BNP Paribas' Alain Papiasse on the difference an acquisition can make

In investment banking news, BNP Paribas' (BNPP) acquisition of Fortis did not score highly in terms of media interest. Fortis did not have a big investment banking presence and lacked the cachet of other European or global banks. Yet the acquisition, sealed in the aftermath of Fortis' collapse after its part in the ill-fated acquisition of ABN Amro, may turn out to be a pivotal moment for BNPP Corporate & Investment Banking (CIB).

In a world where the size of the balance sheet matters once again, Fortis brings quite a bit to the BNPP party, adding about 50% in risk-weighted assets to the CIB's existing balance sheet of about €160bn.

"Adding Fortis gives us one of the largest corporate and investment banking balance sheets in the world," says Alain Papiasse, CEO of BNPP CIB. "Our relative size vis-a-vis corporates has improved by 50%, which, in a sense, gives us 50% more capacity to lend."

And BNPP is focusing that balance sheet growth on its advisory revenues, building on an existing strategy to sell its capital markets business to lending clients. This kind of lending-led strategy is nothing new, of course - banks such as HSBC and Standard Chartered are built around a similar proposition - but Mr Papiasse is convinced that right now, there is an opportunity to leapfrog smaller or less liquid competitors.

The opportunity is even more pronounced because of the disappearance of so many competitors, either because they have collapsed or been acquired - such as ABN Amro, Wachovia, Washington Mutual, or indeed, Fortis - or because banks are exiting markets or retrenching - such as Citi's sale of its German business and Royal Bank of Scotland's exit from areas such as project finance.

In Europe, Fortis adds a large network of branches and corporate centres to BNPP's existing presence, through which it hopes to reach even more medium-sized to large corporates. Moreover, the acquisition gives BNPP one of the largest retail deposit bases in Europe (at €570bn), providing the bank with a huge funding base at a time when liquidity comes at a price.

"The competition is very strong in some products. But if you look at which banks have the balance sheet to support clients in the US, Europe and in Asia, and which can marry that to the product and distribution capability that clients also need, we are probably in a club of five or six banks at most," says Mr Papiasse.

BNPP aims to leverage the relationships built around the provision of basic banking services, such as cash management, local currency funding, factoring and trade finance, to generate a bigger proportion of investment banking business.

If this sounds like a tired restatement of Banking 101 - and one that many would say has failed to propel banks with similar strategies to the top of the advisory league tables - then Mr Papiasse argues that the world has changed. At a recent treasury conference in New York with 30 of the biggest corporates in the US, sponsored by BNPP, he says the key message from treasurers was that they wanted two things: a group of 'core' banks with the lending capacity to support them around the world; and at least one of that core group must be able to deliver local capabilities in day-to-day banking. More importantly, he says, the crisis has taught corporates to value those services, and the banks which provide them, more highly.

"The crisis revealed to clients which banks were quick to withdraw funding and which stuck by them - this has made them rethink some core banking relationships," says Mr Papiasse. "We carried on lending to our clients and that now gives us an advantage. Clients are now willing to give more business to their lending bank. We think that core banks can win 70% to 75% of their clients' fee business. This gives us a unique opportunity."

Structural streamlining

When Mr Papiasse was appointed CEO of CIB in February this year, (swapping places with Jacques d'Estais, who took Mr Papiasse's role as head of the asset management division) he quickly decided to "simplify" the organisation of the division. He says the new structure streamlines multiple management layers to create five regional hubs - Europe, Asia, North America, Latin America and the Middle East - led by a regional head who is charge of all the businesses in that region. For BNPP's worldwide businesses, such as fixed income or commodities financing, the head of the business line makes decisions for his division, in co-operation with the regional head.

Mr Papiasse has also moved to turn what he called a client-driven business into a "client-centric" one. In another echo of Standard Chartered, every corporate client now has a relationship - or coverage - banker, in charge of taking the bank to the client. "We were already a client-driven organisation, but the difference now is that a single banker is responsible for listening to what the client wants, orchestrating the bank's proposal around those needs and delivering it to the client," says Mr Papiasse.

