* Airbus parent would get ECB access to deposit and borrow
* Company says idea under study, no final decision
* Decade-old plan first seen as move to counter GE
* Plan would give EADS new option to manage cash
By Christian Plumb and Tim Hepher
PARIS/BEIJING, June 8 By thinking of applying
for a banking licence, EADS is dusting off a plan once
designed to make it look as powerful as U.S. behemoth General
Electric Co - but which in today's crisis just looks
attractive as a way of safeguarding its cash.
Departing Chief Financial Officer Hans Peter Ring surprised
European finance and industry last week by floating the prospect
that the world's second largest aerospace group could transform
itself into a bank. The reason? The Airbus parent is now more
creditworthy than some of its crisis-hit lenders.
The move signals a potentially wrenching new phase in
Europe's financial crisis as EADS becomes the latest major
industrial company to consider ways of shielding itself from
accelerating financial turmoil.
"In my view it's primarily counterparty risk," said one
Paris-based investment banker speaking on condition of
anonymity. "If the whole world collapses, legally speaking, if
it's at the ECB (European Central Bank) it's safe."
"If it's in some funds set up by a bank and the bank is
weak, sometimes you have a risk," he added.
Such a plan would also follow in the footsteps of
engineering companies such as Siemens, whose banking
licenses have allowed them to tap the ECB's low-interest loan
In general, as long as a company has a banking license and
is an eligible counterparty, the ECB would allow it to deposit
funds with the central bank and allow it to access funds as a
borrower -- including any future cheap cash injections like
those offered to banks earlier this year. In extreme cases the
ECB can turn banks away, if it decides to do so.
In addition, such a license, which analysts say would be
relatively easy to obtain, could help clients finance purchases
of its planes, although there are few signs as of yet that help
from Airbus is needed.
Some French banks have pulled back from aircraft financing
after a dollar funding crunch last summer, but the difference
has so far been mostly made up by U.S. and Asian banks.
"Broadly speaking the French banks, having had a perhaps
greater role have in effect pulled back to having the normal
weighting," said Jefferies analyst Sandy Morris. "The idea would
be to have a bank as another weapon in the armoury if needs be."
EADS has a problem many companies would love: an 11 billion
euro ($13.82 billion) net cash pile - which has grown as
airlines have put down deposits to secure more fuel-efficient
next generation jets - that it has to manage and safely invest.
EADS and Boeing have both been mostly immune to airline
industry woes which may overshadow a big industry summit in
Beijing this weekend.
"This is simply a wise and prophylactic move," said Barclays
analyst Joseph Campbell. "This will give them direct access to
He added that Franco-German-led EADS also relies on banks to
hedge its currency risk - the company said last month that it
has a hedge portfolio worth $80.3 billion.
Newly named Airbus Chief Executive Fabrice Bregier, who is
also a member of EADS' executive board, said on Friday that the
idea of a bank was "under study" but that no decision had been
"In any case, it wouldn't be used to support very short-term
operations, notably financing aircraft sales," he added in a
radio interview. "For that we have access to the traditional
The idea of getting a bank license has been floating around
for at least a decade at EADS. Shortly after it was founded in
2000, top executives debated whether it was needed to create a
European titan in the vein of GE.
The U.S. conglomerate's massive GE Capital arm helps it
finance the sale and lease of Airbus and Boeing Co
jetliners as well as financing and leasing its own jet engines
as well as rivals'.
"In those days, the rationale was 'we are more powerful for
customers if we have a bank' and 'isn't that part of GE's
success?,'" one source who closely monitors the company said.
"Now today it is probably more to do with whether EADS has
enough trust in the banks and what is the future it sees."
Its U.S. rival also has a finance arm, Boeing Capital
Corporation, although it "tends to operate as a finance
facilitator, putting together sources of finance for customers,"
according to RBC analyst Robert Stallard, who added that it did
very little direct lending.
CHANGE OF HEART
While EADS executives were said to have been intrigued with
the idea because a financing arm would offer cheap financing,
they were dissuaded by the increased regulatory scrutiny -
potentially involving 10s of millions of euros in extra audits
and processes - such a move would bring.
Now, though, with the worsening of the euro zone crisis and
some investors' faith shaken in once-solid seeming banks, the
idea is again on the table, even though Ring himself was long
seen as an opponent of the plan.
Sources said Ring would have been unlikely to publicly
announce his apparent change of heart without consulting with
his successor Harald Wilhelm. Wilhelm was not available for
comment and EADS declined further comment beyond Ring's recent
interview with Germany daily Financial Times Deutschland.
German regulator Bafin, which is the body to award banking
licenses, said it never comments about whether companies have
applied for them. The Banque de France, which would approve any
license request in France, had no immediate comment.
"With the crisis, everyone is thinking about scenarios," a
source familiar with the matter said. "It is back on the radar
screen but I wouldn't say it is close to decision."