Pierre de Fontenay started his banking career in 1990 at BNP Paribas in Norway, before working for 20 years in Shipping Finance and Corporate Coverage, at Credit Agricole then BNP Paribas, in France and in the Nordic Countries.
He took the responsibility of BNP Paribas’ activities in Norway in 2009 and for the Nordic Region in 2012.
Norway is going through an economic turmoil as Oil & Gas investment falls, with spillover effects on other sectors. How do you forecast the 2017 outlook and financing needs for companies?
The fall in the oil price has definitely taken its toll on Norwegian industry. Oil producers were somewhat less affected than their suppliers, as they generally have a more robust financial structure and benefit from the Norwegian oil tax cushion (78%) which dampens the impact of falling revenues on their post-tax cashflows. Oil & gas equipment & service providers, many of whom had over-invested with excessive cheap debt, were hit more severely. Many of them are currently undergoing painful restructuring, triggering a wave of industry consolidation. Despite the above and the associated massive headcount reductions in the oil sector, especially on the Norwegian west coast, the Norwegian economy has resisted surprisingly well, with a slightly positive GDP growth and a relatively low national unemployment. The mitigating effects of the Norwegian Sovereign Oil Fund, wisely built over the years by the Norwegian Government, played in full with another significant injection (4%) into the State Budget for 2017. We believe that next year will still be painful for the oil service industry and their creditors, but the steep cost reductions which this industry has achieved since 2014, coupled with financial restructuring and industry consolidation, will produce fewer stronger groups which should benefit from an expected rebound in the oil price when sub-investment by producers should result in a more balanced oil market. In the meantime, investments are reallocated to other sectors like fish farming and green energy where Norway is trying to play an increasing role. In a low interest rate environment, institutional investors are keen to find assets with proper remuneration, therefore are ready to consider financing more risky investments in modern technology. An increasing number of companies in the digital and biotech sectors are attracting strong interest and become candidates to the stock exchange. In the end, the oil crisis will have been painful but triggered a welcome wake up call for the Norwegian economy to make a long-awaited shift towards the industries of the future.
French-Norwegian industrial cooperation has a strong potential for development. Which advice would you give to French companies willing to develop business in Norway and how would BNP Paribas support them?
French investments in Norway have often been linked to the oil sector, and as a consequence are affected by the above. But Norway still offers interesting opportunities for French companies : a strong and open economy, a stable political and economic environment, high-spending consumers, a well-educated workforce, cheap & green energy, a high degree of digitalization, massive investments in infrastructure and housing. New technologies allowing to exploit North Sea oil & gas in a more efficient and environment-friendly manner, are very much in demand for the development of large oil & gas fields like Johan Sverdrup. Sizeable wind energy projects have been validated and solar projects are being developed. The Norwegian railways are making significant investments in rolling stock. Therefore, despite its small size, Norway can be an interesting export market for consumer and capital goods, especially in the energy & infrastructure sectors. It can also constitute a competitive base for some industrial activities. Groups like Schneider Electric and Nexans are successfully growing their presence in Norway.
As part of its strategy “One Bank for Corporates in Europe”, BNP Paribas has committed to support its French clients who operate – or envisage to operate - in Norway. Our Oslo Branch offers them a full range of Corporate Banking services, including financing, cash management and trade services, which can be easily integrated with the BNPP systems which they may already use elsewhere. In addition, the BNPP group offers a number of other services to companies in the Nordic Region, through its subsidiaries in Sweden and Denmark, including car leasing (Arval) and factoring (BNPP Factor).
The financial service industry is going through dramatic changes as a consequence of digitalization of business, changing customer behaviour, adoption of new technologies… Consequences on retail banking services are obvious but are the corporate banking activities also impacted? How do you see the evolution of such services, especially in the Nordic region?
Digitalization has so far primarily affected retail banking, a sector in which BNPP is not active in Norway. However our Danish subsidiary Ekspres Bank, specialized in consumer finance, is growing its activities in Norway and offers cutting-edge mobile digital tools to its retail partners and their clients. Digitalization will obviously also impact corporate & institutional banking, but due to the complexity and highly regulated nature of these activities, the progress is slower and less visible. One of the main issues to address, is data protection. Beyond the digital client interfaces which have become an absolute must, BNPP is making significant investments, on its own or together with “fintech” partners, in new technologies like blockchain and artificial intelligence, which will become essential components of the digital platforms through which most banking products & services will be made available to clients in the future. Most large companies – including our Nordic clients - are already widely using digital platforms to execute capital market transactions like foreign currency exchange & hedging.
As a global company and Bank, to which extend would you say that BNP Paribas could contribute to the climate collective effort. Do you think that the recent ratification of COP21 will have an impact on leading banks such as BNP Paribas ?
Ahead of COP 21, BNPP made in November 2015 a bold public commitment to Sustainable Finance, doubling from €7bn to €15bn the funds allocated to finance renewable energy, reinforcing its carbon risk management policies, and pledging to support its clients in making a safe transition to more sustainable energy use. Last week, BNPP issued its first green bond (€500m), an instrument which BNPP is steadily promoting to corporates and institutions, and a market in which BNPP aims to rank among the top three players worldwide for euro-denominated issues by 2018. The proceeds from BNPP’s green bond will be allocated to the financing of renewable energy, energy efficiency, public transportation, water management and/or recycling.
BNP Paribas is involved in the post COP21 French-Norwegian CO2 value chain project (so called CCS - Carbon Capture and Storage) that the CCFN has recently initiated. Based on its experience with financing infrastructure projects such as offshore wind farms, BNP Paribas is helping us assessing whether the financing markets are “CCS ready” and how a sustainable CCS business model between France and Norway could emerge. Why are such projects of interest for BNP Paribas?
CCS is a good example of “safe transition to more sustainable energy use”. It is promoted by some of our largest Norwegian and French clients, as well as public authorities in Norway and France. BNPP is indeed a leading player in the financing of energy infrastructure. Therefore the project sponsored by the CCFN provides an interesting opportunity to leverage our combined competences and resources, and deliver on our commitment to support energy transition.