Banking M&A Digest #22

My weekly summary notes on banking and financial services - 

by Aivars Jurcans

Done and Done

Admiral Group, a UK insurer, in partnership with Mapfre SA, another insurer, and Oakley Capital, a private equity firm, have acquired Acierto, a Spanish digital broker. Admiral and Mapfre will collectively retain majority ownership in the JV which will combine the operations of Acierto and Rastreator Comparador Correduria de Seguros, Admiral’s own broker.

Source: Reuters

Deals on the Table

A fund financed by Italian banks may participate in a cash call under the rescue plan for Carige, an Italian lender, developed by BlackRock, a US asset manager. Carige which has been put under temporary administration by the ECB is said to have a capital shortfall of EUR 630 million.

Source: Reuters

Allianz, a German insurer, is said to be in advanced talks to buy Legal & General’s UK home insurance business. The potential deal value is estimated at GBP 240 million.

Source: Reuters, Financial Times

OTP, a Hungarian lender, is said to be interested to acquire either Addiko Bank unit (an Austrian-owned lender with 4.5% market share) or Raiffeisen Bank unit (another Austrian-owned bank with 8% market share) in Croatia. After the acquisition of Splitska Banka OTP controls c.10% of the Croatian market.

Source: Reuters

Deutsche & Commerzbank: Single Again

Fierce resistance from Deutsche Bank’s corporate customers is said to be “the straw that broke the camel’s back” and resulted in calling off the merger talks with Commerzbank. Deutsche estimated that the revenue loss from leaving customers could be as high as EUR 1.5 billion.

Source: Bloomberg

Thus Spoke the Markets

Metro Bank’s, a UK lender, net interest margin fell from 1.76% as at the end of 2018 to 1.64% in Q1. It claims that its non-performing loans make up just 0.18% of the portfolio.

Source: Financial Times

Allied Irish Bank reported a EUR 1.3 billion, or 21%, reduction in non-performing loans in Q1 to EUR 4.8 billion, or 7.6% of gross loans. The bank’s target is to reach the milestone of c.5% by the end of 2019.

Source: Financial Times

Bank of England’s Prudential Regulation Authority has set a lower rate for Lloyds, a UK bank, “systemic risk buffer”. This would reduce its target common equity tier 1 ratio by 0.5% and increase its share buyback capacity by GBP 1 billion.

Source: Financial Times

Banco Santander’s, a Spanish lender, return on tangible equity decreased to 11.2% in Q1, compared with 11.7% for the whole year of 2018. Its stated target ROTE is 13%-14% within 3 years time.

Source: Financial Times

A 2% reduction in costs has helped Standard Chartered to lift returns on tangible equity to 8% in Q1. The planned share buybacks (USD 1 billion) are expected to leave the CET1 ratio in the targeted range of 12%-14%.

Source: Financial Times

Danske Bank’s price-to-book ratio which has been well correlated with its profitability has dropped below that of other European banks in the MSCI Europe Banks index for the first time in 5 years. Its CET1 capital ratio – a measure of financial strength – after Q1 stood at 16.5%, which is 0.5% above its target level. Investments in further anti-money laundering efforts, compliance and regulatory requirements have increased the bank’s expenses by 9%.

Source: Financial Times

BBVA’s, a Spanish lender, fully loaded core equity tier 1 ratio stood unchanged at 11.3% at the end of Q1.

Source: Financial Times

Deutsche Bank’s corporate and investment bank reported costs higher than its income for the second quarter in a row. In Q1 2019 it spent EUR 1.02 on operations to generate EUR 1.0 in revenue.

Analysts forecast that Deutsche’s return on tangible equity in 2019 is likely to be 1.5%, as opposed to the management’s plans to achieve a 4% return. Its common equity tier one ratio stands at 13.7% which is above the regulatory minimum.

Source: Financial Times

Barclays investment bank is said to account for more than 1/2 of the bank’s risk weighted assets of GBP 320 billion. Its return on tangible equity was 9.3% compared with 16% for its consumer business.

Source: Financial Times

Where the Money Goes

European Bank for Reconstruction and Development (EBRD) has leased 365,000 square feet of office space from 2022. The bank will relocate from its current location at 1 Exchange Square in the City of London to 1-5 Bank Street in Canary Wharf.

Source: Financial Times

VTB, Russia’s state owned lender, has acquired controlling interest in Dinamo Moscow football club for RUB 1. The financial liabilities of Dinamo will be restructured into an interest-free loan of RUB 5.3 billion and repaid in equal instalments over 8 years.

Source: znak.com

New Tricks for Old Dogs

Bank Santander’s digital offering, Openbank, has started testing in Germany in Q1 and will launch in the Netherlands and Portugal in 2019. The number of digital services customers has increased by 6.5 million in 2018, to 33.9 million.

Source: Financial Times

Up-and-Comers

PayPal, the online payments company, is said to invest USD 500 million in Uber Technologies at the IPO price through a concurrent private placement. Uber is seeking valuation at between USD 80 billion and 90 billion, less than the USD 120 billion suggested by investment bankers in 2018.

Source: Reuters

On the Baltic Shores

Nordea has taken a EUR 95 million provision for a probable fine from Danish regulators due to weaknesses in its money-laundering controls.

Source: Financial Times

Swedbank intends to spend an extra USD 68 million on anti-money laundering measures in 2019, including setting up a unit to tackle financial crime.

Source: Financial Times

Exciting Numbers

Winning a 10% share of the Chinese asset management market would deliver annual revenues of about USD 4 billion to the manager.

Source: Financial Times

The companies that raised more than USD 1 billion in IPO paid their investment bankers on average 3.88% of proceeds in fees in 2018 and 4.42% this year to date.

Source: Financial Times

A Thought Worth Noting

“We know what we know and we feel comfortable about the past 8, 9,10 years. But you need to be very humble because you can find something tomorrow that you don’t know today…  We can’t ever guarantee that we don’t miss a criminal activity going through our bank.”

Johan Torgeby, CEO, SEB

 

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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