Natixis mulls exit from cash equities

Mon Feb 25, 2013 9:21am EST

LONDON, Feb 25 (IFR) - Natixis is considering pulling out of cash equities in order to concentrate on more profitable parts of its investment bank, following similar moves by some of its larger rivals, including Nomura, after years of weak volumes and poor revenues.

Natixis plans to announce a strategic overhaul planned for 2014-17 in the second half of this year and an exit from cash equities is one of the options on the table, Olivier Perquel, a member of the senior management committee for corporate banking, told IFR.

"Like the whole banking industry, we are facing a tough decision with respect to cash equities," he said.

"Cash equities is not a core franchise for us, but we need the product to have continuity with clients. That is an open question for us and we will study it closely in the upcoming months as part of the launch of our next strategic plan for 2014-17."

Profit at the investment bank declined by 9% in the fourth quarter from a year earlier to EUR159m. Its equities division brought in EUR95m of the total EUR682m during the quarter, bringing in far less than its fixed-income and structured financing units.

In September, Nomura said it plans to close much of its international equities business in response to a decline in trading volumes and increased competition from electronic trading platforms which have increasingly grabbed trades and eaten into brokers' margins. Electronic platforms now attract about two-thirds of trading in Europe, up from nothing as recently as 2000.

Natixis is going through some major changes, having decided to sell 20% of its shares in a network of savings banks connected to its parent company BPCE, triggering a EUR2bn dividend to shareholders. After the payout, its Basel III Core Tier 1 ratio will be 9.2%. Bankers touted the move as Natixis simplifying its structure into one that would enable it to operate more efficiently.

INTERNATIONAL FOCUS

Perquel emphasised that no decisions had been taken on the equity franchise yet, but that he envisaged the firm becoming more international and focusing more on its core businesses of structured finance, debt capital markets, commodities and infrastructure.

"The other big push I can anticipate is the international side," he said.

"We have a slightly bigger international franchise than people think, 50% of our business is generated outside of France. We'll invest in our American and Asian platforms, and obviously develop our EMEA platform as well. As a sense of our commitment there, we have taken very strong team members to run both the US and Asia."

The members he referred to were Stephane About, chief executive officer for the Americas platform, and Francois Riahi, chief executive officer of the Asia-Pacific platform.

"We will invest in our core businesses, including structured finance and specific assets like commodities and infrastructure," he said. The other major franchise is DCM, which we will definitely continue to promote through our debt platform which performed well and did extremely well in the league tables."

Natixis ranks second in the league table of financial institution bonds issued in euros so far this year with eight deals under its belt. In the fourth quarter of 2012, fixed income and treasury at Natixis had revenues of 189, a 2% increase from a year ago.

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