FINANCIALS: BNP Buys Axa IM: Smart For Both, Few Spread Negatives

BNP Paribas (BNP: Baa1/A-/A+) announced the acquisition of Axa IM late last week, having announced exclusive negotiations on 1-Aug. This is a material deal for BNP with small near-term earnings and CET1 hits – however, this is a relatively low-risk business and strategically sensible, in our view, so should not be a spread negative. This appears a minor positive for Axa (AXASA: A1/A+), in our view.

• BNP announced it is buying Axa IM (and Select) for a total of EUR5.4bn, bringing EUR850bn of AuMs with it. BNP intends to move Cardif’s assets into this business and this will bring total AuMs across the BNP group to EUR1.5trn. More importantly, this gives BNP scale in alternatives, where Axa IM had EUR184bn of investments (Mar-24).
• The transaction is only around 8% of market cap but there is a 25bp hit to CET1. Axa indicates a EUR0.4bn loss of earnings from the sale which does indicate a purchase multiple of c.14x earnings, which, compared to the 6x consensus forward earnings BNP trades on, does indicate this is earnings dilutive in the near-term. BNP is indicating a RoI above 18% “as soon as the third year”. Closing is seen in mid-2025, so this return is a 2028 event.
• Whilst there is a near-term earnings and capital hit to BNP from this deal, the reality is that this business stream tends to be lower risk than the wider group, so this should not be a spread negative, in our view. Axa indicates it will buyback stock with the proceeds (so likely earnings enhancing) and that Solvency II measures are broadly unaffected. The simplification achieved should be a minor spread positive for Axa, in our view.