BNP can absorb U.S. fine without cash call, CEO tells paper

PARIS (Reuters) - French bank BNP Paribas BNPP.PA can withstand the impact of the record fine imposed on it by U.S. authorities without having to raise fresh capital, Chief Executive Jean-Laurent Bonnafe told Les Echos newspaper in an interview.

BNP Paribas pleaded guilty to two criminal charges and agreed to pay almost $9 billion to resolve accusations that it had violated U.S. sanctions against Sudan, Cuba and Iran, in a severe punishment aimed at sending a clear message to other financial institutions around the world.

“I’m not trying to minimise the financial impact, which is enormous,” the CEO was quoted by the newspaper as saying in the interview, published on its website on Tuesday.

“The bank could have reinvested this money in the company or distributed it to shareholders. I say it again, we are financially solid ... a group like BNP Paribas can absorb a shock like that without calling on the market.”

Asked whether the position of his predecessor, Baudouin Prot, now chairman of the bank, had been weakened by the episode, Bonnafe said he would remain in the role “even if the shock is as hard for him as for the rest of the group”.

In an unprecedented move, regulators banned BNP for a year from conducting certain U.S. dollar transactions, a critical part of the bank’s global business, in addition to the fine, which was a record for violating U.S. sanctions.

BNP said it would take an exceptional charge of 5.8 billion euros ($7.9 billion) in the second quarter of this year, but it plans to keep its dividend payment at 1.5 euros per share this year, as in 2013, and expects its core capital adequacy ratio to have been around 10 percent as of the end of June, consistent with long-term targets.

Bonnafe told Les Echos that BNP would further strengthen its controls as a result of the lessons learned. The fine would not impact BNP’s ability to lend to large, medium and small companies, or private individuals, he added.

BNP had considered its provision of $1.1 billion appropriate to cover the possible punishment imposed following the four-year U.S. investigation, but the size of the fine showed the environment had changed, Bonnafe said.

“It is the era of zero tolerance for our industry,” the CEO said. “Banks need to get through this phase to visibly purge the past, for public opinion as well as for the regulators.”

Bonnafe added that universal banks had not become too big for their leaders to manage, saying on the contrary that they needed to have a minimum of geographic and business diversification to cope.

The CEO also said the bank planned to respect the goals set at the start of the year alongside its three-year growth plan, and that the United States remained one of its three priority markets, with Europe and Asia.

Reporting by James Regan; Editing by Alexandria Sage and Mark Trevelyan