BNP Paribas acquires Credit Agricole €12.5bn EQD portfolio

Credit Agricole Corporate and Investment Bank (CIB) and BNP Paribas Global Equities and Commodity Derivatives (GECD) have signed a partnership agreement to ensure the management and continuity of Credit Agricole CIB's portfolio of equity derivatives, which is being discontinued.

Credit Agricole CIB has agreed to transfer the administrative and operational management of a €12.5bn portfolio of notional to BNP Paribas GECD from January 2014 in order to ensure the continuity of service for investors in these products including redemptions, secondary market, valuations, reporting and client relationships.

"The smooth management of the closure of our equity and fund derivatives activity is essential for Credit Agricole CIB," said Régis Monfront, deputy chief executive of Credit Agricole CIB. "After a competitive selection process which lasted several months, we have decided to select BNP Paribas to conduct by our side, in the environment that appeared the most favourable for us, this significant and imposing run-off project."

Within this framework, Credit Agricole CIB will also completely transfer the market risks linked to its positions to BNP Paribas GECD, which will manage the hedge.

"We are proud to have been chosen by Credit Agricole CIB for this transaction," said Yann Gérardin, global head of BNP Paribas GECD. "It demonstrates the quality of our infrastructure in the equity derivatives business and the efficiency of our teams. BNP Paribas GECD will bring all its know-how to meet the new needs linked to changes in the industry."

The news of Credit Agricole's exit comes after months of speculation about the future of its structured products business, following its December 2011 announcement to withdraw from "certain activities" including equity derivatives and commodities due to €2.5bn write-down related to its corporate and investment banking division.

In mid-2012, Credit Agricole CIB and Kepler CM unveiled plans for the sale of CA Cheuvreux to Kepler CM, which was completed in May 2013.

In its 2012 year-end results published in February, Credit Agricole said that structured products had decreased their share in assets under management, despite having a leading position as a business line for the banking group.

A Credit Agricole spokerperson told SRP that Thomas Chedru, co-head of structuring equity and funds derivatives at Credit Agricole CIB, has changed its functions at the bank but declined to comment further.

SRP spoke to Chedru to establish his new position and the impact of the partnership agreement with BNP Paribas on the firm's headcount but he declined to comment.

It is rumored that BNP Paribas is one of the leading contenders to acquire parts or the whole of RBS' investment products and equity derivatives (IP&ED) business.