Jefferies analysts like what they see at French investment bank Natixis.

A group of equity specialists sent out a ‘buy’ rating on the firm's stock week with a  €5.95 price target - equivalent to a 41% upside on current levels.

“Natixis is a capital return & multiple expansion story, with management gradually implementing a capital-light strategy in CIB and expanding asset management,” said Maxence Le Gouvello Du Timat, a London-based equities analyst at Jefferies.

“Consequently, earnings mix is moving in favour of high-multiple activities but this is only partly priced in.”

The company has come along way since its “descent into hell” as Jefferies describes it.

Natixis had a large exposure to US monoline insurance company CIFG during the subprime crisis. 

By mid-2009, the bank was trading at a 71% discount compared to its broader peer-set of the Eurostoxx Banks index.

That year the leadership was passed to Laurent Mignon who spent years stabilising and simplifying the group franchise.

Having steadied the ship, Mignon presented a new strategic plan in November 2013, which has been a turning point for the group investment case.

On the one hand, Jefferies notes that Natixis’ business mix is pivoting in favour of higher-multiple asset management activities.

On the other, its CIB division is less capital intensive than before which has created a more optimised balance sheet. 

“From being loss making in 2009 to generating a 9% return on allocated equity in 2015, the returns generated by Natixis’ Investment Bank have improved substantially in spite of substantially tighter capital rules,” added Joseph Dickerson, also an equities analyst at Jefferies.

“The improved return profile has been driven by the implementation of a capital light strategy in investment banking, which essentially translates into a reduction in plain vanilla financing activities towards more of an ‘originate to distribute’ model.

"Likewise, on the markets side, management is gradually gaining some market share in equity derivatives and optimising the fixed income platform. 

“The earnings mix is moving in favour of high-multiple activities as management has kept capital allocation to CIB stable over the period and is in the process of implementing its €1.5bn external growth programme in asset management.”