Executive Interview – Jean-Francois Varlet – Managing Director, BNP Paribas
(27 January 2004 – Australia) French bank BNP Paribas has had a presence in Australia for more than a century, first arriving here in 1881 as Comptoir National d’Escompte de Paris to finance the wool trade between Australia and Europe. The bank took its current shape in 1999 when Banque National de Paris acquired French investment bank Paribas. The bank is the largest in the Euro zone (countries that use the euro currency) by market capitalisation and net income.
BNP Paribas is the 12th largest bank in Australia and the third largest foreign bank by assets. It employs more than 350 staff in offices in Sydney, Melbourne, Brisbane and Perth.
The bank’s managing director Jean-Francois Varlet is enjoying his second stint in Australia, having previously been Victorian manager for Banque National de Paris from 1983 to 1986. Since returning to take up the post of managing director of BNP Paribas in 2000, Monsieur Varlet has seen the bank through a turbulent period of restructuring. The bank sold its asset management arm to Wilson HTM and retail division to Macquarie Equities but purchased global investment company Cogent from AMP for $650 million in 2002.
The bank posted its best ever result in Australia last year.
Monsieur Varlet talks to East & Partners executive editor Paul Bartholomew.
You’ve taken the bank through a difficult couple of years as you’ve restructured and bought and sold businesses, but 2003 was a positive one for BNP Paribas. Talk me through it.
2003 has been an extremely good year. In fact in profit terms it has been our best year ever since we were established in Australia 122 years ago. The result is there for all to see and the explanation is quite simple: it’s a consequence of the fact that all the businesses that we are in have delivered good results and we are firing on all cylinders. Also, we went through a deep restructure operation over the previous two years and we are now seeing the benefits of that restructure. It has probably made us the lowest cost producer in Australia for the time being among investment and commercial banks.
We have refocussed our commercial activities to a smaller number of customers and we’re extremely cost and risk conscious. The business has been good, we have some new clients and our marketing activities have been focussed. This combination of cost and risk control and marketing strength should carry us forward and produce even better years for the bank.
Looking ahead to 2004, are you focusing on selling more to existing customers or expanding your customer base? What’s your strategy?
We are currently focussing on about 400 to 500 companies in Australia, having come down from around 800. So we now have the banking relationships with our customers that we wish to have. We still have a few more to gain but most of the expansion will come through cross selling better and more sophisticated product to our existing customers.
Most people think of BNP Paribas as essentially a French bank. They’re probably unaware that the bank has been in Australia for 122 years. Is the fact that you have a rich history in this country something that can be leveraged?
I think BNP Paribas has always taken a relatively low profile; it is serious and focused on its customers rather than spending hugely on gratuitous advertising. We are known by the people we have been targeting, which explains our position as an extremely long term relationship bank with the people we want to be with.
It’s true that we don’t have large brand recognition but for the clients and prospects we are targeting we have very good recognition and that’s the only thing that matters. The general public may not know who we are but it probably shows that our advertising is focussed in the same way that our business is.
However, the culture of the bank is changing slightly; we’re raising our profile worldwide and in Australia, but we always have the same focussed target so you won’t find us in the general media much other than the bank’s sponsorship of the tennis. But even the tennis is more about entertaining clients.
The bank has a reputation for being particularly innovative in the structured and project finance areas, can you give me some examples?
In aircraft financing we had the three deals of the year across the world; we are also one of the best banks in oil and energy financing and advisory work globally, so those are areas where we have a clear, technical lead.
In securities services we bought Cogent a year ago from AMP. It was already well established as one of the top three securities services firms in Australia but we have been introducing some technologies that we developed in France to the business. This allows much better management by the asset manager, so that’s a technical edge that we are leveraging and that explains why we are the easily the largest custodian and securities services in Europe.
How successful has the purchase of Cogent been for BNP Paribas?
Cogent had been earmarked as a divestment by AMP, so it suffered a bit initially as people don’t want to commit to a firm when they don’t know who’s going to own it. Since we bought Cogent we have given it two things: certainty for the future and the backing of the group. Clients are really coming to see us and we are winning a lot of business. It was an excellent purchase in a difficult industry that is continuously in consolidation mode, but we’re very happy with this new part of our business in Australia and we intend to play a consolidation role in this industry.
If you look at the various businesses we have, they’re all earmarked for growth. The major one would be securities services and the second one would be fixed income. BNP Paribas is one of the largest fixed income houses in the world. We don’t have this position here but we are going to grow this business aggressively and some of the operations that are done overseas for the Australian market will probably come back here so it’s going to be a big growth area.
Also we are not leveraging our expertise as much as we should in the energy, oil and commodities areas. Asset management will continue to grow and we are having regular wins and I expect that to accelerate.
Is the bank looking to make more acquisitions to grow these businesses?
