Olivier Perquel, the head of financing and global markets at Natixis corporate and investment banking, explains how the revived bank will grow in a shrinking world.

The name and the accent are unmistakeably French. But after a decade and a half working for US investment banks and hedge funds in London, Olivier Perquel was seen as an Anglo-Saxon hire when he joined France’s Natixis in 2009. The investment banking arm of French network Banques Populaires and Caisse d’Epargne was in need of a new mentality, after exposures to complex structured credit and correlation products caused it to lose the parents €2.6bn in 2008 and €1.7bn in 2009.

That triggered the merger of the two groups to form Groupe BPCE in 2009, and a new management team including chief executives Francois Pérol at BPCE and Laurent Mignon at Natixis.

Involving the outsider

During his time as a mergers and acquisitions advisor at Goldman Sachs in the 1990s, Mr Perquel numbered Mr Mignon, the then chief financial officer of insurer Assurances Generales de France (since merged with Allianz), among his clients. The new Natixis chief executive entrusted Mr Perquel with the task of steering the turnaround strategy, including the wind-down of non-core asset unit Gestion Active des Portefeuilles Cantonnés.

“The perception of me was perhaps one of a results-oriented outsider who could get the job done without getting too involved in internal politics. Although I had spent 16 years working in the UK, I’d worked frequently with French clients. And I arrived to find a new administration who were very driven,” says Mr Perquel.   

By mid-2012, the work was almost complete, with the sale of private equity holdings and about €55bn in illiquid credit, derivatives and correlation books. The process cost less than the day-one provisions laid down by Natixis, and was completed ahead of schedule. It was time for Mr Perquel to help move the bank to the next stage of its revival. In August 2012, the bank split out investment solutions from corporate and investment banking (CIB). Mr Perquel became head of financing, markets and regional platforms in the CIB, having already joined the senior management team.

Selective approach

At the start of 2014, the bank embarked on a strategy entitled New Frontier, to raise return on equity to 12% by 2017. Mr Perquel is keenly aware of the long list of management consultancy firms predicting that all but the strongest investment banks will struggle to deliver improved returns. Most recently, Boston Consulting Group warned that corporate banks “must take bold steps to adapt their business models or potentially suffer prolonged, painful periods of underperformance”. Oliver Wyman published with Morgan Stanley a wholesale and investment banking outlook that predicted “the industry will need to take a much more structural approach to changing how it does business”, including “strategic selection – more tough decisions, focused on fixed-income, currencies and commodities businesses and the international footprint”.

Natixis is already a long way down that road, and Mr Perquel says the investment banking arm is now well perceived within the wider BPCE group. The Natixis share price has recovered from below €1 in March 2009 to €7.40 in mid-April 2015. The bank is focusing on a series of key product lines, as well as a selective approach to its chosen client base.

“Staying focused on products is straightforward, but staying focused on your core client base is harder,” says Mr Perquel.

The overall focus for Natixis is centred on its asset management division, which is already among the top 20 in the world in terms of assets under management, at more than €735bn as of the end of 2014. Most of the capital created by the bank will be invested in expanding this business line, a process that is already under way through the acquisition of €14.6bn European multi-asset investment manager DNCA Finance, announced February 2015 but yet to close.

“The largest asset managers are counting their assets under management in the trillions, so managers need to grow to stay relevant, or be consolidated into larger groups. We have decided we want to be a consolidator, and the DNCA transaction will help to push our equities business in Europe,” says Mr Perquel.

Specialised offering

In Mr Perquel's CIB division, capital is more constrained and the bank will remain a small player, albeit one associated with the large BPCE balance sheet. Natixis is 72% owned by BPCE, and manages the treasury for the whole group on a separate book basis. For the most part, Mr Perquel wants to keep Natixis focused on what he calls the base of the balance sheet – lending and fixed-income activities.

The bank specialises in what French banks refer to as structured finance, including energy and commodity-backed, project and infrastructure and acquisition finance, as well as real estate financing in France and the US. It managed the first French project bond issuance, a deal in the digital infrastructure sector for Axione Infrastructures in July 2014. Natixis also has a healthy aircraft financing franchise that Mr Perquel intends to build on further.

“We are well positioned by being relatively small and nimble. From a client perspective we are not expected to be everything to everyone, and it is good not to have to compete in non-profitable business lines. Of course, you still have to do some vanilla business to get your foot in the door, but at the end of the day we should manage to be more profitable than the competition by being more specialised,” says Mr Perquel.

Fixed-income trading is a more difficult prospect in terms of capital usage, especially in view of the looming implementation of the simple leverage ratio. Mr Perquel expects the bond repurchase (repo) business to be particularly affected.

“If anyone is going to stay in the fixed-income business, it will be Natixis, because it is in the blood of our bank,” he says.

To add an extra pillar to the strategy, he also hopes to revive the equity derivatives business at Natixis. As with other French investment banks, this had been a traditionally strong business line pre-crisis, but was scaled back heavily from 2008 onward. Mr Perquel says the advantages are that there are few players in this segment compared with fixed income, and equity derivatives are relatively capital-light under the Basel risk-based capital ratio (although less so under the leverage ratio). The bank already had a strong equity financing business and the basic set-up for equity derivatives. However, there were quick wins from “fundamentally improving the operational set-up”, says Mr Perquel.

“We have relaunched the business by doing things better. Our strategy is to be much more client focused, much more solutions driven. That may sound boiler-plate, but we have found that we can differentiate ourselves by making those practical improvements, by improving communication within the bank to deliver global solutions as opposed to pushing products. That has to be done with very close management to make sure it happens, and when you do that, it works,” he says.

International strategy

In terms of client base, the trend since the crisis has tended to be for second-tier investment banks to go home, focusing on domestic clients where they still have the advantage of banking relationships. Natixis is now looking to reverse that. Naturally, BPCE’s coverage of mid-sized French corporates is valuable for Natixis, but Mr Perquel says this is a mature relationship and the investment banking market share in France is where the group wants it to be. The key will be to expand internationally.

“If you look at where the business is originated rather than where it is booked, we are roughly 50:50 French to non-French today. Our goal by the end of the strategic plan is to be 66% non-French, which is very ambitious. We will have the same selectivity of clients and focus on the businesses that we know well – many of which are global businesses anyway, such as energy and commodities finance,” says Mr Perquel.

The Natixis Americas platform is already performing well following the addition of a broader Latin America team in 2014 alongside the Brazilian subsidiary (originally Banco Multiplo) that was bought 27 years ago and is now undergoing a renaissance. Total Americas income grew by about 20% in 2013 to 2014, with a team of 600 staff.

The bank also has a large presence of about 500 staff in Asia-Pacific. But the geographically fragmented client base, high costs and staff turnover have made the region less profitable for global investment banks generally.

“We have redeveloped this area with the same product mix as elsewhere, and Singapore is a strong platform. We have grown significantly over the past two years, and more can and should be done to improve profitability,” says Mr Perquel.

In Europe, origination and trading operate seamlessly across Paris and London. Spain and Italy are quasi-home markets for Groupe BPCE in which Natixis has retained capacity while keeping a tight rein on risk. Mr Perquel says revitalised client relations have transformed the prospects for activity in Spain over the past two years. Natixis also launched a pfandbrief (covered bond) bank in Germany in 2013, which provides a useful funding tool for German and French real estate financing activity. In the Middle East, the bank is based in Dubai and is striving to bring in new business, while African energy, commodities and infrastructure markets are covered as part of the global platform.


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