Natixis shares drop after H2O warns of large asset management losses
Recent performance of French bank’s funds unit has called into question its multi-boutique model
Natixis shares dropped sharply on Wednesday, making the French lender the worst-performing European bank as large losses at one of its asset management units alarmed investors.
The pressure on Natixis comes after H2O Asset Management, a London-based asset manager in which it has a 50.1 per cent stake, told clients that it had suffered “surprisingly large” losses during the recent market turmoil.
The resurgence of volatility across markets on Monday left H2O’s flagship Multibonds fund down 20 per cent, according to data released on Wednesday.
Even before this week’s turmoil, its funds were nursing large losses this year. Multibonds has now lost 40 per cent since its peak last month, while smaller H2O funds have suffered even bigger falls.
Analysts said that the punishment meted out to Natixis reflected the importance of H2O, which was founded by Bruno Crastes and Vincent Chailley in 2010, to the French bank’s profits.
“The shares have lost some €1.7bn of relative performance since Thursday which, given the €0.2bn earnings contribution of H2O, doesn’t seem particularly unfair if the market factors in longer term impairment of the franchise,” analysts at Barclays noted.
Although H2O enjoyed stellar performance for several years, over the past 12 months it has been seen as increasing concern for Natixis, which is majority owned by French mutual group BPCE.
Last year, the Financial Times revealed that H2O had put more than €1bn of investors’ money into illiquid bonds linked to Lars Windhorst, a controversial German financier. The revelation triggered €8bn in outflows from its funds, prompting Mr Crastes to vow that he would never gate them.
Following this week’s losses, analysts at Barclays said that “clearly the risk is of further sizeable outflows in that context, particularly given the prior commitment of management not to gate.”
The recent performance of H2O has called into question Natixis’s multi-boutique model, which involves taking majority stakes in smaller investment firms that continue to be run at arm’s length. The French bank’s ability to manage risk also came under fire when a €260m loss linked to South Korean derivatives emerged in late 2018.
In November, Natixis unveiled measures aimed at reinforcing its risk management but an internal audit has not resulted in any further public changes.
Last month, François Riahi, the Natixis chief executive, told analysts that the bank had “always said that we are not releasing any audit we are doing. We will not make an exception”.
Shares in Natixis closed down 4.8 per cent on Wednesday, taking their decline this year to 40 per cent. France’s benchmark CAC 40 index finished 0.6 per cent lower.
Natixis, which, like other French lenders, has been hurt this week over concern about its exposure to the energy sector, declined to comment on Wednesday.
The latest letter to investors from H2O flagged that its funds have bounced back strongly from previous large losses during times of extreme volatility, including during the 2015 Greek government debt crisis.