Corporate Financier’s Notes
by Aivars Jurcans
Done! And Done
Banco Santander, a Spanish lender, has agreed to sell Santander Bancorp, its retail and commercial banking franchise in Puerto Rico, to First Bank Puerto Rico in a deal valued at USD 1.1 billion. The deal is said to include 27 bank branches and total assets of USD 6.2 billion.
Banco do Brasil, the Latin America’s biggest lender by assets, and a government-managed fund have raised USD 1.4 billion by selling shares in the state-owned bank. The sale was part of a broader government effort to shore up its fiscal accounts through asset sales.
GSFM, an Australian wealth manager, has acquired a 49% stake in Redpoint Investment Management, a boutique fund manager, from MLC Asset Management (owned by National Australia Bank) for an undisclosed amount. The combined firms would manage more than USD 11.6 billion of assets.
Banque Centrale Populaire, a Moroccan lender, has acquired a 71% stake in Banque de Madagascar et de l’Ocean Indien. BCP is said to have 6.2 million clients in Morocco and operates in 30 countries, including 16 in Africa.
Deals On the Table
Societe Generale, a French bank, is said to start the sales process of SG Finans, its equipment finance unit in Norway, Sweden and Denmark, as part of a plan to exit non-strategic businesses. SG Finans had assets of USD 4.19 billion at the end of 2018.
VTB, Russia’s state-controlled lender, is said to be intending to sell a 10% stake in VTB Africa, its Angola-based subsidiary, to its management. VTB currently owns 50.1% of shares, with the balance held by Mr Antonio Carlos Sumbula, the former head of Endiama (Angolan state-owned diamond firm).
ABN Amro Bank, Oddo BHF (a Franco-German financial group) and Fosun International (a Chinese conglomerate) are said to be among suitors considering bid for Bankhaus Lampe, a private bank owned by Germany’s billionaire Oetker family. Established in 1852 by Herman Lampe and part of Oetker family’s holdings since after WW II, the bank generated EUR 14.9 million in profit and had EUR 19.1 billion of assets under management at the end of 2018. The transaction could possibly value Bankhaus Lampe at EUR 200 million or more.
Blackstone and CVC Capital Partners, the shareholders in Paysafe, a payments processing firm, are said to be preparing for an IPO which could value the company at more than USD 10 billion, including debt. Paysafe handles more than USD 80 billion of transactions annually and is expected to generate around USD 600 million in ebitda in 2020.
PKO BP, the Poland’s biggest state-run bank, is said to be prepared to consider bidding for mBank, the Commerzbank’s Polish unit, if and when it is officially put up for sale.
BNP Paribas is said to be the frontrunner to acquire Deutsche Bank’s business that sells certificates and warrants to retail investors. The unit’s value is estimated at EUR 400-500 million.
Emirates NDB, a Dubai lender, is said to be planning to raise USD 1.76 billion in fresh capital to fund its expansion regionally.
Not So Fast
The European Central Bank has blocked the planned acquisition of Cassa di Risparmio di Cento by Banca Popolare di Sondrio, instructing Popolare to clean up its balance sheet first. Popolare’s impaired loans accounted for 13.7% of its loan portfolio on June 30, compared with an average of 9% for Italian banks.
Metrics To Watch
Metro Bank’s, a UK lender, net interest margin has been shrinking from 1.97% in 2016 to 1.81% in 2018 and 1.62% this year.
UBS, a Swiss bank, reported return on equity of 6.6% in Q3, compared with a group target of 15%. Its cost-to-income ratio has climbed to 88% from 75% the year before.
Morgan Stanley reported return on equity of 11.2% in Q3 suggesting that its shares (trading at a price-to-book value of about 1.0x times) could be undervalued compared to Goldman Sachs’s shares which trade at the same price-to-book level while the bank generates a lower return on equity of 9%.
Follow the Money
Santander, a Spanish lender, intends to launch a platform to attract online deposits in the US. It expects to narrow the gap between its USD 107 billion in loans and leases and its USD 64 billion of US deposits.
Avenue Capital Management, a New York-based investment firm, is said to be discussing raising USD 1 billion for the purchase of up to 50 aircraft to boost its leasing business.
Revolut, a UK neobank, is planning to begin issuing cards in the US by the end of 2019 in partnership with Mastercard. The deal would allow Revolut to plug into Mastercard’s networks so that its cards will be accepted by merchants in 210 countries.
On the Baltic Shores
Swedbank, a Swedish lender currently under investigation for money-laundering allegations, has started 132 initiatives to improve its ability to fight against financial crime and is aiming to complete abut 70 of them by the end of the year.
According to McKinsey & Co, in 2018 for North American banks the average return on equity was 16% versus 6.5% for their rivals in Western Europe.
According to Citi research, if Basel 4 rules were in place today, European banks would face a capital shortfall of EUR 130 billion.
Thoughts Worth Noting
“We believe we’re in the late economic cycle and banks need to make bold moves ow because they are not in great shape. In the late cycle, nobody can afford to rest on their laurels.”
Kausik Rajgopal, senior partner, McKinsey & Co
“Going forward, scale will likely matter even more as banks head into an arms race on technology.”
McKinsey & Co report
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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