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Natixis may revise risk controls after H2O fund audit, disputes liquidity fears

Natixis is currently conducting an audit of its H2O AM LLP investment fund following outflows on liquidity concerns and will alter its risk controls depending on the results of the review, the French investment bank's CEO said on Aug. 1.

Natixis shares were pummeled by investors toward the end of June after rating firm Morningstar placed a fund managed by H2O under review over concerns about its holdings in illiquid bonds of businesses backed by German businessman Lars Windhorst. It later downgraded the fund.

"There is an audit ongoing at H2O and when it delivers it conclusions, we will be able to draw lessons from this," Natixis CEO François Riahi told reporters following publication of the bank's second-quarter earnings. The bank will implement changes if needed, he said, adding that Natixis is always looking at ways in which it can improve its risk controls.

Analysts had called into question Natixis' risk management especially as the fund debacle came after it was hit by volatile Asian markets, leading to large losses on derivatives.

He declined to say when the audit would be published, saying it was an internal review. The conclusions will be published if Natixis decides to undertake changes related to the review, he added.

The fund manager suffered outflows of €6 billion on investor concerns, which Riahi said were overblown, adding that there were no liquidity problems at the fund and that clients had managed to divest their investments when they wished.

'No contagion effect'

Assets under management at the fund stood at €26 billion at the end of June, slightly higher than the figure at the end of the second half of 2018, the bank said.

Natixis has been buying stakes in boutique asset managers in the U.K., France, Spain, the U.S. and Asia, and Riahi said there had been "no contagion effect" on any other of its funds.

"That's the great strength of our multiboutique model," he told journalists.

His comments come as the bank reported a 32% decline in second-quarter net profit to €346 million and a 3% fall in net revenues to €2.28 billion, hit by weak results at its investment banking division.

Its parent Groupe BPCE, which also owns French retail banks, Banque Populaire SA and Caisse d'Epargne, posted a 1.6%% drop in second-quarter net banking income to €6.12 billion and a 7.9% decline in net profit to €956 million before changes in accounting rules.

European bank results have been under pressure across the board due to low interest rates.

BPCE has been in exclusive negotiations since February with retailer Auchan Holding SA to buy a 50.1% stake in consumer finance bank Oney Bank SA, and BPCE Chairman Laurent Mignon told reporters the deal had received EU regulatory approval and would be closed by year-end.