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Credit Suisse to recommend its hedge fund clients join BNP Paribas

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Credit Suisse has signed a deal to recommend its hedge fund clients move over to BNP Paribas, which is hoping to capitalise on the Swiss bank’s withdrawal from prime broking services in the wake of the Archegos scandal.

Rivals circling Credit Suisse’s prime brokerage, which serves hedge funds, have a chance to pick up customers as the Swiss bank all but exits the business, which racked up $5.1bn of losses this year following the collapse of family office Archegos Capital.

New Credit Suisse chair António Horta-Osório unveiled a sweeping overhaul of the group last week, including a broader plan to streamline the investment bank and consolidate its wealth management division.

France’s BNP Paribas, which competes with bigger rivals such as Goldman Sachs and Morgan Stanley in prime services, swooped on a retreat by Deutsche Bank two years ago and bought its global prime finance unit and its electronic equities business.

It is still transferring those prime broking clients across and integrating the two banks’ systems, which it aims to have done by the end of 2021, and has this year also bought out the 50 per cent it did not already own in investment company Exane to beef up its equities business.

The French bank said on Monday it had signed a referral agreement with Credit Suisse, which aims to try and ease a transfer of services between the two banks for clients who want that option.

Hedge funds that used to work with Credit Suisse and want to go elsewhere would still be free to do so. And BNP Paribas would have leeway to approve or turn away clients. A person with knowledge of the talks between Credit Suisse and BNP said they expected up to half of the Credit Suisse prime assets could transfer to the French bank.

Credit Suisse has no other agreements of this type in place for its prime services, but did not rule out signing more.

The banks did not comment on any financial terms involved.

BNP is one of the few European banks expanding prime finance, a risky but potentially lucrative business when done on a large scale, and which involves lending money and handling trades for hedge funds.

Often used as a means to woo hedge funds to also sell them other services, it has long been dominated by Wall Street banks, with Barclays, Credit Suisse and UBS ranking as the contenders to beat outside the US before the Swiss firms were hit by Archegos losses.

Credit Suisse had said it was the fourth-biggest bank in US prime broking last year.

The Deutsche Bank acquisition, and fresh gains linked to Credit Suisse, could put BNP Paribas in a position to rank fifth or sixth globally and rival Barclays, the person familiar with the talks said.

Calls from Credit Suisse clients to the French bank had picked up since last week, the person said, adding that actual transfers would start to materialise in the next three months as hedge funds would want to move quickly to ensure they had access to cash and financing.

BNP Paribas profited from a recent equities trading boom, thanks in part to the Exane integration, and its equity and prime services revenues rose 79 per cent in the third quarter, versus an average rise of 35 per cent at big US banks.

It is still a minnow in the market compared to Wall Street giants, however, with equities revenues in the quarter amounting to a third of Goldman Sachs’ for example.

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