PARIS BNP Paribas (BNPP.PA), France's No. 1 bank, is confident it can profit from rivals' distress after a year of cutting assets and staff to meet tougher regulations, its head of corporate and investment banking said.
At a time when lenders such as Deutsche Bank (DBKGn.DE), Royal Bank of Scotland (RBS.L) and UBS UBSN.VX are still slashing jobs and overhauling business models to adapt to costly Basel III rules that crack down on risk-taking, BNP is moving its focus to growth, he said on Wednesday.
"We have turned the page from the past year's efforts to cut debt," Alain Papiasse told reporters at a media event. "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 (CAGR.PA) and Societe Generale (SOGN.PA) 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 CSGN.VX 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 (C.N), Deutsche Bank, HSBC (HSBA.L) and Standard Chartered (STAN.L).
Papiasse said BNP still needed to keep growing long-term corporate deposits to prepare for Basel III and also to await more detail about French draft banking reforms due in December.
The government has said the 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.
If the final law sticks to this line, BNP can adapt to the reform, said Papiasse. Proprietary trading accounts for 1 percent of investment-banking revenue, which for the year 2011 would put it around 100 million euros ($128 million).
"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 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.
"If the target is speculative commodity derivatives trading, I can easily live with that," he said.
(Editing by Helen Massy-Beresford)