EuroBusiness Media (EBM): Natixis, the corporate, asset management, insurance and specialised financial services arm of Groupe BPCE, one of France’s largest banks, just reported results for the full-year 2016. Laurent Mignon, hello. You are the CEO of Natixis, what are the key takeaways from these 2016 results? How do they reflect the company’s performance?
Laurent Mignon: Well, I think we really posted very solid results in 2016, despite a difficult start, because financial markets were pretty difficult at the beginning of the year.
Net banking income grew by 2% to reach €8.7 billion. If we take our core businesses, net banking income reached €8.1 billion, up 3% compared to last year, with a very strong fourth quarter at €2.1 billion of net banking income. This growth has been driven mostly by the ramp-up of our insurance business, which has been very successful this year, the significant growth of our Capital Market business and the M&A [Mergers&Acquisitions]activity has grown significantly, and the very strong dynamic of our Specialised Finances division. Cost of risk has been lower than last year, at 34 basis points, despite this little hic and tension at the beginning of the year linked to the oil and gas crisis. We were at 36 basis points in cost of risk in 2015 and 38 bps in 2014, so you see a constant improvement of the cost of risk.
All of that led to a very good profitability of our core businesses and this is probably the most important thing, 13% return on equity on those businesses, improvement of 100 bps compared to last year, which really is illustrating the strength and the health of Natixis today. At the end of the day, we posted €1.4 billion net restated earnings for the year, up 7% compared to last year.
EBM: You have now reached the final year of your strategic plan, New Frontier, which will end in 2017. Can you comment on the results and what are the main achievements?
Laurent Mignon: Well, we still have one year to go so we have to make sure that we deliver up to the end, but at this stage, after three years, we can say that it is very much a success. We have reached most of the goals, or are well underway to reach all the goals that we have set ourselves back in 2013.
If I take a few of them, to illustrate that, number 1 is insurance, really the development of the insurance business, where we have created a true business, joining up all the business from the BPCE group and we are well on the way to create a true Banque-Assurance group, which is one of the key targets of the BCPE group. We have developed very well the life insurance business throughout the Caisse d’Epargne network. That was one of our key goals, and I think it has been a very successful development. A project we call “assurément#2016”.
In Asset Management, we are one of the leading firms in the world, with more than €830 billion of assets under management. We have been able to grow that business significantly over the period, either organically through net inflows or, through acquisitions, we acquired back in 2015 DNCA which has been a nice addition to our business globally. In CIB, we have been able to develop the Originate-to-Distribute business model, which allows us to have a much more strategic and solution-oriented dialogue with our clients, and one of the illustrations of that is the very strong development of our [Mergers&Acquisitions]business through the acquisition of Leonardo, now Natixis Partners, or Peter J Solomon this year in 2016, which allow us to really enhance our CIB development.
Another very important element also of the plan was to increase the synergies between Natixis and both Caisse d’Epargne and Banque Populaire networks. Our target was to make an additional revenue with them of more than €400 million over the course of the plan. At this stage, we have made €340 million of additional revenues, so we are ahead of our linear target to reach that goal.
The last point was really to make of Natixis a much more international company. Today we are making more than 50% of our net banking income outside France, mostly through our CIB and Asset Management business, very much in line with our target and I think that we have, which is the most important, the ability to bring solutions to our clients, which are global solutions today.
EBM: And finally, how will shareholders of Natixis benefit from these 2016 results?
Laurent Mignon: Well, a key aspect of our strategy is really to develop an asset-like model, which really means that all earnings we are generating are free for the shareholders, because we don’t need to increase our balance sheet, to increase our risk, to achieve these earnings. That translates into an objective that we will pay to our shareholders at least 50% of the earnings, depending whether we have made an external acquisition or not. The year where we don’t make an external acquisition we can have a pay-out ratio significantly higher than 50%. In fact, in 2016, we have not made any significant external acquisition, because we didn’t find any valuable target like we have done in 2015, so this year we will pay a very significant dividend to our shareholders, with a pay-out ratio that will be at 85%, if the Annual General Meeting votes what we will propose to them, which is a 35 cent dividend this year.
EBM: Laurent Mignon, CEO of Natixis, thank you.
Laurent Mignon: Thank you.
