BNP Paribas CFO: Two elements to AXA IM deal explain capital hit

By Mathieu Rosemain

PARIS (Reuters) -The European Central Bank sees two elements to BNP Paribas' 5.1-billion-euro ($5.8 billion) acquisition of AXA's asset management arm, BNP's finance chief said on Thursday, explaining the capital requirements made by the central bank.

"The AXA deal that we have signed consists actually of two different items," Lars Machenil told analysts on a call.

"On one hand, it consists of a long-term contract with AXA, and on the other hand, the acquisition of AXA IM (Investment Managers). And they require a different handling," he added.

BNP last week hiked its forecast for the capital burden it expected from the acquisition of AXA IM by 10 basis points to 35 basis points on its CET1 ratio - a key measure of financial strength - following updated guidance from the ECB.

BNP is acquiring AXA IM via its insurance subsidiary, Cardif. Many investors had expected BNP would be able to apply the so-called Danish Compromise to the deal, a regulatory approach that reduces the capital for banks that own insurers.

"We considered the deal to be insurance," Machenil said.

"We're having discussions with the ECB, where the ECB is triggering the question: is this not an asset management kind of deal?"

The bank's updated guidance on the capital impact reflects this dual view of the transaction, the CFO said.

"It's two different deals and if you look at it, that's how we come to a step-up of 10 basis points."

($1 = 0.8800 euros)

(Reporting by Mathieu RosemainEditing by Mark Potter)