BNP Paribas' JEP: RBS deal was more than just risk management, 01 January 2015

BNP Paribas' JEP: RBS deal was more than just risk management

The agreement hammered out earlier this year by the Royal Bank of Scotland's (RBS) and BNP Paribas for the sale of certain parts of RBS's structured products and retail investor equity derivatives (IP&ED) for around £15bn gave the French bank a new edge in some European markets where its presence had been marginal.

The notional value of the RBS portfolio when the bidding began was roughly £175bn ($282bn), with £30bn belonging to its public distribution network, £65bn the listed options and futures division and £80bn in over-the-counter products. The number of employees from RBS joining the ranks of BNP Paribas equity derivatives business amounted to just over 80 across jurisdictions out of a 600 strong force RBS IP&ED had over a year ago when the UK bank announced its exit from structured products.

"The RBS acquisition offered some real synergies with our existing structured equity platform, building out our business into new markets, and raising our profile among clients across Europe," says Jean-Eric Pacini, the bank's head of structured equity distribution (GECD), Europe. "The clear synergies across our business in Europe meant the deal was certainly more than just a risk transfer management transaction, as it has allowed us to serve existing and potential new clients more effectively, thanks to the strong match of RBS's financial offerings with our strategic growth targets, both in terms of products and countries."

In June, the French bank officially took over the responsibility for market-making for RBS' IP&ED business in Italy, the Netherlands and the Nordics (Sweden and Finland) with the RBS teams responsible for turbos moving with the products to BNP Paribas.

"In the retail listed products space there were very simple and obvious synergies which match our strategy to increase our profile in some key markets such as Switzerland and the Netherlands," says Pacini. "This provided a natural complement to our existing exchanged-traded solutions business and it was a clear addition in terms of teams and capabilities."

As part of the acquisition, BNP Paribas also moved a limited number of RBS IP&ED staffers from the UK, the US, HK and Australia desks.

"Excepting France and emerging markets, our sales coverage has been boosted across Europe as a result of the RBS acquisition," says Pacini. "About a dozen staff from the sales side have already moved across and been fully integrated into BNP Paribas' operations both on the structured products sales force and for the exchange-traded business, split between Switzerland, Germany, the Netherlands, Italy and UK."

Business model
BNP Paribas' equity derivatives division is based on a product specialist structure although the bank recognises synergies in a cross-asset set up between the flow and the traditional structured products business. Following the RBS acquisition, the French bank made changes to its equity derivatives business with Nicolas Marque, global head of structured equity at BNP Paribas in Paris expanding his portfolio to cover equity flow. Marque's appointment as global head of structured equity and flow was made on the back of the creation of a new streamlined two-pronged equity derivatives line to "improve and strengthen" the service provided to investors while fostering synergies between teams and products.

The bank retains its four-pronged equity derivatives units established in 2010 as part of a reorganisation led by the then global head of equities and commodity derivatives (GECD) Yann Gerardin to provide more regional autonomy, including to commodity derivatives, managed by Amine Bel Hadj Soulami; market liquidity provision, headed by Olivier Osty; structured equity, managed by Nicolas Marque; and flow and financing, then managed by Emmanuel Heurtier.

Gerardin was appointed head of BNP Paribas Corporate & Investment Bank (CIB) in October to revamp the division which was renamed Corporate & Institutional Banking. This reorganisation makes part of the bank's strategy to serve institutional clients with a comprehensive range of solutions which also saw the bank's securities services unit coming under the governance of the new CIB, while remaining a separate legal entity.

The new equity derivatives and flow division led by Marque is broken down by region with Pacini head of structured equity distribution (GECD), Europe; Krisztina Anspach, head of structured solutions Group Asia; and Frank Bertoneche, interim head of structured equity distribution, replacing Fabrice Hugon following his move to Elkhorn.

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