About anyone and anything anywhere related to banking and making money with money - by Aivars Jurcans
Buying, Selling, Merging
Societe Generale, a French bank, has agreed to sell its 35% stake in La Banque Postale Financement, a consumer credit company, to its majority owner, La Banque Postale. Details of the transaction have not been disclosed. SocGen has indicated that the deal would have a EUR 35 million negative effect on its Q4 earnings because of goodwill impairment, but that its core Tier 1 capital would increase by 5 basis points after the transaction.
Source: www. reuters.com
Swiss Julius Baer has announced the sale of its Dutch domestic wealth management business (with assets under management of c. EUR 1 billion) to WMP, a wealth manager.
Indonesian Financial Services Authority has approved the merger of PT Bank Tabungan Pensiunan Nasional and PT Bank Sumitomo Mitsui Indonesia, a subsidiary of the Japanese Sumitomo Mitsui Financial Group.
HSBC Holdings’Asia Pacific insurance unit has received Malaysian central bank’s approval to divest its 49% in HSBC Amanah Takaful Malaysia Bhd, a life insurance joint venture, to a Hong Kong FWD Group, owned by Richard Li. The transaction terms have not been disclosed. HSBC has confirmed its intention to exit takaful (Islamic insurance products) business in Malaysia and to focus on banking operations and distribution of its own insurance products.
Source: www. reuters.com
BAWAG Group, an Austrian bank, has agreed to acquire Health AG and Zahnaerztekasse AG, a German and a Swiss company respectively that are offering dental financing products and services, for an undisclosed consideration.
Cevian Capital, a Swedish “engaged” or activist investor, has acquired a 2.3% stake in Nordea Bank and will be pushing the bank to reduce costs to EUR 4.4 billion by 2012 and further to EIR 4 billion in 2022. This is significantly more aggressive than the bank’s own guidance for costs of c. EUR 4.65 billion in 2021. Nordea share price has dropped 23% this year and has underperformed all of the major Nordic banks, except for Danske Bank. The bank’s shares are trading with a 30% discount to its peers, according to Cevian, due to its lower profitability. Nordea’s reported return on equity of 8.7% after Q3 compares poorly with the double-digit returns of its main competitors.
Japanese MS&AD Insurance Group has agreed to invest further GBP 315 million into ReAssure, the Swiss Re British closed-book business (GBP 45 billion in assets under management and 3.3 million policies), which would increase its stake from 15% to 25%. Swiss Re has confirmed that it is working on a possible IPO of ReAssure, which buys closed life-insurance books and then manages them until maturity to generate cash flows, in 2019.
Societe Generale has agreed to sell its subsidiary in Serbia to Hungarian OTP Bank as part of its strategy to exit markets where it lacks the critical size. The deal terms are not disclosed but SocGen has stated that the transaction will have a EUR 108 million negative effect on it Q4 earnings.
Home Capital Group, a Canadian mortgage lender, announced that Warren Buffet’s stake in the company after the completion of share buyback will drop to below 10%. Berkshire Hathaway bought 20% of shares in Home Capital in 2017 and extended a credit line of 2 billion Canadian dollars.
Japan Post Holdings confirmed its intention to acquire 7% in Aflac, a US insurer which earns 70% of its revenue from its Japan business and is one of the oldest cancer insurance provider, for about USD 2.4 billion.
Santander Brasil has become the sole owner in Getnet Adquirencia e Servicos para Meios de Pagamento, a card processor, by acquiring the remaining 11.5% of shares for USD 367.29 million. Getnet has a 14% share in card processing market in Brazil.
The auction process of Ukrainian VTB-Bank has ended with no result and the bank, which was declared insolvent in November, will be liquidated. According to media, 3 banks – Ukrainian Alfa-Bank, Taskombank and PUMB (First Ukrainian International Bank) – had shown interest, but the only bid which was submitted by Taskombank “came in significantly below the valuation”.
Deal Ideas Cooking
Cadence, a US regional bank, has increased its offer to acquire State Bank Financial in a deal that now values State Bank at USD 849 million (significantly below the USD 1.4 billion offer made in May).
Saudi Arabia’s National Commercial Bank has started talks with Riyad Bank to explore potential merger opportunities that could create the 3rd largest bank in the region with assets of USD 182 billion. Saudi Arabia’s Public Investment Fund holds 44% of shares in National Commercial Bank and 22% in Riyad Bank.
Chow Tai Fook, the Cheng family owned conglomerate which is known for its chain of jewellery shops across China, has entered into exclusive negotiations with JD Capital, a Chinese investment firm, regarding the possible acquisition of FTLife Insurance (a former Hong Kong unit of Ageas which was acquired by JD Capital in 2015 for USD 1.38 billion and subsequently rebranded into FTLife). The current transaction is estimated to value FTLife at USD 3 billion.
After having taken a write-down on its Turkish subsidiary and making a provision related to the US sanctions, totalling EUR 850 million, in November, UniCredit is said to be preparing to start looking for a buyer of its German real estate assets (c. 30 assets with the total value of EUR 1 billion) in January. The bank is also looking to dispose of Card Complete Service Bank, its Vienna-based credit card business.
