Only capital can fix Santander’s discount 29 Jan 2020 The Spanish lender’s return on equity fell in 2019 due to one-off costs, but it should do better this year. Still, the bank run by Ana Botin has yet to hit a 12% solvency target, which in turn lags European peers. Until it catches up, its lowly valuation will persist.
Nord Stream 2 exposes the limits of U.S. sanctions 29 Jan 2020 Washington dislikes the new gas pipeline from Russia to Germany, and tried to stop its construction. But Moscow can bear the likely delays, and sanctions won’t be extended to Nord Stream 2’s users. It’s hard for the U.S. to be tougher when its own Russian stance is muddled.
Virus tests Hong Kong market’s resistance 29 Jan 2020 A full-blown epidemic would rock what is already the year’s worst-performing major exchange index following a fresh 3% fall. Though a protest-related tourism tumble may prove a blessing in disguise, anti-Beijing public sentiment is also complicating the health response.
India’s tax tweaks will deliver half-stimulus 29 Jan 2020 The government may implement big changes to levies on dividends and capital gains in the budget, building on cuts to corporate dues. Lower rates will please investors, but the next step is freeing officials of collection targets and creating a credible system to resolve disputes.
Goldman Sachs fades memory of the spank from Hank 28 Jan 2020 As boss David Solomon unveils his growth strategy, he’s likely to shine a light on Goldman’s inner Blackstone. But the direct investing business has in the past caused conflict with clients and angst from regulators. Solomon will need to explain why this time it’s different.
New Renault boss faces a vertiginous uphill start 28 Jan 2020 The French automaker said Luca de Meo will be its CEO from July. The Italian helped revive Fiat under late boss Marchionne and is credited with fixing Volkswagen-owned Seat. Renault’s grim profit margins and a dilapidated alliance with Nissan present stiff challenges.
Virus lockdown hands LVMH tricky start to 2020 28 Jan 2020 The $230 bln luxury group’s comparable sales grew 10% in 2019. But at least the current quarter could be rocky with the fallout from the new coronavirus likely to infect its hefty Chinese sales. That makes smooth progress towards its acquisition of Tiffany even more important.
Urban culture adds to Harley-Davidson’s backfires 28 Jan 2020 The $5 bln motorbike maker is attracting new riders to replace aging baby boomers. But revenue keeps falling. City dwellers have plenty of other transport options. But they also lack time to devote to the Hog. That’s causing almost as many to ditch their wheels as climb aboard.
Car-parts makers seek solace in climate-driven M&A 28 Jan 2020 BorgWarner’s $1.5 bln swoop for Delphi will help boost its green-engine offerings, the same rationale behind the Peugeot-Fiat Chrysler deal. BorgWarner easily covers the 77% premium with cost cuts. But a struggling Delphi brings with it debt and slower margins.
ECB gives banks a reason to sort themselves out 28 Jan 2020 Europe’s lenders have stronger balance sheets but aren’t very profitable, the regulator’s annual review shows. Executives blame low interest rates and strict capital rules, but these won’t change soon. If banks are too slow to cut costs or merge, they face even closer scrutiny.
Home cleanup lets Philips focus on health push 28 Jan 2020 The 40 bln euro Dutch group is offloading its vacuum and coffee maker arm which brings in 12% of revenue. Detangling the business is fiddly but lets CEO Frans van Houten focus on its health units. Catching up with rivals like Siemens Healthineers requires more reliable results.
Apple investors cook up complacent valuation 28 Jan 2020 The $1.4 trln tech giant consistently squeezes more juice out of a mature smartphone market. Its price-to-earnings ratio has nearly doubled in a year, closing on Facebook and Alphabet. In part that’s overdue, but Apple is also the most exposed to risks in China.
UK’s Huawei call is anti-Trump parting gift to EU 28 Jan 2020 Britain has granted the Chinese telecom-kit maker a limited role in 5G networks. The U.S. president, who had pushed for a ban, will be as miffed as mobile operators will be relieved. On the eve of Brexit, London has also shown Europe how to balance Washington and Beijing.
Virus panic makes OPEC cat-herding even harder 28 Jan 2020 Oil prices have dipped below $60 a barrel on fears the coronavirus will hit growth. The Saudi-led producers group already has a job convincing the likes of Russia to keep supporting cuts agreed in December. The virus jitters might make others, such as Riyadh, want to double down.
Elliott’s friendly tech bet faces tough second act 28 Jan 2020 Shares in SAP are up 19% since the activist unveiled a stake. Investors seem to believe the $160 billion company will hit ambitious targets endorsed by Paul Singer’s fund. But tough competition and increasingly muddy governance mean there is limited scope for further quick wins.
