Banking M&A Digest #10

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Lonely Businessman Alone in the Beach

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 majority stake in Mobiasbanca Societe Generale in Romania to Hungary’s OTP Bank for an undisclosed consideration. The transaction, which is expected to close in the coming months, is said to have EUR 28 million negative effect on SocGen’s Q4 2018 earnings and will increase its core equity tier one ratio by 1basis point.

Source: Reuters

Alghanim Trading, the second largest shareholder in Gulf Bank, a Kuwaiti lender, acquired additional 9.2% of shares increasing its stake to 16.62%. The Alghanim family through several vehicles controls 20% of shares in the bank.

Source: Bloomberg

The agreed merger of Commercial Bank of Africa and NIC Group (expected to close in Q3 2019)  will create the 3rd largest bank in Kenya with USD 4.1 billion in assets.

Source: Bloomberg

Deal Ideas In Process

Urged by president Recep Tayyip Erdogan, the Turkish parliament may vote on nationalisation of Turkiye Is Bankasi, the country’s largest bank, and on transferring it into the property of Treasury. Isbank has the market cap of USD 4.7 billion and is 28% owned by the opposition CPH party. The bank’s non-performing loan ratio was 3.4% at the end of Q3 2018 (compared to the sector’s average of 3.2%) and is expected to increase to 6% in 2019.

Source: Bloomberg

NordLB is said to be selling its ship financing portfolio of EUR 2.7 billion (of which 90% are non performing) to Cerberus Capital Management. The bank expects that the balance sheet loss after additional provisioning and tax for 2018 will amount to EUR 2.7 billion. This will reduce the bank’s common equity tier 1 capital ratio to 6.0-6.5%.

Source: Handelsblatt

Norwegian DNB which with close to 20% of shares is the largest owner of Oslo Bors VPS, the stock exchange, confirmed that it will support the offer from Nasdaq even if the rival bid from Euronext was raised.

Source: Reuters

The German state of Lower Saxony has agreed to support a EUR 3.5 billion rescue plan for NordLB, according to which the group of Sparkassen savings banks will provide EUR 1.2 billion in fresh equity and the Lower Saxony’s government – another EUR 1.5 billion in cash plus unspecified “non-cash balance sheet support”.

Source: Financial Times

The planned sale of Primonial, a French investment manager with EUR 37 billion of assets under management, is expected to fetch bids above EUR 1.5 billion. At this offer level Primonial would be valued at 10x of its EBITDA. Bridgepoint, the UK based owner of Primonial, is said to have retained Rothschild and JPMorgan Chase to explore the sale options; the process might start in summer 2019.

Source: Financial Times

According to Reuters, a “major investor” is awaiting a market reaction to Deutsche Bank’s and Commerzbank’s earnings announcements over the next few weeks before deciding on the need for a merger of both. The investor is said not to oppose the merger idea if such is proposed by the German government.

Source: Reuters

Natixis, a French bank, is said to be looking for a buyer to a portfolio of complex Korean derivatives with a notional value “in billions of dollars”, according to Bloomberg. The bank admitted losses and provisions in the amount of EUR 260 million on the portfolio in December 2018.

Source: Bloomberg

Thanks, But No Deal

LongJiang Bank Corporation, a Harbin-based bank, has withdrawn from the auction process of Russia’s ATB (Asian-Pacific Bank) citing not having received the necessary approvals from China’s regulator in time as the reason. It was expected that LongJiang might make a joint bid for ATB together with another Russian bank, Solidarnost, at the auction scheduled to take place on March 14.

Source: banki.ru

Valued by Markets

Atlas Mara, a pan-African banking group which is undergoing leadership change (Bob Diamond to be replaced as chairman by Michael Wilkerson), has raised more than USD 800 million since its floatation in 2013. Its shares are currently trading at a price-to-book ratio of 0.4x and it has a market cap of just USD 280 million.

