May 30, 2014 / 8:07 AM / 4 years ago

European shares down, BNP Paribas slumps on possible fine

* FTSEurofirst 300 index falls 0.1 percent

* BNP slumps on report of possible $10 billion fine

* Investors cautious ahead of next week’s ECB meeting

By Atul Prakash

LONDON, May 30 (Reuters) - European shares fell on Friday, with BNP Paribas leading the market lower after a report saying the U.S. Justice Department was pushing the French bank to pay more than $10 billion to resolve a criminal probe.

BNP fell 5.8 percent after the Wall Street Journal reported the figure late on Thursday, citing people familiar with the matter. The probe 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 ($3.68 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,” Yohan Salleron, fund manager at Mandarine Gestion in Paris, said.

“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.

“Beyond the uncertainty related to the potential financial settlement, the key issues remain of the type of potential charges and impact on BNP Paribas’ operational capability,” Citi said in a note.

The pan-European FTSEurofirst 300 index was down 0.1 percent at 1,377.55 points by 0749 GMT, with analysts saying that investors were also trading cautiously ahead of the 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 interest rates.

“In the short run, I do not see any potential catalyst for European equities. The market will hold at current levels until the ECB meeting next week. Should the ECB disappoint the market, then I expect a negative reaction and equities will run into a consolidation that could hold in the summer months,” Christian Stocker, equity strategist at UniCredit in Munich, said.

Germany’s benchmark DAX index bucked the falling trend seen 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.

Europe bourses in 2014:

Asset performance in 2014:

Today’s European research round-up [RCH/EUROPE (Additional reporting by Lionel Laurent; Editing by Alison Williams)

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