nine months to fix things.
- ECB Vice-President Constancio: "Banks should start to consider what private sources of capital could be raised as a result of this exercise and plan accordingly."
- Earlier: The EBA unveils stress test criteria. 124 banks from 28 EU states are subject to the exams. Among the larger ones: DB, BNPQF, BNPQY, SCGLY, SAN, BBVA, UNCFF, UNCFY, IRE, NBG, CRZBY, CRARY.
- European financial sector ETF: EUFN
Mon, Apr. 7, 1:13 PM
- Nine months ago, the European Commission accused 13 banks of blocking Deutshce Boerse (DBOEY) and CME from entering the lucrative CDS business between 2006-09, but the banks, reports Reuters, are set to fight those charges at a closed-door hearing next month.
- Should they lose, the banks could be subject to fines of up to 10% of their global CDS turnover - not a small amount given the size of the market.
- Those charged and expected to fight: C, GS, DB, BAC, BCS, BNPQY, CS, HSBC, JPM, MS, RBS, and UBS.
Thu, Mar. 6, 10:46 AM
- Another casualty in the probes over foreign-exchange trading mischief is Bob de Groot - the head of spot currency trading for BNP Paribas (BNPQF, BNPQY) - who has just been suspended from his position, reports the WSJ. More than twenty traders have been placed on leave, suspended, or fired by global banks since the investigations began, and the BoE suspended a staff member earlier this week, though it says it found no evidence of any wrongdoing as it pertains to manipulating rates.
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BNPQY vs. ETF Alternatives
BNP Paribas has a presence in 75 countries with more than 180,000 employees, including 140,000 in Europe. It ranks highly in its three core activities: Retail Banking, Investment Solutions and Corporate & Investment Banking. In Europe, the Group has four domestic markets (Belgium, France, Italy... More
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