by Mathieu Rosemain

LONDON (Reuters) – When Czech billionaire Daniel Kretinsky set his sights on one of Britain’s most iconic postal companies, the Royal Mail, earlier this year, he chose two Wall Street giants to advise it as well as BNP Paribas, which is seeking to gain a foothold in the fiercely competitive City of London.

The acquisition of International Distributions Services, the parent company of Royal Mail, for 3.57 billion pounds (4.02 billion euros) has yet to receive the green light from the British government but the mandate granted to BNP Paribas shows the ambition of the French bank in a market dominated by the most prestigious local and American investment banks.

To achieve this, the eurozone’s largest bank in terms of assets has strengthened its mergers and acquisitions teams and expanded its clientele in the field of “corporate broking”, a typically British business segment which consists of advising companies on their stock market strategy and their relations with shareholders.

Growing brand awareness and business growth in one of the world’s leading financial centres is a key part of BNP Paribas CEO Jean-Laurent Bonnafé’s strategy for the group’s investment bank, which he has significantly expanded globally during his 13-year tenure.

Revenues from this activity were the main driver of the 21% growth in net profit attributable to the group in the second quarter, announced by BNP Paribas on Wednesday.

“Rather than a specific market share, for me the progression is to become one of the usual suspects,” Matthew Ponsonby, head of BNP’s global bank in the UK and formerly of Barclays, told Reuters in an interview in London.

At stake for the executive is a share of the booming British mergers and acquisitions market. At the end of April, 38 companies were the subject of a bid in the United Kingdom, the highest number since June 2022, according to brokerage Peel Hunt.

Data from Dealogic shows that M&A advisory fee revenues have increased by 38% since the start of 2024 compared to the same period in 2020, although the total of £995m remains slightly below the £1.06bn generated in the same period in 2023.

FILL THE VOID

With a market share of 2.2% in 2023, BNP Paribas’ UK investment banking business ranks 15th in terms of revenue, well behind the top three of Barclays, Goldman Sachs and JP Morgan, according to Dealogic data. German rival Deutsche Bank ranks 8th.

In 2020, during the COVID-19 pandemic, BNP Paribas managed to achieve a market share of 3.5%, as the French bank filled the void left by some of its larger competitors.

Emmanuelle Bury, head of BNP Paribas in the UK, admits that competition is tough but believes the French bank has “the opportunity to increase its market share”, she said in an interview with Reuters.

One way of doing this is for the bank to develop its corporate broking business across a large number of blue chip UK listed companies.

For the time being, BNP Paribas is still far behind its competitors in this segment. However, the French bank has gone from a single client in 2020 to seven in 2023, including the airline easyJet, the alternative asset fund management group Bridgepoint and the bottler and distributor of Coca-Cola products, Coca-Cola Europacific Partners.

In total, BNP Paribas’ corporate broking clients represent a market capitalisation of £50bn, placing the French bank 14th in the UK, according to Adviser Rankings Ltd.

By comparison, market leader Morgan Stanley had clients worth £881bn in May 2024, ahead of JP Morgan (£844bn) and UBS (£695bn), according to the market research provider.

NO NUMIS TYPE OPERATIONS

Unlike some of its larger rivals, BNP Paribas, which employs 8,000 people in the UK, has not sought to buy its way into corporate broking to accelerate its growth and strengthen its presence, as did the mergers between JPMorgan and Cazenove in 2009 and Deutsche Bank with Numis in 2023.

BNP Paribas has favoured so-called organic growth, investing in its own businesses rather than tackling large targets.

In mergers and acquisitions consulting, BNP Paribas is also strengthening its internal presence. Its team in the United Kingdom now has 13 members, with the recent arrival of a managing director from Perella Weinberg Partners.

In 2021, the French bank recruited Kirshlen Moodley from JPMorgan to lead its UK M&A team, and Tom Snowball, a former UBS executive director, to lead its UK capital markets team.

These efforts seem to be paying off: while in 2022, BNP was 130th in volume in Dealogic’s M&A ranking, it climbed to 36th in 2023, and is number 8 since the beginning of the year.

(Report by Mathieu Rosemain, with contributions from Tommy Reggiori Wilkes in London, by Diana Mandiá, edited by Blandine Hénault)

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