Natixis’s decision to wave goodbye to its public shareholders marks the end of a painful two decades on the stock exchange. Its future now, as a 100%-owned subsidiary of French mutual group BPCE, will be much more akin to DZ Bank, the unlisted institution housing the corporate banking activities of Germany’s cooperative banks, as well as their asset management and insurance businesses.
This overdue move comes after outsized losses last spring, related to the effect of Europe’s dividend ban on Natixis’s equity derivatives positions. Those losses heralded the arrival of a new chief executive, Nicolas Namias, in August.
Namias and his colleagues, including BPCE CEO Laurent Mignon, justified their decision to buy out Natixis’s 29% minority shareholders in February because of what they see as an opportunity to make the group more streamlined and efficient – which is apparently different to cutting costs. They have said it is more about business development and revenue growth, and about how well Natixis exploits the group’s resources.
Natixis, in other words, should in future make better use of the cooperative group’s corporate centre and capital base – and vice versa. It is a kind of takeover of the mutual group by its subsidiary, given Mignon was previously CEO of Natixis and is not a cooperative banker by background.
Reining in
But this restructuring is above all about reining in the investment bank. Listing has clearly not brought about better management of Natixis, especially in investment banking. The group might now hope that, less burdened by quarterly results and return-on-equity targets, there will be less of a need to boost short-term profits by taking excessive risks in capital markets.
In any case, it has become increasingly clear over the last decade or so that no one wanted to own Natixis’s mismatch of business – especially not its third-tier investment bank.
This business, in its management’s telling, will now be much more closely aligned with opportunities arising from the BPCE cooperative network. This is most valid for payments and insurance. It is unclear how much Natixis’s US leveraged buyouts financing will tie in with BPCE’s core advantage of being France’s second biggest retail bank after Crédit Agricole.
But let’s be honest: Natixis’s corporate and investment bank needed to be much smaller, anyway. As its hiccups last year repeated its 2008 mishaps, it has become an embarrassing archetype of a struggling European investment bank.
In the 2010s, the main reason to own Natixis, for minority shareholders, was its asset management business – before a scandal around illiquid bond holdings at its H20 subsidiary further highlighted the weaknesses of its multi-boutique model.
Like the investment bank, asset management is another bit of Natixis with dubious connections to BPCE, not least given the large size of its US business (the legacy of an early-2000s acquisition). After the H2O incident, the asset manager has its own work to do in restoring confidence, perhaps moving to a more centralized approach.
Once that’s done, though, there is nothing stopping a listing of the asset management business in the future. There will be even more reason to do so, as Namias acknowledges, if a big acquisition opportunity comes along.
