* Commodities financing business to be kept
* Possible bidders - VTB, China Construction, Wells Fargo
* LME stake and ring-dealing membership seen valuable
By Christian Plumb and Eric Onstad
PARIS/LONDON, Feb 23 French investment
bank Natixis plans to "significantly reduce" its
commodities market activities, its chief executive said on
Thursday, as it scales back exposure to less profitable
Natixis said in January in an internal presentation that it
had received and was studying expressions of interest for its
commodities unit, and the comments by Chief Executive Laurent
Mignon are a sign that it may still be in play.
"I don't comment on market rumours, but it's clear that
we'll significantly reduce our activities on the commodities
market," Mignon told journalists in a conference call focused on
Natixis is one of several French banks that have been
scaling back their commodities presence after dollar financing
evaporated amid rising anxiety about the euro zone debt crisis.
Mignon, reiterating earlier statements in the internal
document obtained by Reuters, described the commodities
financing business as "extremely profitable and successful" and
said would be spared.
"But in terms of hedging and the commodities market, we have
too weak a critical mass to be profitable," he said.
The bank's Commodity Markets unit - the main candidate for
sale - offers derivatives on a range of metals, fuels and
commodities as well as currencies, while a separate unit within
its Structured Finance business offers commodities trade
Potential bidders for Commodity Markets include Russia's VTB
, China Construction Bank and Wells Fargo &
Co, market sources have said.
One high-level metals trading source with knowledge of
Chinese banks questioned whether a unit of a European bank would
be a good fit for a Chinese bank due to different regional
attitudes toward risk. On the other hand, China Construction was
more Western-oriented than some others, the source said.
"All the Chinese banks are trying to get into commodities,
but Construction Bank is one of the ones more open to getting
into the worldwide markets ... For Construction Bank, that
(buying the Natixis commodity unit) would fast-track it to the
same level as Bank of China," the source said.
Bank of China International is ahead of its peers in
building up a commodities trading business and is due to join
the London Metal Exchange (LME) in the coming months.
The source said Natixis may be hoping for rich proceeds
after the sale of MF Global's membership in LME ring-dealing -
or open outcry trading - and its LME shares attracted strong
interest late last year.
JPMorgan paid 25 million pounds ($39 million) for MF
Global's LME stake of 4.7 percent, sources familiar with the
situation said. Natixis has a category 1 ring-dealing membership
and 250,000 ordinary LME shares, which alone are worth 10.4
million pounds, based on the price JPMorgan paid.
"I guess for the ring members, they've suddenly got an idea
that they've got a potential windfall on their hands if they
could offload a ring 1 brokerage," the same source said.
"I just don't know how many people are queuing up to get
involved, especially not knowing whether the floor will still
exist if the sale (of the LME) goes through."
Since commodities is a dollar-based business, it would be no
surprise to see a U.S. bidder such as Wells Fargo interested in
Natixis, industry sources said.
Wells Fargo CEO John Stumpf has said the bank is actively
exploring possible acquisitions as European banks look to shed
loans and businesses.
On Tuesday, Wells Fargo said it was buying an energy lending
business from BNP Paribas. BNP, the
largest French bank, shut its Houston commodities office in
Among other Natixis rivals, Credit Agricole has said it
plans to pull out of commodities trading, but like Natixis it
expects to keep its presence in commodities trade financing.
Societe Generale in December moved to quit the
North American physical power and gas markets.