Natixis Replaces Risk Head Debray to Cap Tumultuous Year

(Bloomberg) -- Natixis SA replaced its head of risk with an outside hire and moved to strengthen controls across the firm as Chief Executive Officer Francois Riahi seeks to draw a line under a tumultuous year.

The Paris-based bank appointed JPMorgan Chase & Co.’s Olivier Vigneron to the role of chief risk officer on Thursday, replacing Pierre Debray, who faced internal scrutiny for a personal stock sale. Natixis also named a new head of risk for the U.S. and said it will strengthen governance at its asset management arm, where its H2O affiliate was rocked by concerns about thinly-traded holdings.

Riahi has confronted a series of setbacks since taking over in June last year, from losses on exotic derivatives to an exodus of investors at H2O Asset Management. Debray moved into the spotlight when Bloomberg reported that the timing of a stock sale by the risk head had raised concerns.

The bank said at the time that it found no wrongdoing. Debray will stay with Natixis as a senior adviser to the CEO after he is replaced in mid-January.

Natixis declined as much as 6.8% in Paris before paring losses to trade 5% lower at 9:19 a.m. local time, making it among the biggest losers on the Stoxx 600. The shares have gained about 12% this year, paring losses since Riahi took over as CEO about 16 months ago.

Read more: Natixis Said to Have Examined Risk Executive’s Share Sale

As part of the management changes, Natixis created a new role overseeing risk in the U.S., a region it targeted for expansion as it recovered from losses during the financial crisis. Natixis became one of the biggest underwriters of collateralized loan obligations -- a lucrative business that involves pooling high-yield debts, slicing them into securities of varying risk and selling these to investors. The bank also pushed into the U.S. market for repurchase agreements, or short-term loans known as repos that lenders use to finance their day-to-day trades.

The changes were announced along with third-quarter earnings that showed net income at the French lender rose 16% in the third quarter, more than analysts had expected. The bank benefited as market gains lifted assets and the fees for overseeing them, even as clients pulled money. At the investment bank, the second key pillar for the firm, profit fell amid weaker income from equities trading and advisory.

Natixis’s wealth and asset-management business -- which contributes about 40% of revenue, roughly the same as the investment bank -- saw about 2 billion euros ($2.2 billion) in inflows last quarter, though that was more than offset by 5 billion euros in outflows in North America, mainly in fixed income strategies.

The business, led by Jean Raby, relies mostly on smaller, well-known boutiques such as Harris Associates and Loomis Sayles in the U.S. This unit grew rapidly through acquisitions in recent years and oversaw 921 billion euros for clients at the end of June, making it one of the largest European firms.

One of its affiliates, bond boutique H2O, was thrown into crisis earlier this year when concern over thinly traded bonds at some of its funds sent investors fleeing. A group of six key funds saw their assets plunge by more than 8 billion euros in about two weeks.

At the investment bank, fixed income trading revenue rose 2%, while equities trading fell 3%. French rival BNP Paribas SA saw fixed income revenue jump 35%, while equities trading slumped 15%. At Societe Generale SA, the equities business fared even worse, down by a fifth, while debt trading up 1%.

Read more about the big decline in cash equities trading here.

The smallest of France’s top four listed banks, Natixis has exited the business of cash equities -- buying and selling stocks -- amid a broad decline in the business. At the same time, the firm has taken market share from bigger rivals with an aggressive expansion into complex financial instruments.

That push landed the bank in trouble late last year, when it took a 259 million-euro hit on Korean securities. Natixis recently hired a new batch of senior traders and managers in Hong Kong to strengthen its ranks in the region.

To contact the reporters on this story: Christian Baumgaertel in Munich at cbaumgaertel@bloomberg.net;Donal Griffin in London at dgriffin10@bloomberg.net;Viren Vaghela in London at vvaghela1@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Marion Dakers

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