Natixis: Natural selection in eurozone banks
Could BPCE replicate its growth in investment banking and asset management and make international acquisitions in retail banking too?
Today, Natixis is growing outside the home market. But as a retail bank, BPCE is essentially limiting itself to France and a few small African markets. That could change after 2017, says BPCE’s CEO François Pérol, when the group finalizes its next five-year strategy.
François Pérol, BPCE
He says there could be opportunities for BPCE to expand elsewhere in the eurozone, perhaps through acquisitions or in digital banking, as the single regulator gradually removes barriers to banking across borders. “My view is that there will be consolidation [within the eurozone] because there are too many banks,” Pérol says. The new banking regulator’s name for its database – Darwin – is “a kind of sign”, he jokes. But BPCE will only be a survivor during the banking union’s evolution if it is competitive, something Pérol thinks requires immediate action.
The legal case over his appointment from the government in 2009 has “nothing to do” with his running of the company, says Pérol. But he admits it was a good time, after judges had just cleared him of the charges last November, to secure another four-year mandate before his old mandate expired.
“It was necessary for the management to get sufficient visibility and full support from the governance,” says Pérol. “[Getting the mandate] was opportunistic, but it was also and mainly the result of an analysis of what the situation of the group is and what our challenges are. Our challenges ahead are very deep. There will be a very deep transformation in the banking and insurance industry.”
Since 2009, Pérol says BPCE has closed 400 of its 8,000 branches. He says there have been mergers between some of the subsidiary cooperatives in the Banque Populaire network. Caisse d’Epargne merged its IT system with the group’s mortgage specialist, Crédit Foncier, and also integrated the group’s bank covering the French territory overseas.
“We have implemented a lot of synergies since 2009,” Pérol says.
Tougher than expected
Yet Pérol recognizes it has been tougher than expected to reach the group’s 2017 cost-to-income target of 65% because of costs associated with the EU’s Single Resolution Fund and the need to tap costlier longer-term funding to meet other new regulations. The 2015 ratio was 67.7%. He says the bank may amend the target, although it could also launch a new push on costs.
He hesitates to propose branch closures: “It would be a very big mistake to disarm the network branches before you have the evidence that your digital distribution networks are, first, acquiring customers and, second, being profitable.”
But he says more of the group’s IT systems could be merged and more of the regional banks within Banque Populaire or Caisse d’Epargne could merge too. “There is a lot of potential for new mutualizations, new synergies within the group,” he says.
It must be done gradually, Pérol says, as BPCE’s network banks are in France, where the labour law makes rapid layoffs difficult. But in the absence of a listing and, so, with no pressure to get rid of excess capital to boost return on equity, he says the cost-to-income ratio, more than revenues, is the group’s most important target.
“We want to be as efficient as our competitors in our market,” he concludes.