Fitch Ratings says in a new report that the planned integration of BNP Paribas Investment Partners (BNPP IP) and Fortis Investments (FIM) presents challenges, particularly relating to their different business and operational models.

With assets under management approaching €500 billion (end-March 2009), the combined venture would create a strong pan-European footprint, a diverse client base, wide geographic penetration, and comprehensive product and asset coverage. Nevertheless, Fitch notes that client attrition risk may arise and containing this risk will involve strong client relationship management and enhancing product offering for a clearer differentiation.

“Given the different organisation models that are in place at BNPP IP and FIM, the challenge will be to identify the most appropriate degree of integration of their various investment processes,” says Charlotte Quiniou, director in Fitch’s Fund and Asset Manager Rating Group in Paris. “It will be important to maintain their specific strengths, while still allowing meaningful coordination and cooperation, which is crucial in today’s difficult market environment.” Similarly, the integration of the two dissimilar operational and IT platforms, may prove challenging and will require careful management to minimise potential business disruption.

Maintaining staff motivation, retaining key employees through the transition period, and ensuring people work efficiently together will not be an easy task, but will be instrumental to the success of the integration process. “This is particularly true on the FIM side, given the significant corporate changes and reorganisation the asset manager has recently experienced following the integration of ABN Amro Asset Management in 2008,” says Olivier Fines, associate director in Fitch’s Fund and Asset Manager Rating Group in Paris.

The acquisition of Fortis Bank by BNP Paribas was completed on 13 May 2009, resulting in the French bank holding 75% of Fortis Bank and 66% of BGL SA. As a wholly-owned subsidiary of Fortis Bank, FIM - which brings together all third party asset management activities of Fortis Bank, with the exception of private wealth management - is now ultimately owned by BNP Paribas, hence the planned integration with BNPP IP, the French bank’s asset management arm.