Italian Banca Monte dei Paschi di Siena is said to be close to finalising the sale of EUR 2.1 billion of bad loans (rumoured to comprise 4 portfolios of unsecured loans) to a group of investors, including Banca Ifis and Credito Fondiario.
Carlyle Group, the US private equity firm, is rumoured to be considering a purchase of additional 32.8% of shares in PNB Housing Finance, an Indian mortgage lender, from Punjab National Bank. The stake is valued at USD 745 million. Carlyle already holds 32.4% in PNB Housing Finance. Bloomberg reports that discussions are at an early stage and that there might be other interested buyers for the stake.
NordLB, a German public sector bank, has entered exclusive negotiations with Cerberus, a private equity firm, regarding the sale of portfolio of non-performing shipping loans with a face value of EUR 3.9 billion.
This transaction is contingent on NordLB being able to raise additional capital to cover write-downs. Cerberus and another private equity firm, Centerbridge, are referred to as interested parties to make the EUR 3.5 billion capital injection. Although the sale would be of a minority interest in NordLB the buyer will be granted certain governance rights in a shareholders agreement.
Although Helaba (Landesbank Hessen-Thuringen), another German public sector bank, has not submitted a final offer for NordLB and is no longer participating in the process, discussions of seeking a public sector solution for NordLB have been reported as still ongoing. According to Handelsblatt, the current discussion is about a merger of both banks rather than Helaba taking a stake in NordLB. A possible sale of Braunschweiger Sparkasse, NordLB’s retail banking division, is also presumed as being discussed.
Three Russian private banks – Credit Bank of Moscow, Sovcombank and Expobank – might be interested in bidding for Asia-Pacific Bank. According to Russia’s Central bank, 99.9% of Asia- Pacific’s shares will be offered for sale at an electronic auction on 14 March 2019 at a starting price of RUB 9.85 billion (c. EUR 129.3 million).
The plans to sell all of Islandsbanki and part of Landsbankinn, the 2 Icelandic banks in government ownership since the financial crisis, as recommended by the recently published white paper, might be affected by the reality of not having too many interested parties. The local pension funds have indicated interest but would be prepared to acquire up to a 5% stake. The paper also suggests that 5% of shares should be allocated to general public.
Icelandic banks still have to borrow at almost 3 times higher margins than their Nordic counterparts, being charged what the paper has named an “Icelandic premium”.
Valued by Markets
As a result of the year-end selloffs, the shareholders in European banks have collectively lost c. USD 380 billion in market value in 2018. All the major UK and continental European banks are now trading at a level that is below their net asset value (price-to-book multiple of 0.6x, compared with to 1.1x for the largest US banks and 1.0x for the Asian banks).
After its second profit warning (net profit of DKK 15 billion, compared to DKK 18-20 billion forecasted in the beginning of the year) the Danske Bank shares dropped to the lowest level in almost 5 years, DKK 124.75 a share. The share price has halved in value since March.
According to estimates by Swiss Re, an insurance company, natural and man-made disasters in 2018 have caused economic losses of USD 155 billion and claimed over 11,000 human lives. Insurance sector is expected to compensate USD 79 billion of the losses, making this year the fourth most expensive for the industry on the record.
Spending, Saving, Paying
JPMorgan Chase has allocated a USD 10.8 billion technology budget to its recently established Digital & Platforms Services division which will be responsible for delivering tech solutions for 36,000 employees across 59 locations.
Ant Financial Services, a fintech arm of Alibaba Group, is reported to be in advanced talks to acquire WorldFirst, a British currency exchange startup, for a consideration exceeding GPB 500 million.
A Hong Kong-based digital insurance startup, Bowtie, raised USD 30 million in Series A funding from investors led by Sun Life Financial, a Canadian insurance company. Bowtie has been the first company to receive a license from Hong Kong Insurance Authority under its fast-track scheme set up to support insurtech development.
The US fintech, Robinhood, a stock-trading startup with 6 million customers and USD 5.6 billion valuation, has been forced to amend and to rebrand its latest product offering. The company’s advertised new checking and savings accounts offering a 3% interest while charging no fees have been called misleading by regulators. Although marketed as banking products, they are not insured by FDIC but only by Securities Investor Protection Corporation (SIPC) which covers the brokerage accounts, but not the cash not used to invest in stocks.
Justice Being Served
10 years after Bernard Madoff’s Ponzi scheme was discovered and he himself arrested, Irving Picard, a lawyer overseeing liquidation, has recovered USD 13.3 billion, or approximately 70% of the approved claims. This is significantly higher than the usual recovery rates in Ponzi schemes which range from 5% to 30%. Up to date almost 1,400 victims with claims of USD 1.38 million or less have been repaid in full.
Family offices control up to USD 4 trillion of assets – equivalent to 6% of the value of the world’s stock markets.
A Thought Worth Noting
“China is absorbing decades of financial knowhow into its institutions in a few short years, a similar pattern to its absorption of manufacturing technology”.
David Malpass, US Treasury official
See you in the New Year!