The merger of Groupe Banque Populaire and Caisse d’Epargne, Paris-based privately held mutual banks, is likely to create one of the largest retail lenders in France – reported Financial Times. The creation of BPCE is the result of the need to correct a mistake on the part of the two banks, when they drifted away from their domestic banking roots.
Natixis, the investment bank in which the mutuals hold a 70% stake, is France’s worst-performing bank. Its 2008 pre-tax losses of €2.8 billion pushed them into the red for the first time after more than a half decade. However, all along the financial crisis, most of the French banks have been relatively stable and avoided government bail-outs, that have been a common feature of the financial system across the globe.
A new package of financial support for the troubled bank was made conditional on the two mutuals to exercise more control on it, and to install a simplified governance structure. Nicolas Sarkozy, French president, roped in Francois Perol, his adviser, to do the job.
Mr. Perol will formally become CEO of BPCE on August 3. In an interview to Financial Times, he said: “The mutual movement is deeply anchored in France’s history and social movements. That is why today in the French banking landscape, 80% of the retail market is in the hands of mutualists.”
Now, both the banks plan to exchange notes in deals worth up to €1.5 billion to boost the core Tier 1 ratio at shared investment banking arm Natixis. “This exchange offer gives us the opportunity to strengthen the regulatory capital structure of Natixis, which of course is a key part of our group’s future,” added Mr. Perol.
