Compagnie Financiere de Paribas
Compagnie Financiere de Paribas
Assets: Ffr818 billion (US$135 billion)
Stock Index: Paris
The French banking conglomerate Paribas has been one of the most important financial institutions in Europe for more than 100 years. It has played a major role in the development of the French economy, as well as the economies of the Netherlands, Belgium, and Luxembourg. Unrestricted in its scope of activities (France has nothing like America’s Glass-Steagall Act, separating commercial and investment banking), Paribas is at once a leading industrial, commercial, and foreign-exchange bank, a securities underwriter and dealer, and a stock broker.
Paribas was formed in 1872 through the merger of the French Banque de Paris and the Banque de Crédit et de Depot des Pays Bas, incorporated in the Netherlands. The new company, the Banque de Paris et des Pays-Bas—called Paribas for short—was headquartered in Paris and had branches in the Benelux countries and Switzerland. Its primary backers and customers were large industrial concerns in the manufacturing industries. As a result, the bank was closely associated with many industrial ventures in France and its colonies. Several of these ventures involved production of steel and heavy machinery, as well as oil exploration in North Africa and southwest Asia. Paribas participated in the formation of Compagnie des Francais Petreles in 1924, and became a major competitor of the Banque de ITndochine et de Suez, France’s leading colonial bank.
World War II interrupted much of the bank’s international activity. Paribas remained open for business through the German occupation, but stagnated. Under German control, Paribas’ major clients faced risks such as the constant threat of RAF bombing. In addition, the bank’s managing board was compelled to follow directions from the occupation authority and the Vichy government.
Once again in control of its business after liberation in 1944, Paribas devoted much of its attention to rehabilitating bomb-damaged factories and supporting the war effort. With the fall of Germany in May, 1945, Paribas was again able to concentrate on its international investments. Although pressure from the United Nations precipitated the eventual downfall of the colonial system, France, with numerous interests in Indochina, Algeria, West Africa, and the Western Pacific, was slow to relinquish its empire.
Insurrections in Vietnam and Algeria during the 1950s led to military engagements that seriously damaged French investments, many of which were underwritten by Paribas. While the Americans inherited the Vietnamese War, the conflict in Algeria escalated into a costly war that ended in Algerian independence in 1962. Still, in places where France had relinquished its colonial presence, there remained a strong tie to French culture and a deep dependence on French development aid, in which Paribas played a leading role.
Paribas wound down much of its Latin American lending in the years following World War II. The bank also curtailed activity in the French Western Pacific, an area which, since it offered France little economic benefit, was used increasingly for military projects.
In an effort to expand its presence in major financial markets during the early 1960s, Paribas opened a branch in London and, in conjunction with Lehman Brothers, attempted to start an investment bank in New York, but failed. However, Claude de Kemoularia, a former adviser to the United Nations, made significant inroads for the bank in the Third World, while serving as Paribas’ traveling ambassador. As a result of his efforts, Paribas regained its leading position in the Middle East during the early 1970s.
The bank restructured in 1968 and, adopting a holding-company structure under the name Compagnie Financiere de Paris et des Pay-Bas, tried once again to achieve a greater international presence. Paribas opened an office in Tokyo in 1972, and in 1974, with S. G. Warburg and A. G. Becker, formed an investment bank called Becker Warburg Paribas. In 1978 the bank opened a branch in New York and an office in Hong Kong and also purchased 5% of Japan’s Orient Leasing. A year later, it increased its holding in France’s Compagnie Bancaire, a finance firm, to 45%.
Internationalization became especially important to Paribas during the French elections of 1977. Paribas’ board, fearing nationalization by a new left-wing government, set up several new ventures in Spain, Italy, West Germany, and England as part of an effort to transfer as much of the bank’s capital as possible out of French jurisdiction. The elections, however, returned the conservative government to power.
In 1981 the threat of nationalization loomed once again for Paribas. With a Socialist, Francois Mitterand, favored to win the presidency, Paribas Chairman Pierre Moussa sold controlling interest in the bank’s Swiss and Belgian subsidiaries to prevent the Socialist government from gaining control over those assets. When Mitterand and the Socialists won the election, they pledged to nationalize many of France’s largest industries and all of its leading banks. Paribas in particular was vilified as an arrogant and abusive institution preoccupied with self-interest and profit. Even the company’s headquarters, the mansion where Napoleon Bonaparte married Josephine in 1796, became an issue.
Although Paribas was taken over by the government in February, 1982, Moussa’s plan succeeded in cutting the bank’s losses. In November, 1981, Laurent Fabius, Mitterand’s budget minister, complained of Moussa’s defensive actions. He filed suit against the chairman and several of Paribas’ top aides in January, and a month later won their resignations. Moussa was acquitted in 1984, but three of his top officers were convicted, sentenced to prison, and heavily fined. Two sentences were suspended; the third was given to a fugitive. Jean-Yves Haberer, a career civil servant, was appointed to succeed Moussa as chairman of the nationalized Paribas.
