Market only half buys LSE merger thesis 16 Mar 2016 Investors have priced in the 450 mln euros in annual savings Deutsche Boerse and its rival exchange hope to create by merging – but no more. The two aim to create value from revenue synergies too. If they can’t convince the market, the tie-up looks vulnerable to an interloper.
BMW clean future dependent on gas-guzzling present 16 Mar 2016 The German automaker is stepping up its costly foray into electric and self-driving cars. The move is strategically sound but will take years to pay off. Meeting CEO Harald Krueger’s ambitious short-term profitability targets will hinge on selling a lot of fuel-hungry SUVs.
Fund managers join investment banks in hurt locker 15 Mar 2016 Asset gatherers’ costs could rise by 3 pct a year, new research estimates. As at investment banks, misconduct fines and negative rates could be painful. Bank capital rules are also forcing money managers to spend to offset scarcer financing and lower trading volumes.
Sainsbury can open its wallet wider for Argos 15 Mar 2016 The UK grocer’s like-for-like sales have turned positive, but prices are still falling. A proposed 1.4 bln pound merger with rival Home Retail is a decent coping strategy, if Sainsbury can beat rival bidder Steinhoff. A boost of 10 pct would still just about make financial sense.
L&G falls victim to bank-style capital envy 15 Mar 2016 The UK insurer met forecasts and hiked its dividend for 2015. But investors seem concerned that L&G’s position under the incoming Solvency II capital regime is relatively weak. It may be unfair, but as banks have found to their cost, capital adequacy tends to be a race to the top.
Schaeffler shows who’s boss in auto industry 15 Mar 2016 Big suppliers have pricing power. Family run German engineering group Schaeffler just reported a 12.7 percent operating margin, twice what volume carmakers manage. Tighter emission rules will accelerate the trend: green technology is costly, but drivers are unwilling to pay more for cars.
Stock market jitters are here to stay 14 Mar 2016 Europe’s blue-chip index has all but reversed heavy losses from the early weeks of the year. Slower global growth and specific fears over commodities firms and banks sparked the selloff. But with sellside market-making restricted, further bouts of acute volatility look likely.
Merkel down not out after Super Sunday defeat 14 Mar 2016 Right-wing populists won large gains in three German state elections. Support for Angela Merkel’s coalition is waning. Yet results also show credible and determined mainstream leaders can still woo voters. This may help the chancellor to keep inner-party critics at bay.
Brexit index: Economy bolsters “Leave” campaign 14 Mar 2016 The likelihood of Britons voting to leave the European Union has been spiking, Breakingviews’ Brexit index implies. Economic inputs like sterling and EU trade are weakening. Anti-EU media sentiment and asylum figures could rise. The “remain” camp has a fight on its hands.
Old Mutual splits for good reason: it can 11 Mar 2016 The Anglo-South African financials group is breaking into four. It has that rare combination of businesses that don’t go together, a boss willing to empire-shrink rather than build, and potential hidden value. Other groups have the same problem, but lack a clear way to fix it.
Draghi offers gift euro zone doesn’t need 11 Mar 2016 The ECB chief will soon buy corporate bonds. This should make borrowing cheaper for banks and small companies. But bond yields are already low and companies may use Mario Draghi’s largesse for M&A and share buybacks rather than useful investment. A small programme may be best.
Draghi pulls a risky rabbit out of his hat 10 Mar 2016 The ECB chief cut rates, said non-bank corporate bonds could qualify for a larger asset buying programme, and flagged new long-term loans. The good news is Mario Draghi is willing to go the extra mile. The bad: he may encourage excessive risk-taking without lifting inflation.
Challenger bank rollup would create real contender 10 Mar 2016 Upstart UK lenders like Aldermore and Virgin Money are growing fast and making reasonable profit. Individually they are tiny next to dominant UK banks. Mashing together nine challengers, however unlikely, would create a 150 bln stg group with decent returns, big enough to matter.
Aviva investors upgrade Friends deal to so-so 10 Mar 2016 The UK insurer has said it will deliver hoped-for synergies from its late-2014 deal to buy Friends Life a year early. Its capital position is greatly improved. But a minus 12 pct total return since the deal broke implies shareholders are still waiting to be convinced.
Carlos Slim builds Spanish empire at skinny price 10 Mar 2016 The Mexican tycoon has been building stakes in builder FCC and property firm Realia. He has made bids for both, at low premiums, after exceeding a 30 pct threshold. Slim has no incentive to offer target shareholders a sweeter offer unless the regulator forces his hand.
Yoox Net-A-Porter is luxury’s less well-off cousin 10 Mar 2016 Sales at the newly merged posh online clothing retailer grew by a fifth last year. It’s dominating the global market. But selling luxury online means dealing with demanding suppliers and capricious consumers. That’s a tough business, as a 4.2 pct operating margin shows.
LSE merger must please three tough crowds 9 Mar 2016 A tie-up with rival exchange Deutsche Boerse should please customers by cutting their collateral needs. But it could unsettle regulators if it sees too many derivatives being booked in one place. Squaring that circle might leave less for a third key constituency: shareholders.
How to beat the rise of the trading machines 9 Mar 2016 Buyside firms are spending more on trader compensation than on technology, and the humans’ share is rising, Greenwich Associates says. It’s a glimmer of good news for bankers whose livelihood is threatened by autobots. But they’ll need a pretty unique suite of skills to survive.
Credit Agricole glosses over the point of fintech 9 Mar 2016 The French lender will invest 4.9 bln euros into digital banking. Yet cost savings won’t bring job cuts. That contradiction works given CredAg’s quirky rural model. But it neglects an inconvenient truth: for investors, fintech’s appeal is to help make staff and branches obsolete.
Inditex magical formula begets magical valuation 9 Mar 2016 The owner of fashion chain Zara’s like-for-like sales in 2015 were its best in a decade. Not bad for a retailer that eschews ads. The luxury valuation that has produced would make sense if not for currency wobbles, and the company’s reticence on the economics of its online business.