UK grocer goals betray scale of climate challenge 28 Jan 2020 Sainsbury’s has pledged zero emissions by 2040, 10 years ahead of the UK goal. That’s good, but like many banks and oil groups, the cuts only affect CO2 the company itself produces. For businesses to decisively tackle global warming, they need to cut what’s emitted by customers.
Investors and EU can marginalize U.S. on climate 27 Jan 2020 Commerce Secretary Wilbur Ross says the White House might deem a European carbon tax on imports protectionist. That exposes one of the problems with regional solutions to global warming. Allying with global investors would help create more powerful sticks and carrots.
Buenos Aires dares bondholders to game of chicken 27 Jan 2020 Creditors vote this week on the province’s bid to delay a $250 mln debt payment. Opponents can argue the delay is unneeded and would complicate restructuring Argentina’s sovereign bonds. But they don’t have much leverage. And investors’ short memories give Buenos Aires an edge.
Viewsroom: Over beers from Davos 27 Jan 2020 At the end of the World Economic Forum, Breakingviews’ three delegates reflected on the highs and lows of the annual gathering of world leaders, corporate executives and do-gooders. Overall, they conclude that Greta outdid Trump, and sustainability is now a boardroom fixture.
Energy debt woes are a canary in the shale mine 27 Jan 2020 U.S. oil and gas group McDermott is filing for bankruptcy and Chesapeake may default after undisciplined deals left them crumbling under piles of debt. Low natural gas prices are a bigger problem than oil right now. But their woes are a warning for the likes of Occidental.
New China virus is bigger threat for world economy 27 Jan 2020 Growth rebounded quickly after the 2003 SARS outbreak. Stronger prevention measures this time are offset by the potentially more contagious coronavirus. China’s economy is also more fragile and accounts for a larger share of world growth. No wonder investors are jittery.
Capgemini victory over Elliott comes with baggage 27 Jan 2020 The French IT group won a $4.1 bln bid to take control of Altran, which the New York activist tried to veto. The victory is a coup for CEO Paul Hermelin, who steps down in May. But Elliott can block a full takeover. That presents an integration headache for successor Aiman Ezzat.
The world’s most important person who missed Davos 27 Jan 2020 It wasn’t a billionaire or a world leader – at least not yet. But the Democrat who will take on Donald Trump for the U.S. presidency in November cast an unavoidable specter over the week’s proceedings. The race and its potential outcomes are as open as they were four years ago.
Saudi Newcastle punt is not as silly as it sounds 27 Jan 2020 Riyadh’s wealth fund is mulling a 340 mln pound takeover of the English soccer club. It’s another eyebrow-raising move in Saudi’s efforts to diversify its economy. But a repeat of Abu Dhabi’s successful reboot of Manchester City could help repair the kingdom’s tarnished brand.
China puts Washington into awkward M&A role 24 Jan 2020 The government faces the temptation to broker new tie-ups to mitigate the blacklisting of telco Huawei, and unwinding of China-related mergers. True, Beijing-bashing could inspire other deals: think Cisco buying Nokia. But Washington is better as an onlooker than a matchmaker.
Bayer settlement only slightly eases Monsanto pain 24 Jan 2020 The German chemicals group may spend $10 billion compensating alleged cancer victims of its acquisition’s Roundup weed killer. That would be better than CEO Werner Baumann’s worst fears. But it barely makes his ill-starred $66 billion deal look any better.
Progress can’t dispel viral risk to world GDP 24 Jan 2020 It has been decades since a pathogen as frightening as new coronavirus has spread. Biotech advances and China’s modernization helps catch diseases earlier, but easier travel speeds dispersal. Vaccine development is slow. Economic damage, from mild to $3 trln, is up to chance.
Review: Trapped inside Big Tech’s “Uncanny Valley” 24 Jan 2020 Anna Wiener slams the industry’s godlike power in her new memoir about Silicon Valley’s recent gold rush. But the book mirrors what it mocks, largely reducing people to their social media posts or buying habits. It shows how impossible it is to escape the Bay Area’s long shadow.
UK belatedly bares antitrust teeth over tech M&A 24 Jan 2020 Competition authorities may probe Takeaway.com’s Just Eat deal, even though the buyer doesn’t operate in Britain. As with its Amazon-Deliveroo inquiry, the regulator’s logic borders on paranoia. That’s better than the naivety it showed with Facebook’s 2012 Instagram purchase.
Ericsson gives glimpse of pain from 5G squeeze 24 Jan 2020 An earnings hit from a U.S. mega-merger is only one headache for the $28 bln Swedish telecoms firm. Britain appears to be throwing a lifeline to Chinese rival Huawei. And mobile operators are pushing hard to break the pair’s grip over the $500 bln market for next-generation kit.