BNP Paribas is the first bank to take advantage of Deutsche Bank's announced exit from this business, just days after announcing cuts to equity research in Asia.
France's largest bank has entered a preliminary agreement «to provide continuity of service to prime finance and electronic equities clients,» Frankfurt-based Deutsche Bank said in a statement on Sunday. The agreement is pending approvals and would allow a transfer of technology and staff to BNP Paribas in due course.
Under the deal, BNP agrees to back up and potentially assume control of electronic trading and prime services for hedge funds currently run by the German lender.
Streamlining Research
The move comes days after BNP said it would cut the bulk of its Asia equity research team in Singapore and Hong Kong and instead use content from Morningstar. About a dozen analysts will leave as part of the move by BNP, according to a report in «Reuters» last week.
The agreement with Morningstar «should ensure the long-term sustainability of our business model and underpin our strong ambitions in cash equities and ECM, both of which we remain fully committed to,» said Hugo Leung, chief executive of BNP Paribas Securities said in a media statement. Independent research coverage is gaining popularity in European markets as global investment banks are seeking to cut costs and regulations are forcing banks and brokers to charge fund managers for equity research.
Selective Investments
BNP Paribas is amongst a few European banks hoping to strengthen its position in corporate and investment banking across the continent, even though tough market conditions at the end of last year prompted additional cost cuts and an exit from proprietary trading. The French lender has been investing to grow in markets such as Germany and the UK over the last several years.
BNP's fixed-income trading business bucked the trend of declines seen at most European and Wall Street rivals for the first quarter, but revenue from equities trading and prime services for hedge funds in the same period fell about 29 percent from a year earlier.