It’s clear to me that we will be making regular acquisitions in security services. As for the other businesses, I don’t think we will make pure Australian acquisitions but BNP Paribas as a group has an ambitious acquisition perspective, which I’m pretty sure will have some consequences in Australia. Therefore, indirectly we may make an acquisition in Australia as the group will buy a firm with an Australian operation.
But generally we are known to be extremely strict with our acquisition criteria so sometimes it’s necessary to wait a long time before the market is reasonable enough for the acquisition to make sense.
To what extent does the bank operate autonomously in Australia and how much are you ruled by head office in Paris?
We have a fairly classical multinational structure where we have a matrix system with product lines and geographical customer lines, so it’s really a mix of the two. A matrix is fine on paper but they only work if people are working well together. In Australia we are well accepted as a relationship bank. What is maybe a differentiating factor here is that we work as a team; we have a few stars but not as many as other banks, it’s more important to have a team working together.
We don’t have a regional office for Asia Pacific so our reporting line differs from business to business; some businesses have Singapore, Hong Kong or even Tokyo hubs whereas others report directly to Paris or London. There’s no specific organisation, each business has its own organisation and it works like that in a pragmatic way. Personally, I like it when we are the original hub as businesses which have regional centres of expertise work better even within Australia because they’re closer.
Does the bank have a policy regarding staff exchanges? Do you have head office people working in Australia and vice versa?
We have a policy of having a very limited number of French ex-pats but we have a relatively large number of exchanges which means the exchanges are not coming directly from head office or even France – they can come from anywhere. We also send our staff to other locations and take them back with added qualities. We have probably a dozen Australian-based people working overseas for a year or two and more or less the same number of people working here, who will eventually go back to their country of origin.
Jean-Francois, how do you find the Australian business culture?
I like Australia which is why I accepted to come back three years ago. It’s a sophisticated market, the most sophisticated market in Asia Pacific in my opinion and you find a lot of the same characteristics here that you find in New York, London or Paris. There’s a lot of competition, which is healthy for the customer and also pushes the supplier to their limits. Australia is really the major centre for innovation, finance in Asia Pacific, which is recognised by the fact that you have a lot of ex-pat Australians working in banking throughout the region.
I find working here extremely interesting and the fact that I’m far away from head office is an added advantage! On a personal level, it’s one of the nicest countries, somewhere you dream to live. My four children are based in Europe, so of course I miss them and it’d be nice to have more competition among airlines so we could have lower fares [laughs]!
Finally, how do you see the next year shaping up for BNP Paribas?
I think 2004 is going to be even better than the record year of 2003. We are well positioned; we are exactly where we want to be and our commercial dynamism is increasing; we have new products and technologies that we are importing so if all this is leveraged on everything we achieved in 2003 we should improve significantly in 2004 and 2005. I’m very confident for the future.
The bank’s managing director Jean-Francois Varlet is enjoying his second stint in Australia, having previously been Victorian manager for Banque National de Paris from 1983 to 1986. Since returning to take up the post of managing director of BNP Paribas in 2000, Monsieur Varlet has seen the bank through a turbulent period of restructuring. The bank sold its asset management arm to Wilson HTM and retail division to Macquarie Equities but purchased global investment company Cogent from AMP for $650 million in 2002.
The bank posted its best ever result in Australia last year.
Monsieur Varlet talks to East & Partners executive editor Paul Bartholomew.
You’ve taken the bank through a difficult couple of years as you’ve restructured and bought and sold businesses, but 2003 was a positive one for BNP Paribas. Talk me through it.
2003 has been an extremely good year. In fact in profit terms it has been our best year ever since we were established in Australia 122 years ago. The result is there for all to see and the explanation is quite simple: it’s a consequence of the fact that all the businesses that we are in have delivered good results and we are firing on all cylinders. Also, we went through a deep restructure operation over the previous two years and we are now seeing the benefits of that restructure. It has probably made us the lowest cost producer in Australia for the time being among investment and commercial banks.
We have refocussed our commercial activities to a smaller number of customers and we’re extremely cost and risk conscious. The business has been good, we have some new clients and our marketing activities have been focussed. This combination of cost and risk control and marketing strength should carry us forward and produce even better years for the bank.
Looking ahead to 2004, are you focusing on selling more to existing customers or expanding your customer base? What’s your strategy?
We are currently focussing on about 400 to 500 companies in Australia, having come down from around 800. So we now have the banking relationships with our customers that we wish to have. We still have a few more to gain but most of the expansion will come through cross selling better and more sophisticated product to our existing customers.
Most people think of BNP Paribas as essentially a French bank. They’re probably unaware that the bank has been in Australia for 122 years. Is the fact that you have a rich history in this country something that can be leveraged?
I think BNP Paribas has always taken a relatively low profile; it is serious and focused on its customers rather than spending hugely on gratuitous advertising. We are known by the people we have been targeting, which explains our position as an extremely long term relationship bank with the people we want to be with.
