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BNPP recasts its credit analysis

BNP Paribas has topped the investment grade section of the Euromoney credit research poll for the past three years but this success has not stood in the way of a shift to a new research model.

Last month the bank established a sector specialist desk, which comprises analysts taken from the fundamental research team. It has been set up to provide certain clients and the bank’s fixed income desk with trading ideas. The word desk analyst springs to mind but Rick Deutsch, formerly head of credit research and now head of the desk, is quick to dispel that notion. He says he will be talking to clients, and publishing notes – research that the bank makes clear is done in its interest.

The bank is by no means the first to downsize its fundamental research capacities and place more emphasis on supporting its trading desk, now that regulation requires Chinese walls between research departments and the trading desk, unhinging the cost-benefit equation. Although there is no denying that the restructuring will address this issue, as the sector specialists will support the trading desk, Deutsch points to other reasons. “The buy side has evolved more towards short-term profitable trades,” he says. “Hedge funds are obviously big traders themselves but they have also pushed real money investors to become more active traders.” A research department designed to focus exclusively on fundamental research would thus not be in tune with market developments.

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