* BNP, SocGen hiring for selective expansion in U.S.
* Focus on markets like fixed income, private banking
* U.S. rivals still look to have cost-of-funding edge
By Lionel Laurent
PARIS, Dec 5 France's top banks are taking
advantage of calmer markets to return to expanding in the United
States, a year after deep cuts to their investment banks saw
them lose ground to rivals in the world's biggest financial
BNP Paribas, France's largest bank, and closest
rival Societe Generale have hired several top U.S.
bankers in recent months, signalling a selective return to
growth in areas like private banking, fixed income, equity
derivatives or mortgage securitisations, according to bankers.
No one expects the empire building of before the euro zone
debt crisis. But things have changed since summer 2011, when a
market panic forced French banks to slash staff and U.S. dollar
lending to trade, shipping and aviation.
Fears of an imminent euro zone collapse have faded, allowing
French banks to raise dollars at affordable rates. And the risk
of a regulatory crackdown at home by Socialist President
Francois Hollande has also waned.
"They (French banks) must be thinking: 'Okay, we're starting
at square one again, we're in a position now to see where, if we
grow things on a balanced basis, we can ramp up again,'" said
Andrew Lim, bank analyst at Espirito Santo.
BNP and SocGen were among the most ambitious banks in their
expansion during the years of easy credit, leaving them heavily
exposed when the market turned. They have respectively hacked
$60 billion and $50 billion from their U.S. funding needs in a
deleveraging which could be over if markets remain stable.
While both are looking at other regions - Asia for BNP and
eastern Europe for SocGen - they want to recoup ground in a U.S.
market where economic growth is stronger than Europe and which
accounts for over half of global investment banking revenue.
But the focus appears to be measured, targeted expansion.
"Five years ago we would have hired a team of ten, twenty
people and really gone for it ... Today we're looking at a
smaller number of possible hires and really seeing where we can
add value," said a banking source at SocGen.
AMBITION AND REALITY
The task is in some ways easier for BNP than for SocGen.
BNP, which has poached a Mizuho Financial banker
to head its U.S. fixed income unit, is seen as more financially
robust, with one of the highest regulatory capital ratios in
Europe, and has a long-term dollar deposit base at its
West-Coast retail franchise BancWest for potential funding.
However, BNP executives have said they are looking to build
up fixed income operations in New York without having to rely on
their own balance sheet resources by, for example, using private
bond placements to match big U.S. institutional investors with
European firms seeking funds.
SocGen, meanwhile, relies on bond markets to fund operations
and is seen as less well-capitalised and more focused on trading
activities - like commodities and equity derivatives - and hedge
The bank is less vocal than BNP about its growth potential,
though SocGen did poach several senior U.S. equity sales traders
from Citigroup, RBS and UBS last month.
SocGen is also hiring a trade finance associate, which some in
the bank say is linked to its focus on natural resources.
A SocGen spokesman said the bank's commitment to natural
resources and commodities was "unwavering".
"In the last two months, we in the recruiting industry have
seen an uptick," said John Lee, a partner at Heidrick &
Struggles in New York. "There is no broad-based hiring
initiative but there is definitely hiring taking place across
the board, both European and Japanese institutions."
Regardless of their ambitions in the United States, however,
French banks are unlikely to have a cost-of-funding advantage
against dollar-rich domestic banks or export-focused Asia.
"If you look at aircraft finance, or shipping, clients are
extremely opportunistic ... They deal with whichever has the
lowest price," said Yannick Naud, portfolio manager at Glendevon
King. "I think Canadian and Japanese banks have the edge there."
There are also doubts the French will make a big return to
the $2 trillion trade-finance market, which has seen big
cutbacks by European players looking to reduce their exposure to
a faltering global economy and to rebuild their capital bases.
"The deleveraging cutbacks just don't seem to be stopping,"
said Thierry Senechal, banking expert for the International
Chamber of Commerce (ICC).
Bank for International Settlements data (BIS) shows that the
best-capitalised European banks cut trade finance by 9.8 percent
between the third quarter and fourth quarter of 2011.
However, Barclays' head of trade and working capital, Kah
Chye Tan, said he was more sanguine about Europe's banks.
"A lot of these European banks continue to be very much in
this business, if maybe a bit more moderate than before. One
should never write them off."