French investment bank Natixis has cautioned that a strong first-quarter performance does not mean it should boost its profit targets.
The bank reported a return on tangible equity — a key profitability ratio — of 15.4% for the first quarter, above its target for 2020 of between 13% and 14.5%.
But addressing journalists on a call to discuss first-quarter earnings May 17, CEO Laurent Mignon said ROTE tended to be higher in the first months of the year than over the full year, meaning it would not necessarily always beat its target.
Natixis has demonstrated its capacity for profitability, he said, but added: "We mustn't get carried away after a quarter. ... There is no reason at this stage to review our ambitions either upwards or downwards."
Natixis, which is part of French banking group BPCE, reported a 15% year-over-year rise in first-quarter net profit to €323 million, buoyed by strong growth in its asset management and insurance businesses.
Revenues rose 3% year over year to €2.41 billion. Net revenues in asset and wealth management rose 10% to €777 million, helped by more than €6 billion in net inflows during the quarter and high fee strategies by affiliates such as Harris Associates and Dorval Asset Management. Mignon said he was confident that inflows would continue at a similar pace over the course of the year.
AUM totaled €818 billion at the end of March, with €406 billion coming from Europe and €399 billion from North America. Average AUM at constant exchange rates increased by 10% in Europe and 14% in North America.
Asset management 'boutique'
Natixis is positioning itself as an asset management "boutique" with a global dimension and distribution network, and is aiming for €1 trillion in AUM by 2020, as it seeks to diversify its activities. It also wants to strengthen its position in insurance; net insurance revenues rose 8% in the first quarter to €204 million.
In corporate and investment banking, net revenues fell 3% to €938 million, hit by a 15% drop in equity revenues. Mignon said Natixis' partnership with ODDO BHF SCA had weighed on the bank in the quarter. The partnership involves the transfer of Natixis' equity broking and equity research activities in France to ODDO BHF.
Global market revenues were down 4%, while fixed-income trading rose by 1%, somewhat bucking a decline in fixed-income trading suffered by other French banks such as Société Générale SA and BNP Paribas SA as rates helped offset weaker client activity in the credit and foreign exchange markets.
Groupe BPCE, which is also the parent company of retail banks Banque Populaire SA and La Caisse d'Epargne, saw its net profit fall 3.7% year over year to €634 million due to contributions to the EU's Single Resolution Fund, created following the financial crisis to help deal with failing banks. Net banking income fell 0.8% year over year to €6.02 billion on the dollar's decline against the euro.
Retail banking revenues were down 3% to €4.18 billion, weighed by low interest rates and the highly competitive French retail market, according to the head of BPCE, François Pérol.
Mignon will take the helm of BPCE on June 1 as Pérol is leaving the bank to join Rothschild & Cie Gestion as a managing partner. BPCE's head of finance, strategy and legal affairs, François Riahi, will become Natixis CEO. BPCE announced May 17 that Riahi will be replaced by Natixis CFO Nicolas Namias.
