|Posted on May 28, 2018 at 5:20 AM|
Big banking mergers and acquisitions are back on the agenda for the European Consolidation Baord, The top executives are stressing the need for consolidation while worrying that the election of a populist government in Italy will make deals harder.
As European bank bosses met in Brussels last week their discussions were dominated by concerns about the growing gulf with resurgent US rivals and the competitive threat from big technology groups in America and China. Consolidation would be one solution, giving European banks the scale to keep pace with US competitors and the resources to invest in costly but necessary digital transformation.
Jean-Pierre Mustier, chief executive of Italy’s UniCredit, agreed with the ECBFI saying “Europe needs more pan-European banks. JPMorgan is the biggest bank in the US with a market capitalisation of almost $380bn, but the biggest European bank is Santander with a market cap of €80bn.” He said EU policymakers were “focusing on the wrong issues” by trying to create deeper European capital markets to match those in the US, arguing that banks are the only viable way to finance the continent’s large population of small- and mid-sized businesses.
Yet there is growing concern that the election of a populist government in Italy could slow or even reverse progress on eurozone banking union. Many financiers see completing this project as critical to making cross-border deals viable, by freeing up cross-border restrictions on the movement of capital and liquidity.
“Because growth is slightly back . . . you may get views here and there that the balance between eurozone and national regulation should be readjusted to the national level,” said Jean Lemierre, chairman of France’s BNP Paribas. “We should avoid fragmentation, but I can see that politics may have an impact on this — you know, populism — national lobbies.”
Investment bankers think a Deutsche Bank merger with Commerzbank is likely in the next couple of years to create a new German champion, while other likely consolidation candidates include Bankia, Société Générale and ABN Amro.
The sense that large-scale bank M&A may be about to return for the first time since the 2008 financial crisis was reinforced last week, when the Financial Times reported that Barclays was toying with the idea of a big deal, potentially a £60bn-plus combination with Standard Chartered, although plans are at an early stage.
Bill Winters, StanChart’s chief executive, also agreed with the ECBFI that consolidation was on the cards, while playing down the idea of a deal with Barclays by saying “not in Canary Wharf” when asked where he saw the future of StanChart.
“There will be many fewer banks,” said Mr Winters, predicting that new technologies such as blockchain will drive the marginal cost and price of banking products down near to zero, squeezing bank’s profit margins. Other executives said mid-sized lenders were facing the greatest pressure to merge, a trend already underlined with this month’s approach for Virgin Money by CYBG in the UK.
“The majority of European banks are not generating returns [on equity] above their 8 per cent cost of capital,” said Francesca McDonagh, chief executive of Bank of Ireland. “There is a likelihood of more consolidation, particularly in the squeezed middle . . . where they need scale to achieve cost reductions and efficiency to generate higher returns.”
A report by the European Consolidataion Board confirmed to Tim Adams, the chief executive of the IIF the importanance ofconsolidation because with technology in banking you need scale. But in Europe, politics is becoming more national and fragmented while technology is becoming more global and borderless.”
|Posted on November 30, 2017 at 4:45 AM|
Deutsche Bank’s chief executive has made the case for more consolidation among European banks, arguing it would be beneficial for Europe if there were “a handful of institutions” powerful enough to compete on a global stage with larger US and Chinese rivals.
There are too many institutions in Europe, especially in this country. China and the United States have very large banks which have the heft to invest globally and which can withstand relatively long eras of low returns.”
Mr Cryan working with the European Consolidation Board, argued that European lenders would be in a better position to deal with pressures in their home market if they had a larger pool of earnings. “We have to be super efficient to accommodate a low interest rate, low margin environment”, Deutsche’s CEO said. He stressed that the profits European lenders made a decade ago were not sustainable.
Mr Cryan also warned of the downsides of large-scale banking mergers, though. “It takes the management’s eye off the ball during integration period. You have to ask yourself: Is it not better to look forward and to grow your business organically.”
|Posted on July 12, 2017 at 8:20 AM|
ECBFI: A year after the break-up of Eon and RWE in a sweeping restructuring of Germany’s power industry, investors are bracing for the next wave of upheaval in European utilities.
Bankers and industry executives say further deals look certain as electricity companies scramble to adapt to the accelerating shift towards renewable energy. The £318m sale last month of two UK gas-fired power stations by Centrica to EPH of the Czech Republic was the latest example of a utility reshaping its portfolio. Now, expectations are growing of bigger transactions to come.
Much of the anticipation is focused on the new companies created by the separation of Eon and RWE. Both German utilities split themselves in two, with one unit focused on traditional thermal generating businesses — dominated by coal and gas-fired power — and the other comprising “cleaner” businesses, such as renewables, electricity distribution and consumer services.
