By Reece Wallace · June 29, 2020
French lenders Natixis and La Banque Postale signed a deal on Sunday combining their fixed-income and insurance-related businesses, creating a joint entity with €415 billion ($466 billion) in assets under management and plans to outperform a slowing European asset management industry.
The agreement, entered into by Natixis Investment Managers and La Banque Postale Asset Management, commits the partners to merge their fixed-income and insurance-related asset management operations under a joint entity expected to be completed in the fourth quarter of 2020, pending regulatory approval.
Under the terms of the entity’s “balanced governance structure,” Natixis will own a 55 percent stake while La Banque Postale will own 45 percent of the company. Philippe Setbon, CEO of Natixis affiliate Ostrum Asset Management, will lead the future entity, whose executive committee will include members from both Ostrum and La Banque Postale Asset Management.
“With €415 billion in assets under management, the new entity’s horizon will be European-wide, with a focus on meeting the needs of liability-driven institutional investors, namely insurers, pension funds and corporates. It will seek to quickly grow its volumes and to play a central role in driving the consolidation of the European market in the coming years,” Natixis said.
The agreement is the latest development in the firms’ ongoing plans to create a major insurance-related asset manager in a sector searching for a profitability boost. Natixis and its parent Groupe BCPE had expanded its partnership with La Banque Postale and defined “the main terms of the contemplated combination of asset management activities” in December 2019.
Consolidation has been a priority for Western European asset managers, who like their American counterparts are facing pressures on the bottom line. While Western European assets under management hit a record €22 trillion 2019, the region’s profit pool fell short of its record €18.1 billion set in 2017, according to an analysis by McKinsey & Company.
Shrinking revenue margins could spell trouble for asset managers squeezed by fee compression and alarmed by a modest medium-term financial outlook. Growth in total assets under management, net new money and profit pool is expected to slow following a period of solid gains from 2015 through 2019, McKinsey said. Scale will be important for managers seeking profit and growth in assets.
“Critical scale will enable the company to continuously innovate for its clients, while operating model optimization and the pursuit of the compelling business development opportunities afforded by this combination are expected to bolster the joint entity’s profitability,” Natixis said.