PARIS - Banque Nationale de Paris, the largest private commercial bank in France, is reorganizing its asset management operations and considering a U.S. manager acquisition.
After a year of reflection, BNP officials are about to implement strategic changes in the bank's asset management business.
In the first stage, the bank is going to shift its pooled funds and institutional operations to a new subsidiary, BNP Gestions. The new entity, to be officially created in May, will have 255 billion French francs ($44 billion) under management.
Of that figure, only 10 billion francs comes from foreign clients, revealing the bank's need for international diversification. About 70% of assets are invested in pooled funds. Institutional separate accounts and employer-sponsored savings plans accounted for the balance.
According to the Paris performance measurement firm Fininfo, the bank as of March 31 had 136 billion francs in SICAVs (societes d'investissements a capitals variables), which are equivalent to mutual funds. Of the SICAV assets, 51% were money market funds, 34% bond funds, 11% stock funds and 3% balanced funds.
BNP also manages 65 billion francs in private banking mandates that will remain the responsibility of the bank's branch network.
Creation of the new subsidiary was inspired by France's financial services law, enacted in July to comply with the European Union's investment services directive. The law encourages greater transparency and creation of Chinese walls between banking and investment operations within the French money management industry.
Richard Deville, a director at Watson Wyatt Worldwide, Paris, said creation of separate subsidiaries is important to attract international accounts, provide greater transparency of fees and promote professionalism within money management units.
"It is a very important stage to affirm the autonomy of money management" in terms of having its own equity capital and ability to manage its own finances, said Gilles Glicenstein, who formerly directed the bank's strategy unit and was appointed assistant director of asset management last summer.
Gilles de Vaugrigneuse, former head of BNP's investment department, is in charge of the new subsidiary. BNP Gestions will have 200 employees, including 45 fund managers.
BNP will capitalize the new unit at 600 million to 800 million francs. "But if an (acquisition) opportunity showed up, our parent company would give us the required means," Mr. Glicenstein said.
BNP's money management ambitions don't stop in France. In Asia, Sydney-based BNP Investment Management handles $500 million (U.S.) for Australian clients. The bank now is in the process of setting up an office in Hong Kong, where BNP has its largest foreign branch.
In Asia, BNP officials prefer to away teams of money managers rather than acquire an existing business, Mr. Glicenstein said. In developing markets, where money managers are relatively new, brand names are less helpful in retaining clients if portfolio managers or marketers quit, he said. Eventually, BNP officials want to package all regional products and offer them to all their clients.
But BNP executives know they eventually must tackle North America. "To grow globally, in the U.S. or to a certain extent in the U.K., we will need to develop through ventures or acquisitions," Mr. Glicenstein said.
"The problem is that prices are expensive and we're in a sellers' market, so we're not going to do anything (precipitously). But, in the long run, we will probably need to offer our clients a U.S. money management capability, so we are more than attentive, we are watching precisely at possible opportunities, but not at any price," Mr. Glicenstein said.
A move into North America would follow BNP's ill-fated joint venture with New York money manager Neuberger & Berman. In 1993, the two companies entered into a joint venture to cross-market products; that venture was unwound in June 1995 after disappointing results in attracting clients.
BNP continues to outsource a U.S. small-cap fund to Neuberger & Berman and recently launched an emerging market fund also managed by the New York firm.
Mr. Glicenstein said BNP would seek an institutional manager with both U.S. and global investment capabilities for equities and fixed income. The bank also would want a manager that fits with BNP's focus on fundamental research, he said.
BNP wants a cautious firm. He said a potential acquisition ideally would have a large client base but would manage less money than the bank, on the order of $20 billion. Mr. Glicenstein recognized such a firm could cost some 3 billion francs at going rates. But prices could fall if financial markets decline, he noted.
The recent financial market hiccups reassure BNP in its wait-and-see position for the moment.