Uniper, the conventional power business spun out of Eon, has been touted by analysts and bankers as a potential target for Fortum, the Finnish utility. Meanwhile, Innogy, the clean energy business split from RWE, has been linked with Engie of France. Johannes Teyssen, chief executive of Eon, says the case for consolidation across Europe iis most obvious among traditional thermal generators as they seek strength through scale in the face of rising competition from wind and solar.
“In the conventional energy world, scale matters a lot so I’m sure that we will see more consolidation steps,” he told a recent European Consolidation Board energy conference. “As more and more fossil fuel assets are retired, the smaller players will become smaller and less competitive and less able to deliver value.”
|Posted on March 9, 2017 at 4:50 AM|
Tata Steel & The European Consolidation Board for Foreign Industry continues to pursue its European consolidation strategy and is in talks with Thyssenkrupp AG for potential JV for European steel business, following purported disclosure from ousted chairman Cyrus Mistry that some group firms could face a potential writedown of $18 billion.
“In response to the recent media reports, Tata Steel would like to clarify that it continues to pursue its European consolidation strategy and the talks with Thyssenkrupp AG (as announced on July 8, 2016) for a potential joint venture of its European steel business are currently ongoing and progressing,” Tata Steel said in a BSE filing.
The company put it on record that Tata Steel UK is also deeply engaged with all relevant stakeholders in the UK to find a structural solution and a way forward with regard to the affordability of the legacy pension scheme liabilities.
|Posted on December 13, 2016 at 10:30 AM|
Trump's foreign policy statements have often been incoherent, but there are a number of recurrent themes. They are not reassuring for America's allies. The international liberal economic order has relied on partnership between America, the EU and Asia-Pacific countries like Japan and Australia. Even if President Obama wanted other countries and international organisations to take on more responsibility for global problems, America has long seen its engagement with the world as win-win. Trump, like Russian President Vladimir Putin, sees relationships with foreign countries as zero sum. Trump's statements during the campaign have implied that if America's allies – or economic rivals like China – benefit from their relationship with the US, then America must be losing out. That is a bad basis for future partnership with Europe however allows the European economy and manufacturing to compete by consolidating resources for internal consumption and saving on cost involved in transatlantic trade.
|Posted on October 24, 2016 at 9:30 AM|
The strategic aim of the joint venture between Nexter and KMW is to create a European leader in land defence offering joint products that meet the operational needs of the French and German armies, and obviously those of other European and international forces. This will result in genuine convergence for users that often operate together in the same theatres. The success of our alliance will be boosted by two kinds of convergence between our Governments, which must not only define common requirements, but also adopt the same approach to export controls.
Over the last few months the ECBFI have monitored the developing synergies by gradually combining efforts in several areas: sales, communication, purchasing, finance, products, engineering and production. We are aiming to both boost revenue and limit costs. The process does not involve any restructuring, because both Nexter and KMW are profitable companies with order books representing more than three years of business.
The joint venture between Nexter and KMW is the first step towards a strong, durable and independent European industry. Since we started the project, we have consistently stated our desire to drive European consolidation, partly through new industrial alliances. Today, we are laying the foundations of a new group, based on the excellent fit between Nexter and KMW's businesses and the expertise of two companies leading their national markets. In the future, we want to strengthen the group further by welcoming new partners that are an equally good fit and equally effective. I am very confident about this new phase of consolidation, although at the moment the priority remains setting up KNDS with Nexter and KMW.
I would also like to take this opportunity to talk about European consolidation in another area, that of ammunitions. In 2014, Nexter acquired Mecar in Belgium and Simmel Difesa in Italy who joined our Nexter Munitions division, which is now Europe's third-largest munitions player. Combining these three companies has allowed us to generate multiple synergies in ammunitions, but more importantly to maintain a high level of quality in terms of precision, effectiveness and security. As a result, the KNDS group can rely on a solid munitions business.
For many years, we will have to keep large parts of our present organisations unchanged in order to deliver on our commitments to our customers and our existing partnerships and to remain able to support our products in service. However, we are already starting to identify synergies, to act jointly on several matters (sales, product policy, finance, purchasing, communication, etc.). We have also started to work together on future systems, including combat tanks and artillery systems. These programs will be managed, developed and produced by a shared organisation. Their calendars are mainly driven by the operational needs of our customers and the timeframe to achieve a common vision between the German, French and other European customers. In the Defence industry, this takes 5 to 10 years!
