Natixis unveils plans to lift profitability targets
French investment bank targets further growth in insurance and asset management
Natixis launched new targets for its strategic plan on Sunday, with the French investment bank looking to take advantage of the strides it has made restructuring its business since the financial crisis.
“The philosophy of our new plan is similar to the last,” said Laurent Mignon, chief executive, as he looks to push ahead in core areas of corporate and investment banking, insurance and asset management.
The bank is setting tougher profitability targets under its “new direction”. It wants to lift its return on tangible equity to between 13 per cent and 14.5 per cent by 2020.
That compares with a previous target of 11.5 to 13 per cent under the old strategic plan. It is also aiming at revenue growth of about 5 per cent a year. Natixis is also pushing its “shareholder-friendly distribution policy”, which will result in up to €4bn being paid out in dividends by 2020, with a minimum payout of 60 per cent every year, up from 50 per cent in the previous plan.
Natixis wants to differentiate the bank from its competitors and make the same sector-wide digital push.
“Differentiation is very important because Natixis cannot aim at being one of the number one of the banks of the world . . . but in the sectors we are in, we want to be viewed as the number one,” Mr Mignon said.
Natixis, which is majority owned by French retail banking group BPCE, was hit particularly hard by the financial crisis and needed a rescue capital raising from its parent in 2008.
That, said Mr Mignon, forced the bank to restructure and adapt at a rapid pace: “We suffered more than many and we refocused quickly.”
“We don't underestimate competition. It’s going to be strong, other banks have either now finished or coming through their restructuring,” Mr Mignon added.
“Of the $4bn in capital we generate throughout the plan, we plan to give €3bn to shareholders,” he said. “We will allow ourselves to do €1bn of acquisitions over the period . . . If we don’t find an acquisition that makes sense we will give back more.”
Those acquisitions may well be in asset management where Natixis aims to push its perceived advantage.
Thomas Buberl, Axa’s chief executive, has recently poured cold water on a move for its asset management business even if many believe consolidation will occur in the industry in the near term.
Natixis’s corporate and investment banking division weathered the decline in trading activity better than many of its peers in the third quarter, even as the bank’s overall result was propped up by its asset management and insurance businesses.
Lorraine Quoirez, an analyst with UBS, said: “After having well implemented the de-risking strategy between 2008-12 and successfully transformed the business model into an asset light one since 2013, we believe management has now gained significant credibility among investors.”
The bank is targeting a 2 per cent growth in risk-weighted assets per year in its CIB division by 2020 and an increase in revenues of 3 per cent a year. It is aiming to increase insurance revenues by 7 per cent during the same period.
In asset management, Natixis is targeting more than €100bn of net inflows that will boost assets under management to near €1tn by the end of 2020.
“We really want to become one of the world’s leading active asset management companies,” Mr Mignon said.
“The more the world goes to passive with no brain behind it . . . the more business chances there will be active management,” he added.