BNP Tumbles Most in Almost a Year as U.S. Sanctions Probe Weighs

May 02, 2014 7:06 am ET

May 2 (Bloomberg) -- BNP Paribas SA posted the biggest two- day loss in almost a year as Keefe, Bruyette & Woods Ltd. and Credit Suisse Group AG cut their ratings on the stock citing concern over a legal probe into U.S. sanctions-busting.

France’s biggest bank fell 3.2 percent to 52.38 euros by 12:41 p.m., extending declines over the past two trading days to 6.3 percent. It was the lowest level since Dec. 9. The shares dropped 7.6 percent this year as the 43-member Bloomberg Europe Banks and Financial Services Index rose 2.9 percent.

BNP Paribas said two days ago it may need to pay “far in excess of” the $1.1 billion it has set aside for legal investigations by U.S. authorities. The bank said it held talks with U.S. officials in the first quarter and it “can’t be excluded” that penalties could be significantly larger than provisioned. The shares were closed yesterday for a public holiday.

“Litigation risk potentially undermines the business plan targets for U.S. operations,” Jean Pierre Lambert, a London- based analyst at KBW, said in an e-mailed report to investors. Lambert lowered his rating to market perform from outperform and reduced the price target 9 percent to 60 euros.

BNP also had its rating cut to neutral from outperform at Credit Suisse, which cited potential U.S. litigation costs. French financial companies Societe Generale SA, Natixis and Credit Agricole SA offer better rewards, analysts including Maxence Le Gouvello said in an e-mailed report.

Credit Suisse, Switzerland’s second-largest bank after UBS AG, is also under investigation in the U.S. and both it and BNP are at risk of being criminally charged, a person with knowledge of the matter said two days ago, signaling that authorities are taking a tougher approach as they seek to resolve probes of major banks.