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Natixis SA’s 14 years as a publicly traded bank will be best forgotten. Losses during the global financial crisis pushed the French firm, which trades securities and owns an asset manager, to the edge soon after its 2006 creation.
While the company has been profitable since then, repeated trading losses and funds that ran wild have been a constant reminder of how not to run a midsized investment bank. It’s little wonder that its parent
firm now intends to take Natixis private.
Groupe BPCE, the French cooperative lender that controls Natixis, is offering minority investors — who own about 29% of the company — 4 euros ($4.85) for each of their shares. Though the 8% premium to the previous day’s close may look skimpy, Natixis’s shares have hardly traded above that price since June 2019, well before the pandemic struck. The stock was less than half the current price as recently as
October. With an uncertain future as a standalone company, Natixis investors don’t have many options.
The trouble with Natixis in its current form is that it’s not big enough to be of critical importance to many trading clients but its
$600 billion of assets make it large enough to do broader harm to the financial system should things go wrong. Backed by the deep pockets of BPCE, one of the world’s 30 most systemically important banks, and squeezed by low interest rates, it chased revenue by selling complicated and risky financial products. The math whizz kids who managed Natixis ran rings around the parent’s board.
In 2018 it was exotic Korean derivatives that cost the firm hundreds of millions of dollars, and drew scrutiny from the European Central Bank. Then last year wagers on company dividends blew up, leading to more losses.
The Natixis strategy of
owning stakes in boutique money managers rather than consolidating those businesses under one roof also backfired. When H20 Asset Management overinvested in dubious, illiquid bonds it triggered client withdrawals and raised the alarm about Natixis’s risk management and controls.
True, Natixis has been trying to turn a corner since ousting its chief executive officer in August. It promised to shrink its equity business, ending the sale of some complex derivatives, and it cut its annual revenue target at the equity unit by about a quarter from the previous run rate. It also planned cost savings of 350 million euros ($423 million) by 2024 and started talks to unwind the H2O partnership, a move
analysts estimate would
reduce recurring profit by 5% over time.
—Bloomberg