Natixis, the French financial services provider, announced last week (September 12th, after close) that it is to sell its retail banking operations to its parent company BPCE. In what has certainly not been a vintage year for European financials and their shareholders, the move provided some cheer for investors, particularly those with an income tilt.

Natixis’ remaining operations encompass asset & wealth management, corporate and investment banking, insurance and payment. This is consistent with its strategic plan to move away from traditional retail banking operations and focus on asset-light activities that consume less capital, liquidity and cost of risk. Chief Executive Francois Riahi stated that this latest deal gives the company “further financial firepower to invest in its differentiating asset-light business lines – primarily asset management,”

The rationale for this is clear. The asset management segment is growing strongly, increasing revenues by 10% year on year and taking in EUR 10 billion of net inflows per the latest set of results. It also generates higher margins and requires less capital than the retail banking segment, enabling it to increase its return on equity targets. Following the deal, Natixis will be allocating 45% of its capital to the asset management franchise.

The deal itself is valued at EUR 2.7bn (equivalent to 1.7x book and 12.5x P/E on 2017 earnings) and is due to close at the end of Q1 2019. This valuation for the deal looks healthy and the move raises the prospect of additional capital being returned through a special dividend – good news all round for shareholders. The company plans to pay a special dividend of EUR 0.50 when the deal closes, which would give a special yield of nearly 9% – not bad at all when added to an already attractive ordinary dividend yield of 6.3%. The one note of caution here though is that management have said that some of the funds may be used for M&A activity instead, should the right opportunity present itself in the meantime.

So, overall, this is a move that appears to fit in well with Natixis’ strategic goals of (i) pivoting towards its fast-growing asset management and investment banking segments, (ii) continuing the journey to being a more international business and (iii) creating more flexibility with costs. As a result, we should see a more streamlined business, focused on the right areas for growth going forward.

All in all, this is a move that ‘tix’ a lot of the right boxes.


Opinions and views from the Equities team at Kames Capital are not an investment recommendation, research or advice and should not be considered as such. Content discussing investment strategies and stocks is derived from and solely relates to the investment management activities of Kames Capital.

About the author

Mark Peden is the architect of our global equity income strategy and has been the lead manager of the Kames Global Equity Income Strategy since its inception in 2011. European equities are his main area of research expertise where he has been analysing companies since joining the firm in 1992. Over his tenure Mark has held a number of positions and managed a range of both International and European equity funds. He graduated from the University of York and the University of California (Santa Barbara) with a BSc honours degree in Economics with Politics. He a CFA charterholder and is also an Associate member of the UK Society of Investment Professionals (ASIP). He has 26 years ’industry experience (as at 30 June 2018).

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