BNP Eyes Top European Equity Spot After Deutsche Bank Deal
(Bloomberg) -- BNP Paribas SA is aiming to become Europe’s top equities-trading player after completing the integration of Deutsche Bank AG’s prime-brokerage assets.
Paris-based BNP finished on-boarding all the technology and assets, along with some 900 staffers, from the German lender late last year, according to a statement Wednesday. Announced in 2019, the deal is part of an effort by Chief Executive Officer Jean-Laurent Bonnafe to bulk up an equities business long in the shadow of BNP’s larger fixed-income unit. Now, the bank has a new objective.
“I don’t see why we couldn’t be the first player in equity in Europe” in the next few years, Olivier Osty, BNP’s head of global markets, said in an interview. “We hold all the cards.”
While banks across Europe are giving up on competing with Wall Street in the risky world of equities trading, BNP has spent the past years beefing up the business. In addition to the deal with Deutsche Bank, which is expected to bring 400 million euros ($450 million) in additional annual revenue, it acquired the stake it didn’t already own in partner Exane.
BNP gained as much as 1.3% in Paris trading and was up 0.8% as of 11:54 a.m. local time.
BNP, which had one of the smallest prime-brokerage units among global banks just a couple of years ago, is now among the last remaining European holdouts in a sector dominated by U.S. banks such as Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. That, combined with an effort to expand its research platform in the U.S., will allow the bank to gain ground overseas.
“If we are No. 1 in Europe, American clients will work much more with us, and we’ll be able to potentially target the fifth or sixth spot in the U.S.” Osty said. “Being the first European bank in the U.S. is an objective that is reachable, though also difficult to attain.”
In addition to the deal with Deutsche Bank, BNP also has agreed to take on the hedge fund clients of Credit Suisse Group AG in a referral agreement announced in November.
“We have already benefited from it late last year as some prime clients came to BNP in December, and we will continue to have more between January and March,” Osty said. “I believe we are a good alternative to Credit Suisse for a global client that does not want to have only prime balances with U.S. players.”
The Swiss bank, which decided to leave the business in the wake of $5.5 billion in losses from its relationship with Archegos Capital Management, is expected to lose between $500 million and $600 million in revenue this year as a result of the exit.
“We will see a concentration of the prime-brokerage players -- and we’ve seen it, because the barrier to entry is high,” Osty said. “With Archegos, we realize that risk monitoring is important and requires very sophisticated platforms.”
BNP, which can rely on steady revenue from its giant retail unit and from its financial-services operations, is better-positioned to turn a profit from a capital-intensive business like prime brokerage than some of its peers. And the $16.3 billion it’s expected to pocket this year from the sale of its U.S. retail operations to Bank of Montreal may give BNP the capital needed to participate in any further industry consolidation.
Bank of Montreal, for its part, said Tuesday that its BMO Capital Markets unit hired Thomas Guagliardo and Robert Luzzo from BNP to start a U.S. prime-brokerage business.
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