French banks eye U.S. expansion after year of cuts

Wed Dec 5, 2012 8:05am EST
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By Lionel Laurent

PARIS (Reuters) - France's top banks are taking advantage of calmer markets to return to expanding in the United States, a year after deep cuts to their investment banks saw them lose ground to rivals in the world's biggest financial market.

BNP Paribas (BNPP.PA: Quote), France's largest bank, and closest rival Societe Generale (SOGN.PA: Quote) have hired several top U.S. bankers in recent months, signaling a selective return to growth in areas like private banking, fixed income, equity derivatives or mortgage securitizations, according to bankers.

No one expects the empire building of before the euro zone debt crisis. But things have changed since summer 2011, when a market panic forced French banks to slash staff and U.S. dollar lending to trade, shipping and aviation.

Fears of an imminent euro zone collapse have faded, allowing French banks to raise dollars at affordable rates. And the risk of a regulatory crackdown at home by Socialist President Francois Hollande has also waned.

"They (French banks) must be thinking: 'Okay, we're starting at square one again, we're in a position now to see where, if we grow things on a balanced basis, we can ramp up again,'" said Andrew Lim, bank analyst at Espirito Santo.

BNP and SocGen were among the most ambitious banks in their expansion during the years of easy credit, leaving them heavily exposed when the market turned. They have respectively hacked $60 billion and $50 billion from their U.S. funding needs in a deleveraging which could be over if markets remain stable.

While both are looking at other regions - Asia for BNP and eastern Europe for SocGen - they want to recoup ground in a U.S. market where economic growth is stronger than Europe and which accounts for over half of global investment banking revenue.

But the focus appears to be measured, targeted expansion.   Continued...