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UPDATE 2-BNP Paribas sees tax, regulation pressures piling up
February 5, 2015 / 6:39 AM / 3 years ago

UPDATE 2-BNP Paribas sees tax, regulation pressures piling up

* New taxes to impact earnings by 500 mln euros in 2016

* Bank plans extra cost-cuts to offset compliance costs

* CEO rules out further cost-cuts to protect ROE target (Adds shares price, CEO remarks, analyst remarks)

By Leigh Thomas and Matthias Blamont

PARIS, Feb 5 (Reuters) - BNP Paribas expects rising taxes and new regulations to reduce 2016 earnings by 500 million euros ($571 million), France’s biggest bank said on Thursday, sending its shares down 4 percent.

The bank faces increased costs for foreign banks in the U.S. and a mounting bill related to Europe’s new banking union. It expects banking-sector specific taxes to top 900 million euros next year and said the impact of costs should ease thereafter.

Meanwhile, lower-than-expected interest rates were hitting revenues from retail deposits and weaker-than-expected euro zone growth was weighing on retail and corporate loan volumes.

The pessimistic outlook soured news that fourth quarter net income rose sharply to 1.3 billion euros, up from 110 million a year earlier after a fine in the U.S. almost wiped out 2014 profits.

The assumptions underlying the bank’s 2014-2016 strategic plan target a return on equity (ROE) of at least 10 percent next year.

“The context has markedly deteriorated since we drafted our plan,” Chief Executive Jean-Laurent Bonnafe said during a presentation of the group’s 2014 results.

However, Bonnafe ruled out extra cost cuts on top of those currently planned to protect the ROE target, which most analysts already do not expect the bank to achieve, according to Thomson Reuters data.

“There won’t be any more because we can’t be constantly changing things,” he said, declining to comment further on the ROE target when asked whether it was still within reach.

BNP’s shares were down 4.5 percent at 46.62 euros at 1109 GMT, while the Eurostoxx index of euro zone bank shares was down 1.7 percent.

The bank’s 2014 profit was almost entirely wiped out by a nearly $9 billion fine to settle U.S. sanctions violations, with BNP posting 2014 net income of 157 million euros ($178 million).

Despite the impact of the U.S. fine on its bottom line, the bank said it proposed maintaining its dividend at 1.50 euros per share for the third year in a row.

After tightening controls following the U.S. case, compliance and regulatory costs would reach 250 million euros more than expected in 2016 under the bank’s strategic plan. They would be largely absorbed by 230 million euros in additional cost cuts.

$1 = 0.8763 euros Editing by James Regan and Elaine Hardcastle

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