BNP Paribas completes AXA IM acquisition, in talks with supervisors on capital hit

LONDON (Reuters) -BNP Paribas said on Tuesday it had completed the takeover of AXA Investment Managers and was still discussing with supervisors the hit to its capital ratio after regulators previously opposed it using a favourable capital treatment.

The French bank last year embarked on the 5.1 billion euro ($6 billion) purchase of AXA's investment management unit. It said on Tuesday the deal would create a business with 1.5 trillion euros in assets under management.

BNP expected regulators would let the deal through with minimal effect on the bank's capital because it was buying AXA IM through its insurance business, Cardif, to make use of a treatment known as the "Danish Compromise" - which allows lower capital requirements for banks that own insurance units.

But an assessment earlier this year from the European Central Bank tempered those expectations, leading to a greater hit to BNP's capital than the lender had initially priced in, sources said at the time. BNP subsequently cut its forecast for returns from the deals, and on Monday reiterated those lower return projections.

BNP also confirmed that the hit on the group's common equity tier 1 (CET1) ratio would be around 35 basis points - worse than the 25 bps it had initially expected - and that discussions with supervisory authorities were ongoing.

The bank said it would provide an update on the progress of the deal when it publishes third-quarter results on October 28.

Sandro Pierri, CEO of BNP Paribas Asset Management, will lead the group's asset management business while Marco Morelli, current Executive Chair of AXA IM, will become its chair, BNP added in its statement.

($1 = 0.8487 euros)

(Reporting by Tommy Reggiori Wilkes; Editing by Emelia Sithole-Matarise)