BNP Plans to Slash Dividend, Sell Multibillion Euro Bond Next Week
Move Comes Amid Investigation into Bank's Alleged Violation of U.S. Sanctions
The settlement between the large French bank and U.S. authorities is expected to be announced on Monday, although both sides are still ironing out final details, this person said. BNP Paribas is expected to plead guilty to criminal charges and pay up to $9 billion, people familiar with the negotiations have said.
New York's financial regulator also is expected to suspend for up to a year the bank's ability to engage in certain dollar-clearing activities, according to other people familiar with the matter. The planned suspension, which will be phased in over several months, is likely to focus on transactions specifically related to BNP's trade-finance unit, which is at the center of the sanctions-violation case, these people said..
The expected penalty of up to $9 billion will hurt BNP's capital ratios, but the bank doesn't currently plan to issue new shares to replenish its capital, according to the person familiar with the matter.
Instead, the bank expects to dramatically reduce its dividend, this person said. It isn't clear if the dividend will be scrapped entirely, or if BNP will maintain a token dividend for symbolic purposes.
BNP has paid out a dividend each year since at least 1998. Earlier this year, the bank paid out a 2013 dividend of €1.50 per share. BNP previously had said it hoped to increase that dividend payment for 2014.
Analysts say BNP is likely to suspend its dividend for up to two years.
One victim of the dividend cut will be the State of Belgium, which owned a 10.3% stake in the French bank as of Dec. 31. The Belgian government, which bought shares in the French bank back in 2009, this year received about €192 million in dividend payments from BNP Paribas.
A spokesman for the Belgian Finance Ministry declined to comment.
BNP also plans to issue a multibillion-euro bond, according to the person familiar with the matter. The exact size of the bond issuance isn't clear.