BNP Paribas could sign Deutsche prime broking deal in September
The French bank sees an opportunity to grab market share – and a more advanced tech platform – in a business that it sees as strategic.
BNP Paribas is actively working to sign a referral agreement for the prime brokerage and electronic execution platform of Deutsche Bank in September, according to BNPP’s COO Philippe Bordenave, speaking to Euromoney as the bank announced strong second-quarter results.
The technological complexity of the acquisition, however, means that full implementation may not be until the end of 2020.
“We want to further develop our strategic relationship with fund managers – this is absolutely key for us,” says Bordenave, explaining the attraction of the Deutsche Bank deal in spite of the fact that prime brokerage revenues at BNPP and competitors have generally fallen in the most recent quarter.
The French bank attributed a 14% year-on-year revenue decline in its equity and prime services unit to a strong prior-year quarter and lower volumes in prime in particular.
The performance did not make the bank an outlier: equities fell by double-digit percentages at Bank of America Merrill Lynch, JPMorgan and Morgan Stanley in the second quarter, and was down by 9% at Citi and UBS, with many firms citing weaker prime revenues as one cause.
However, BNPP, which Bordenave says ranks about ninth in prime brokerage globally, is betting on its acquisition of Deutsche’s business to catapult it into the big league of prime brokers, on the basis that recent weakness in the industry is not structural, but rather down to depressed volatility levels that have seen clients reduce their positioning.