* FTSEurofirst 300 index falls 0.1 percent
* CAC 40 weighs on European shares
* BNP slumps on report of possible $10 billion fine
* ECB easing hopes fuel monthly rise
(Adds quote, detail, updates prices)
By Alistair Smout
EDINBURGH, May 30 French shares underperformed
on Friday after a report saying the U.S. Justice Department was
pushing blue chip bank BNP Paribas to pay more than
$10 billion to resolve a criminal inquiry.
The French bank's shares were down 3.9 percent after earlier
falling around six percent after the Wall Street Journal
reported the figure late on Thursday, citing people familiar
with the matter. The case relates to allegations that the bank
evaded U.S. sanctions against Iran and other countries for
years. BNP and the Justice Department declined to comment.
The bank had set aside around 2.7 billion euros ($3.7
billion) for litigation-related costs.
"We had already reduced our position slightly at the start
of the year ... Now that with these headlines the stock has
dropped heavily, we haven't touched it. We don't dare accumulate
more at this stage," said Yohan Salleron, fund manager at
Mandarine Gestion in Paris.
"For me the worst thing is the uncertainty over the size of
the fine ... There is a very real reputation risk here. It could
spook certain counterparties into staying away from BNP."
Citi removed BNP Paribas from its Focus List Europe citing
the uncertainty, but retained a "buy" rating on the shares.
The news is the latest setback for a euro zone banking
sector, which is still nearly 70 percent below its 2007
peak, reached before the global financial crisis sparked alarm
about bad loans on bank balance sheets.
Investors said banks still had challenges ahead.
"Even ignoring potential fines to the U.S., European banks
still need to make loan loss provisions. There is a lot further
to go, especially if you compare them to U.S. banks," said
Jonathan Bell, chief investment officer at Stanhope Capital.
The CAC 40 index of blue chip French shares fell 0.5
percent, sharply underperforming a 0.1 percent dip on the
pan-European FTSEurofirst 300 index, which had fallen
to 1,377.20 points by 1354 GMT.
BNP accounted for nearly half the fall on the French index.
Germany's benchmark DAX index bucked the negative trend in
several other national European bourses, staying flat after
figures showed on Friday that German year-on-year retail sales
grew at their strongest rate in April since June 2012 as Easter
fell later this year than last.
The FTSEurofirst 300 was set for a 1.9 percent gain for the
month, which has taken it back up to 6-year highs.
Gains have been fuelled by building optimism over possible
monetary policy easing at next week's crucial policy meeting of
the European Central Bank.
Reuters reported this month that the ECB was preparing a
package of policy options for its June 5 meeting that includes
cuts in all its main interest rates.
However, trade could be cautious until the decision is made,
with decisive policy action already priced in.
"Equities are near highs, and there's a lot of hope tied to
the ECB, and greater chance of disappointment," said James
Butterfill, global equity strategist at Coutts.
"The equity market seems to be very optimistic, and it might
be a bit of a let down."
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today's European research round-up [RCH/EUROPE
(Additional reporting by Lionel Laurent and Atul Prakash;
editing by Stephen Addison)