While Paribas was run by the government, it adopted Banque Paribas as its official name. In 1983 it terminated its association with Warburg by divesting itself of its Warburg shares and taking control of A. G. Becker, which it later sold to Merill Lynch and Company in 1984. The bank’s broad interests in French industries, however, were left largely intact.
The socialist experiment in France did not work as planned. Parliamentary elections in 1986 forced President Mitterand to share power with a conservative prime minister, Jacques Chirac, who had the power and legislative support to return several nationalized companies to private and institutional shareholders. Paribas was second among these.
Haberer, however, had run Paribas with such a heavy hand that he had virtually disenfranchised the bank’s top managers and left many employees feeling that they had been reduced to public servants. Indeed, Paribas frequently had come under pressure to aid financially troubled companies—regardless of their viability—as if it were a government rescue bank.
With the new political circumstances, Haberer was dismissed in 1986 and replaced by Michel Francois-Poncet, a 26-year veteran of the bank handpicked by Chirac himself. Francois-Poncet immediately began the difficult task of rebuilding morale by returning responsibilities to managers.
Next, taking American investment banks as a model, Francois-Poncet expanded the bank’s involvement in institutional investment markets. He adopted a strategy aimed at preserving the bank’s existing customer base by offering a wider range of services. Paribas took over the French sharebroker Courcoux-Bouvet, and Quilter Goodison, a London-based investment bank. In 1987 Paribas managed the partial privatization of Elf Aquitaine and British Gas’s French interests and initiated a new campaign to win business from small- and medium-sized firms in search of fee-based income from its consulting services.
Early in 1988 Paribas regained full ownership of Crédit du Nord, a recently reprivatized retail bank. Crédit du Nord, however, has remained a doggedly expensive operation due to French laws that restrict banks from closing branches.
As a result, Paribas is likely to de-emphasize the retail-banking business of Crédit du Nord and other subsidiaries in favor of the more promising investment-banking sector. Paribas also seems to have recognized the small growth potential of its insurance operations, a costly sector that appears peripheral to the company’s long-term focus.
Francois-Poncet’s greatest achievements are the successful reorientation of the company to sounder operating strategies and the restoration of Paribas’ prestigious reputation. Nationalization, if it accomplished nothing else, removed the bank’s old-boy-network image. As one of France’s premier financial institutions, it intends, Francois-Poncet has said, to become uamong the 15 that count in the world,” particularly after 1992, when European trade barriers are to be eliminated.
Compagnie Financiere De Paribas; Banque Paribas (91.1%); Omnium De Participations Bancaires De Paribas (85%); Banque Pour la Construction Et L’Equipement 4CGIB’; Compagnie Céntrale de Financement Cocefi’; Conseil Investissement; Banque Paribas Pacifique (90.0%); Societe Générale de Financement Intercontinentale ’Sogefi’; Societe Anonyme De Transactions Internationales; Societe Nouvelle De Banque Europe: SNB-E; Banque Paribas Polynesie (70%); Crédit Du Nord; Union Bancaire Du Nord (61.1%); Banque Tarneaud Freres Et Compagnie (79.1%); Banque Arnaud Gaidan; Caisse Générale Des Depots Et D’Avancees ’Cageda’ (99.4%); Banque Nicolet Lanfranechere Et De L’Isere (97.2%); Societe Immobiliere D’Investissement Et De Coordination (99%); Compangnie Bancaire (48.4%); Union De Crédit Pour Le Batiment (36.8%); ’Locabail’ Compagnie Pour La Location D’Equipements Profess-ionels; Union Francaise De Banques; Fonciere De La Compagnie Bancaire (90.2%); Crédit D’Equipement Des Menages ’Cetelem’ (75.6%); ’Locobail Immobilier’ (40.3%); Compagnie Francaise D’Epargne Et De Crédit ’CFEC’; Compagnie Pour Le Financement De LTndustrie, Du Commerce Et De L’Agriculture ’Cofica’; Parit; Banque Financiere Cardif; Kleber Portefeuille; Compagnie Financiere Kleber (99.4%); Cofibail; Banque Paribas Belgique (75%); Banque Paribas Luxembourg (99.4%); Banque Paribas Suisse (90.7%); Banque Paribas N.V.; Banque Paribas Gabon (57.3%); Eural Spaarbank NV (79.7%); Financiere Gabonaise De Developpement Immobilier (67.8%); Paribas Bank International (Texas) Inc.; Banque Paribas Canada; Paribas Suisse (Bahamas) Ltd.; Paribas Finance Inc.; Paribas Quilter Goodison Holding (99.9%); Banque Paribas Deutschland; Paribas North America; Paribas South East Asia; Paribas Finanziari; Paribas Limited; Paribas Finance Texas Inc.; Banque Paribas Cote-DTvoire (82.9%); Banque Paribas Norge; Banque Paribas Bienne; Novelease N.V.; Paribas UK Holding; Crédit Nord Beige.