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BNP shares rise as bank escapes worst-case outcome

IMarco Di Lauro—Getty Images

Shares in BNP Paribas SA (BNPQY), opened sharply higher Tuesday in Paris after the bank managed to avoid being barred from U.S. financial markets, as some had feared.

The bank’s shares had risen 3.6% by 11am local time in Paris, on relief that the penalties it agreed to in a settlement of charges of sanctions violations didn’t include a wholesale ban on its trading in U.S. dollars.

The ban, which will run from a year from the start of 2015, will only affect the bank’s oil and gas and commodity financing units, which had been at the heart of the Justice Department’s probe.

The deferred start to the ban will allow it to set up alternative arrangements for processing its clients’ orders through third parties, meanwhile, reducing the risk that it will lose major clients permanently.

BNP and the Justice Department confirmed earlier reports late Monday that the bank would pay $8.97 billion to settle claims that it had helped Sudan, Iran and Cuba to avoid U.S. sanctions. It’s the first time that a global bank has pleaded guilty to large-scale, systematic violations of U.S. sanctions.

BNP’s shares had fallen some 20% in the two months since the scale of the financial penalty it would have to became clear.

Attorney General Eric Holder said “BNP went to elaborate lengths to conceal prohibited transactions, cover its tracks, and deceive U.S. authorities.”

He was particularly critical of its role in helping the Sudanese regime, saying that it had acted “despite knowing that the Sudanese government supported terrorism, engaged in human rights abuses, and even – in the words of one senior compliance manager – ‘has hosted Osama bin Laden and refuses the United Nations intervention in Darfur.'”

All that was old hat as far as market participants were concerned Tuesday. Of more importance were the bank’s statements that it wouldn’t need to raise new capital or cut its dividend. The bank will take a charge of €5.8 billion against earnings in the second quarter, having already made provisions of €1.1 billion.

Its home regulator, the Banque de France’s ACPR, accepted that the bank “has a solid solvency and liquidity position, which will allow it to absorb the anticipated consequences of these sanctions.”

Banque de France Governor Christien Noyer had earlier defended BNP as acting within French and European regulation, a line repeated Monday by BNP Paribas chief executive Jean-Laurent Bonnafe in a message to clients.

In a press statement, Bonnafe said: “We deeply regret the past misconduct that led to this settlement. The failures that have come to light in the course of this investigation run contrary to the principles on which BNP Paribas has always sought to operate.”