BNP Paribas leaves behind Franco-French mentality

When Jacques D’Estais was transferred from corporate and investment banking to head of asset gathering activities at French bank BNP Paribas two years ago, he quickly established his priorities to his 30,000 employees working across more than 60 countries.

His asset management, securities services, brokerage and insurance businesses would all be handled at arms’ length, with their own dedicated CEOs. What concerned Mr D’Estais most was the firm’s undervalued private banking and wealth management franchise.

Mr D’Estais rapidly installed himself as hands-on boss of the business, with the recently retired Francois Debiesse strategically recalled as head of philanthropy, but also acting as a de facto special adviser on all wealth management issues. The intensive care which Mr D’Estais is bestowing on this business, which now enjoys its own dedicated brand management teams in Europe and Asia, is certainly paying off.

Its acquisition-fuelled 45.7 per cent growth in client assets during 2010 – well ahead of its peer group, with Deutsche on 35.3 per cent and ABN Amro on 23.8 per cent – places the Paris headquartered banking brand as fourth in Europe, managing €257bn. In the global rankings collated by Scorpio Partnership, BNP Paribas has now moved up to 9th place, surging ahead of JP Morgan and Pictet.

Regional heads of wealth management at BNP Paribas talk of a concerted group effort to shake off a narrow “Franco-French” mentality at the centre of the bank’s previously introspective mindset. A UK domestic business, inherited from Fortis, has also been sold to Williams De Broë along with 70 staff, with the bank keen to focus more on clients with an international dimension.

When asked about his key task of breaking out of the “French ghetto”, the normally amiable Mr D’Estais almost spits out the words with a brusque, disdainful shake of the head. This is the one observation that clearly hits a raw nerve with the suave Frenchman. “I hope this Franco-French perception is not really there,” says Mr D’Estais, quickly collecting himself. “France represents just €70bn of our AUM. It is important, but it’s just a piece.”

TWIN APPROACH

With Europe accounting for 85 per cent of earnings of the Investment Solutions business, there are now “special plans” in place for countries in Asia, Latin America, the Middle East and Africa. The expansion strategy is based on growing the bank across two delivery streams.

The first represents not just the domestic French market, but others such as Italy, Poland, Brazil, North American and North African operations, where the private bank is integrated into retail banking networks, powered by products from the asset management division. “This model has already been extremely successful in France,” says Mr D’Estais. “The idea is to look at the portfolio of clients in our network and, on an ongoing basis, assess which of them are worthy of the treatment of a private bank.”

Currently, this tried-and-tested system is being rolled out in Turkey, following the bank’s merger there with TEB. It is also being introduced in Italy, where BNP Paribas recorded a surge in sales of over-the-counter investment products after absorbing the troubled BNL franchise in 2006. Belgium and Luxembourg, where the Fortis and BGL private banking operations have recently been integrated, are next in line.

“But we also have a big base of clients with no retail network,” says Mr D’Estais, referring to wealthy customers in branchless territories, often introduced by the bank’s capital markets division, CIB. This delivery channel operates in Switzerland, Spain, the UK, Middle East, Latin America and Asia.

“The CIB connection proves very important in terms of account access,” he admits.

The previous occupier of the asset gathering post, Alain Pappiasse, who swapped jobs with Mr D’Estais and now runs the investment bank, saw private banking primarily as a distribution channel. While Mr D’Estais recognises the need for cross-selling, he is keen to move on from the product pushing culture, that was once a reality here.

“Private banking is a distribution channel, as we sell funds managed by BNP Paribas Investment Partners and also investment banking products,” admits Mr D’Estais. “But it is now open architecture. Our wealth managers are working for the clients, not trying to sell our own products.”

Investment products for private clients are chosen by Fundquest, the bank’s fund selection and asset allocation consultancy arm, which also falls under his remit. There are also internal calls for Mr D’Estais to increasingly use more of the brokerage capacity of his Cortal Consors unit, a key player in French retail markets, but not as yet utilised by BNP Paribas Wealth Management.

“Fundquest is the gatekeeper for BNP Paribas funds. If a product is not stamped ‘OK for business’ by Fundquest, it is difficult for it to be sold in our networks,” says Mr D’Estais.

The transformation away from the product-centric to a client-led culture in wealth management is still ongoing. “In certain countries, there were excesses in the nature of products being sold through retail networks, where clients did not understand the nature of products they were buying,” admits Mr D’Estais, with many clients burned by complex, synthetic structures soon after the crisis hit.

“This is not a sign that structured products are necessarily bad. But some control in the system is necessary.”

He talks about producing a simpler, easier to use generation of wealth management products. In helping to devise this, he hopes to share with clients his intimate knowledge of structures developed during his years coming up through the capital markets division.

This is in direct contrast to many senior French bankers, who are graduates of the ‘Inspectorate’ focussing on compliance disciplines, but lacking detailed product knowledge. “I am not the type of person who likes to look down from a high level,” agrees Mr D’Estais. “We work with complex products. If you don’t understand how they work, it is more difficult to make an impact. I like to be involved in the detail.”

Wealth management, insurance, securities services and asset management – the mainstays of his responsibility as Investment Solutions boss – are “fantastic” businesses in the Basel III regulatory environment, because their success is determined by the value of their assets, says Mr D’Estais.

They consume very little capital and the underlying assets are directly influenced by levels of wealth creation. “In the new world, where underlying assets are growing by 5 to 10 per cent, backed by the BNP Paribas name, long liquidity and long cash, with low capital consumption, there are not many businesses in a bank that are as good as that. I can’t think of anything like this anywhere else.”

Mr D’Estais is clearly talking about a favoured child, but one he feels can perform well above current realities. “I want to steer the wealth management business directly for some time, to change the evolution of the strategy,” he says.

“There is a bit of work to do to make it better. We are already a good and profitable private bank, but there are things which we can improve.”

CV

Jacques D’Estais

2009 Appointed head of investment solutions at BNP Paribas and CEO of the bank’s wealth management arm

2005 Head of corporate & investment banking and became member of Group’s Executive Committee

2000 During merger of BNP and Paribas, appointed global head of fixed income, BNP Paribas, covering all the bank’s bonds, derivatives and FX activities worldwide

1995 Moved to Japan to take up position of general manager of Paribas Capital Markets Japan

1991 Head of equity derivatives

1988 Moved to London to take responsibility for interest rate options

1985 Transferred to trading room activities in the Treasury department, before joining derivatives team

1983 Joined Paribas in France and spent two years in corporate banking department

1981 Graduated from the Ecole des Sciences Economiques et Commercialses and began banking career at Credit Lyonnais

Jaccques D’Estais, BNP Paribas