BPCE, the parent company of troubled French investment bank, Natixis has come forward to help its subsidiary, so that it can avoid taking government help and proceed with its long pending restructuring process – reported Financial Times.
Natixis has suffered huge writedowns on derivatives and sub-prime investments and subsequently emerged as the worst performing bank in France. It had posted losses for four quarters consecutively.
BPCE, which owns 72% in Natixis, conducted stress tests for months on the investment bank, before agreeing to guarantee E33.7 billion of distressed assets. It has been reported that the improved performance by the asset markets might have prompted BPCE to take this decision.
Guillaume Tiberghien, analyst at Credit Suisse, said: It’s better that the guarantee comes from BPCE because if the government was involved then the EU would also get involved. The EU might demand some elements that Natixis might not be able to offer. In that respect it’s ultimately much cheaper to do this privately, no matter whether the cost is a direct financial fee or a disposal the bank may have to make. Plus it’s better for the reputation of BPCE, which can say, ‘we had a problem and we dealt with it’, rather than having to ask for government help, reported the Daily Mail.
