The Wall Street Journal reports, ''BNP Paribas SA, on Thursday became the latest bank to disclose the extent of its litigation problems in the U.S., saying it has set aside $1.1 billion against potential penalties related to transactions in countries under sanctions''.
The French lender said that it had found during an internal probe conducted over the past few years "a significant volume of transactions" between 2002 and 2009 that could be "considered impermissible under U.S. laws and regulations including, in particular, those of the Office of Foreign Assets Control."
"The bank has presented the findings of this review to U.S. authorities and commenced subsequent discussions with them," it added.
BNP didn't give details about its internal probe, notably which countries were involved.
People familiar with the matter said the French bank reviewed transactions involving entities that were doing business in U.S.-sanctioned countries, such as Iran, Cuba, Sudan and Libya during the 2002 to 2009 period. In most cases, BNP provided dollar-denominated financing to companies, both French and non-French.
BNP is a major provider of export financing for the oil and mining industry.
The transactions didn't necessarily get routed through BNP units in the U.S. Yet, the U.S. is asserting jurisdiction simply by claiming that its currency was involved, the people familiar with the matter said.
The surprise provision pushed fourth-quarter net profit down 76% to €127 million ($172.8 million) from €519 million a year earlier, well short of analyst forecasts putting the figure at €959 million.
BNP Paribas is one of several banks that have disclosed talks with regulators about potential sanctions breaches.
It is unclear how much BNP Paribas may need to pay to settle the alleged charges against them.
"There have been no discussions with U.S. authorities about the amount of any fines or penalties," said the bank in a statement. It could therefore be "different, possibly very different, from the amount of the provision," and its timing is "uncertain" it added.
While BNP previously said it was conducting an internal probe into possible U.S. sanctions breaches, the size of the provision took investors by surprise, sending shares down sharply.
"We knew there was a risk, but we didn't expect it to be that big," said Keefe Bruyette & Woods analyst Jean-Pierre Lambert.
As with many other global lenders, muted economic growth and rising legal costs due to greater oversight by regulators have squeezed BNP Paribas's profit.
