BNP Paribas’s EMEA ECM head Andreas Bernstorff explains to Marie Kemplay how the bank is progressing on its plans to be a top-three European player for equity capital markets.

Andreas Bernstorff main

Andreas Bernstorff, BNP Paribas

Last year was a marquee year for equity capital markets (ECM), with global volumes hitting $1.3bn in 2021 — an all-time high, according to Refinitiv data. This includes Europe, the Middle East and Africa (EMEA) activity, which saw a 37% year-on-year increase in volumes.

It was also a “very pleasing year” for BNP Paribas’s performance, says Andreas Bernstorff, the bank’s EMEA head of ECM. The bank, historically strong in the debt capital markets, has been seeking to increase its ECM market share and become a leading player in the region. For Mr Bernstorff, the bank is well on track to achieve this goal. “We ended the year in sixth position in the region by deal volumes, and that’s up from eighth position in 2020 and 10th position the year before. We’re pleased with the direction of travel,” he says.

“If you dig into those figures a little deeper, we’re third for rights issues, fourth for initial public offerings (IPOs), fifth for business from financial sponsors and sixth for block trades. What’s encouraging is that looking across the piece, it’s a pretty consistent picture around performance, which is exactly what we want it to be.”

Deal highlights for the year included acting as global coordinator on Spanish telecom firm Cellnex’s €7bn rights issue, fund distribution platform Allfund’s €2.1bn IPO in Amsterdam, Just Eat Takeaway’s €1.2bn convertible offering and private equity firm EQT’s €2.5bn secondary placing.

Not just a French bank

There has, Mr Bernstorff says, been something of an inaccurate perception to shake off about BNP Paribas being “just a French bank”.

Career history: Andreas Bernstorff  

  • 2017 Head of equity capital markets (ECM), EMEA, BNP Paribas
  • 2015 Managing director, head of Germany, Austria, Swiss and Nordics ECM, Citigroup
  • 2007 Managing director, head of Germany, Austria, Switzerland, ECM, Citigroup
  • 2004 Head of German ECM, Dresdner Kleinwort
  • 2003 Managing director ECM, Dresdner Kleinwort

He says: “If you take our IPO business, 90% of [it] by volume was not in France last year, and there’s nothing in this year’s pipeline to indicate it will be any different.” Of the seven IPOs where it acted as a global coordinator last year, just one was for a French company. “That’s not to say that we aren’t pleased about being number one by some margin in France,” he says, “but we have also had top line roles in the Netherlands, Italy, Portugal and Germany. And that’s a good reflection of our strengthening franchise across the region, because you really do need to play in every corner of Europe if you want to play in the top five.”

Mr Bernstorff highlights that in addition to a top league table position in France, across ECM, the bank also placed first in Italy, third in Spain and fourth in Benelux, as well as second for cash ECM in Germany. In the UK, however, he notes “we’ve a while to go”, he points to BNP Paribas’s role as global coordinator and sponsor on Easyjet’s rights issue, a significant deal. Although the bank missed out on a top five position for the overall region in 2021, it is a firm objective for 2022.

US competition

Among the European banks, BNP Paribas has a clear lead in ECM. The bank’s real competition comes from the US banks, which have dominated the top of the ECM league table in the post-financial crisis years.

“Increasingly in pitches, it is clear it’s the US banks that we are up against, and not really other European banks,” says Mr Bernstorff. He also believes there has been something of a shift in attitudes, particularly since the start of the pandemic, where corporates and sponsors are keen to see a strong European bank play a decisive role — a realisation that “putting all eggs in the US basket for banking isn’t necessarily a good approach to take”.

There are good reasons, he asserts, to opt for a European bank as part of a major ECM issuance. “Our advice has been, and this is a pragmatic observation, that if you’re a European company going public in Europe, something like 80% to 85% of your shareholders are going to be European. So, it does make sense to have one out of your lead banks as a European bank. And a lot of these decisions for our clients come down to soft factors as well as hard factors. The breadth of our relationships with corporates, and increasingly sponsors in Europe, is really important and something we have been very focused on developing.”

