About anyone and anything anywhere related to banking and making money with money - by Aivars Jurcans
Buying, Selling, Merging
Advent International has agreed to acquire 51% of Prisma, an Argentinian issuer of Visa and other credit cards, in a transaction that values Prisma at USD 1.42 billion.
Co-op, a UK retailer, has sold CIS General Insurance, its insurance underwriting business, to Markerstudy for a consideration of GBP 185 million. Under the deal terms Co-op will continue selling insurance under a 13 year distribution arrangement with Markerstudy.
Idea Bank, a Polish lender, has agreed to acquire Getin Noble Bank, another Polish rival, in an all-share transaction. The deal is expected to close in Q3 2019 and will create the 7th largest bank in the country.
Amundi, a French asset manager, has acquired the remaining 51% of shares it didn’t yet own in Anatec, a fintech which operates as an aggregator of savings and financial advisory services from different providers under the WeSave brand
Deal Ideas Cooking
Union Life, a China insurance company, is said to be planning a sale of controlling interest in a deal that will likely value the company at USD 1.5 billion to 2 billion. The Hong Kong-based AIA and Prudential are rumoured as being involved in the bidding process the first round of which is expected to be completed by the end of Q1.
The Italian government is considering a potential merger of troubled banks Monte dei Paschi (bailed out by the state in 2017, with 68% of shares still held by the government) and Banca Carige (put under a special administration by ECB in December 2018) with financially healthier competitors, like UBI Banca. The talks are said to be in an early stage and even a three-way merger is among the models being discussed.
JPMorgan is said to have be retained by National Commercial Bank, the Saudi Arabia’s largest bank, to advise on the proposed merger with Riyad Bank. The transaction is about to create the 3rd largest financial institution in the Gulf area with assets of USD 182 billion. Riyad Bank is being advised by Goldman Sachs on this deal.
Barclays analysts believe that Deutsche Bank’s EUR 1.4 trillion balance sheet size and the EU stalled efforts in moving towards unified capital markets are among potential impediments to any deal between Deutsche and another European non-German bank.
Royal Bank of Scotland, which is still 62.3% owned by the British government, is considering using its excess capital for share buyback. The proposal to be brought to the shareholders meeting for vote would allow the bank to buy a maximum of 4.99% of its total shares from the Treasury in any one year. The Treasury has set a target to fully re-privatise RBS by March 2024.
The Mumbai-based alternative assets investor, Edelweiss Financial Services, has raised USD 1.3 billion to participate in Indian bank balance sheet cleanup and to buy and turn around distressed assets with “viable business models and potential of generating cash flows”.
Subject to its Board approval, National Commercial Bank, a Saudi Arabia bank, is about to pick JPMorgan to advise on merger talks with Riyad Bank, another Saudi lender.
Valued by Markets
The UK Metro Bank’s shares lost almost 1/3 in value on the news that the estimated risk-weighted assets were higher than the market had expected and that the bank may have to increase its core tier one capital (currently estimated at 13%) by as much as GBP 400 million.
Financial Times Lex calls Metro’s a binary stock that has made conventional valuation redundant – either you believe its high service/ expensive branches business model will succeed, or you don’t.
The shares in UBS, a Swiss bank, have lost 29% in value in 2018. The bank’s cost-to-income ratio has increased by 3 percentage points, to 87%. The bank’s core equity tier 1 ratio stands at 13.1% and it is planning to spend USD 1 billion on share buybacks in 2019.
UBS trades at just above its tangible book value which still compares well to 0.8x at Credit Suisse, 0.4x at Societe Generale and 0.3x at Deutsche Bank.
Standard Chartered (which generates 40% of its revenues from Greater China and Hong Kong region) shares are said to be trading at a less than half of the book value of its net assets. The bank’s return on equity of 6.1% in Q3 2018 is below the levels reported by the other Asian and emerging markets banks. The core tier one equity of Standard Chartered stands at 14.5% which, as some believe, suggests that share buybacks are required to shrink equity to improve the returns.
In Q3 2018, the return on equity of the corporate and investment banking division at Barclays was 6.6%, compared to 10.1% reported by the UK consumer bank division.
The number of banks in Russia has decreased over the last 5 years from 894 in July 2013 to 440 in January 2019.
Despite the effects from “disposals and a challenging environment in global capital markets”, Societe Generale, a French bank, expects its core equity tier one ratio to be between 11.4% and 11.6% as at the end of 2018. The bank is to take an exceptional charge of c. EUR 240 million due to disposals that included sale of Societe Generale Serbia and the bank’s stake in La Banque Postale Financement.
Planning, Investing, Moving
Santander, the 5th largest UK bank, is planning to close 140, or 1/5, of its branches in the UK. It says that the number of transactions at branches has decreased by 23%, while the amount of digital transactions has doubled over the last 3 years.
The Japan’s property and casualty insurer, Tokio Marine, will actively pursue M&A opportunities overseas, according to its new CEO Satoru Komiya, who will take over in June 2019.
Nippon Life, a Japanese mutual company owned by its insurance policy holders, is actively seeking M&A opportunities overseas, with a focus on the US and Asian markets, according to its president Hiroshi Shimizu.
Pictet, a Swiss wealth and asset manager, is planning to increase its global headcount of 4,500 by additional 10% while focusing on 3 core markets – German-speaking Switzerland, the Middle East and Asia.
Morgan Stanley might be looking to buy “small add-on firms” or hire teams to spur growth at its USD 463 billion investment management division, according to James Gorman, CEO. Expanding fixed income offering and alternative products, like private equity and infrastructure, could be of possible interest.
Barclays and Santander InnoVentures have led a GBP 26 million investment in MarketInvoice, a London-based fintech specialising in invoice finance to SMEs. The transaction is said to value MarketInvoice, established in 2011, at about GBP 85 million.
The European Investment Bank estimates that the EU’s annual funding need for infrastructure is EUR 688 billion.
The level of debt held by Eurozone’s households dropped to 57.6% of GDP at the end of Q3 2018, the lowest level since 2006. Meanwhile, the US household debt stood at 75% and the UK – at 86% of GDP.
In 2018, investors withdrew in total USD 34 billion from hedge funds; this amounts to approximately 1% of money managed by the industry.
A Thought Worth Noting
“Putting two bad banks together doesn’t make a good bank. But politicians do it anyway because they look like they’re taking action.”
Robert Jenkins, former official, Bank of England
See you again next week!
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