Banking M&A Digest #33 (18.7.2019)

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My weekly notes on banking and financial services - 

by Aivars Jurcans

Done! And Done

Rothschild has agreed to buy “a minority stake” in Redburn, a British equity research and financial services firm, for an undisclosed amount.

Source: Reuters

People’s United Financial has agreed to acquire United Financial Bancorp, a holding company for United Bank, in an all-stock transaction valued at about USD 743 million. Established in 1858 and based in Hartford, Connecticut, United Bank has assets of USD 7.3 billion.

Source: Reuters

Deals on the Table

Charles Schwab is said to be in talks to acquire brokerage and wealth-management operations from USAA, a San Antonio-based provider of financial services to former and current military personnel and their families, for about USD 2 billion. The transaction is expected to add additional USD 100 billion in client assets to USD 3.5 trillion Schwab already manages.

Source: WSJ

Home Credit, a Prague-based lender controlled by PPF (a Czech financial group), has filed for a Hong Kong IPO to go public in late September. Founded in 1997, Home Credit has assets worth close to EUR 25 billion and is one of the biggest non-bank consumer lenders in China. The latest transaction with its shares in May 2019 is said to have valued the company at EUR 8.5 billion.

Source: Reuters

Credito Fondiario, an Italian financial services firm controlled by Elliott Management, is said to be holding preliminary talks for a possible combination with its peers, including Prelios Credit Servicing and Cerved Group. Fondiario which specialises in purchasing and managing bad debt (with more than EUR 45 billion of assets under management), is said to be interested in companies with a debt management platform.

Source: Bloomberg

Thanks, But No Deal

AMP, Australia’s wealth manager, has warned that the USD 2.3 billion sale of its life insurance business to Resolution Life is “highly unlikely” to proceed due to strict capital requirements.

Source: Reuters, Financial Times

Thus Spoke the Markets

Goldman Sachs reported 11% return on equity in Q2. It estimates that its investments in consumer lending and credit card businesses have created a drag of about a percentage point on the returns.

Source: Financial Times

Citigroup produced a return on tangible equity of 11.9% in Q2. Its target for this year is 12% and could approach 14% by 2021.

Source: WSJ, Financial Times

Where the Money Goes

Goldman Sachs has invested EUR 25 million in Raisin, a Berlin-based internet platform for bank savings products, in exchange for “a low single digit” stake. This latest funding brings the total investment in Raisin to EUR 195 million.

Source: Bloomberg

Despite the recently announced radical cuts over several key business lines Deutsche Bank intends to spend EUR 13 billion on technology over the next 3 years.

Source: Financial Times

Up-and-Comers

Investors have sunk more than USD 1 billion into European digital banks over the past 12 months, despite the fact that few are profitable.

Source: Financial Times

On the Baltic Shores

A potential fine of EUR 1 billion (which is viewed as not at all unrealistic) for alleged involvement in money laundering would push Swedbank’s CET1 ratio down to its regulatory minimum of 14.6%.

Source: Financial Times

Financial Lingo

“Methode champignon” – a technique for growing mushrooms; in banking context describes approach where non-resident directors “are kept in the dark and fed with manure”.

Source: Financial Times

Exciting Numbers

According to European Central Bank, non-performing loans on banks’ balance sheets in the eurozone have fallen from 8% of total lending in 2004 to 3.7% today; in Italy, the figure is close to 8%, from a 17% peak,

Source: WSJ

Over the past 10 years the European Investment Bank set aside reserves for 0.1% of its loan book to go wrong, whereas KfW, a German development bank, expected 0.8%, China Development Bank – 3.1%, and the European Bank for Reconstruction and Development – 4.4%.

Source: Financial Times

According to Bain & Co, almost 40% of US leveraged buyouts in 2018 raised debt that was 7.0x times ebitda.

Source: WSJ

According to European Central Bank data, the average eurozone bank made a 5.76% return on equity on average CET1 capital of more than 14%.

Source: Financial Times

A Thought Worth Noting

“We will not allow private enterprises to give themselves the attributes of state sovereignty … the means of monetary sovereignty.”

Official at France’s finance ministry [speaking on Libra]

 

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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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