Natixis Profit Rises as Trading Performance Outpaces Most Rivals

(Bloomberg) -- Natixis SA reported better-than-expected fourth-quarter earnings as its trading performance outpaced most European competitors and corporate lending rose.

A surge in structured financing, especially for U.S. real estate projects, fueled a 12 percent revenue increase at the global lending business, the Paris-based bank said Tuesday. Natixis, which has won investment-banking market share over recent years, posted a 7 percent revenue decline at its global markets business. Still, in both equities and fixed income it fell less than the average estimate of three analysts surveyed by Bloomberg News.

Among big European players, only French rivals Societe Generale SA and Credit Agricole SA had better trading results in the fourth quarter. Natixis said that reduced client activity in areas such as equity derivatives weighed on its trading performance. The bank should benefit from increased market volatility in 2018.

“This return of volatility is offering opportunities” for financial companies like Natixis, Chief Executive Officer Laurent Mignon said in a Bloomberg Television interview.

Natixis climbed as much as 4.8 percent in Paris before erasing its gains. The shares were down almost 1 percent at about 7 euros at 11:20 a.m. They’ve advanced about 6 percent this year, while the Euro STOXX Banks Index has risen about 1.1 percent.

In asset management, Natixis had about 8 billion euros ($9.9 billion) in net asset inflows in the fourth quarter as both key U.S. boutiques Harris Associates and Loomis Sayles attracted net new money. Total assets under management surpassed $1 trillion and higher margins also fueled a 22 percent revenue increase at the asset-management business.

Natixis’s total revenue was almost unchanged at 2.51 billion euros, beating the 2.3 billion-euro average estimate of five analysts compiled by Bloomberg.

Revenue Goal

In November, Mignon pledged to reach a return on tangible equity of as much as 14.5 percent for 2020. Natixis wants to increase revenue annually by about 5 percent as it provides asset management, insurance and other services to its parent, Groupe BPCE. Asset gathering is crucial to the bank’s strategy, as it’s targeting more than 100 billion euros of net inflows over the next three years.

Natixis gets about a third of its earnings from the U.S., according to Morgan Stanley research. Its activities there include asset management, trading and merger advisory.

President Donald Trump’s move to reduce the U.S. corporate tax rate resulted in a positive impact of about 100 million euros for Natixis in the quarter, as it wrote down the value of deferred tax liabilities. That’s a striking difference with most global banks, which took billions of dollars in accounting hits for repatriating overseas profits and having to reassess deferred tax assets, rather than liabilities.

Other fourth-quarter highlights include:

  • Net income rose to 518 million euros, beating estimates
  • Natixis to propose cash dividend of 37 euro cents per share for 2017
  • CET1 capital ratio at 10.65% end 2017, up from 10.4% a year earlier
  • Bad-loan provisions at 65 million euros in fourth quarter, compared with 60 million euros a year earlier

©2018 Bloomberg L.P.

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