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By Steve Slater
LONDON, July 1 (Reuters) - BNP Paribas said arecord $9 billion fine slapped on it for avoiding U.S. sanctionswould not force it to rush out and raise cash or sell assets,even though it will wipe out the French bank's capital advantageover weaker rivals.
The fine will leave BNP with a core capital ratio of 10percent - above minimum regulatory levels but the floor thatinvestors now expect big banks to hold, and below the 11 percentaverage that Europe's bigger banks now hold.
It undermines progress made by BNP in building its capitalup over the last three years and could leave it under pressureto raise equity if a review of assets by European regulatorsthrows up any nasty surprises, or if any more bills land at itsdoor from a rising tide of legal charges and fines.
In a show of confidence, BNP rejected the option to cut itsdividend. It said it planned to keep its 2014 payout unchangedat 1.5 euros per share in cash, which costs 1.9 billion euros.
BNP's record penalty for breaking U.S. sanctions on tradingwith Sudan, Iran and Cuba has been hanging over the bank formonths, and analysts said it was encouraging that the bank'scapital at the end of this year should still scrape above itstarget of 10 percent.
"It leaves them in a position where they (should be) abovetheir target - not as strong as they'd like to be, but they'renot far off given the enormous trauma they've had to gothrough," said Chris Wheeler, analyst at Mediobanca.
BNP's core capital was 10.6 percent at the end of March,after the bank worked hard to bolster capital since the summerof 2011, mainly by closing businesses and reducing its relianceon short-term funding, especially in U.S. dollars.
But rivals have also been building capital, and mostEuropean banks have an average core capital ratio of 11.1percent under full Basel III rules, according to analysts atCredit Suisse. Nordic lenders Handelsbanken andSwedbank have ratios of near 18 percent, while weakerrivals in Italy, Portugal and Spain are below 10 percent.
Deutsche Bank and Barclays have bothraised billions of euros from rights issues in the past year astheir capital and leverage ratios came under intense scrutiny.
BNP Paribas could sell Additional Tier 1 debt - or bondsthat convert into equity if the bank hits trouble.
"At this stage we're in no rush in respect to Tier 1. Thatdoesn't mean we might not do something opportunistically, butthere is no rush for Tier 1," BNP finance director Lars Macheniltold analysts on a call on Tuesday.
Asked if the bank could sell assets, such as its stake inshopping centre Klepierre worth more than 1.5 billioneuros, Machenil said that was a "micro management question" andthere were no specific plans for any sales.
There are risks to its capital rebuild plan, however. Incomefor all investment banks remains weak, which could limitearnings generation. BNP also still needs to pay Polish bankBGZ, which it has agreed to buy for $1.4 billion, and it faces aregulatory "valuation adjustment" next year, which together mayknock 50 basis points off its capital, analysts said. (Additional reporting by Maya Nikolaeva in Paris; Editing bySophie Walker)
