Jung injects verve into BNPP’s expansion plan

In the run-up to the Brexit vote, BNP Paribas earmarked the UK as a priority market in its push to expand its European investment banking operations. And for those who fear an exodus of the financial industry from London, it will be a comfort to know that the French bank is staying its course despite the UK vote to leave the European Union. Fresh hires have been ruled out, but BNPP has vowed to deliver on its plan to enhance its senior banking ranks and boost the cross-selling of investment banking products to its corporate banking clients.

But whether this commitment will have the bank’s UK rivals shaking in their shoes is another matter. BNPP has adopted something of a stop-start approach to the UK in the past. So does the latest push, accompanied by a refresh of management, signal a firmer intent?

This month, BNPP appointed Anne Marie Verstraeten as group country head of its UK business as part of its initiative. Of more direct significance to the French bank’s EMEA corporate finance aspirations was the promotion at the same time of Yannick Jung to head corporate coverage, financing and advisory (CCFA) for EMEA. Jung replaced Thomas Mennicken, who has taken on the role of chief risk officer for the corporate and institutional bank.

The 44-year old Jung is a rising star who promises to inject some vitality into BNPP’s corporate finance project. He was a central figure in the creation of the corporate and institutional banking division under Yann Gérardin in December 2014 and his career progression mirrors that of BNP Paribas’ strategic development. 

Jung, a French national, joined BNPP in 1997 in the financing department, specialising in infrastructure and telecoms. He later left for a brief spell at a start-up advisory firm before rejoining the bank in 2002 in its leveraged finance business, with a focus in media and telecoms. Five years later, he went to Asia to run the branch office in Tokyo before returning to France in 2012. There, he held a series of positions within the corporate bank, including deputy head of corporate transaction banking Europe — a role that made him responsible for the firm’s network of 30 corporate business centres across Europe, as well as focussing on building the European mid-cap client base outside the bank’s home markets.

With the creation of CIB in late 2014, Jung oversaw the unification of the bank’s corporate client relationship units, creating a corporate coverage group of 650 professionals. He also headed up the combination of CIB’s dispersed sector teams, creating an industry group of 65 professionals split between five sector teams: industrials; consumer goods and healthcare; energy, natural resources, infrastructure and transport; food, beverages and retail; and media and telecoms.

In his new job running CCFA for EMEA, Jung’s responsibilities include M&A, ECM, the corporate debt platform, leveraged finance, export finance, all of the bank’s long-term financing activities, as well as coverage bankers and industrial verticals. His overriding priority is to make BNPP the “reference bank” for its biggest clients. The bank has already achieved that status in transaction banking, risk management solutions and debt, but it needs to address its relative weakness in M&A and strategic advisory.

In practice, this means bringing its ECM and advisory businesses up the league tables to top three level across Europe, where its debt capital markets business sits. BNPP’s senior management believes the bank has punched below its weight in corporate finance because of its inability to leverage the power of its corporate banking network. For that, they’ve placed their faith in Jung. But that’s no small task: for an institution as conservative as BNPP, the sector revamp is something of a revolution.

 

Previously, BNPP’s sector teams were vertically integrated, which involved having the same individuals who originated transactions then executing them. The obvious disadvantage of this approach was that the origination and marketing effort ground to a halt as soon as a transaction came through the door. 

Now, with coverage and execution separate but aligned, the bank believes it can win more market share and deliver the firm to its most important clients. BNPP provided a glimpse of what it hopes to achieve this year when it acted as adviser to Air Liquide on its acquisition of AirGas in May. The mandate spanned M&A, loan structuring, rating advisory and capital markets, and the bank sees it as a blueprint for further mandates.

In these times when the industry’s operating models are being redesigned to focus on niche strengths, it’s fair to ask why BNP Paribas, which has built up such an impressive presence in corporate banking and cash management, as well as DCM, still harbours strong ambitions in advisory. It is an area that has the obvious advantage of barely consuming capital, but advisory continues to be dominated by industry stalwarts like Goldman Sachs, JP Morgan and Morgan Stanley. Those banks, with their long-standing franchises, have created formidable barriers to entry.

