BNP Paribas eyes the Cyprus corporate market

The introduction of the euro in Cyprus due in January 2008 not only means new opportunities for local Cypriot businesses, but adds a new market for large, locally based international players who have traditionally done business abroad.

In an interview with the Financial Mirror, Managing Director of Limassol-based BNP Paribas Cyprus Limited, Thierry Gigant, explained how the bank’s operations in Cyprus have adapted to EU membership and how the BNP Paribas group’s position as a large international bank will help it expand in the local corporate market.

— Number 1 in the Eurozone

BNP Paribas, which has been in Cyprus since 1986, is known in Cyprus primarily as a bank of “large clients” (both corporate and private) but in France, Italy or Western USA, it is a household name through its large network of retail branches. It also has operations in more than 85 countries worldwide.

Within the Eurozone, BNP Paribas ranks number 1 in terms of capitalisation and corporate governance according to Fortune magazine. It ranks number 1 in France in Mergers and Acquisitions according to Thomson Financial magazine (8^th worldwide).

The group reported net income of EUR 2.5 bln in the first quarter of 2007, up 24.5% on the year earlier.

Thierry Gigant explained the changes that occurred in BNP Paribas Cyprus, as a result of Cyprus joining the EU in 2004.

Cyprus had to adapt its laws so that local and international businesses were treated equally, and the last remaining distinctions between onshore and offshore banking sectors were abolished in January 2006.

“Preparing the changes to come, this had been seen as an opportunity to change status,” said Gigant, explaining that in the past, BNP Paribas in Limassol was a branch of BNPI, the international arm of the banking group.

BNP Paribas Cyprus Ltd was thus created as a 100% subsidiary of BNP Paribas on the first of January 2003. With its capital in Cyprus, BNP Paribas Cyprus Ltd is officially a Cypriot bank. “We are therefore amongst the most international of the local banks,” said Thierry Gigant with a smile.

— Large lending resources

As any Cypriot bank, BNP Paribas in Cyprus has a lending limit restricted to a proportion of its capital. “In case of need, the back up of our mother company is immediate. Therefore, we work with the capital of BNP Paribas SA, which as you obviously know is not insignificant” explained Thierry Gigant.

— Fast turnaround on letters of credit

For companies which have to deal with foreign imports or exports, dealing with a bank which has a solid international network can be instrumental. Trade financing via Letters of Credit or international Guarantees can be much faster and cheaper.

As an example, Thierry Gigant explained that a Chinese company supplying goods will normally ask for a letter of credit issued by the purchaser’s bank. “When the letter of credit is opened by a bank with limited geographical recognition, the Chinese Company will probably ask for a confirmation by a reputable bank”, said Thierry Gigant. This can add costs.  “With its rating of AA (S&P, Fitch), and its network spanning Singapore, Hong Kong, Shanghai and all the other key emerging markets, BNP Paribas’ signature is always accepted which can ensure clients with lower costs” he said.

Furthermore, thanks to its experience as an “offshore bank” heavily involved in trade finance, BNP Paribas can issue a letter of credit within the hour if necessary. Other services such as transfers are also done quickly.

“I think that we have one of the best Trade departments in Cyprus. Our transfer services are equally efficient” said Gigant.

Through BNP Paribas’ online Connexis Trade system, clients can also track the exact status of their Letter of Credit requests, download a copy of the swift confirmations, and show them to the suppliers for example. “I believe that this level of quality is probably unique in Cyprus” said Thierry Gigant.

The Connexis Cash system can also allow clients to manage all of their accounts—whether with BNP Paribas or not—through one unique and highly secure system.

“Being part of BNP Paribas group helps to provide added value services.”

— Hedging for borrowers, importers

One promising market for BNP Paribas in Cyprus consists of proposing to Cypriot companies hedging services in terms of interest rate, exchange rate or commodity price movements, which is not yet usual in Cyprus.

One of the key risks for importers and borrowers alike is that the costs are variable. If the currency in which they have to pay for their imports or for their debts rises in value, they have to pay more in local currency. There are similar risks for borrowers if the interest rate rises or for raw materials importers if prices evolve.

Hedging allows to fix prices, interest or foreign exchange rate that they will pay, the risk essentially taken by the bank, allowing clients to “sleep well”, said Thierry Gigant.  “BNP Paribas is a leader in derivative products allowing us to provide tailor-made products for clients” he added.

— No plans for retail

Local banking chiefs wary of takeover can relax that BNP Paribas, at least, has no current plans for entering the retail market.

“At this stage we have considered that the local market on the retail side is already correctly served… and we would have a limited added value to propose to the retail customer,” said Gigant.

BNP Paribas Cyprus will thus concentrate on large clientele, both corporate and Private, thanks to the 22 local staff, with the support in terms of Treasury, research, IT and a range of other services from its global network.

“Our objective when we talk about the local market is mainly to target the large corporates or the private investors”, he said. In that sense, not being in the retail market in Cyprus is not a disadvantage.

Thierry Gigant concludes: “We concentrate on a limited number of clients and we serve them very well.”