BNP Paribas keeps eyes on the ball

Underperforming funds, duplicate ranges and products too small to compete with rivals are being scrapped in the ongoing merger between the asset management operations of leading French bank BNP Paribas and troubled Belgian institution Fortis. The assets of Fortis Investment Management (Fim) have added almost E160bn to the E340bn previously managed by BNP Paribas Investment Partners. But it is through accelerating product distribution rather than improving investment management operations that fund bosses hope to profit most. Joint initiatives between the two sides of the company are tackling product areas with greatest client need, such as exchange traded funds (ETFs). BNP Paribas recently bought out Axa from the two French groups’ joint venture in passive products, EasyETF, managing E4bn. While Fortis does not manufacture its own ETFs, its distribution strength is a valuable plus for the French bank, which is way short of the market penetration it would like to achieve in this sector. Product selling power will also receive a serious boost now that BNP Paribas’ increased private banking capacity lifts it from 10th to 6th place in the global wealth managers’ league, managing E224bn, the largest private client book in the Eurozone. The French bank acquired excellent experience of leveraging products for sale in different banking networks after the acquisition of Banca Nazionale del Lavoro back in 2006. “What we have done well in the past at BNP Paribas has been the integration of retail and private banking networks, which we demonstrated with the French network and BNL in Italy,” confirms Christian Dargnat, CEO at BNP Paribas Asset Management. “We have the capacity to offer fast, bespoke product to retail and private banking clients. We implemented the French model in Italy and will now implement it in Belgium and Luxembourg.” The key difference between the investment arms is that Fim has been much less integrated into its parent bank, existing almost as a separate company. BNP Paribas IP, on the other hand, falls under the ultimate control of bank board member Jacques D’Estais, until recently head of investment banking, before he swapped jobs with Alain Papiasse. BNPP IP is part of Investment Solutions, the umbrella arm for asset gathering activities, including private banking and securities services and is closely entwined within the French bank’s structure. Asset management in the newly-combined entity is overseen by Philippe Marchessaux, previously reporting to Gilles Glicenstein, who died earlier this year. Before his death, Mr Glicenstein saw the integration of Fim as a key challenge, helping his group react to the newly-empowered and recently established CAAM/SGAM funds franchise. Mr Dargnat sits on the 15-strong integration committee for the French and Belgian fund houses alongside William de Wijlder, the erudite and charismatic funds boss from the Fortis side, who will run investment at the group’s boutique labels, such as FFTW. Richard Wohanka, who as CEO was previously responsible for much of the direction and structure of the Fortis funds effort, parted company with the group after the merger deal closed. Integrating the investment centres of Fim, with their distinctive culture, into the equally unique boutique philosophy of BNPP IP will be no picnic, particularly as the Belgian state retains a 25 per cent stake in the merged bank and can veto unpopular moves. “BNP Paribas people recognise this is a tough time for asset managers,” says Etienne Barel, seconded by the French bank to Fortis head office in Brussels, where he conducts much of the day-to-day integration work. “On top of the integration with Fim, we are now feeling the full effect of all the asset allocation changes made in 2008 to more liquid products. People are very reluctant to move back into assets with better margins.” While the merger promises E500m in cost savings following the linkage of the two banks, substantial job losses in asset management or private banking are not expected. Both Fortis and BNP Paribas announced lay-offs in investment banking before the merger took hold. BNP bosses have much sympathy for Fortis customers, many of whom were shareholders in the Belgian bank, at one stage seeing the stock price tumble from E30 to E1. But while such investors may feel BNP Paribas took over their birthright rather cheaply, there is relief among staff that a merger with local rivals such as ING, KBC or Dexia was prevented. Mr Dargnat’s aim is to make sure that, amidst all this noise, the investment machinery is not buried by the integration process. Despite the distractions, he says, “we must remain focused on asset management. We need to outperform. We need to remain performance focused and client driven.”