BNPP IP aims to double Asian profit contribution
In April last year, the blood of Asia-based BNP Paribas and Fortis staff ran cold on the announcement of the firms' planned merger. Many, even those on the BNPP payroll, worried that the plans -- driven out of Paris -- would be overly Euro-centric and could spell major casualties in the region.
One year on, BNP Paribas Investment Partners (BNPP IP) has officially completed its integration with Fortis Investments. Now that the dust has settled, there hasn't actually been a great deal of overlap between the BNPP and Fortis bodies when compared to the merger of ABN Amro and Fortis, although the level of synergies is also limited.
That gives Stewart Edgar, the new head of Asia-Pacific for the combined entity, more room to manoeuvre. Ensconced in the company's new office in Exchange Square Three in Hong Kong yesterday, he looked ahead at how the business could grow in the region. This could potentially develop through two or three small opportunistic M&A deals, and new hires as good candidates come along.
Edgar isn't your typical French candidate parachuted out of Paris into a top Asia role. The non-French-speaking Scot has worked with Fortis Investments for 14 years -- a tenure best remembered for Edgar's prescient backing of Tian Rencan in founding the Fortis Haitong joint venture in Shanghai (a dark-horse project that met resistance from Fortis's European management at the time).
Edgar is here to assert the vision that BNPP IP wants to go "global for local" and be "local for local". While he won't forbid staff from communicating with each other in the native language (French), he says the official lingua franca in the Asian office among the regional team is English.
However, interestingly, BNPP IP is now providing after-work classes for its staff, in a campaign to ensure the French surnames of its officers are pronounced correctly by Asian employees.
BNPP IP is already the 11th largest asset manager in the world and the fifth largest in Europe. The combined BNPP IP entity sources about 10-15% of its profit from the Asia-Pacific region. According to the last aggregate figure provided by BNPP for AsianInvestor's AUM survey in December, $64.7 billion of its AUM comes from the Asia-Pacific region. Edgar says the split between institutional and retail-resourced AUM is about 70% to 30%.
Edgar plans to double the amount of profit contributed by the business in the region. And as it does so, his target is for all the firm's local businesses to enter the top tier. Compared to its largest competitors, BNPP IP has a favourable presence in Asian markets. It's already present in markets ranging from the developed (Australia, Japan, Korea and Taiwan) to the developing (China, Indonesia, India and Malaysia).
BNPP's growth in the coming years will come from four key pillars: China, India, Indonesia and Korea. All these businesses are already leaders locally. But Edgar wants them to make further advances -- for example, in Korea, BNPP's JV with Shinhan needs to enhance its distribution ties with the Shinhan group and locally with other third-party players.
BNPP also has lofty goals to become a leading offshore and regional product provider to local distributors and institutional clients in Hong Kong and Taiwan, and to dominate in terms of institutional market share in Hong Kong, Malaysia and Singapore.
Behind these aggressive ambitions, however, the unspoken challenge is that BNPP IP is under pressure from several regulators to become compliant with local ownership rules. In India, Edgar wants BNPP IP to become a top-10 local player, which would be marked by BNPP's ability to deliver innovative products locally, but it is under regulatory pressure to consolidate its two JVs there.
And in China, today marks the official closing date of the sale of BNP IP's ABN Amro Teda JV inherited from Fortis. But it has yet to seal a deal to offload its other non-compliant stake in its home-grown JV, SYWG BNP Paribas Asset Management.
Market speculation suggests Japanese and Korean suitors had already expressed interest in the SYWG-BNPP AM stake, with potential bidders including Nomura and Samsung. The move would mark a resolution to its saga of three separate non-compliant stakes in ABN Amro Teda, Fortis Haitong and SYWG BNPP, resulting in just one in the Fortis Haitong JV.
"We don't talk about that because we are well mannered," quips Edgar. But he says the legal machinery at BNPP is working to meet local regulatory rules.
Furthermore, Edgar says he's noticed more interest among Asia-Pacific clients for regional -- in particular, renminbi-denominated and asset-allocation -- products. BNPP IP's qualified foreign institutional investor (QFII) offering, managed by Fortis Haitong in Shanghai, used to be a big hit among European pension clients. However, as markets develop, BNPP's biggest clients for its QFII capability are now all from the region.
The firm is giving up the QFII licences that had been granted by Chinese regulators to ABN Amro and BNP Paribas, and keeping only the QFII quota allotted to Fortis. QFII licences are apparently tied to local JV licences in China. But the process will not affect capacity for current AUM, as the firm is free to apply for more as required under the Fortis label, says Desmond Tjiang, chief investment officer for Asia ex-Japan equities in Hong Kong.
On the exchange-traded fund (ETF) front, a lot of European investment banks are making big Asia-Pacific pushes for their products, and BNPP is one of the leaders by market share in Europe. Edgar says ETFs are another product that will eventually grow for BNPP in Asia, but the firm is trying to navigate through local regulations, and work is in process to develop products suitable for local consumption.
BNPP IP now boasts a headcount of around 800 in total, of which 230 investment-related staff are based in Asia-Pacific. That figure has been added to over the years, first by ABN Amro, then by Fortis and BNPP. "We are no longer a small company," says Edgar. "We're now all over Asia-Pacific."
As of the end of January, BNPP IP manages a total AUM of €62 billion: €20.6 billion in Korea; €7.9 billion in China (and a separate €0.2 billion under the SYWG JV, which has to go); €8.8 billion in Japan; €4.3 billion in Hong Kong; €1 billion in Taiwan; €2.3 billion in Singapore; €0.6 billion in Malaysia and Brunei; €1.4 billion in India; €1.5 billion in Indonesia; and €13.5 billion in Australia.