BNPP puts digital heart in its three-year plan

By:
Mark Baker
Published on:

BNP Paribas COO Philippe Bordenave tells Euromoney that the bank is putting digitization at the heart of its new strategic plan.

The recasting last year of the group’s CIB division as corporate and institutional banking, rather than corporate and investment banking, was a nod to that objective. And part of the bank’s push in the new strategic plan period is to increase the penetration of such services to other client bases, particularly institutional investors.

"On the equity side, we will continue to push out our tools to private banks to help them to build structured products automatically, as well as adding more features and more complex products in order to have the same kind of result with institutions," says Bordenave. "Ideally we would like to see all fund managers enjoy a similar kind of service that we already give to corporate treasurers, with our screen on their desks, particularly in areas like equity derivatives."

The danger for any bank of increasing automation of its services is that the bank-client relationship becomes more distant — and less frequent. Bordenave acknowledges that risk and the pressure it imposes on a bank’s relationship managers, but adds that this presents an opportunity to enrich the dialogue.

"More and more basic services will be conducted automatically, but clients will always be interested in talking in person about higher value products," he says. "More automation leads to basic services becoming less demanding, so we see room to improve and add value at the upper end of the service – and to keep developing. At the same time, there should be greater volume going through at the lower, more commoditised end, with lower operational costs."

Automation through portals also in theory allows for opportunities to grab market share, on the basis that clients are unlikely to choose more than perhaps a couple of the best offerings to monitor, rather than attempting to use services through half a dozen platforms.

A continued expansion of the securities services offering, where the bank is already a European leader, forms another leg of the plan, says Bordenave.

"On the institutional side, we want to continue to leverage our knowledge and skills around derivatives. There are also many opportunities for us to continue to grow in securities services, which is perhaps the equivalent of cash management for institutions, and where we are already number one in Europe."

Overall the bank is looking to grow annual CIB revenues by an average of 4.5% until 2020, cutting the division’s cost-to-income ratio by 8 percentage points and increasing its return on notional equity to more than 19%, up from 13% in 2016.

Northern exposure

Geographical expansion — or rather, ensuring a deeper penetration in markets where BNP Paribas already has a presence — is another priority, particularly within the CIB division. Bankers at the firm readily admit that there is more to be done in improving its market share in countries away from France, and reckon that now is as good a time as any to embark on a serious push, given that some regional competitors are having to retrench.

Germany was a specific focus within the 2014 to 2016 plan, which saw the bank increase revenues there by 50%. Bordenave thinks there is plenty more to do.

"There are many opportunities for us to increase market share in Europe, particularly in northern Europe, such as the Nordics and Germany," says Bordenave. "From the product perspective, what we are pushing most are cash management because it is a 'hook’ product, and trade finance because of our international nature. Our presence in 80 countries is a natural advantage for exporters, especially when combined with our specific knowledge and skills around derivatives."

Big US banks are frequently adopting the same approach, however, and have proved adept at moving into the ground being freed up by their capital-constrained European cousins.

They will be the most formidable obstacle to BNPP’s ambitions.