PARIS Natixis (CNAT.PA) shares leapt as much as 30 percent on Monday, a day after the French bank announced an ownership overhaul that paves the way for higher dividends and fuelled speculation rival Credit Agricole (CAGR.PA) might try a similar move.
Natixis plans to shed its 20 percent stake in a network of savings banks tied to its parent company BPCE in a deal that will free up capital and allow for a one-off 2 billion-euro ($2.7 billion) dividend to shareholders.
The investment bank, rescued in the financial crisis in 2009 through a government-backed merger of its retail cooperative parents, has since been undergoing a gradual restructuring aimed at selling off risky assets.
Natixis's shares were up 29 percent at 3.67 euros by 9.35 a.m. ET, the highest level since June 2011, with volumes triple the 90-day average.
The sale could put pressure on larger rival Credit Agricole, which has a similar 25 percent stake in its own allied group of savings banks, to do something similar, although there would be significant drawbacks which might scuttle such a deal.
"It is safe to say it's a direct challenge to Credit Agricole," said Yannick Naud, a portfolio manager at Glendevon King Asset Management in London.
One banker said although the deal would raise pressure on Credit Agricole to at least look at such a transaction, it would be more difficult for the larger bank to do given its recent spate of weak results, including billions of euros in goodwill writedowns and losses on the sale of its Greek unit.
A source close to the deal said that, despite superficial similarities, there were key differences between the two groups that made such a transaction less likely for Credit Agricole.
Shares in Credit Agricole, which was not immediately available for comment, were little changed.
ASSET MANAGEMENT CONSOLIDATION
"Natixis is above all an investment bank and an asset manager," the source said. "Credit Agricole SA is really a universal bank with retail components, so it's a different vehicle."
While Natixis' holdings in the regional savings banks yielded low returns, Credit Agricole "gets a better yield, it's better for shareholders," he said.
In addition, in the case of Natixis, the restructuring puts an end to a guarantee mechanism that aimed at insuring risky assets related to the regional bank stakes, freeing up capital.
Credit Agricole has a similar guarantee mechanism, but because of the way it is structured it would not free up capital, the source close to the deal said.
Still, Natixis Chairman Francois Perol said in an interview that, given Credit Agricole was the one other bank with a similar structure, "I would imagine that could cause them to reflect", adding he had no idea if the rival might do a deal.
Perol also said Natixis would take a close look at potential acquisitions to strengthen its asset management division.
"Our conviction is that banking models haven't finished their transformation," Perol said. "In asset management, there will be consolidation, and we wish to participate."
Natixis' asset management arm had 591 billion euros of assets under management as of the year-end. The bank's other two main units focus on corporate lending and consumer credit. It also controls Coface, a credit insurance agency.
Analysts praised the restructuring plan, saying it would boost Natixis's regulatory capital under Basel III solvency rules and render a complex and opaque group more transparent.
"The transaction makes financial sense via improvement in efficiency and profitability and simplification of group structure while returning significant capital to shareholders," Citi analysts said.
Natixis will unload the stake by selling 12 billion euros in investment certificates through which it owned a fifth of Banques Populaires and Caisses d'Epargne (BPCE) to the savings and cooperative banks themselves, which will then cancel them. BPCE will remain a 72 percent stakeholder in Natixis.
BPCE and Natixis plan to unveil a new three-year strategic plan in the second half of the year, Natixis executives said.
Longer term, the sale of the BPCE certificates will also clear the way for Natixis to regularly pay out dividends of around 50 percent of earnings starting with those from 2013.
($1 = 0.7490 euros)
(Additional reporting by Steve Slater; Editing by Greg Mahlich and Mark Potter)