In the second part of an interview, Nicolas Reille, head of equity derivates sales and financial engineering at Natixis in Asia Pacific, and Samuel Plagnard (pictured), head of fixed incomes sales and financing engineering at Natixis in Asia Pacific, talk to SRP about Natixis's projects in Asia and the bank's initiatives in the ESG segment.

According to Reille, Natixis is still a relatively new player to the Asian market, and as such, the company still needs to foster its relationships with certain private banks. "However, we are excited to see our impact in the industry being increasingly recognised, which augurs well for our business development efforts," he says.

Reille believes that, at an industry level, the overwhelming focus by most of the manufacturers in the flow business in general and reverse inquiries in particular - a highly commoditized business with very few, if any, differentiating factors - has led to an increase of one-way risk, i.e. banks accumulating the same risks.

"In that regard, innovation is not only a way for us to show off our superior financial engineering capabilities, we at Natixis think it is also the only viable way forward from a business standpoint because it diversifies the risks," says Reille.

According to Plagnard, running a profitable business in a tightly regulated environment requires an "asset-light" strategy (balance sheet rationalisation. "Also, because [banks] act as the ultimate 'financial risk recyclers', [they] need to be innovative in order to be able to come up with investment solutions that are relevant to their clients."

Therefore, product suitability is key, and as a solutions house, developing a thorough understanding of clients' needs is critical, according to Plagnard. "Our cross-asset sales setup, with product experts across all asset classes, plays a crucial role in determining what products and solutions are best for our clients given their needs/constraints," says Plagnard. "To that end, we are constantly investing to expand our financial engineering capabilities, allowing Natixis to have a holistic approach, spanning all asset classes, to product innovation, whether on pay-offs, wrappers, regulatory treatment and legal structuring. We have invested significantly in our solutions business over the past six years, and the series of awards we have secured this year seem to suggest that this approach was the right one."

Natixis' focus on innovation, which has underpinned and continue to underpin the growth of its structured product business, is what makes it stand out from the competition, according to the two executives. "We are constantly on the lookout for new strategies and products that will benefit our clients," they say. "Our recent work with KRX, which culminated with the launch of the Kospi3 index, the first structured products index to be launched by an index sponsor in Asia, is the perfect illustration of our innovative capabilities. Our solid cross asset pricing capabilities, our strong credit rating, and our expertise in structuring bespoke solutions are also strong differentiators of the Natixis brand."

Natixis opened a branch in Taiwan earlier this year, a development which is already offering multiple new opportunities around equities and fixed income. The company is also seeking new opportunities in the hybrids and global security finance spaces. According to Plagnard, Asia is a fast-growing credit market, and Natixis is in a very good position to tap into the growing appetite for this specific asset class. "The company has a long and successful track record in structured credit solutions in both the US and Europe, and we are able to leverage that expertise as we develop our credit franchise in the region," he says. "We are seeing solid interest for our solutions in all markets and across a variety of client segments, and we anticipate this asset class to only gain in popularity in the coming years in the region."

On the increasing activity around ESG, Reille points that developing ESG strategies through structured products is a very important area for the bank, and one in which the bank has historically been very active. Most recently the bank hired Chaoni Huang, who is an instrumental member of our Green & Sustainable Hub, which we have launched recently globally. "Natixis has a long and successful track record of development of ESG/SRI indices," says Reille. "We have a dedicated team of ESG specialists at Group level, with whom we work closely."

On the fixed income segment, Natixis is also one of the leaders in the European green bond markets, and "we are also able to draw on that wealth of knowledge as we grow our franchise in Asia", according to Plagnard.

"SRI/ESG metrics, because they are strong indicators of future volatility, earnings risk, price declines and bankruptcies, are now also recognized within the broader investment community for their ability to generate long-term competitive financial returns, while delivering a positive societal impact," says Plagnard. "As societal and environmental awareness grows more acute, we expect investors to place increasing emphasis on ESG/SRI investments, at the expense of "grey products". Building on our leading financial engineering capabilities to design ESG investment strategies is a natural next step for Natixis."

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