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Current issue in Corporate Finance (BNP Paribas)
- 1. CURRENT ISSUES IN CORPORATE FINANCE BNP PARIBAS SHIMA TRISNA/ANIS FADLILAH/HEICKAL PRADINANTA/ZANE BAITY/ MARTIN/ADEL AZWAR/GERALD PRAYOGO
- 2. AGENDA • Company profile • Money Laundering • European banking Crisis • CEO Salary Issue • Conclusion
- 4. Money Laundering of BNP Paribas • The allegation to BNP Paribas: ➢ Hid $30 billion in transactions ➢ Used by regional overseas banks to route transactions
- 5. Stock Price Before The Scandal
- 6. Stock Price After the Scandal
- 7. The Impact to BNP Paribas ➢ The stock price fell slightly ➢ BNP Paribas pays almost $9 billion to the U.S. regulatory authorities ➢ BNP Paribas barred from clearing any financial transactions in dollars for a year
- 8. BNP Paribas and The European Banking Crisis
- 9. How it Affects the Company ? • 2.3 billion pounds write- down on Greek Debt • 72% Drop in third-quarter earnings • 7.4 billion pounds reduction in Italian debt holdings • 1.8 billion capital shortfall • The bank's Tier 1 ratio was 11.9% at the end of September
- 10. Dividend Date Dividen d 5/19/201 0 1.5 5/20/200 9 1 5/26/200 8 3.35 Source : yahoo.finance.com
- 12. Date Net Assets Turnover 12/31/20 08 3.4797 12/31/20 09 2.6256 Net Fix Assets Turnover
- 13. Stock Price
- 14. Stock Price
- 15. CEO Compensation CEO Baudouin Prot - $1.43M total computation
- 16. Objective of a Business Organization
- 17. CEO Compensation
- 18. CEO Compensation • The issues of high salary of the CEO BNP Paribas is inappropriate because they didn’t think about the shareholders and the dividend that should be gotten by the shareholders. • They also didn’t concern about the company financial condition which brings BNP Paribas into crisis. • There are several rule which makes the CEO’s salary following the financial condition of its company
- 19. Conclusion • A large banks are expected to stimulate the economy of Italy and Portugal, even still hesitant to lend money to these countries • Macroeconomic and microeconomic situation may affect the performance of the company • Modify corporate business ethics behind BNP Paribas should be fixed (Seeing it’s history is shrouded in Lawsuits & Controversy) • The management of the firm should be adjusted to best fit the Priority of a firm, “shareholder wealth maximization”. (CEO compensation, needs to change) • Unethical acts will prove beneficial in the short-term, In the long-term it might cause an end to a company. (Enron, Worldcom)
Notes de l'éditeur
- The French bank wrote down its exposure to Greek government debt by 60%, against the 50% mandated under the European Union's new plan to stem the crisis. The write-downs and losses from the sale of sovereign debt pushed the bank's third-quarter profit down a steeper-than-expected 72%. Sovereign debt is the amount of money that a country's government has borrowed, typically issued as bonds denominated in a reserve currency. The bank took a €2.26 billion charge on its Greek sovereign bonds and booked a €362 million loss from the sale of sovereign debt. It significantly reduced its holdings of Italian sovereign debt, which had weighed on the bank's shares since the summer on fears that the debt crisis afflicting Greece could spread to Italy. The bank held Italian sovereign bonds worth €12.2 billion on Oct. 30, sharply down from the €20.5 billion it had three months earlier. BNP Paribas had already completed a major restructuring plan last year to meet Europe's new capital and liquidity rules developed to prevent a repeat of the 2008 financial crisis. BNP Paribas owns BNL bank in Italy, therefore, would have material exposure to an Italian sovereign default. BNP Paribas holds about EUR 12 billion of Italian sovereign debt and EUR 125 billion of other Italian credit exposure as of year-end 2013, compared with its EUR 88 billion of common equity. BNP Paribas' fourth-quarter loss in 2008 and its write-downs in fourth-quarter 2011 demonstrated that the bank is not immune to the market turmoil, and more write-downs on loans and securities, from Italy or elsewhere, could be ahead. We also worry about the dimming economic outlook for France, BNP's largest market, whose recovery seems to be lagging the rest of core Europe. We think that the bank could manage a moderate increase in loan losses, but a loss of confidence in the country and its sovereign debt could be catastrophic. BNP has been named in lawsuits alleging illegal manipulation of foreign exchange trading, and has suspended a senior trader. Given BNP's small market share in foreign exchange trading, we think the bulk of any settlements will fall on other banks, but our opinion may change as evidence emerges.
- France is disproportionately exposed to peripheral European countries such as Italy through its trade linkages and its banking system. Despite their good loss-absorption capacity, French banks remain vulnerable to a further deepening of the crisis. With its colossal £1.6trillion debt, Italy is now at the eye of the storm and is paying 6.3pc to borrow money for ten years. That figure is perilously close to the 7 per cent level where Greece, Ireland and Portugal were forced to seek a bailout. In a sign of the dwindling confidence in Rome’s ability to re-pay its borrowings, BNP Paribas reduced its holdings of Italian bonds by £7.4billion to £10.5billion. The bank's Tier 1 ratio—a key measure of a lender's capital strength, consisting of equity, preferred shares and retained earnings—was 11.9% at the end of September. Its core Tier 1 ratio, made up of only top quality capital such as equity and retained profits, was 9.6%. Revenue in its Investment solutions and retail banking units rose 2.5% and 2.2%, respectively, offsetting a 40% revenue drop at its corporate and investment bank. The bank's share price soared, reversing earlier losses, in part on the surprise decision by the European Central Bank to cut interest rates. Shares climbed 7.5% to €31.92 in Paris.