(Bloomberg) —
Natixis SA joined its French peers in taking a hit from equities trading as market turmoil and dividend cancellations following the outbreak of the coronavirus forced it to mark down assets.
Equities trading revenue was more than erased by a 130 million-euro ($140 million) writedown when companies started to pull their dividends, contributing to a 204 million-euro net loss for the first quarter. Income from debt trading rose 46%, the bank said late Wednesday, beating peers BNP Paribas SA and Societe Generale SA as well as the Wall Street average.
The quarter ends a brief respite for Chief Executive Officer Francois Riahi, who had been trying to draw a line under a series of missteps since taking over in June 2018, including trading losses on Korean securities, a liquidity scare at its H2O Asset Management subsidiary and oversight problems. The bank put aside 193 million euros for credit losses, mainly to account for loans to oil and gas companies.
Natixis pushed back its next strategy update to the end of 2021 and lowered a target for a key measure of capital strength — the common equity Tier 1 ratio — to 10.2% for this year and next, from 11.2%.
Equities Hit
The equities trading performance mirrored that at Societe Generale and BNP Paribas, where traders were also blindsided when companies started to cancel dividends. Each of those firms took a 200 million euro hit in the quarter from complex products such as dividend futures.
Natixis’s biggest businesses are investment banking and asset management. It’s one of the largest fund managers in Europe, owning a collection of boutiques that oversee about 828 billion euros across the globe. Investors pulled 8 billion euros from its affilates’ funds in the first three months of the year, with the virus-fueled market plunge helping send its assets under management 100 million euros lower.
Natixis also took a hit of 117 million euros related to the disposal of an almost 30% stake in credit insurer Coface. The bank had previously flagged that the sale would result in an impairment.
Complex Products
Natixis has long eschewed trading common stocks and bonds in favor of more lucrative and complex financial products, such as derivatives linked to baskets of shares and so-called collateralized loan obligations that pool together high-risk debts. After the losses at the end of 2018, questions emerged over whether Riahi and his team can manage the risks of such a strategy.
To reassure investors and regulators, the bank recently hired a new global head of risk from JPMorgan Chase & Co. and a batch of senior traders in Asia, while creating a new role to specifically oversee risks in the U.S.
(Updates with Coface details in seventh paragraph)
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