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Énarquist cookbook

17 September 2020 By Christopher Thompson

Natixis’s dark clouds could yet have an M&A silver lining. New boss Nicolas Namias has a misfiring investment bank and a robust asset management unit hampered by some deeply troubling offshoots. Yet a potential funds business tie-up with Amundi or UBS – creating a European rival to $84 billion BlackRock – isn’t so far-fetched.

Namias has had a baptism of fire. After fellow énarque Francois Riahi abruptly left in August following a 261 million euro net loss, French regulators ordered a temporary suspension of funds at its London-based boutique H2O, which has 22 billion euros in assets under management. H2O said on Wednesday some illiquid securities would take a 60% haircut.

With shares trading at half tangible book, Namias has pledged a strategic review. Recent history suggests deep surgery is required: While fund freezes at H2O should end in October, repeated trading blowouts over the past two years saw the lender deliver a dire total shareholder return of minus 60% during Riahi’s tenure.

Any renovation starts with Natixis owner BPCE, which has over 20 billion euros of excess capital. Assuming a 40% premium, it could buy the rest of Natixis for 2.7 billion euros and then – regulators permitting – use the 1.2 billion euros difference between the purchase price and tangible book value to fund a shake-out. Once the revamp is complete, Namias can relist his most profitable unit sans the value-destroying investment bank.

With total of AUM 906 billion euros, Barclays reckon the asset management division will generate 1 billion euros of pre-tax profit in 2021. Apply Natixis’s 29% tax rate and an earnings multiple of 13 – a discount to French rival Amundi – and it might be valued at 9.2 billion euros, a nearly two-fifths uplift to Natixis’s current share price.

The real excitement might then kick in. The new-look wealth manager could finally use its shares to pursue M&A and scale-up. Power coupling with Amundi would create a 2.5 trillion euros in AUM regional rival to BlackRock’s $7 trillion. If a deal with Amundi owner Credit Agricole is too sticky, a union with UBS’s asset management division would boost AUM to a still chunky 1.8 trillion euros.

Namias said he plans to wait until next year to announce the new strategy. Given the prizes on offer, he should move quicker.


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