BNP Paribas completes 5.1 billion-euro acquisition of AXA Investment Managers

[LONDON] BNP Paribas said on Tuesday (Jul 1) it had completed the takeover of AXA Investment Managers, creating one of the five biggest asset managers in Europe, and was still discussing with supervisors the hit to its capital ratio after regulators previously opposed it using a favourable capital treatment.

The new combined entity manages more than 1.5 trillion euros in assets, ranking behind European rivals Amundi, UBS Asset Management, and Allianz (including PIMCO), following last year’s 5.1 billion-euro (S$7.7 billion) acquisition of AXA’s investment management unit by the French bank.

The acquisition allows BNP to manage long-term savings for insurers and pension funds with around 850 billion euros in assets, while also positioning the bank among the main exchange-traded funds (ETFs) providers in Europe and targeting growth in private asset investments, it said in the statement.

BNP expected regulators would let the deal through with minimal effect on the bank’s capital because it was buying AXA IM through its insurance business, Cardif, to make use of a treatment known as the “Danish Compromise” – which allows lower capital requirements for banks that own insurance units. But an assessment earlier this year from the European Central Bank tempered those expectations, leading to a greater hit to BNP’s capital than the lender had initially priced in, sources said at the time. BNP subsequently cut its forecast for returns from the deals, and on Monday reiterated those lower return projections.

BNP also confirmed that the hit on the group’s common equity tier one (CET1) ratio would be around 35 basis points – worse than the 25 bps it had initially expected – and that discussions with supervisory authorities were ongoing.

The bank said it would provide an update on the progress of the deal when it publishes third-quarter results on Oct 28.

Sandro Pierri, CEO of BNP Paribas Asset Management, will lead the group’s asset management business while Marco Morelli, current Executive Chair of AXA IM, will become its chair, BNP added in its statement. REUTERS