Banking M&A Digest #21

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My weekly summary notes on banking and financial services - 

by Aivars Jurcans

Done and Done

Softbank, a Japanese technology conglomerate, has agreed to invest EUR 900 million in 5-year convertible bonds issued by Wirecard, a German digital payments company. The bonds are expected to convert into a 5.6% stake. The sale of bonds is still subject to shareholders’ meeting approval in June.

Source: Financial Times

Stifel Financial, a St Louis-based investment bank, agreed to acquire Mooreland Partners for an undisclosed consideration. The transaction is expected to increase Stifel’s international presence and to strengthen its technology advisory business.

Source: Financial Times

Deals on the Table

Goldman Sachs is said to be in talks to buy large distressed loans from Turkish banks and companies, looking at those valued in the range of USD 2 billion to USD 6 billion.

Source: Reuters

The asset management arms of Deutsche Bank and UBS are reported as being in “serious” merger talks. If the transaction were to materialise the combined business would have over EUR 1.4 trillion of assets under management.

Source: Reuters, Financial Times

Allianz, a German insurer, and Amundi, a French asset manager mostly owned by Credit Agricole, are said to be working on rival deals for DWS, the Deutsche Bank majority-owned asset management company with market capitalisation of EUR 6.4 billion. 

Source: Reuters

BNP Paribas, a French bank, is said to be in the process of seeking acquirers for its stakes in retail banks – Union Bancaire pour le Commerce et l’Industrie (50.1%) in Tunisia and a bank in Gabon (47%).

Source: Reuters

GAM, a Zurich-based fund manager with a market value of USD 687.7 million, is said to have retained advisers and approached potential acquirers.

Source: Financial Times

When Deutsche Meets Commerzbank

Analysts expect that this merger would generate between EUR 2 billion and EUR 2.5 billion in annual cost-saving opportunities, with lower funding costs providing an additional financial benefit. With synergies of this size the expected EUR 500 million revenue loss because of the client overlap is not being considered a potential deal breaker.

Source: Financial Times

Thus Spoke the Markets

Credit Suisse’s common equity tier one ratio – a key benchmark of balance sheet strength – remained stable at 12.6% at the end of Q1. The return on tangible equity of 8%, though, was below its target of 10% to 11% for this year. 

Source: Financial Times

According to Willis Re, a reinsurance broker, the return on equity at selected major reinsurers fell from 6.7% in 2013 to 2.7% in 2018. The industry’s expense ratio – a measure of costs as a proportion of premiums – has increased from 29% in 2007 to 33% in 2018. 

Source: Financial Times

Deutsche Bank’s domestic retail operations in 2018 generated return on equity of 4.1%, and it spent 88 cents in operating costs per each euro of revenues (compared with 6.5% and 69 cents respectively as reported by local savings banks).

Source: Financial Times

Where the Money Goes

Sberbank, Russia’s state owned lender, has acquired a 46.5% stake in Rambler Group, the owner of a search engine, a media services company and a news aggregator. The deal is expected to close in Q3 2019.

Source: Reuters, Financial Times

Exciting Numbers

The average return on equity for the 187 biggest EU lenders was 7.2%, compared with close to 12% reported by the US banks.

Source: Financial Times

Germany’s 5 largest banks control less than 1/2 of the total banking market (compared with 85% in France); 1,700 German banks employ 620,000 staff.

Source: Financial Times

Buyout groups take on average 12 months to raise a fund compared to 20 months in 2010, according to Preqin.

Source: Financial Times

A Thought Worth Noting

“[European banks’] future is retail and commercial banking, run efficiently, with few people and smarter technology, plus investment banking in their home geographies.”

Ronit Ghose, head of banks research, Citi 

See you 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.

Photo by Daria Shevtsova on Unsplash

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