With just a single acquisition, BNP Paribas Personal Finance has become a major player in the UK motor finance market. Motor Finance caught up with chief executive officer Laurent David to find out more about the company, its plans, and what the future holds for Opel and Vauxhall
Motor Finance: Please can you give some background about BNP Paribas Personal Finance?
Laurent David: BNP Paribas Personal Finance is 100% owned by BNP Paribas, dealing with consumer finance in close to 30 countries, mainly in Europe.
Outside Europe we have operations in China, Latin America and South Africa, but most of the countries we operate in are in Europe. We deal currently with something like 27m individual customers, which mean 27m people pay an instalment at the end of the month, and we employ 17,000 people for consolidated outstandings of €65bn.
Our main operating country is in Europe – France obviously – which is the oldest country we operate in, and the country of our mother company. But if I take all the countries where we have more than €3bn outstanding, you’ll find Italy, Spain, Germany, and Belgium.
As far as the UK is concerned, our activity there is more recent. We were co-shareholders in the LaSer Group until 2014, when we became the single shareholder. There we have around £2bn outstanding, which in terms of market share on the global consumer credit market in the UK is not that big, just 1%.
In other countries we operate with market shares at closer to 10%. It is 1% in the UK because we have been specialising on retail financing through agreements with groups like Dixons.
Car financing brings outstandings which are bigger than retail financing, obviously, because a car is more expensive than a fridge! That being said, the deal meets several strategic objectives. The first one was to keep on increasing our share in the European car financing market.
Out of our €65bn outstanding, car financing is €15bn, so about a quarter, or 35%; it was €10bn three years ago. That means our strategy for developing car financing outstanding in the past four years has already borne fruit. We’ve now found a very powerful accelerator.
The other one is to increase our footprint in two strategic markets: Germany and the UK. These are the two main markets where Opel and Vauxhall financing operate.
Was that €15bn mostly as a white label or as an independent?
When we had only €10bn a few years ago, it was only as an independent lender. If you look at the growth we’ve gone through in the last four years, it has been fed more than half by white-label agreements with car manufacturers in most European countries. The manufacturers are mostly from Asia – Kia, Hyundai, Toyota to some extent, Volvo, Suzuki.
We’re white label partners of most of them in countries like France, Spain, Poland, and Belgium. But in none of them have we reached a pan-European agreement that we will be reaching with Opel and Vauxhall.
Could you give me a flavour of what the new deal is going to look like?
The deal was built in such a way that we will be co-shareholders with Banque PSA Finance – 50% each. It will take place in a way that looks like the Peugeot financing model, which was established with Santander as a partner, so 50% each with specific responsibilities.
The responsibilities we will take care of are all linked to refinancing asset liability management, risk policies and risk processes, allowing us entitlment to consolidate 100% of the activity in the BNP Paribas Personal Finance account.
The commercial policy and everything that needs a strong relationship between the car maker and the captive will be managed by Banque PSA Finance.
At the top of this, we need to share all the decisions. We would go towards an organisation where we will have a European company, 50-50, which will own 100% of the local companies, rather than having X companies, each owned 50-50. This is in order to be more efficient in terms of controlling and developing the activity.
In terms of strategic objectives, obviously this is a story written with the word ‘development’ in the title for at least Chapters 1, 2 and 3.
We’ll be able to develop the financing company’s outstanding as early as 2018. Then we’ll be able to complete the range of products offered to dealers and clients in order to grow the profitability of the business significantly in the years to come, which will be made through the development of the top line implemented.
GM was already quite a large organisation. What’s going to happen to the staff?
In terms of employment, all the agreements that are in force will be pursued. If I go a little bit further, the organisation of the group in Europe, is made up of operating companies and shared service centres.
We do not intend to shift much from these current organisations because our priority is to build up the top line, and we intend to do it relying on the competencies which are inside the company. So we don’t have any plan in mind in any given country.
And for the dealers, what message would you give to them?
This is certainly the positive angle of these changes. We entered a very long-running agreement with Peugeot, so we’ll bring stability to the dealerships, and to the system as a whole.
The fact we are combining the expertise from PSA Banque on one side and BNP Paribas Personal Finance on the other side will allow the dealers to have the best products, services and solutions to propose to their clients. So I think of all the changes taking place, this is the most positive.
What would you consider to be your particular strengths?
If I were an Englishman I would answer that if there were none, we would not be ranking as we are, so there should be some!
But seriously, I would say the expertise we’ve developed in so many countries means the risk management we’ve developed, in a broader sense, will really be an asset for the company.
Good risk management means being able to finance the most possible clients while still guaranteeing a reasonable level of comfort on the cost risk and cost of credit we have to bear.
This is combined with the fact that, as far as funding issues are concerned, being inside BNP Paribas in the long run means having strong capabilities and stable levels of pricing, and low-level pricing for the company.
One of the strategic objectives is to expand into the UK. Is that something you are looking at separately?
The UK is a very mobile market. We are permanently looking at opportunities, whether in terms of commercial agreements or in terms of acquisitions – still with the same disciplines that are ours. We do not overpay anything, and we try to be reasonable in our acquisition processes.
In this new company, do you have a corporate leadership team in mind at all?
We signed the deal yesterday night. We organised the first conference call with management teams this morning.
What we said, and what is true, is that we need a little bit of time to design the future of the organisation.
In the meanwhile, the priority of everybody should be to clients and to bringing the best service possible to them in order to reach the 2017 targets.
At that point we will be ready to talk about the future, knowing the closing of the deal might happen no sooner than the fourth quarter of this year. It will be a long run in terms of all the different regulatory bodies that have to look at the process.
What else is new?
On the UK side, in a period when you’re talking about banking and the UK, it’s all about how Brexit will be managed, and what will happen with non-UK banks.
We trust that the UK economy will overcome the time of Brexit, and we are still very confident in domestic activities managed in the UK. That is true of BNP Personal Finance, as well as of Arval. <