France’s Natixis is expanding rapidly around Asia, hiring trade and commodity finance bankers as it looks to build on the successful merger last year of Groupe Caisse d”Epargne and Groupe Banque Populaire.


The resulting entity, Natixis, in March poached Clement Zhou from Fortis. Zhu will be stationed at the bank’s fully licensed office in Shanghai, with a remit to build out its mainland China operations.


In Hong Kong, Natixis has hired Evelyn Sun, who joined in early April from Mitsubishi UFJ. Another banker is also set to join the Natixis team in Jakarta, while two more bankers are being hired in Singapore, one of them coming over from Standard Chartered.


The November 2006 merger has left the new hires (and some of Natixis “incumbent staff) wondering how they ‘ll be described on their business cards. “The titles aren ‘t decided yet,” says one Natixis insider. “Maybe in the next month or so.”


Natixis is also looking to open several new offices around Asia, where it is well staffed in markets like Indonesia and Vietnam, but remains under-exposed to several key markets.


India is top of the agenda at France’s fourth largest lender by assets – even though it takes upward of US$50mn in registered capital to set up a working office in Mumbai.


Natixis hopes to open a full branch in India’s eastern financial hub sometime in either late 2007 or early 2008. Further branch openings are expected in the coming year in the Korean capital of Seoul, and in Australia, where several trade finance bankers will be installed to take advantage of the country’s continuing vibrant metals and mining sector.


The office will service increasing exports of Australian resources to markets across Asia, notably in Japan, Korea, India and China, as well as exports into the European Union and the US.


Natixis posted group net income in 2006 of €
7.322bn, up 22% on an annualised basis, and Asia should provide an increasingly large slice of those earnings.


Created in November 2006 via the merger of units of Groupe Caisse d ‘Epargne and Groupe Banques Populaires, Natixis, with 21,000 employees in 68 countries, is pushing ahead into new markets. Natixis posted group net income in 2006 of €
7.322bn, up 22% on an annualised basis, and Asia should provide a boost to those earnings.


Francis Lacourte, Natixis “Hong Kong-based Asia head of natural resources and related industries, says the philosophy of the bank is to remain as strongly focused on transactional and secured financing as far as commodities are concerned. “We don ‘t want to offer the same thing at a lower price,” says Lacourte. “We try to build a bit of added value and go to niche markets where the returns and margins are better.”


When Natixis started out on its Asian adventure in 1999, Singapore was over banked, says Lacourte. (It still is). So the bank decided to focus on Vietnam and Indonesia which was a timely entry as most commodity banks have scaled down on Indonesia as a result of the Asian financial crisis. The result was that Natixis had Indonesia – one of the world’s biggest producers of not only for soft commodities like coffee, cocoa, rubber and palm oil but also for coal – then naturally expanded to the import of soybeans, wheat and raw sugar. In Vietnam the bank started to finance coffee, at the beginning for the foreign traders which bought the coffee in stocks before shipment and then Natixis HCMC Branch joined to finance the local coffee exporters.


For Lacourte, it was an auspicious time to be doing business, largely due to the void left by the more established commodity banks. “Spreads were wonderful to start with – around 3 to 4%,” he says.


That, however, has all changed as the competition has once again re-focused its efforts on Southeast Asia and its vast commodity market. “Now, everyone is coming back to Indonesia,” Lacourte says. “Everyone is offering looser structure and lower margins on prepayments or stock financing. Margins are down to 2%, and our biggest rivals are back (in Indonesia).”


Natixis is undaunted by the competition despite shrinking margins. Indeed it is boosting headcount around the region. It is looking to rapidly grow its current commodity network (now renamed Natural Resources and Related Industries) – not including representative offices in most countries the French bank has full branches in Shanghai, Hong Kong, Ho Chi Minh City, Singapore and in Labuan, Malaysia.


In the last month or so the bank has beefed up its team in North Asia to include a staff in its Shanghai branch dedicated to commodities and increased its head count for its Hong Kong and Singapore desks. The bank should also open up a branch in Mumbai hopefully by the end of 2007, or early next year, which will naturally include a commodities desk catering to the rising flow of commodities flooding into, and out of, the Indian subcontinent Natixis is also set to open a finance company in Australia, in Sydney, as well as a mining team to cater to Australia’s still rapidly-expanding mining sector.


The Indonesia representative office will also include a dedicated commodity staff pushing Natixis “headcount in Asia up yet another notch. And that, says Lacourte, will be it in terms of its commodities finance team for the time being.


Two glaring facts of life about trade finance in Asia which positively affects Natixis “increase in headcount. Number one – the market is back. And second, that many banks will likely struggle to find enough qualified people prepared to work for a realistic wage. Lacourte says Natixis will continue to grow at a fairly rapid pace, and will continue to bid for specialists with experience and expertise in this sector without overpaying for them.


Lacourte suggests that while Natixis has grown in recent years “we’vegrown fairly quickly but we ‘re still at a modest stage in Asia,” he says. “There are definitely things to be done in Indonesia, Singapore, Hong Kong and we ‘re positive about Vietnam and China Without mentioning the mining desk to be opened down in Australia.”


In terms of China’s rise, Lacourte says the bank is very optimistic about the growth in Asia’s biggest emerging market. Natixis is looking to upgrade its Beijing office into a branch in the next year or two. However, the bank’s activities will continue to be done in Singapore, Hong Kong with Shanghai complementing the China related activities as a support and financing the domestic China business from the Shanghai office. Its regional network benefits from the brokering/dealing services from Natixis Commodity Markets, a full subsidiary of Natixis, which was bought several years ago from the Belgian group Union Miniere.


But while commodity and trade finance services boom in Asia – with China exporting processed goods and steel, India shipping iron ore, Southeast Asia producing ever greater quantities of soft commodities and Australia exporting anything hard that lies under the ground – the industry remains, in technological terms, moderately sophisticated and a lot of the trade is handled by local banks which don ‘t have necessarily the expertise and logistics.


Huge revenues are there to be made in very simple trade finance services like the simple, much-maligned letter of credit. Like a holding midfield player in a soccer game, the letter of credit is often overlooked, yet its steady, reliable, dependable performance is often the guarantor of a good financial year.


Many Asian countries remain heavily dependant on letters of credit – in China, for example, sellers of commodities or finished goods often demand payment up front for their goods and services, which come squarely in the form of bank letters of credit. The same is true around much of Asia – Japan, Australasia and parts of South Korea apart. Revenues are made from document fees on transfers, advising, letters of credit – although again margins are shrinking in this area.


Lacourte says with regards to Energy an evident amount of change has come from an inrush of oil trading companies over the past few years, notably Vitol, Trafigura and Glencore International.


These oil majors have de-centralised the oil finance from headquarters to their Asian offices which have contributed to the upsurge in opportunities for energy finance.


However, the metals finance for these companies continue to be controlled out of their head offices. “A few years ago, only a few could be directly financed out of Asia. Lacourte says. “We were among the first offer facilities to these regional oil companies once their European head offices decided to let these offices arrange financing directly out of Asia.


Lacourte says Natixis generates around 40% of its revenues from financing the energy sector in Asia, with the remaining is equally spread between the soft commodity and metals business. Natixis “aim is to focus on higher-level, higher-margin services.


“The philosophy of the bank is not to offer every service to everyone, but to participate as strongly as possible in transactional and secured financing and take some performance risk as and when deemed acceptable from the risk perspective either through pre-payment or tolling facilities.”