Banking M&A Digest #40 (5.9.2019)

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Corporate Financier’s Notes  

by Aivars Jurcans

Done! And Done

Lloyds Banking Group has agreed to buy a mortgage book of Tesco Bank in a deal valued at GBP 3.8 billion. The deal price comes at a premium of 2.5% over the loans’ outstanding book value.

Source: FT, Bloomberg

First Financial Network, an Oklahoma-based operator of an online bidding system, has auctioned off a portfolio of 290 Ukraine’s non-performing loans collateralised by commercial, industrial and residential real estate, vehicles and equipment. The USD 416 million portfolio was sold for USD 3.5 million, or less than 0.9% of its book value.

Source: WSJ

Deals On the Table

Caixa Economic Federal, a Brazilian state-owned bank, is said to be planning to float its insurance subsidiary in an IPO this year, while the IPO of its card unit is likely to be delayed until 2020.

Source: Reuters

Kairos Investment Management, an Italian subsidiary of Julius Baer, is said to be open to considering acquisitions in Italy.

Source: Reuters

VEB, Russia’s state development bank, is said to be planning to acquire “a blocking stake” in Blagosostoyanie, a pension fund not involved in managing state pensions. Currently majority-owned by Gazprombank, Russian Railways and the Russian Agriculture Bank, Blagosostoyanie has more than 1.3 million clients.

Source: Reuters

Indian government has announced its intention to consolidate 10 state-owned banks, including Punjab National Bank (2nd largest state lender), into 4 entities. The banks to be merged control more than 1/2 of Indian banking assets. 

Source: FT, Bloomberg

Emirates NBD, a Dubai bank, has raised the cap on foreign ownership from 5% to 20% and is said to seek shareholders’ approval to double the new limit. The bank is 55.76% owned by Dubai’s government.

Source: Bloomberg

BNP Paribas, a French lender, is said to be planning to bid for Deutsche Bank’s equity derivatives book to auctioned in September. Deutsche’s derivative exposure is tying up capital that could have generated income of EUR 500 million a year.

Source: Reuters

Thanks, But No Deal

Julius Baer, a Swiss lender, has decided not to sell Kairos Investment Management, its Italian operation with over EUR 9 billion in assets under management, after completion of a strategic review. Mediobanca, an Italian lender, has been mentioned as potential acquirer at some point.

Source: Reuters

Metrics To Watch

DBS, Oversea-Chinese Banking Corp and United Overseas Bank, the biggest Singaporean lenders, generate returns on equity of more than 11%.

Source: FT

Bank of Jinzhou’s, a Hong Kong listed lender, non-performing loans have increased more than 8x times in 2018; its bad-loan ratio stood at 4.99% at the end of year.

Source: WSJ

Follow the Money

VTB, a Russia’s lender, is said to be selling its 55% stake in Tele2 Russia to Rostelecom, a state-controlled telecoms group, in a cash and shares deal. As a result, VTB may become owner of about 17% of Rostelecom.

Source: Reuters

Strategic Moves

Tesla, the electric car manufacturer, will start offering auto insurance to its customers acting as a broker in California and is planning to become an insurer in its own right and to use its own balance sheet to underwrite car insurance.

Source: FT

Up-and-Comers

Chairmans Financial, an Anglo-Dutch investment group, has agreed to acquire 100% of Ipagoo, a UK fintech that fell into administration last month, for an undisclosed amount. 

Source: FT

On the Baltic Shores

Applying the 16x times forward earnings multiple that Blackstone is trading at, EQT, a Swedish private equity group with anticipated net profits of EUR 250 million in 2020, is worth around EUR 4 billion, while the 23x multiple of Partners Group, a Swiss rival, would imply a value near EUR 6 billion.  

Source: FT

Exciting Numbers

In 2018, US banks earned USD 7 of every USD 10 in merger fees, USD 6 of every USD 10 in stock commissions, and USD 6 of every USD 10 paid to hold and move corporate cash, according to Coalition. 

Source: WSJ

The financial wealth of high-net-worth individuals (those with at least USD 1 million in investable assets) is estimated at USD 70 trillion worldwide, according to Capgemini.

Source: FT

According to Economic Policy Institute, a think tank, the average annual income of the US wealthiest 0.1% was USD 2.8 million in 2017.

Source: FT

A Thought Worth Noting

“We’ve had a fairly long bull cycle. So as an investor today you have to be prepared for a certain change in the markets or a downturn.”

Christian Sinding, CEO, EQT

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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 Joe Taylor on Unsplash

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