* Investment bank to focus on growth, not cutbacks
* French reform threatens tiny slice of revenues
* Cash management, fixed income offer growth
By Lionel Laurent and Yann Le Guernigou
PARIS, Nov 21 BNP Paribas, France's
No. 1 bank, is confident it can win market share despite the
threat of an upcoming domestic crackdown on banks' risky
trading, its head of corporate and investment banking said.
A draft French law, which will force banks to house risky
proprietary trading operations in a separate entity, will likely
only impact a tiny slice of revenues at BNP, Alain Papiasse
said, adding the final proposal could still change.
"Given that we have few speculative activities, if we have
to put a tiny bit into a separate entity with more capital... we
will adapt," he told journalists at a media event on Wednesday.
Proprietary trading only accounts for 1 percent of
investment banking revenue at BNP, which for the year 2011 would
put it at some 100 million euros ($128 million), said Papiasse.
BNP, like other French and European banks, has spent the
past year cutting assets and staff to better withstand the euro
zone's debt crisis and tougher global Basel III rules on
Its relatively high capital levels have put it ahead of
rivals in the race to meet Basel III, giving management
strategic leeway to think about where it can grow its business.
The French government reform will require banks to split
risky proprietary trading from activities deemed useful to the
economy. Sources earlier told Reuters that banks' crucial
business of market-making would be spared.
The law is expected to come into force before the end of
2013, although subsidiaries of foreign banks in France are not
expected to be targeted, banking sources told Reuters. This was
in some ways fair given U.S. and U.K. banks' preference for
using London as a primary trading base, one source said.
Regarding possible bans on high-frequency trading and prop
trading of commodity derivatives, Papiasse said the bank's
trading was firmly in the market-making category and its
commodities activities focused on client products like hedging.
At a time when lenders such as Deutsche Bank,
Royal Bank of Scotland and UBS are still
slashing jobs and overhauling business models to adapt to Basel
III, BNP is moving its focus to growth.
"We have turned the page from the past year's efforts to cut
debt," Papiasse said. "For our rivals, who are forced to take
action to boost profitability, however... there are three more
years of deleveraging ahead."
BNP and domestic rivals Credit Agricole and
Societe Generale have all completed year-long drives
to slash debt by dumping assets and cutting jobs, after market
panic in the summer of 2011 deprived them of cheap funding.
Citing BNP's capital ratio of 9.5 percent under Basel III -
one of the highest in Europe - and an investment-banking
cost-to-revenue ratio of 62 percent in the first nine months,
Papiasse said the bank could now steal market share from rivals.
UBS's cost-to-income ratio in investment banking is closer
to 90 percent, while Credit Suisse's is more than 80.
Among the growth areas being targeted, Papiasse cited
corporate debt issuance, cash management and lending
partnerships with institutional investors like insurers.
He also cited niche areas of trade finance, such as flows
between China and the Middle East, where he said there were only
four other serious competitors: Citigroup, Deutsche Bank,
HSBC and Standard Chartered.