Natixis on Trial Over Claims It Misjudged Subprime-Loan Risks

Natixis SA is on trial in France over decade-old allegations that it failed to properly disclose its exposure to subprime loans, making it impossible for investors to anticipate future losses.

The misleading-information case began in Paris on Monday with Judge Nicolas Michon reading out a summary of the accusations. Investigators say Natixis incorrectly specified in a November 2007 statement that its subprime risks were limited, underestimating the bank’s exposure by at least 1.2 billion euros ($1.4 billion).

For Natixis, the court case brings back bad memories. The U.S. subprime crisis and the subsequent collapse of Lehman Brothers Holdings Inc. forced the French bank to carry out a radical restructuring a year after its trading debut in 2006. Natixis cumulative net losses reached about 4.5 billion euros between 2008 and 2009, according to Bloomberg data.

The company first sold shares to the public in December 2006 at 19.55 euros apiece, but two years later the stock dropped as low as 1.25 euros.

Natixis referred to a 2017 statement where it denied the allegations and said it provided information about its exposure in good faith. No current or former Natixis employees are targeted.

The smallest of France’s top four listed banks risks a maximum penalty of 7.5 million euros in the Paris court case as well as monetary requests from hundreds of investors who say their savings were wiped out.

The trial is set to last until April 8, with judges likely to issue a ruling several months later.

©2021 Bloomberg L.P.

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