Natixis has, for more than a decade, had a reputation as one of Europe’s leading covered bond houses. It has won awards as the best euro lead manager, and for covered bond research, while maintaining a top 10, and usually a top five position in the global covered bond league tables. “That strength, however, could turn to be a weakness, when volume in the covered bond markets declines”, says Gabriel Lévy, global head of DCM for financial institutions at Natixis in Paris.
“What we have done in the last three years is to build on the top of our covered bond expertise a global FIG brand where we widen our focus and add value to our clients across the capital structure.”
To build what Lévy calls the second leg of the business, Natixis has stepped up the content it provides to FIG clients, gathering internal experts and hiring externally to bring in additional technical expertise within investment banking and to operate in a wider range of jurisdictions.
“We’ve been able to leverage on the visibility we have in covered bonds,” he says.
The strategy is paying off. In the last two years it has won bookrunner or global coordinator mandates on more than 26 bank and insurance debt capital transactions. Its landmarks this year in the insurance sector include restricted tier one for insurer Phoenix Group in January, tier two for Helvetia in June and a tender offer and green tier two for Generali in July, while bank deals include additional tier one for La Banque Postale in November 2019 and for Bankinter in July.
“The slope has been quite steep but we are achieving the targets we had in mind,” says Lévy. “Natixis has won mandates as a global coordinator on subordinated transactions.
“We also have worked hard to achieve a full alignment along the entire bond chain with this strategy, including syndication, salesforce, research, secondary trading : the resources and skills together with key people.”
At the same time, Natixis has built a capital structuring and ratings advisory unit within its investment banking division. “This allows us to offer advice in every area of the capital stack,” says Lévy.
The subordinated space has become a comfort zone, he says. “We could not have won these mandates unless we were comfortable with the banking and insurance regulation, as well as the rating agencies constraints.”
And it has trodden a similar path with the development of a green and sustainable hub to increase content and provide advice and innovation. “Clients recognised this added value expertise by involving our teams in more structuring and strategic dialogues.”
A key driver for Natixis’s efforts in FIG is its membership of the Groupe BPCE, the second largest banking group in France, which is itself highly visible in the capital markets and a regular issuer of covered bonds and bonds that minimum requirement for own funds eligible liabilities (MREL).
Undoubtedly, though progress is being made — and thanks to the trust of its customers, it has been recognised with this award — while the firm is maintaining its reputation and ranking in the covered bond space. “The idea was not to substitute one versus another, but to add a new layer in the dialogue with our FIG clients,” he says. “As of mid-September we were ranked number two in covered bonds, which shows that we have started a new story without losing sight of the other.
“The first leg remains strong. But with the second one, we have a much better balanced FIG DCM business model.”
