By Mathieu Rosemain
LONDON (Reuters) - When acquisitive Czech billionaire Daniel Kretinsky set his eyes earlier this year on one of Britain's most iconic companies, the Royal Mail, he chose BNP Paribas along with two Wall Street giants to advise him.
The 3.57 billion pound ($4.63 billion) takeover of Royal Mail's owner still needs UK government approval, but the mandate shows the French bank's ambition to become a player in the fiercely competitive City market dominated by local and U.S. "bulge bracket" investment banks.
To accomplish that, the eurozone's biggest bank by assets has been beefing up its M&A teams and expanding the ranks of its corporate broking clients.
Brand recognition and growth in one of the world's prime financial hubs are key to CEO Jean-Laurent Bonnafe's plans for BNP's investment banking unit, which has expanded globally during his 13-year tenure.
Investment banking sales were the key driver of the group's second-quarter 21% earnings year-on-year growth, which BNP released on Wednesday.
"Rather than precise market shares, for me the progression is to become one of the usual suspects," said Matthew Ponsonby, head of BNP's global banking in the UK, who joined from Barclays in 2017, told Reuters in an interview in London.
At stake is a slice of a resurgent UK deals market. At the end of April there were 38 companies under offer in Britain, the highest number since June 2022, according to Peel Hunt.
Revenues from M&A-related advisory fees have jumped by 38% so far this year from the same period in 2020, according to Dealogic. The total so far this year of 995 million pounds is however a bit behind the 1.06 billion pounds generated over the same period in 2023.
FILLING THE VOID
With a 2.2% share of the market in 2023, BNP's investment banking business in Britain ranked 15th by revenues. Barclays, Goldman Sachs and JP Morgan made up the top three, according to Dealogic, while German rival Deutsche Bank ranked 8th.
Last year's market share was below the 3.5% BNP had in 2020, during the COVID-19 pandemic - a period during which the French lender filled the void left by some of its larger competitors.
Emmanuelle Bury, country head for BNP Paribas in the UK, acknowledged the stiff competition, but said her team would focus on helping UK businesses access international finance to drive new business. BNP had "space to grow our market share", Bury told Reuters in an interview.
One way to accomplish that is for the bank to become corporate broker to a greater number of UK-listed blue-chip companies, a role that public UK companies must assign to a bank or a securities firm to act as a key intermediary between them and their shareholders.
BNP's corporate broking business trails rivals considerably, but its clientele has grown from one in 2020 to seven last year, including airline easyJet, alternative asset fund management group Bridgepoint and discount retailer B&M.
Another client, Coca-Cola Europacific Partners, a bottler and distributor of Coca-Cola products, accounts for more than half the 50 billion pounds of total market cap of all of BNP's corporate broking clients, ranking the bank 14th in the UK, according to Adviser Rankings Ltd.
Market leader Morgan Stanley had clients worth 881 billion pounds as of May 2024, ahead of JP Morgan, with 844 billion, and UBS, with 695 billion, according to the market research provider.
NO NUMIS-STYLE DEALS
Unlike some of its bigger rivals, BNP, which employs 8,000 people in the UK and has 70 billion euros of outstanding loans to British companies, has not sought to buy its way into corporate broking to speed up its growth and enhance its presence.
JPMorgan's 2009 buyout of British stockbroker Cazenove gave it access to a prestigious client base, including many FTSE 100 companies, on top of equity research.
Deutsche Bank last year paid about 410 million pounds for Numis, a London-based boutique investment bank, to broaden the German bank's range of UK corporate clients and institutional investors.
In contrast, BNP has favoured so-called organic growth, investing in its wholly-owned activities rather than going after big targets.
The investment bank's last consequential deal was the 2022 acquisition of Deutsche Bank's prime brokerage business, which the German lender offloaded as part of a restructuring plan.
One of the areas where BNP aims to raise its profile is dealmaking. Its UK-focused advisory team now counts 13 people with the recent addition of a managing director from Perella Weinberg Partners to expand its private equity client list.
In 2021, the French bank brought in Kirshlen Moodley from JPMorgan to spearhead its UK M&A team, and Tom Snowball, a former executive director at UBS, to head its UK equity capital markets team.
Those efforts appear to be making some headway.
While in 2022, BNP ranked 130 by volume in Dealogic's M&A league tables, it climbed to the 36th spot in 2023, and is number 8 so far this year. By revenue the bank's rise has been less impressive, though, going from 52nd in 2020 to 47th this year, the data showed.
Several analysts say the French bank has more room to grow.
"They have shown the capacity to be able to compete with the large bulk brackets," says Johann Scholtz, an analyst at Morningstar. "They are increasingly becoming seen as the CIB (corporate and investment bank) that clients wants to use with specific reference to Europe. "
($1 = 0.7739 pounds)
(Reporting by Mathieu Rosemain; Additional reporting by Tommy Reggiori Wilkes in LONDON,; Editing by Anousha Sakoui and Tomasz Janowski)
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