About anyone and anything anywhere related to banking and making money with money - by Aivars Jurcans
Buying, Selling, Merging
A US finance technology provider Fiserv is to acquire a payment processor First Data Corp in an all-stock deal valued at USD 22 billion. The transaction is said to create the world’s largest payment processor and envisages the combined entity generating USD 4 billion in free cash flow in year 3 after the closing (including USD 900 million in cost savings over 5 years).
China’s largest brokerage, Citic Securities, has announced its intent to acquire Guangzhou Securities for a total consideration of USD 2 billion. The transaction is said to value Guangzhou Securities at a price-to-book ratio of 1.2x to 1.3x.
Deal Ideas Cooking
DSGV, the Germany’s savings banks association, is still working on a potential bid for NordLB to inject more than EUR 3 billion in capital should the negotiations with private equity bidders fail. The savings banks (holding 26% of shares in NordLB) might be expected to come up with EUR 1 billion in equity while the rest would have to come from the state of Lower Saxony which is a majority owner in the bank.
Eurobank Ergasias, a Greek bank, is said aiming to reduce its NPLs and exposures from 30% to 15% by the end of 2019. EUR 7 billion of NPLs are already being prepared for securitisation and sale.
Single Supervisory Mechanism the European Central Bank’s regulatory arm, has started informing banks how much capital is required to be held against the old non-performing loans. Across the Eurozone the outstanding non-performing loans account for 4.4%, whereas in Italy, for instance, in Q2 2018 almost 10%, or EUR 159 billion, were deemed as bad loans.
Valued by Markets
Deutsche Bank’s shares were up 7.6% on January 16 on the news that the European Central Bank would prefer it to merge with another European bank rather than with its domestic competitor, Commerzbank. BaFin, the German regulator, is said to believe that the two domestic banks are currently too weak to benefit from such a merger.
Meanwhile, other reports suggest that the German government is still “definitely looking” at the option of a merger. With almost EUR 2 trillion in assets a merged entity would become the 3rd largest bank in Europe after HSBC and BNP Paribas.
As a result of lower expenses and share buybacks, Wells Fargo return on tangible common equity exceeded 15% at the end of Q4 2018.
Deutsche Bank, according to its CEO Christian Sewing, had met its 2018 cost-cutting target to reduce adjusted costs by EUR 900 million – to EUR 23 billion. The bank is also expected to report its first annual profit since 2014.
JPMorgan Q4 2018 results show return on equity of 13%, compared to 10% in 2017. Meanwhile, the share price has been 15% off its peak in early 2017 and the forward P/E ratio has decreased from 14x to 10x.
Planning, Investing, Moving
BNP Paribas is to close its proprietary trading unit, Opera Trading Capital, within the next 3 months. Opera is reported to have capital of EUR 600 million which is likely to be deployed to more client- facing businesses.
Established in 2013 and backed, among the others, by Peter Thiel and Li Ka-shing, N26, a German banking startup, has raised USD 300 million in the latest fundraising round at a valuation of USD 2.7 billion. This makes N26 the most valuable European non-listed fintech startup, ahead of Klarna Bank (valued at USD 2.5 billion in 2015) and Revolut (valued at USD 1.7 billion in 2018). N26 is said to have 2.3 million customers across 24 markets in Europe and plans to enter the US market (working with a US banking partner) in the first half of 2019.
Closer to Home
Meniga, a UK fintech provider of digital banking technology with operations in 30 countries, is said to acquire Wrapp, its Swedish peer backed, among the others, by Nordea, Swedbank, UniCredit and Islandsbanki, for an undisclosed amount. The sellers will be paid with newly issued shares in Meniga.
According to Wealth-X, there were 9,370 people with assets of at least USD 30 million in the UK in 2017, up 9% on the previous year.
A Thought Worth Noting
“People are waking up to the fact that we are late in the economic cycle and we could be ending [it] in the next year or two. That brings more risk into the system; that’s why gold is moving up”
Joe Foster, portfolio manager, VanEck
See you again next week!