It’s true that we don’t have large brand recognition but for the clients and prospects we are targeting we have very good recognition and that’s the only thing that matters. The general public may not know who we are but it probably shows that our advertising is focussed in the same way that our business is.
However, the culture of the bank is changing slightly; we’re raising our profile worldwide and in Australia, but we always have the same focussed target so you won’t find us in the general media much other than the bank’s sponsorship of the tennis. But even the tennis is more about entertaining clients.
The bank has a reputation for being particularly innovative in the structured and project finance areas, can you give me some examples?
In aircraft financing we had the three deals of the year across the world; we are also one of the best banks in oil and energy financing and advisory work globally, so those are areas where we have a clear, technical lead.
In securities services we bought Cogent a year ago from AMP. It was already well established as one of the top three securities services firms in Australia but we have been introducing some technologies that we developed in France to the business. This allows much better management by the asset manager, so that’s a technical edge that we are leveraging and that explains why we are the easily the largest custodian and securities services in Europe.
How successful has the purchase of Cogent been for BNP Paribas?
Cogent had been earmarked as a divestment by AMP, so it suffered a bit initially as people don’t want to commit to a firm when they don’t know who’s going to own it. Since we bought Cogent we have given it two things: certainty for the future and the backing of the group. Clients are really coming to see us and we are winning a lot of business. It was an excellent purchase in a difficult industry that is continuously in consolidation mode, but we’re very happy with this new part of our business in Australia and we intend to play a consolidation role in this industry.
If you look at the various businesses we have, they’re all earmarked for growth. The major one would be securities services and the second one would be fixed income. BNP Paribas is one of the largest fixed income houses in the world. We don’t have this position here but we are going to grow this business aggressively and some of the operations that are done overseas for the Australian market will probably come back here so it’s going to be a big growth area.
Also we are not leveraging our expertise as much as we should in the energy, oil and commodities areas. Asset management will continue to grow and we are having regular wins and I expect that to accelerate.
Is the bank looking to make more acquisitions to grow these businesses?
It’s clear to me that we will be making regular acquisitions in security services. As for the other businesses, I don’t think we will make pure Australian acquisitions but BNP Paribas as a group has an ambitious acquisition perspective, which I’m pretty sure will have some consequences in Australia. Therefore, indirectly we may make an acquisition in Australia as the group will buy a firm with an Australian operation.
But generally we are known to be extremely strict with our acquisition criteria so sometimes it’s necessary to wait a long time before the market is reasonable enough for the acquisition to make sense.
To what extent does the bank operate autonomously in Australia and how much are you ruled by head office in Paris?
We have a fairly classical multinational structure where we have a matrix system with product lines and geographical customer lines, so it’s really a mix of the two. A matrix is fine on paper but they only work if people are working well together. In Australia we are well accepted as a relationship bank. What is maybe a differentiating factor here is that we work as a team; we have a few stars but not as many as other banks, it’s more important to have a team working together.
We don’t have a regional office for Asia Pacific so our reporting line differs from business to business; some businesses have Singapore, Hong Kong or even Tokyo hubs whereas others report directly to Paris or London. There’s no specific organisation, each business has its own organisation and it works like that in a pragmatic way. Personally, I like it when we are the original hub as businesses which have regional centres of expertise work better even within Australia because they’re closer.
Does the bank have a policy regarding staff exchanges? Do you have head office people working in Australia and vice versa?
We have a policy of having a very limited number of French ex-pats but we have a relatively large number of exchanges which means the exchanges are not coming directly from head office or even France – they can come from anywhere. We also send our staff to other locations and take them back with added qualities. We have probably a dozen Australian-based people working overseas for a year or two and more or less the same number of people working here, who will eventually go back to their country of origin.
Jean-Francois, how do you find the Australian business culture?
I like Australia which is why I accepted to come back three years ago. It’s a sophisticated market, the most sophisticated market in Asia Pacific in my opinion and you find a lot of the same characteristics here that you find in New York, London or Paris. There’s a lot of competition, which is healthy for the customer and also pushes the supplier to their limits. Australia is really the major centre for innovation, finance in Asia Pacific, which is recognised by the fact that you have a lot of ex-pat Australians working in banking throughout the region.
I find working here extremely interesting and the fact that I’m far away from head office is an added advantage! On a personal level, it’s one of the nicest countries, somewhere you dream to live. My four children are based in Europe, so of course I miss them and it’d be nice to have more competition among airlines so we could have lower fares [laughs]!
Finally, how do you see the next year shaping up for BNP Paribas?
I think 2004 is going to be even better than the record year of 2003. We are well positioned; we are exactly where we want to be and our commercial dynamism is increasing; we have new products and technologies that we are importing so if all this is leveraged on everything we achieved in 2003 we should improve significantly in 2004 and 2005. I’m very confident for the future.
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