Asset management used to be an afterthought in mergers between investment and retail banking groups. But it is increasingly becoming part of the equation. Currently, in the quieter moments of Parisian life, when there is a lull in the sporadic rioting of students and banlieu residents, the business world becomes absorbed in merger talks between key units of the country’s fourth largest bank, the Caisse d’Epargne group and the Banque Populaire mutual group.
Both groups come from a collectively owned tradition. The partially state-held Caisse owns a chain of 35 regional co-operative banks. The network of regional Banques Populaires branches numbers almost 2700, with 6.8m customers. Both institutions have huge distribution power to a clientele beyond the reach of larger but more centralised retail banking players.
Individual organisation
But in asset management, a merged operation of Ixis Asset Management and Natexis Asset Management, distributing funds under a new ‘Natixis’ brand, begins to look particularly interesting. Currently Ixis runs €430bn and Natexis oversees €100bn. A €530bn merged operation would put the ‘Natixis’ entity up there with Crédit Agricole’s funds franchise, and allow it to join Europe’s largest players.
Is the merger a sensible one? According to ratings agency Fitch, the two entities are fairly complementary in terms of banking network, products, clientele and investment capacity. But job losses may well be on the cards.
If we look at other examples of the French, cross-border investment world, there has been much reluctance to merge among senior staff. BNP Paribas has a profitable funds shop, and is currently in advanced merger talks with Italian bank and funds house Banca Nazionale del Lavoro. But, despite outward enthusiasm there is merger fatigue within the organisation, with certain difficulties in putting together BNP and Paribas staff during previous consolidations.
Staff at sworn rival Société Générale have done everything they can to undermine overtures from BNP, often questioning their rivals’ business models.
But the story at Natexis is a different one. Then again, this is a highly individual organisation. Senior board level players in the Natexis funds factory - behind the Gare de Lyon railway terminus – appear to be relishing the opportunity of playing on a much bigger stage. “We have been working very hard for three years, and this is exactly what we have been waiting for,” said one well-placed source.
The group runs around €30bn in assets for its retail banking customers and the balance is from institutions, with a particularly strong footprint in money markets and the quasi-institutional world of French self-selected pension fund business, following the acquisition of an Epargne Salariale unit from its parent bank at the end of 2004.
It is of no little irony that the chief executive of Natexis Asset Management, Daniel Roy, had been chief of CDC Ixis Asset Management, before CDC was bought out by the Caisse. Mr Roy had been running more than €300bn from Ixis headquarters in Montparnasse back in 2003, but was forced to look elsewhere. There is little doubt that he had been successful in accommodating the demands of his original shareholder, French investment bank Ixis, in its desire to build an institutional fund business. Mr Roy facilitated this by buying Nvest in the US, allowing him to bring in corporate bond expertise. He also bought Loomis Sayles, hedge fund specialist Harris Associates, and a string of other US subsidiaries.
But the new shareholder, a retail bank, had different priorities. It was perceived that Mr Roy, as an institutionally orientated business builder, did not have the right outlook. This is something he denies, saying that the job done by an asset manager, whether managing retail money, or an institutional discretionary mandate, is essentially the same one. It is just the nature of the stakeholder, which changes the profitability structure.
But at Banques Populaire, he was very quick to establish retail credentials, developing a multi-management subsidiary, Natexis Asset Square, with his deputy, Philippe Couvrecelle. “When he came to Natexis, Daniel was very clever,” says a French asset manager who knows Mr Roy well. “One of the first things he did was to set up a guaranteed product for retail investors. He has kept the interests of his shareholder, which is a retail bank, paramount at all times.”
Watchers of Natexis have long expected a change of ownership, and its absorption into a larger group. But the situation at the politically charged Caisse d’Epargne is an unpredictable one. There has been a very fluid state of affairs at Ixis since the last change of ownership.
Questionable commitment
After the departure of Mr Roy and other key individuals, French consultants began to question the group’s commitment to institutional business. Peter Voss, chief executive at Ixis Asset Management, has made his own mark on the company by recently appointing Jerry Chafkin from Schwaab as head of the growing US operation, which now accounts for almost half of the group’s assets. Mr Voss came to Ixis as part of Mr Roy’s buy-up of Nvest. Now the two men could be going head to head for the top job.
Things have been tougher for the American in France and Europe, where a planned distribution blueprint has already been shelved several times. The French arm is also expected to pull out of hedge funds due to poor performance.
Mr Roy is a heavyweight in the institutional world. Everything about him – his robust manner, innovative nature and aggressive pursuit of both alpha and expansion, suggest that he is currently a very big fish in a tiny pond. And most importantly of all, he has shown that he can re-invent himself when necessary.
Yuri Bender, editor-in-chief
