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Baudoin Prot: dismisses talk of merging |
Baudoin Prot, the CEO of BNP Paribas, used a results announcement last month to deny some of the merger rumours involving his firm and to sketch out plans for using the bank’s excess capital. As he outlined the bank’s 2003 results, which included an impressive 13.1% increase in net income from the corporate and investment banking division, he declined to reveal what BNP Paribas would do if a large US firm bought one of its European rivals. He described such hypothetical strategic plans as “science fiction”.
Since JPMorgan announced its intention to buy Bank One in the US in January, several European financial firms have been rumoured to be in talks to merge with each other in an effort to bulk up and avoid being bought by a large US bank.
BNP Paribas, with its relatively high levels of excess capital, has been said to be considering buying AXA or even ABN Amro. However, Prot dismissed these ideas, saying they were “stupid rumours”.
Seeking distribution
And in a light-hearted but pointed reference to other banks’ acquisition strategies, he said: “We are different from some German banks in that we do not comment every day on deals we are not going to do.”
Nonetheless, Prot is interested in making sensible acquisitions, in the US as well as in Europe. He said the firm would be able to deploy e5 billion to e6 billion in capital without leveraging the balance sheet. “Our strategy is not to go for big and spectacular deals but to grow organically and to make timely and professional medium-size acquisitions,” he said.
He is also looking for very specific capabilities from an acquisition target. He added that he would be more interested in buying firms that offer distribution capabilities rather than those that produce the instruments themselves. Aside from making acquisitions in the medium term, further efforts to use excess capital have created higher shareholder dividends. Share buybacks will also continue.
Like other banks, BNP Paribas had a bumper year for fixed income in 2003. The bank has risen up the debt capital markets league tables and net revenue for the corporate and investment banking group was up by over 13% on the previous year, at just over e5.8 billion. If the results had been reported at stable exchange rates rather than with the decline in the US dollar, net banking income would have been shown to have increased by nearly 25%.
Prot wants to develop businesses such as these organically through measures including hiring. But in keeping with the firm’s strategy of keeping costs low, he denied that this would involve radically increasing salary and bonus payments. Nonetheless, he is prepared to pay for the best staff. “We only bulk up in investment banking in a way that makes the most talented people interested,” he said.
