PARIS: BNP Paribas bank revealed a net loss of 4.3 billion euros ($5.75bn) for the second quarter on Thursday, holed by charges for a record US fine for sanctions busting.

The French bank, a leading bank in Europe, said the overall loss was also weighed down by charges for new compliance procedures to ensure that such errors do not occur again.

Shares in BNP fell in initial reaction to the results but then rallied for a slight gain of 0.06 per cent to 49.91 euros by mid-afternoon trading.

The results showed the impact of the record US fine of $8.9bn (6.6bn euros) after the bank pleaded guilty at the beginning of July to breaking sanctions against Iran, Sudan, Myanmar and Cuba.

But excluding such exceptional items, net profit leapt by 23.2pc from the same figure last year to 1.9bn euros driven by the finance and investment bank activities.

“This result reflects a very high level of commercial activity given the context which was difficult for our teams in the second quarter,” managing director Jean-Laurent Bonnafe told a press conference, referring to turmoil over the sanctions case.

That case, which caused France to appeal for clemency to US President Barack Obama and also cost heads at the top of the BNP Paribas management, put the bank into the first quarterly loss since the collapse of US bank Lehman Brothers hit the banking industry.

BNP Paribas, knowing that it faced heavy penalties for allowing countries to get round a US ban preventing them from doing transactions in dollars largely for trading in oil and gas, had put aside provisions of 798 million euros.

In the results on Thursday it took an additional charge of 5.75bn euros for the fine and 200m euros for setting up new compliance procedures.

Compliance, balance-sheet costs

The bank last posted a quarterly loss at the end of 2008, as its corporate and investment division was caught up in the fallout from the collapse of Lehman Brothers.

The US fine has also weakened the balance sheet, reducing the ratio of hard-core shareholder funds to loans and risks underwritten from 10.6pc to 10pc, but still above the rate required by regulators.

Published in Dawn, August 1st , 2014