Playing inside big league is reasonable in prime broking. the industry generates annualised profits approaching $20bn. scale takes care of both economically (comes back on concrete equity in the near order of 20 percent) and in terms of customer stickiness. land a large hedge fund and you have business across asset courses and geographies in trading, clearing, settlement and plenty of various other revenue streams besides. bnps ambitions in the field, because it beds down a recently obtained prime brokerage device from deutsche bank, are completely rational.
Can the french lender pull it off? europeans, typically, have thus far been consigned into mid-ranks in the industry of business banking for hedge resources. they either are lacking the total amount sheet ability, tech capabilities, worldwide footprint or (as deutsche bank discovered) security to challenge the ruling trinity of goldman sachs, morgan stanley and jpmorgan.
Bnp has got the financing capacity in spades. it ticks the majority of the various other boxes also, aside from a relatively poor us impact. however, getting hedge resources to modify companies is certainly not simple. market shares hardly budge in typical many years. in unusual many years customers tend to bail quickly, preferring not to loaf around when it comes to final rites. globally, leverage is down, stability sheet capacity is up. quick selling bans have been revived. they are perhaps not conducive trends.
History also suggests scepticism. it is a capital-intensive business. several also-rans saw the 2008-9 financial meltdown as a chance to go into the market, and not very made the grade, hsbc one of them. others made acquisitions at that time, including bnp paribas, which bought bank of americas suffering prime business. that business was deficient in many places, including multi currencies and say those around at the time creditworthy clients. once bnp had washed it, deutsche bank swooped in featuring its superior (non legacy) technology.
Really the only title that elbowed its way in to the top three was jpmorgan, creating on its purchase from bear stearns. that has been the best part of 10 years into the making.
The offer provides a helpful template for bnp. system integration, which it's some kind through the bofa package, is key. effective trading and execution tend to be important, calling for continued financial investment in technology. content the investigation, ceo audiences and conferences rolled out-by the most truly effective three is good but not a deal breaker. the top 3 will not be quaking inside their boots quite however. but bnp is way better placed than many european peers to give it a chance.
If you're a subscriber and wish to receive notifications when lex articles are posted, simply click the switch increase myft, which appears at the top of these pages over the headline.