Banking M&A Digest #23

My weekly summary notes on banking and financial services - 

by Aivars Jurcans

Done and Done

Federated Investors, a Pittsburg-based fund manager with USD 485 billion in assets under management, has agreed to buy USD 14 billion in investment funds from PNC, a New York – based financial services provider, for USD 52 million.

Source: Financial Times

Edizione, a holding company of the Italy’s Benetton family, has increased its stake in Assicurazioni Generali to 4%.

Source: Reuters

Banco Bradesco, a Brazilian lender, has made its first international acquisition by buying BAC Florida Bank, a Florida-based lender focused on servicing high net worth individuals with total assets of USD 2.2 billion, for approximately USD 500 million.

Source: Reuters

Societe Generale, a French bank, has disposed of SKB, its Slovenian subsidiary, recognising a capital loss of EUR 67 million.

Source: Financial Times

Deals on the Table

Grab, a Singapore-based ride-hailing company, is said to be looking for potential investors to take minority stakes in its financial services business. It expects to raise less than USD 500 million through the spin-off of financial services activities.

Source: Reuters

Gulf Capital and Waha Capital, both Abu Dhabi-based investment firms, are said to be having exploratory discussions regarding a possible merger. Gulf Capital manages over USD 4 billion in assets while Waha Capital’s total assets stood at USD 3.18 billion at the end of 2018.

Source: Reuters

JPMorgan Asset Management is expected to acquire additional 2% of shares in China International Fund Management to be auctioned by Shanghai International Trust. This would increase JPMorgan’s stake to 51%.

Source: Financial Times

UniCredit is said to be considering reducing its 35.35% stake in FinecoBank, an online broker, by selling 17% of shares. Its current stake is valued at EUR 2.4 billion and has a book value of EUR 981 million. 

Source: Reuters, Financial Times

Arqaam Capital, a Dubai-based investment bank, and The National Investor, an Abu Dhabi-based investment bank, are said to be considering potential merger. The combined entity could have an equity value of c. USD 250 million.

Source: Bloomberg

Corvex Management and Sachem Head Capital Management, both US-based hedge funds, are exploring challenging the planned USD 17.3 billion acquisition of WellCare Health Plans by Centene, a US health insurer.

Source: Reuters

Metro Bank, a UK lender, is said to be in the process of raising GBP 350 million to prop up its capital position in Q2.

Source: Financial Times

Thus Spoke the Markets

Commerzbank’s return on tangible equity was 1.9% in Q1, compared with 4.2% a year ago (and the European banks’ average of around 10%). Even adjusted for the bank levy paid in Q1 for the whole year its ROTE was only 3.7%. The bank’s common tier one equity ratio fell by 60bps to 12.2%. Operating costs amounted to 85% of revenues.

Source: Financial Times, Bloomberg

Societe Generale’s common equity tier one ratio rose from 11.2% to 11.7% in Q1.

Source: Financial Times

HSBC’s return on tangible equity was 10.6% in Q1, a 220 bps improvement compared with a year ago. Meanwhile, its core profits (net interest income plus fees minus costs) were 17% below the analysts forecast.

Source: Financial Times

Lloyds, a UK bank, was the only UK lender to report a return on tangible equity above its cost of equity, a 0.2% increase to 12.5% in Q1. It expects to increase its ROTE up to 15% in 2019; this could create excess capital of GBP 4 billion. The bank’s net interest margin dropped by 2 bps in Q1, to 2.91%.

Source: Financial Times

BNP Paribas, a French bank, common equity tier one ratio remained stable at 11.7% in Q1.

Source: Financial Times

Where the Money Goes

Morgan Stanley is said to discontinue its banking operations in Russia and to give up the brokerage and depository licenses starting from Q1 2020. It is expected to maintain its advisory business though.

Source: meduza.io

European Bank for Reconstruction and Development (EBRD) is considering extending its lending operations to sub-Saharan Africa to stem migration to Europe. The bank has doubled its annual lending over the last 10 years to EUR 9.5 billion and expects to reach EUR 11 billion by 2021.

Source: Financial Times

New Tricks for Old Dogs

Societe Generale has set a target to grow Boursorama’s, its online bank, client base from 1.8 million to more than 3 million by 2021.

Source: Financial Times

Goldman Sachs has postponed the German launch of Marcus, its consumer bank. It still expects to add USD 10 billion in deposits annually with an ambition to raise as much as USD 250 billion to fund more than 1/4 of its balance sheet.

Source: Financial Times

Royal Bank of Scotland has launched NatWest Tyl, a new merchant acquiring service for SMEs. This move will put it into a direct competition with Worldpay, its former subsidiary.

Source: Financial Times

Up-and-Comers

SoftBank, a technology conglomerate, has invested USD 20 million in Clip, a Mexican payments startup, increasing its valuation after the funding round to USD 350-400 million.

Source: Reuters

Checkout.com, a UK-based payments startup, has raised USD 230 million from investors (including Insight Partners and DST Global) at a valuation of about USD 2 billion. It reported USD 46.8 million in total revenues in 2017, a 65% increase on the previous year.

Source: Financial Times

Financial Lingo

“Divi recap”, or dividend recapitalisation – raising corporate debt for no productive purpose but to hand cash over to shareholders.

Exciting Numbers

4 years after their launch WeBank, an online bank backed by Tencent, and MYBank, backed by Alibaba, have assets equal to just over 1.0% of those of Industrial and Commercial Bank of China, the world’s largest lender.

Source: Financial Times

On average, over the 4 years of quantitative easing, over 15% of total Eurozone public debt has moved on to the balance sheets of the national central banks of the Euro-system, up from about 4% before QE began.

Source: Financial Times

In April 2019 there were 30 companies in the S&P 500 priced at more than 10.0x times revenues (compared with 36 at the peak of dot-com bubble in March 2000)

Source: Financial Times

A Thought Worth Noting

“The UK is basically for sale if you can stomach the Brexit risk.”

anonymous, financial adviser to buyout groups

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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