Sarkozy's Bark Worse Than Bite On Banks

By Lionel Laurent and Daniel Flynn

PARIS | Fri Feb 18, 2011 6:14pm IST

(Reuters) - French President Nicolas Sarkozy has talked tough on banks this year but all signs are he has agreed to go easy where it matters -- on forcing increases in their capital.

Sarkozy was one of the hits of this year's World Forum meetings in Davos, telling JPMorgan Chase chief Jamie Dimon the global crisis had shattered trust in big players and had proved they needed regulation.

But while he has saddled his own banks with more tax on bonuses and balance sheets, he has been softer than neighbouring Switzerland or Britain when it comes to forcing lenders to raise their capital base and discouraging risk-taking, analysts say.

"The capital positions of large French banks are now weaker than those of European peers ... even though they entered the financial crisis with stronger capitalisation," Standard & Poors analyst Elisabeth Grandin said.

(Read on...)

Hedge Fund Predators On The Prowl For Stragglers

By Lionel Laurent and Laurence Fletcher

PARIS/LONDON, Jan 27 (Reuters) - Hedge funds are prowling the post-crisis landscape looking to buy small, weakened rivals that are struggling to grow.

The most vulnerable targets are so-called funds of hedge funds, essentially a basket of stakes in individual funds, which have been among the hardest-hit by client outflows.

"Consolidation will potentially be the only way to survive for smaller funds," said Aureliano Gentilini, global head of hedge fund research at Lipper, a Thomson Reuters company. "It will be a trend that cannot be averted."

Funds of hedge funds are also seen as easier targets because they are typically run by a team rather than a single, star manager who could be difficult to replace.

"Funds of hedge funds are more sellable than single-manager funds," said Antoine Haddad, founder of Bainbridge Partners, a $950 million firm that is keen to make acquisitions.

"They are usually managed by a team and are not star-driven; you're selling a business process."

(Read on...)

Banks Cash In On French Housing Boom

By LIONEL LAURENT | REUTERS

PARIS: The traditional French aversion to risk and debt is being turned on its head as rock-bottom interest rates and tax breaks push investors into real estate, boosting banks’ mortgage lending and their client revenue.

The worry is not that a subprime-style fiasco is in the making, but rather that these trends are unlikely to last.

French housing loan issuance doubled in the 12 months to Nov. 2010, according to the Banque de France, to 145 billion euros ($198.3 billion) — eclipsing mortgage stagnation in crisis-scarred Spain and a 7.9 percent decline in Germany.

House prices in France also outpaced Spain and Germany with an 8.6 percent rise in the third quarter of 2010, according to the Royal Institution of Chartered Surveyors, driven by a cocktail of ultra-low interest rates and government incentives to spur home buying.

Such growth is not a ticking time bomb for domestic lenders like BNP Paribas and Credit Agricole, analysts say. French household balance sheets are solid, lending standards are tight and according to Deutsche Bank France has one of the lowest mortgage-to-GDP rates in Europe at 35 percent.

“Housing loans in France are of a significantly higher quality overall than in a lot of other countries,” said Christophe Nijdam, analyst with Alphavalue. He said France lacked the kind of helter-skelter securitisation that had encouraged U.S. lenders to take big risks in the past.

(Read on...)

BNP's Merger Maestro Seen As CEO-In-Waiting

By Lionel Laurent

PARIS, Jan 25 (Reuters) - After a decade in the shadows knocking acquisitions into shape, BNP Paribas Chief Operating Officer Jean-Laurent Bonnafe may soon find himself in the spotlight as next in line to head France's biggest listed bank.

Speculation is mounting that BNP -- one of the few banks to have kept its reputation and its top management intact throughout the crisis -- is turning its hand to succession planning, with the 49-year-old COO as the shoe-in candidate.

"The job is his, unless some major screw-up happens on his watch," a former colleague at BNP said.

(Read on...)

BNP Funds Face Overhaul As Investors Seek Exit

(This story made the front page of Les Echos' companies section.)

By Lionel Laurent

PARIS, Jan 3 (Reuters) - Two underperforming investment funds recently frozen by French bank BNP Paribas are being restructured in the face of a "significant" number of redemption requests, documents sent by the bank's fund arm to investors reveal.

The "Opportunity" and "Serenity" funds, which are invested in a range of hedge funds and represent $376 million in assets, have been entrusted to a new manager and aim to reopen sometime around March, according to the documents seen by Reuters.

The planned overhaul of the portfolios comes at a tough time for parts of the hedge fund industry as lower-tier funds-of-hedge-funds are squeezed by difficult financial markets and fragile institutional investor sentiment.

(Read on...)

Credit Agricole Seen Returning To Low-Risk Roots

By Lionel Laurent

PARIS, Dec 10 (Reuters) - When French bank Credit Agricole (CAGR.PA) last unveiled a strategic plan in 2005, it promised international growth far beyond its humble agricultural origins and a big push in the glitzy investment banking business.

Five years on, with these ambitious dreams shattered by the financial crisis and its share price cut in half, the bank's new management is seen winding back the clock to less risky times as it prepares a 10-year outlook due to be unveiled on Dec. 15.

New Chief Executive Jean-Paul Chifflet has already rung in some key changes, replacing the head of Credit Agricole's crisis-scarred investment bank with a green-fingered executive trained in agricultural engineering -- a sign that sleepy, domestic banking is very much back in fashion.

"This is about a group of farmers going back to what they do best," a London-based bank analyst said, citing strong retail and asset management activities that helped Credit Agricole double profits ib the first nine months of 2010.

(Read on...)

French Bank Offers "Disco"-Style Branch Makeover

By Lionel Laurent

PARIS, Dec 3 (Reuters Life!) - French bank BNP Paribas has poured 5 million euros ($6.60 million) into a makeover of its flagship branch opposite Paris' Garnier Opera House, even as market jitters linger over the health of euro zone banks.

Purple shag-pile carpets, a glitzy silver hexagon-patterned ceiling and a wall covered with green shrubs are just some of the decorations adorning the re-opened branch, which has iPads on display and a kids' corner with walls to scrawl upon.

"It's too luxurious...Our taxes may not have paid for it but our fees did," said Nouraï, a 40-year-old hotel manager who has used the branch for 15 years. She described the array of Austin Powers-style colours as "a bit disco" and said the 60s-style makeover would not be fashionable in a few years' time.

The average cost of a standard bank branch in Paris is 300,000 euros, according to Stephane Court, of Equinox Consulting. "BNP's store, at 2,600 euros per square metre, is pretty expensive, but then again this is a completely new kind of branch," he said.

BNP, which has repaid state aid received during the financial crisis, has seen its share price lose 13 percent since a resurgence in fears over euro zone debt began in mid-September. The stock has lost nearly half its value since pre-crisis highs.