The answer is that the bank’s senior CIB management believe that BNPP is in a position to capitalise on some of its rivals’ retrenchment. Eighteen months ago, Jung and his colleagues identified 250 corporate clients to which it would offer an entire suite of products across the CIB spectrum and it has been heartened by progress. Two years ago, it was ranked eighth in terms of the wallet share it earned from those 250 clients — now it is third, with Deutsche in fourth, according to internal estimates.

The bank believes that this direction of travel will continue and that the industry is entering a ‘winner takes all’ phase, in which clients deploy a smaller number of banks to which they entrust a broader range of products. 

To gain access to that inner circle, banks need to be involved at the initial stage of a deal. That requires BNPP to improve its strategic offering in both M&A and ECM. Building industry expertise and coverage is the cornerstone of that effort. It’s a similar approach to the one being taken at Deutsche Bank, where head of EMEA CIB, Alasdair Warren, sees a bolstering of sector expertise as a way of turbo charging coverage.

It also puts BNP Paribas in the same strategic bucket as Citi, which revamped its model after the crisis to tailor its investment banking coverage more effectively to its corporate client base. Jung’s aim is to achieve what has proved so elusive in the past — converting its status as a leading corporate bank into a more dominant CIB offering.

Jung’s career mirrors BNPP’s strategy, and the importance of having a banker from the corporate side of the bank cannot be overstated. The success of his approach will depend on the bank’s ability to bring investment banking products to its corporate clients, with whom Jung and his colleagues already have strong relationships. To underscore this, Jung’s previous role has now been filled by two bankers who have experience of both sides of the coverage effort: Christopher Kramme, who ran the EMEA corporate network, and Caroline Pez-Lefèvre, who spent seven years in loan syndication before becoming head of coverage for strategic clients in 2015.

Closer co-operation between corporate and investment bankers is one of the hallmarks of the post-crisis era, when balance sheet has to be rationed and banks must judge the value of a particular client on a group-wide basis, rather than its importance to a single product line. Since taking the reins as head of CIB, Gérardin has been determined to position CIB as a holistic offering — what works in one area of the bank should work for the wider group, creating a virtuous circle.

For example, two years ago, the bank signed up 900 of Royal Bank of Scotland’s cash management clients and the ambition is to scale up and make these clients users of the firm’s investment banking product suite.

At the same time, BNPP has been building out its coverage capabilities, and Jung has a mandate from the board to reinvest cost savings in new talent. While the bank is not adding talent in the UK beyond recruitment that had already been signed off before the referendum, it has boosted headcount elsewhere in EMES. This month, it strengthened its industrials team in the region with the appointment of two bankers in Frankfurt. Frank Balhorn joined as head of chemicals EMEA and Sebastian Bihari joined as head of automotive EMEA. Balhorn was formerly at Lazard, while Bihari joined from Moelis. Both report to Berthold Mueller, head of industrials EMEA, who is based in Frankfurt.

In July, BNPP built up its country coverage effort in Germany by hiring Ulrich Forch from Barclays and Jürgen Sieler from Commerzbank, while it hired former Greenhill managing director Jacob Spens in Scandanavia. In February, it boosted its senior banker line-up in France with the addition of Sebastien Dessillons, a former senior adviser for industrial affairs to French prime minister Manuel Valls.

The restructuring of BNP Paribas under Gérardin has been characterised by what initially appeared to be left-field promotions. Many outside observers, and some inside the firm, professed to be mystified when Mennicken was placed in charge of coverage. But that was all linked to Gérardin’s desire to implement a shift in emphasis. In order to identify and serve the bank’s most profitable clients with balance sheet, the bank started with a risk management approach. Likewise, Jung was a relative unknown to the firm’s investment bankers.

Characterising the latest moves as a takeover of the investment bank by corporate bankers is tempting, but wide of the mark. Instead it’s a truer reflection of what the bank is trying to be. More traditional investment bankers like Sophie Javary, who has oversight of ECM and M&A, and Bruno Tassart, who runs financing, have critical roles to play if Jung’s plan is to work.  

But BNP Paribas has its tail up and its fresh integrated approach promises to achieve the sort of progress in investment banking that it never could when it simply relied on investment bankers.