Corporate Financier’s Notes
by Aivars Jurcans
Done! And Done
UniCredit has agreed with Koc Holding to cut its stake in Yapi Kredi Bank, Turkey’s 3rd largest lender, to below 32%.
Zurich Insurance has completed the acquisition of Indonesia’s Adira Insurance (announced in September 2018). Zurich bought 80% of the company from Bank Danamon and a minority shareholder in a deal valued at around USD 414 million.
Deals On The Table
Bohai Bank, China’s mid-sized lender (USD 142 billion in assets) part-owned by Standard Bank, is said to be considering a Hong Kong initial public offering to raise more than USD 2 billion in the second half of 2020.
Commercial International Bank, Egypt’s largest private lender, is said to be considering buying Mayfair Bank, one of Kenya’s lower-tier banks with a market size index of 0.16%.
MONETA Money Bank, a Czech lender, is said to be “in exclusive talks” to buy the Czech building savings and mortgage business of Wuestenrot & Wuerttembergische, a savings firm and a mortgage bank respectively. The deal is expected to give MONETA 400,000 new customers, raise its retail deposits by 45% (or USD 2.29 billion) and double its mortgage market share to 6%.
NN Group, a Dutch insurer, Ageas from Belgium, Helvetia from Switzerland and Spain’s Santa Lucia are said to be preparing their final bids for Caser Seguros, a Spanish provider of bankassurance backed by Covea (a French insurer) and a series of Spanish banks. The auction is expected to wrap up before Christmas and to value the entire business at up to EUR 1.2 billion.
Investec, an Anglo-South African financial services group, is said to be expecting to raise about GBP 189 million form the sale of around 10% of its asset management business, which will be renamed Ninety One.
Prudential, a US life insurer, is said to be exploring the possibility of selling its South Korean unit, which could fetch about USD 1.7 billion. South Korea’s KB Financial Group and Woori Financial Group as well as PE funds are named as potential buyers.
Not Too Fast
The talks between Assicurazioni Generali, an Italian insurer, and MetLife, a US insurer, over the purchase of MetLife’s European assets are said to have stalled over price. The businesses concentrated in Poland, the Czech Republic, Hungary and Romania were previously thought to be worth more than EUR 2 billion.
Metrics To Watch
UniCredit’s, an Italian lender, shares are being traded at a forward price to tangible book value of 0.5x times, compared with Lloyds at 1.1x and JPMorgan at 2.1x. UniCredit’s return on tangible equity has increased to 8.7% after Q3 this year.
Virgin Money’s, a UK lender, shares are being traded at 7x times forward earnings and 0.5x times its tangible book value.
Bank Pekao, a Polish state-controlled lender, has acknowledged that it won’t achieve a return on equity of 12.5% in 2020 “due to its regulatory burden”. It will be aiming for an amended ROE target range of 11%-12% and expects that “IT and digitalisation projects will help it to raise profitability and to keep the cost-to-income ratio below 40% in the coming years”.
Follow The Money
Sberbank, Russia’s largest lender, has teamed up with Cognitive Technologies, an artificial intelligence transport developer, with Sberbank taking a 30% stake in the JV named Cognitive Pilot, which will be engaged in developing “digital economy projects in transport, agriculture computer vision and artificial intelligence”.
Asian Infrastructure Investment Bank, a Beijing-based lender, and Clifford Capital, an investment firm backed by Singapore’s Temasek, have agreed to establish Bayfront Infrastructure, a JV to specialise in purchasing Asian infrastructure loans for repackaging and sale to institutional investors. Bayfront’s balance sheet will be capitalised with USD 180 million in equity (70% provided by Clifford) and USD 1.8 billion in debt.
Zopa, a British peer-to-peer lender, has raised GBP 140 million from IAG Capital, a US investor. The extra capital was raised to assure regulators that Zopa, which received a provisional banking license in 2018, was stable enough to operate as a full bank.
Rapyd, a support provider for cross-border payment services, has received a USD 40 million investment from Durable Capital, an investment fund run by Henry Ellenbogen.
On The Baltic Shores
Despite the allegations of their involvement in money laundering, SEB and Swedbank, the Nordic banks, are still trading at 1.2x times tangible book value, compared with 0.2x-0.4x times for unimplicated French and German peers.
According to the European Banking Authority research, the lenders’ average return on equity decreased from 7.2% to 7.0%, while just 28% of publicly traded European banks have a price-to-book ratio of more than 1x, compared with 81% in the US.
Seeking to raise USD 4.6 billion from a listing in Shanghai, Postal Bank of China, a state-owned lender, saw the deal about 79x times oversubscribed by retail investors – the lowest level of interest for a mainland listing since 2015.
A Thought Worth Noting
“In this challenging environment, the streamlining of operating expenses is presumably the main area [for banks] to improve profitability.”
The European Banking Authority survey
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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