And to ensure that everyone in the bank fulfils this client mission? The global head of coverage is Mr Papiasse. His appointment in February came as a surprise to the market, particularly when Mr d'Estais had steered the bank through the financial crisis in pretty good order, and marks something of a style change for a BNPP CEO. Like Mr d'Estais - and Philippe Blavier before him - Mr Papiasse is unmistakably Gallic; but where they were reticent and low key, he is voluble and enthusiastic. Some wonder if he has been chosen to represent a new, less conservative BNPP.

Whether or not this is the case, his belief that the bank has a unique window of opportunity is palpable and he is determined to seize it before the window closes. "It will not last for ever," he warns. "We are not the only winner in this crisis. Some of our competitors are also pushing hard and we have not bought another investment bank that immediately adds size and scale."

As a result, Mr Papiasse says the bank is "upgrading" organically. This does not mean that he has a figure in mind of how many investment bankers he is going to hire, he adds. "In some markets or products it may mean hiring; it will mean increasing our focus on some markets; or building out distribution or increasing research capabilities in others. It is not just about adding headcount. We have to find a suit that fits BNPP."

Mr Papiasse's strategy builds on the foundations laid by Mr d'Estais to boost capital markets revenues. The bank's core fixed-income business, headed by Frederic Janbon, has been filling any gaps in its coverage, such as cross-over emerging markets and sovereign debt - and when Canada did a dollar-denominated sovereign debt deal earlier this year, BNPP was the sole European bank involved. Meanwhile, BNPP's equity capital markets business, headed by Thierry Olive, has ruffled a few feathers by muscling in on the rights issues which are traditionally the domain of a client's corporate brokers, gaining top billing on issues from HSBC, UBS and Centrica this year.

Reaping the rewards

BNPP's more aggressive stance is also paying off in terms of revenues. Data provider Dealogic's revenue figures for the first half of 2009 showed that the bank had risen to third place in the Europe, Middle East and Africa rankings, behind Credit Suisse and JPMorgan. By the end of October it had slipped to fifth place, ceding two places to Deutsche Bank and UBS. But it still means that, compared with the same period last year, BNPP was up by five places in the revenue ranking and ahead of investment banking behemoth Goldman Sachs.

BNPP has therefore gone part way to achieving Mr Papiasse's goal. "We want to be top 'tier' in Europe - which means that for one out of every three deals we must have a leading position - and we want to be top 'league' worldwide, which means being top 10."

Competitors argue that when normal lending conditions return, BNPP will not be able to make its new-found lending power stick. But Mr Papiasse argues that it will have done enough to propel itself into a new league. "Spreads are already tightening, but even when easy money returns, the market share we have gained will leave us in a much better place than before the crisis. It will have enabled us to move up a bracket - in terms of how we are viewed by clients and by the bankers we would like to hire," he says.

If many argue that the markets have short memories - and that they quickly return to old habits - Mr Papiasse believes otherwise. Moreover, he maintains that new corporate governance standards will help BNPP to keep some of its gains. "CFOs will have longer memories of how fast some of their banks withdrew lending. And it is not just CFOs who are interested in which are your core banks; now board members are asking to see and approve the list of core banks. This will be to our advantage," he says.

Career history

Alain Papiasse

2009 - Appointed head of Corporate & Investment Banking and also a member of the executive committee of BNP Paribas.

2005 - Joins BNPP as a member of the executive committee and head of Asset Management & Services.

2003 - Moves to become vice-chairman of Crédit Agricole Indosuez Calyon.

2002 - Appointed vice-chairman of Crédit Lyonnais.

2000 - Becomes a member of the executive committee of Crédit Lyonnais.

1998 - Appointed CEO of Crédit Lyonnais Asset Management.

1996 - Appointed executive vice-president in charge of commercial bank activities in North and South America at Crédit Lyonnais.

1992 - Becomes senior vice-president and deputy general manager in charge of corporate banking for Crédit Lyonnais USA.

1988 - Promoted to deputy director, Direction Centrale des Agences de France at Crédit Lyonnais.

1982 - Appointed deputy senior banker to Crédit Lyonnais' Direction Centrale des Agences de France.

1977 - Moves to take responsibility for development of corporate clients at Crédit Lyonnais.

1975 - Becomes a credit analyst at Crédit Lyonnais.

1973 - Joins Crédit Lyonnais at the Place de la Nation branch.