Natixis to adjust EQD positioning

Natixis reported net revenues of €1.5 billion in the second quarter of 2020, down 25% year-on-year.

Revenues were impacted by the full effect of the late Q1 market dislocation and lockdown measures as well as continued dividend cancellations and uncertainty regarding the shape of the economic recovery.

In corporate & investment banking (CIB), underlying net revenues were down 39% YoY in the second quarter and down 27% in half-year 2020, ‘significantly’ impacted by the crisis. The equity desk registered revenues of -€174m in 2Q 2020 due to -€143m of dividend markdowns, together with low client activity during lockdown and higher hedging costs.

Fixed income, commodities and treasury (FICT) revenues, at €279m, were slightly down compared to a ‘good’ 2Q 2019 with overall resilient client activity despite a less favourable environment versus 1Q 2020, notably for FX.

However, with activity bouncing back across all Natixis’ businesses, the bank stated there would be no more 2019 dividend cancellation risk for equity derivatives (EQD) in the second half of 2020 while it launched a project to adjust EQD positioning to focus on Groupe BPCE retail networks and its own key strategic clients.

Natixis collected an estimated US$435m (€369m) from 67 structured products in the second quarter of 2020, down 50% in sales volume compared to the same quarter last year, according to SRP data (Q2 2019: US$870m from 64 products).

The bulk of the volumes were accumulated in France, where it issued 44 products with estimated sales of €329m (Q2 2019: €664m from 33 products). The French products were predominately linked to single equity indices, including the Cac Large 60 Ewer Index (14 products), Euronext Climate Objective 50 Euro EW Decrement 5 % Index (five), and Euronext Water and Ocean Europe 40 Equal Weight Decrement 5% Index (one). The latter was used as the underlying index for Milleis Aqua which sold €11m during its subscription period.

Apart from France, the bank issued products in five other jurisdictions. In Italy, Natixis launched three ‘Yeti’ phoenix notes linked to a basket of stocks while a further three structures were distributed in Sweden via Strukturinvest and Garantum, respectively.

In the UK it collaborated with Mariana Capital and Dura Capital for two FTSE-linked plans and in Belgium Natixis collected €7.8m for Green Note Global Infrastructure Accelerator (90) 2026 which was distributed via the retail network of Deutsche Bank.

Outside of Europe, nine products were targeted at private banking investors in Taiwan.

The best performing product during the quarter was Opportunité Zen Avril 2012, a digital on the Eurostoxx 50, which returned 140% after eight-years, or 5.02% pa.

The asset and wealth management business reported its best quarter in five years for net inflows driving assets under management (AuM) above €900 billion.

‘Natixis’ results in the first half of 2020 were impacted by the coronavirus crisis,’ said François Riahi, chief executive officer, commenting on the results. ‘We are launching a project to adjust the setup of our equity derivatives business towards our key strategic clients and are implementing significant measures to reduce expenses’

Riahi has since left Natixis with the bank citing ‘strategic differences’. He has been replaced on an interim basis by Nicolas Namias.

Click the link to read the full second quarter and 1H2020 results and the presentation.