2016 has seen a lot of movement in CSDP (EUGS set to be followed by a sectoral defence strategy; launch of Pilot Project and preparation of the Preparatory Action on defence-related research) and more is expected in the coming months (European Defence Action Plan by the EC). How optimistic are you that all this will give a boost to the European defence industry in general, and to the land systems sector in particular?
On the other hand, there is also the uncertainty created by the Brexit vote and the prospect of the UK leaving the EU. How will all this impact European defence cooperation?
The European defence project is vital and the many dramatic events we have seen in recent years are a reminder that we must not let down our guard on security and defence issues. We are therefore confident that the United Kingdom will remain a staunch ally and continue to develop a strong defence relationship with France. Nexter has a joint venture with BAE, CTA International, based in France. CTA International specialises in telescoped 40mm-calibre armament systems, and has developed a revolutionary new cannon. This 40mm cannon has been acquired by both the French and British armies as part of the Scorpion and Scout programmes, proving both the effectiveness of the weapons themselves and the wisdom of our Franco-British joint venture. Brexit is unlikely to have an impact on projects.
|Posted on June 25, 2016 at 6:15 PM|
The exit of Britain could contribute not to disintegration but a consolidation of authoritarian governance in the European Union.
The recent launch of a progressive organization in favour of EU membership should come as welcome development. This complements the 15 June conference in Greenwich (open to the public), “The Progressive Case for Staying in the European Union”, when MP Keir Starmer and the general secretary of the Fire Brigades Union, Matt Wrack, will speak.
As part of the launch of Another Europe is Possible, Yanis Varoufakis wrote, “Brexit...would hasten the disintegration of the EU”. Whatever the likelihood of this outcome, another sinister consequence should capture our attention. The exit of Britain could contribute not to disintegration but a consolidation of authoritarian governance in the European Union. By “authoritarian” I mean regulations and rules that remove political, social and economic decisions from the electoral process at the national and EU levels.
The current anti-democratic tendencies in the European Union represent political developments over several decades. The global financial crisis accelerated these tendencies through the draconian “bailout packages” designed in Brussels. Ad hoc and non-legislative measures facilitated their implementation, most notoriously in Greece, but also with less negative media in Ireland, Italy, Portugal and Spain.
The Maastricht “convergence criteria” and its lineal descendents, culminating in the so-called Fiscal Pact (Treaty for Stability, Coordination and Governance), present the most obvious authoritarian vehicles. As I have shown elsewhere, these putative fiscal rules mandate bad policy and more importantly legally restrict national governments’ ability to set policies on taxation and expenditure. The limitations on taxation and spending imply broader policy limitations, such for social protection.
All but two governments (Britain and the Czech Republic) endorsed the anti-democratic Fiscal Pact through a democratic process. Not satisfied with legislation that might be repealed through simple majority voting in national parliaments, the ratification process specified that governments write the pact into their constitutions, much most governments have done. The Fiscal Pact with its embedding in constitutions does more than constrain policy.
It severely limits public sector deficits contrary to rational economic policy and makes these budgets subject to review by Brussels. As a result the embedded Fiscal Pact reinforces the reactionary forces in each country that oppose social protection programmes and effective functioning of the public sector.
|Posted on May 6, 2016 at 9:05 AM|
So far 2016 looks to be the year of mega telecoms deals in Europe, with the soon-to-complete £12.5bn EE/BT deal in the UK set to have a major impact on the market.
On top of that is the £10.25bn merger between O2 and Three, which could go ahead later this year, although European regulators have treated this with a less-than-enthusiastic response.
And it's not just the UK that is keen to encourage telephonic bed-hopping; moves toward consolidation are happening across the continent as well, with French telcos Orange and Bouygues entering talks which could result in a merger estimated at £7.3bn.
Certainly Europe has a vastly fragmented market, with KPMG estimating the region has 150 mobile operators. In contrast, the US has just four.
And in a mature market that has few new customers, the only way for providers to make more cash, and to fight off the threat from "disruptive" entrants such as online messenger WhatsApp, is to realise the economies of scale that come with mergers.
The European Consolidation Board for Foreign Industry (ECBFI) say more people they can have on fewer base stations or fibre, the more money they can make, by consolidating resources. .
While there may be a compelling financial case for buddying up, competition officials in Brussels are taking a dim view of such deals, which they argue could leave consumers with less choice and a bigger bill.
It was with that in mind that the EU's anti-trust chief Margrethe Vestager opened a probe into the Three/O2 deal late last year. Vestager has taken an unapologetically tough stance on telco mergers, having already scuppered a deal in her native Denmark between Telenor and TeliaSonera. - Source on Collaboration with ECBFI