Issuing structured products in France hasn't been easy in recent years, as regulators have placed growing restrictions on the level of complexity sold to retail investors. A requirement that only products that can be described in three steps or less could be offered to the French public proved particularly challenging.
While BNP Paribas dominated its home market last year after working tirelessly to meet such regulatory requirements, the bank retains its position this year for the quality of service it has delivered to investors and its ability to innovate in an environment of continuing low interest rates and ever-tighter regulations.
"Last year we aimed to innovate hand-in-hand with the regulators. This year it was more hand-in-hand with clients," says Omar Alami, head of distribution sales for France, Monaco, Switzerland and Luxembourg at BNP Paribas in Paris.
Consider the experience of a large private bank in France. One thing the firm's head of fund selection particularly likes about BNP Paribas is that Theam, its specialist fund unit, tests how its products will behave in different market conditions. Other product providers may deliver such a service, but Theam is among the best in terms of its responsiveness and the level of information provided, says the private banker.
For example, its Guru strategy was vigorously tested against the heightened stock-market volatility following the Volkswagen emissions scandal that broke out in September 2015. "It was very useful to see how sensitive the model was to the Volkswagen situation. These kinds of tests provide important explanations," he says.
Last year we aimed to innovate hand-in-hand with the regulators. This year it was more hand-in-hand with clients
The service provided by BNP Paribas has improved, particularly in the past year or two, the private banker adds, and this has been reflected in a higher quality of marketing and documentation for clients. "We felt sometimes in the past that Theam was more a provider for institutions, but now they have understood that distribution is a very important area of development," he says.
While assiduous client service has clearly won the bank recognition, BNP Paribas has also demonstrated its ability to come up with attractive new products, such as its iStoxx Europe Centenary Select 30 Index. The index, designed for non-capital-guaranteed products, comprises companies founded at least 100 years ago, which have proven resilient in multiple economic cycles. The first distribution deal took place in July 2015, and the product appears to have set a precedent, with similar ideas emerging from other providers.
One French private bank liked the centenary index for its simplicity and the speed with which it was able to get the products out to its clients - less than a month after the distribution agreement was struck.
"There's a good story behind it, and BNP Paribas is very dynamic, very active in proposing ideas. When you ask for a product, they respond very quickly," says the private bank's structured products specialist.
The French arm of UK insurer Legal & General (L&G), which has sought mainly simple products such as autocallables this year, gives similarly positive feedback. Eric Rosenthal, head of sales at L&G France, says BNP Paribas is the most attentive of the issuers the firm works with.
"The follow-up is very important, and they are always there, not just at the time of issue," says Rosenthal, adding that the bank is surprisingly nimble for such a large operation, and offers good pricing.
Behind the glowing client references, BNP Paribas boasts strong performance and sales volumes. The Guru strategy - which was launched five years ago and uses a systematic, fundamental stock selection process - posted another stellar year in the 12 months to September 2015, both in terms of inflows and performance. Its objective framework picks the most profitable stocks with the best prospects at the lowest valuation, rather than taking a market capitalisation approach.
Across the Guru range, BNP Paribas raised $1.6 billion in new cash worldwide between January and September 2015, some $250 million of which came from French clients. This came alongside a return of 12.48% in the 12 months to September 2015, against 4.03% for its benchmark, the Stoxx 600 Europe Total Return index.
Finally, the World Bank-backed Green Growth Bonds, underwritten and distributed by BNP Paribas and linked to its Ethical Equity Index, have been a big success, raising more than $500 million globally since August 2014. For the World Bank, partnering with BNP Paribas has enabled it to reach a huge number of investors it would otherwise not have been able to tap. The French bank's sophisticated marketing effort, which includes a website dedicated to the bonds, has clearly paid dividends.
The week on Risk.net, December 9–15 2017Receive this by email