VZCZCXRO7091
RR RUEHAG RUEHDF RUEHIK RUEHLZ
DE RUEHFR #5424/01 2221613
ZNR UUUUU ZZH
R 101613Z AUG 06
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 0285
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC
RUCNMEM/EU MEMBER STATES

UNCLAS SECTION 01 OF 02 PARIS 005424 
 
SIPDIS 
 
SIPDIS 
 
PASS FEDERAL RESERVE 
PASS CEA 
STATE FOR EB and EUR/WE 
TREASURY FOR DO/IM 
TREASURY ALSO FOR DO/IMB AND DO/E WDINKELACKER 
USDOC FOR 4212/MAC/EUR/OEURA 
 
E.O. 12958: N/A 
TAGS: EFIN ECON PGOV FR
SUBJECT: NATIXIS: A NEW FRENCH FINANCE NATIONAL CHAMPION 
 
 
¶1. SUMMARY.  The GOF has given the green light to a new joint 
subsidiary between the French Caisses d'Epargne and the Banque 
Populaire banking groups, creating NatIxis.  With 500 billion euros 
(USD 640 billion) in assets managed, NatIxis has the potential to 
become a significant player in the finance and investment banking 
services sector in France and throughout the rest of Europe.  End 
summary. 
 
GOF approves Financial Restructuring 
------------------------------------ 
¶2.  On August 5, the Government Shareholding Agency ("Commission des 
Participations et des Transferts") approved the transfer of a stake 
held by the Caisse des Depots et Consignations (CDC), the 
state-owned financial conglomerate, to the Caisse Nationale 
d'Epargne (CNCE), the parent company of Caisses d'Epargne.  This 
approval removed a key obstacle (namely, CDC opposition) to the 
formation of a joint subsidiary between two mutually-owned financial 
service providers, the Caisses d'Epargne and the Banque Populaire. 
 
 
¶3.  Although the transfer did not amount to a privatization, Finance 
Minister Thierry Breton had asked for its approval in order to quiet 
any controversy surrounding the transaction.  Caisses d'Epargne - 
often called "L'Ecureuil" after its squirrel logo - initially had 
been blocked in its plans to create NatIxis by opposition from CDC, 
its parent company, which had special veto rights. CDC President 
Francis Mayer had condemned the transaction as "imbalanced to the 
detriment of the Caisse d'Epargne group, and opposed to CDC 
interests as a stakeholder in the group."  CDC was put off by the 
change in the group's objective to be listed on Euronext, "a 
complete and sudden change in its strategy," said Mayer. CDC 
eventually agreed to sell its 35 percent stake in CNCE, allowing the 
Caisses d'Epargne group to retain full control of CNCE, and 
L'Ecureuil to separate from CDC. 
 
¶4.  The decisive factor for CDC was the offer by L'Ecureuil to pay 
6.8 billion euros including a transfer of assets.  The price 
includes a 15 percent premium (when 2006 dividends are excluded) 
according to Caisses d'Epargne, or a 25 percent premium (including 
dividends) according to CDC, in any case higher than what the GOF 
would have gotten in a regular privatization.  The Commission ruled 
that "the value and modalities of the transfer of assets are not 
unfavorable to CDC's patrimonial interests," but nonetheless urged 
vigilance when it came time to assigning final prices to assets, 
particularly for the real estate stakes. 
 
NatIxis and Natexis - Who is Who? 
--------------------------------- 
¶5. The new joint subsidiary will be called "NatIxis", which may 
prove confusingly similar to Natexis Banques Populaires, a 
subsidiary of the Banque Populaire group.  Natixis' name comes from 
the first three letters of Natexis, and Ixis, the name of CNCE's 
subsidiaries. 
 
¶6.  Natexis Banques Populaires is Banque Populaire Group's 
financing, investment banking and service bank.  It is listed on 
Euronext, and has sites in France, Europe, America, Africa, Asia and 
Oceania.  Natexis's shares are held by the Banque Federale des 
Banques Populaires (74.97 percent), public (16.28 percent), other 
financial institutions (7.41 percent) and by employees (1.34 
percent). 
 
¶7.  Caisses d'Epargne's subsidiaries involved in the NatIxis project 
include Ixis Corporate & Investment Bank; IXIS Asset Management 
Group and CIFG in the finance and investment banking sector; Credit 
Foncier and CEFI in the specialist banking services sector; and 
Compagnie 1818 in the private asset management. 
 
¶8.  CDC serves as the government's investment bank, and also 
oversees tax-exempt savings funds collected by L'Ecureuil and Banque 
Postale.  CDC allowed L'Ecureuil to gain autonomy by selling its 35 
percent stake in CNCE.  As part of the transactions, CDC lost its 
indirect 50 percent stake in "L'Ecureuil vie", the life insurance 
subsidiary of L'Ecureuil, but will retrieve it as part of assets 
given by l'Ecureuil.  CDC will bring L'Ecureuil vie to insurance 
company CNP, which will get full control of L'Ecureuil vie.  CDC 
will raise its stake in CNP from 37 percent to 40 percent. 
L'Ecureuil has a 17.85 percent stake in CNP, and agreed on the 
renewal of commercial agreements with CNP up to 2015. 
 
NATIXIS: A Major Player 
----------------------- 
¶9.  In March 2006, the Caisses d'Epargne and the Banque Populaire 
groups agreed on the outlines of creating a new vehicle - a joint 
 
PARIS 00005424  002 OF 002 
 
 
subsidiary - for their financial assets and investment banking 
activities.  The goal, to expand through combining forces, rides the 
current tide of European consolidation.  NatIxis will begin 
operations on January 1, 2007.  It will be publicly listed, but will 
be jointly and equally controlled by Banque Populaire and Caisses 
d'Epargne (each will retain a 34 percent share in equity and voting 
rights for ten years). 
 
¶10.  NatIxis is designed to create a heavyweight in the financial 
and investment banking services sector, while allowing its partners 
to conserve their own retail banking businesses.  NatIxis will have 
the "critical" size needed to rival other large French banks, 
notably Credit Agricole, Societe Generale and BNP Paribas, which 
have established international franchises.  With 500 billion euros 
in assets, NatIxis will become the French leader in asset 
management.  Natixis will also hold the number one position in the 
French employees' savings system ("epargne salariale").  Thanks to 
Natexis Banques Populaires' subsidiary COFACE, which provides credit 
insurance and credit management services to French companies, 
NatIxis will become the number two credit insurer in Europe and the 
number three in the world.  NatIxis will have an estimated market 
capitalization of 25 billion euros (USD 32 billion). 
 
Comment 
------- 
¶11.  NatIxis will be a strong competitor among financing and 
investment banks, offering assets management, insurance and 
specialized financial services in the French domestic market.  It 
will have the potential to develop internationally, the most likely 
route for expansion for French banks.  The French banking system is 
already largely consolidated, with the six largest banks managing 90 
percent of deposits.  Among those banks, Credit Agricole, which has 
just acquired a 72 percent stake in the Greek bank Empiroki, has 
plans to devote 5 billion euros (USD 6.4 billion) to acquisitions 
abroad by the end of 2008.  BNP Paribas plans to develop in Italy 
and in the United States.  Societe Generale's objective is to 
continue its expansion in Eastern Europe. 
 
STAPLETON#