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Exane's equities professionals have reason to wonder about the move.

The pain points in BNP's equities merger with Exane

BNP Paribas is doing the deed: while other European banks pull back from equities sales and trading, it's reportedly preparing to go deeper by purchasing the remaining 50% stake that it does not own in Exane. If all goes to plan, then Exane and BNP could soon be one and the same.

While this may be good for BNP's attempt to increase its comparatively meagre 4.8% share of global equities trading revenues at the end of 2020 according to KBW, it may not be quite so popular with equities professionals at Exane.

Although Exane is already 50% owned by BNP, headhunters say it has a very different culture and a very different approach to compensation. 

"Exane's main client focus in structured products is independent asset managers and family offices," says one headhunter who has placed individuals in both organisations. "Exane is a very high touch sales operation and a lot of people there have excellent relationships which can be very lucrative. They get paid a high percentage of the revenues they bring in."

By comparison, as a universal bank, BNP Paribas has an opaque pay structure in which compensation decisions are weighed on the basis not just of individual and divisional performance, but the performance of disparate parts of the operation that are entirely unrelated to equities. "Compensation decisions are much more complicated at BNP," says another equities headhunter.

Exane has effectively been BNP's outsourced cash equities unit for 17 years, but there are also overlaps between the two businesses that could cause issues if Exane is brought in house. BNP itself has evolved as a flow equity derivatives house with strength in areas like Delta One (it also bought Deutsche's Delta One assets last February). However, Exane also has equity derivatives capabilities and built up its Delta One business a few years ago.  Exane Solutions, the bank's derivatives arm, has 21 employees listed on LinkedIn. Those roles could be at risk in a full merger with BNP. There are also suggestions of overlaps in some areas of electronic trading, where BNP is already well-staffed following the addition of people from Deutsche last year. 

The real risk, though, is not that Exane will cut people surplus to requirement but that that Exane's independent-minded equities staff will decide they don't want to be part of the larger French bank. If this is the case, there are plenty of other brokerage operations that will have them. - Exane ranked first across the board in last year's Extel survey, and the independent asset management clients it deals with tend to be loyal to individuals rather than to institutions. 

Brokers that might try to capitalize on any disaffection at Exane include: SILEX, a Swiss brokerage firm founded in 2016 by Xavier Laborde, Exane's former global head of stuctured product sales and structuring; Leonteq, a Swiss structuring house that employs people like Matthieu Fortin, SocGen's former head of structuring and business development in Europe; and Kepler Cheuvreux, the independent brokerage house which includes Credit Agricole's former equities business. 

Photo by Claudio Schwarz | @purzlbaum on Unsplash

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AUTHORSarah Butcher Global Editor

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