RBS and BNP Paribas hammer out IP&ED business sale

BNP Paribas and RBS have reached an agreement on the sale of certain assets and liabilities from RBS's Structured Retail Investor Products and Equity Derivatives (IP&ED) business.

The two banks said in a joint statement that following the start of exclusive talks in November 2013, the two banks have reached an agreement for the sale of certain assets and liabilities of RBS's Structured Retail Investor Products & Equity Derivatives (IP&ED) to BNP Paribas Global Equities and Commodity Derivatives (GECD).

Yann Gerardin, global head of BNP Paribas GECD, said the acquisition will accelerate the French bank's development in the retail listed products and structured retail products markets, "without modifying its risk profile".

"We are proud to have been chosen by RBS, after a highly competitive bidding process which testified to the quality of their business," said Gerardin. "The transaction will allow 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."

Peter Nielsen, co-chief executive of markets at RBS, said that BNP Paribas will ensure seamless execution for our clients. "The reputation of BNP Paribas, its long-term commitment to the equity derivatives business, track record with this kind of transaction and the quality of its teams and platform made BNP Paribas an ideal partner for RBS," he said.

Portfolio value
As reported, the notional of RBS IP&ED portfolio is £175bn ($282bn), with £30bn belonging to its public distribution network, £65bn to the listed options and futures division and £80bn the over-the-counter products (OTC) section.

However, a BNP Paribas spokesperson told SRP that 65% of the portfolio in the scope of the transaction corresponds to retail listed products, and the rest is structured retail investor products.

An RBS regulatory news statement (RNS) statement on the London Stock Exchange stated that "the proposed transaction is expected to transfer risk management of, and/or market making for, up to £15 billion of liabilities over time."

"The proposed transaction is in line with the strategic repositioning and de-risking of the markets division of the RBS Group as announced in 2013," said the statement. "As part of the proposed transaction, where available, statutory transfer schemes will be used to effect a legal transfer of eligible transactions (including securities) to BNP Paribas or one of its affiliates."

BNP Paribas's bid was chosen among 31 original bidding financial firms, with the final shortlist comprising BNP Paribas, Decura, Morgan Stanley and Société Générale and the final stage of the bidding process being a head-to-head between the two French banks.

It is also understood that the future of hundreds of RBS employees is uncertain as the status of their jobs will be subject to the requirements of the French bank. Between 500 and 600 staff within RBS's IP&ED business are expected to move to BNP Paribas. "We do not have all details of hires for the moment, but it is expected that a number of staff will move to BNPP," he said.

2013 acquisitions
The French bank acquired Crédit Agricole's equity derivatives book in October 2013 for €12.5bn in a further move to expand its retail structured products business, following the acquisition of Macquarie's equity derivatives business in July 2012 in a transaction that involved more than 1,500 products being transferred to the French bank across seven exchanges.

BNP Paribas Group also reached an agreement with Rabobank Group in December 2013 over the transfer of the 98.5% stake held by Rabobank in Bank Gospodarki Żywnościowej (Bank BGŻ) to BNP Paribas for PLN4.2bn (€1bn), bringing the total liabilities assumed by the French bank in equity derivatives portfolio acquisitions to over €295.5bn.

Nielsen said that the transaction is still subject to competition approval and that expects receiving clearance for this during H1 2014.