BNP Paribas hit by US legal fears

Tim Wallace
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GIANT French bank BNP Paribas yesterday set aside €798m (£655m) to cover any fines from the US under a probe into possible sanction-breaking.

The lender also took a hit from €252m of impairments, mostly made up of a €186m goodwill impairment in its Italian unit BNL.

BNP Paribas’ annual profits fell 26.4 per cent after that charge to €4.8bn.

Its revenues fell 0.6 per cent on the year to €38.8bn while its operating expenses dropped 1.5 per cent to €26.1bn.

The bank’s return on equity (ROE) fell to 6.1 per cent, down from 8.9 per cent in 2012. Even excluding the huge charges its ROE only came in at 7.7 per cent for 2013.

Its target is to increase that to 10 per cent by 2016.

Over the same time period it wants to implement cost savings of €2.8bn, up from €2bn planned previously.

In 2016 the bank hopes to pay a dividend of 45 per cent, and it wants a Basel III core tier one capital ratio of more than 10 per cent.

Given that ratio is currently at 10.3 per cent – up 40 basis points on the year – analysts expect a strong performance from the bank in the coming years.

“Whilst the dividend payout is slightly lower than our 50 per cent expectation, the 10 per cent Basel III core tier one still implies significant excess capital and sends a positive message on capital redeployment to boost returns,” said JP Morgan analyst Delphine Lee.

“In our view, we see room for buyback – €3.5bn in our estimates – and small bolt on acquisitions.”

The share price fell 2.55 per cent.