Credit update: Our take on BNP Paribas bonds following the recent Sudan litigation verdict

Key happenings

(Unless otherwise stated: Calculation of impact of the litigation verdict in the US is in US Dollar ($) terms. BNP Paribas’s results are reported in EUR (€) terms. As of 22 Oct 2025, the exchange rate was approximately €1 = USD 1.16.)

What happened

On 17 October 2025 (Friday), a New York federal jury found BNP Paribas liable for providing banking services to Sudanese leaders while they were committing human rights abuses. The jury awarded approximately $20.5m in damages ($6.4m + $7.3m + $6.75m) to three plaintiffs (all US citizens originally from Sudan).

BNP’s response

Following the verdict, BNP Paribas issued press releases highlighting these three points: (a) it intends to appeal the decision; (b) it ‘strongly believes’ the verdict is ‘clearly wrong’ and expects it to be ‘overturned on appeal’; (c) the verdict applies only to the three plaintiffs and should not be extrapolated to other legal cases.

Subsequently, media reports cited BNP’s statement (on Tuesday) that it would not make any provisions for this lawsuit in its upcoming 3Q25 earnings release. Its CFO explained that BNP expects the verdict to be overturned, and repeated that it does not expect this to set a precedent for the related class action lawsuit.

Market reaction

BNP Paribas shares dipped by -8% in Europe on Monday following the news and declined further on Tuesday. Its bonds dropped by a lesser extent, with some of its SGD bonds falling by just under -1%. While this $20.5m verdict is modest relative to BNP’s size, markets were more concerned about the potential implications for a related class action lawsuit involving about 23,000 Sudanese refugees in the US.

What this means

A simple extrapolation using $20.5m awarded to three plaintiffs and applying this across 23,000 individuals would imply a staggering $157b in total damages. However, we emphasise that this figure is purely illustrative under an extreme scenario, and is not an estimate of the expected damages. BNP Paribas itself expects any eventual liability to be far more limited. (Bloomberg Law also reported earlier this week that the plaintiffs’ attorney anticipates any settlement would be in the ‘mid-range of the billions’.)

BNP’s latest capital position

Based on BNP’s latest disclosures (as of 2Q25), its key capital ratios have moderated in recent quarters but remain comfortably above regulatory requirements. It currently holds about €16b buffer above its minimum CET1 regulatory requirement (10.48%).

BNP also previously outlined (in a Dec 2024 press release) a CET1 target of 12.0% in 2025 and 2026. Even at this higher internal target, BNP would still have an estimated €4b capital buffer. A settlement in the low-mid billions region may still enable BNP to meet its end-2025 target, but in any case, this is more of an internal guideline rather than a strict regulatory requirement.

Furthermore, in a more adverse scenario, BNP has the flexibility to reduce its capital distributions (dividends and share buybacks), providing yet another buffer for the company. Its recent payout history points toward a payout ratio (including dividends and buybacks) of close to 60% of net income.

• FY23: BNP’s net income was €11.0b, of which €6.3b (57%) was paid out (€5.2b in dividends + €1.1b in share buybacks).
• FY24: BNP’s net income was €11.7b, of which €6.5b (56%) was paid out (€5.4b in dividends + €1.1b in share buybacks).
• 1H25: BNP’s net income was €6.2b. So far, an interim dividend of €2.9b has been announced (47%), very close to previous dividend payout ratios.

For FY25, BNP has guided for net income exceeding €12.2b (FY24: €11.7b), supported by positive jaws from cost management measures, and contributions from its newly acquired AXA IM. This implies that BNP could potentially save €4b by reducing its payouts in 2H25 (€3b from 2H25 dividends + €1b from share buybacks).

For FY26, BNP did not provide explicit guidance for net income but strongly implied that net income growth is forecast to be in the mid-to-high single-digit range (driven by a combination of higher revenues and positive jaws). Even under a more conservative scenario where net income stays flat, this would imply another €6b in potential dividend savings if required in FY26.

To summarise, we think that barring a watershed (adverse) outcome, BNP should have sufficient reserves to withstand the potential upcoming class action lawsuit (Table 2). Its existing €16b in capital buffers, combined with €6b annual flexibility from reducing shareholder distributions, should be sufficient under a mid-billions settlement scenario.

(Note: Calculations above do not account for changes in shares outstanding intra-year. Additionally, note that FY24 dividends and share buybacks will only occur in FY25 after results are out [e.g. FY24 share buyback only completed in Jun 2025].)

Table 1: BNP has ample buffers over regulatory requirements

Table 2: BNP has additional buffers if it opts to cut shareholder distributions

What you should do

For now, we maintain our positive view on BNP Paribas bonds. Within the SGD space, we remain positive on various European T2 bank bonds, including those issued by BNP (Table 3). BNP’s T2 bonds continue to trade at decently attractive levels closer to the high-2% or 3% levels. These yield levels are fairly similar to those of other French T2 bonds (e.g. BPCE and Credit Agricole).

Within the AUD space, investors may find some value in some of BNP’s bonds against its peers (French bank T2s, or even other bank T2s). We like BNP 5.830% 23Aug2034 Corp (AUD) with an indicative yield of around 5.1%, similar to that of Credit Agricole’s 2034s (also 5.1%), but slightly higher than HSBC’s 2035s (4.9%) (Table 4).

Within the USD space, looking at BNP’s senior non-preferreds, we find that spreads remain fairly tight (Table 5). Their bonds here appear fairly priced, with indicative yields somewhat lower than comparable bonds from other French banks.

BNP Paribas is slated to release its 3Q25 earnings on Tuesday next week (28 October 2025). As mentioned previously, they are not expected to make any provisions for this lawsuit. We do not have a specific view on the eventual outcome of future lawsuits, but we will continue to monitor BNP’s broader financial performance and its ongoing thoughts on this litigation.

Table 3: Peer comparison (SGD)

Table 4: Peer comparison (AUD)

Table 5: Peer comparison (USD)

Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in BNP 4.750% 15Feb2034 Corp (SGD), CMZB 6.500% 24 Apr2034 Corp (SGD),BPCEGP 6.5618% 12Jun2040 Corp (AUD), and BACR 6.158% 28May2035 Corp (AUD). The analyst who produced this report holds NIL positions in the abovementioned securities.