Source: Financial Times

Deutsche Bank’s shares have lost 50% of their value in 2018. The bank reported return on tangible equity of 0.4% (only half of what the analysts expected), whereas the target set for 2019 is 4%. The bank’s common equity tier 1 ratio stood at 13.6% at the end of 2018, while its fully loaded leverage ratio rose to 4.1%.

Source: Financial Times

Banco Popular, the largest Puerto Rican bank with assets of USD 48 billion and market share of 54% in deposits and 46% in loans, reported return on equity of 9%. The bank’s core capital ratio (common equity as a share of risk-adjusted assets) stands at 17% which, as The Economist suggests, makes it even over-capitalised. Over the last 5 years Popular’s shares have doubled in value, compared to a 46% increase in KBW index (a measure of American banking stocks).

Source: The Economist

Planning, Investing, Moving

BNP Paribas, a French bank, plans another EUR 600 million in cost reduction and has revised its expected return on equity in 2020 from 10% to 9.5%. The bank will also shut down Opera Trading Capital, its proprietary trading arm. The bank will aim to have a CET1 ratio of at least 12%. Currently the bank’s shares are trading at 0.6x its tangible book value.

Source: Financial Times, CNBC

Julius Baer, a Swiss bank, announced a USD 100 million cost cutting programme which includes a 2% reduction in headcount. The program is deemed to compensate the 2% decrease in assets under management recorded in 2018. The bank’s cost-to-income ratio in second half of the year increased to 74.3%, with shares trading at a price-to-forward-earnings multiple of 10x, which is significantly lower than their decade average. The bank is said to have a target cost-to-income ratio below 68% by 2020.

Source: Financial Times, CNBC

JPMorgan plans to increase its market share in global treasury services from the current 5% to 7% in the next few years and to 10% over the long term by growing its business volumes with multinational companies and in e-commerce. 

Source: Financial Times

Co-op, the UK cooperative which owns 2,500 food stores and 1,000 funeral homes, plans to return to life insurance market. Its products will be underwritten by Royal London who acquired Co-op’s life insurance business back in 2013.

Source: Financial Times

Up-and-Comers

Raisin, the Germany-based financial technology group that allows customers to deposit money with banks in different countries with higher interest rates, has raised USD 114 million in new funds from investors, including Index Ventures and PayPal. To date Raisin is said to have brokered more than USD 11 billion in deposits. The latest deal is rumoured to value the company “in the high hundreds of millions of dollars”.

Source: Financial Times

Bud, a London-based fintech platform that lets banks update their apps to give users access to financial services products from rivals, has secured USD 20 million series A funding from investors including HSBC, Goldman Sachs, ANZ, Investec and Banco Sabadell (the latter 2 investing through their respective venture arms). Bud’s offering is part of what is known in fintech world as “open banking”.

Source: CNBC

WorldFirst, a UK provider of international money transfers and currency exchange services, has unexpectedly terminated its US operations. The stated reason is to avoid the possibility of US regulator blocking the planned GBP 700 million acquisition of WorldFirst by Ant Financial, a digital payments subsidiary of Alibaba.

Source: CNBC

Closer to Home

EQT, a Swedish buyout firm, is said to be planning to raise EUR 1 billion in an IPO as early as in Q2 2019 at a potential valuation of EUR 4 billion. EQT manages about EUR 50 billion  of raised capital under 27 funds.

Source: Reuters

Important Numbers

The Chinese market is trading on a price/earnings multiple of 10x times (based on 12-month forward earnings), down from 14x times a year ago.

Source: Financial Times

The European Central Bank’s guidance says that deals with total debt-to-EBITDA in excess of 6x times should be “exceptional”.

Source: Financial Times

A Thought Worth Noting

“Auditors are watchdogs, not bloodhounds.”

Lord Justice Lopes, in 1896

See you again next week!

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Aivars Jurcans has more than 20 years of corporate finance and investment banking experience. His services are currently available through MURINUS ADVISERS (www.murinusadvisers.com)

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