He is keen to dispel any idea of complacency in terms of its position against other European banks. “There are certain markets where they can be very effective, so we must always be vigilant,” he notes. “If you look across Europe, there are no other European banks that are consistently present throughout all the main markets, in the way that US banks will be. For me, that is the key point and a key strand of our strategy to be present in European markets to the same level as the US banks.”

Team efforts

The strong positioning that the bank has achieved has, in part, been down to ensuring the right people are in post and that they are working together well. Mr Bernstorff points to the continued strengthening of the team, through appointments of experienced senior ECM professionals during 2021, such as Christoph Heuer (from Goldman Sachs), Deepak Sran (from UBS) and Tom Snowball (from UBS). Progress in ECM is part of BNP Paribas’s strategic move towards a comprehensive and integrated equities offering: equities sales, trading and research, equity derivatives, prime broking and ECM. In July 2021, it acquired full ownership of the equity brokerage Exane BNP Paribas, up from the 50% it had held throughout its prior 17-year partnership.

While the acquisition will not directly impact the bank’s ECM clients, or how his team interacts with them, Mr Bernstorff observes it is part of a wider theme of the bank cementing its strong position in European equities, which has a wider positive spill over. “The bank is effectively doing a three-way merger of its equities derivatives business, the electronic and prime broking business that it has taken on from Deutsche Bank, and the Exane BNP Paribas high-touch, research-driven cash business all into one group. And that is incredibly powerful.”

Having a strong equities business was long held to be an important and useful contributor to a successful ECM franchise. However, this concept has increasingly been up for debate in recent years. Several banks have significantly cut their equities businesses while seeking to retain a substantive presence in ECM. It is perhaps still too early to understand the full long-term impact of such strategic differences, but Mr Bernstorff holds that it remains evident that there are some crossover benefits. “If you look at how other big equity houses are organised — again this is really the US banks — there is an integrated derivatives, and high-touch and low-touch cash equities business, that is also connected to prime finance,” he says. “All of that drives a lot of flow and can provide useful market intelligence when it comes to raising new equity capital.”

When you look across the European landscape you could come to the conclusion that European banks don’t want to do equities. But our message is completely the contrary

This is another area where he feels BNP Paribas has taken a different path to other European banks. “When you look across the European landscape you could come to the conclusion that European banks don’t want to do equities. But our message is completely the contrary,” he adds.

Matching market dynamics

Although the jury is out on whether 2022 can match the levels of activity seen in 2021, so far conditions look favourable. “The IPO pipeline for the coming period is considerable and investors are engaging,” he says. However, he reflects that a certain amount of “judgement” remains important, as engagement does not always translate into investment.

While a record year overall, 2021 was not a year of consistently straightforward market conditions. Mr Bernstorff notes that while the year started off extremely strongly, with many tech IPOs being priced at high multiples, periodic rotations into value stocks (as investors fitfully began to anticipate quantitative tightening) saw the environment become much harder in the second and third quarters. He suggests that there were arguably negative IPO discounts in the first quarter, which had expanded to 15–20% at the end of the third quarter (for transactions that priced). The final quarter saw a recovery, but a sharp value rotation made conditions at the start of the year much trickier.

Distribution matters

Mr Bernstorff stresses the importance in such shifting market dynamics of having the ability to flex its approach in order to get deals done. For instance, he suggests that by the end of the third quarter of 2021, some larger investors were becoming significantly more selective in the deals they would do. In these circumstances, he cites the importance of having a diversified distribution network, i.e. a network that does not only encompass large global players, but also smaller and local investors, including large family offices.

“I think the key learning we have taken away is that distribution matters. A lot of these processes can become standardised quite quickly, where the same group of big players are always being contacted and if they, for whatever reason, are losing interest, then that can quickly throw European deals into question,” he says. “There were deals last year where there was a risk of them not working because the pre-launch view from global investors was not sufficiently supportive. We got that type of deal done by also engaging with that broader network. It demonstrates this is not something that is just a nice to have, it can mean the difference between whether a deal gets done or not.”

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