As reported earlier this week, overnight Bloomberg confirmed that Wu Xiaohui, the chairman of China's insurance conglomerate which recently made headlines in the US for nearly reaching a deal with Jared Kushner over 666 Fifth Ave., was detained by a joint team of Central Commission for "Discipline Inspection" and police for questioning. It adds that that Chinese investigators who detained Wu are carrying out a wide probe that includes looking into the sources of funding for the firm’s acquisitions overseas, possible market manipulation by insurers, and “economic crimes." The Wall Street Journal reported earlier that investigators were een checking whether Wu - whose fortune last year was calculated to be just over $1 billion - was involved in bribery and other economic crimes at Anbang and that Wu couldn't be contacted for comment. As noted on Wednesday, Anbang said Wu couldn’t perform his duties for personal reasons, a story which has since been disproved. The authorities are said to be examining Anbang transactions including acquisitions overseas and their funding. According to Bloomberg;s sources, the probe also fits into a broader investigation of possible market manipulation by insurers, although they didn’t specifically define the term “economic crimes.” The action is the result of the government’s crackdown on a sector that is "supposed to help families and companies cut their financial risks, but has recently become a hub for rampant financial speculation." Yet while Wu's fate now appears sealed, swallowed by China and unlikely to reemerge any time soon if ever, questions have emerged about the viability of Anbang Insurance Group itself, which as the NYT reported overnight, has seen its growth come to a "screeching halt" as Chinese investors who helped fund its meteoric rise no longer want to have anything to do with the politically connected company which is "no longer in Beijing’s good graces." Specifically, according to government data released on Thursday, Anbang’s sales of life insurance policies and investment products, an key source of cash, stopped almost completely in April after tumbling sharply in March. It wasn't just Anbang: across the insurance industry, where the (ab)use of Wealth Management Products is prevalent, sales slowed in April compared with earlier in the year. More details: From January through March of this year, Anbang raised three-fifths as much money as it raised all of last year, government data shows. It has maintained a large stockpile of cash after a series of big investments fell apart, including a $14 billion bid for Starwood Hotels and Resorts and a deal for a Manhattan office tower with Kushner Companies, the family real estate firm partly owned by Jared Kushner, the son-in-law of President Trump and an administration adviser. But Anbang’s latest figures are eye-catching for the opposite reason. Including new kinds of policies and wealth management products, it took in only $218 million in April this year, down from $5.92 billion in the same month last year, the government data on Thursday showed. That was the biggest Y/Y collapse in the company's premium income on record, and as a result Anbang is now under "acute" financial pressure. The NYT notes that "its revenue from existing life insurance policies and certain wealth management products was down 88 percent in April compared with the same month the previous year. The rest of the industry was up 4.5 percent in the same period." While largely ignored on the list of potential Chinese risk factors, Anbang's troubles could soon become systemic. In early May, Chinese insurance regulators ordered Anbang to stop selling two investment products. One, they said, was improperly marketed as long-term insurance while a crucial application for the other lacked an actuary’s signature. By that point, Anbang was already in trouble. Questions about Anbang’s financial strength had begun circulating on social media in China in March and April, as Chinese officials publicly raised questions about sales of wealth management products by some insurers. If the drop in revenue is steep enough, Anbang could eventually be forced to liquidate assets. A big factor will be what happens with its existing policies and investment products, which comprise China's shadow banking system. As the NYT adds, Anbang’s annual report provides little information on the monthly tempo at which its previously issued investments are maturing. The company might need to pay them out if they are not rolled over into further investments with the company. The company’s policies do have very stiff penalties on early redemption to discourage holders from turning them in early for cash. Anbang could raise money by selling some of its investments, but that could take time. Additionally, the conglomerate, which over the past 3 years was nothing short of the world's most aggressive "roll up" has been an active investor in Western hedge funds, in addition to making outright acquisitions of overseas companies. And those terms tend to impose severe limits on Anbang’s ability to ask for its money back quickly. That said, a firesale of Anbang assets, which include the Waldorf Astoria, should be a fascinating event. The biggest risk from a potential unwind of Anbang, however, is the fate of its billions in WMP "assets" and whether any troubles at the insurer lead to investor impairment, and a potential run on China's $8.5 billion "shadow bank" considered by many as the Achilles heel of China's massively overlevered financial system.
ING Group, N.V. (ING) seems to be a Great Momentum Stock on the back of its favorable rice performance witnessed both in short and long term.
Я уже не первый год комментирую ежегодные встречи Бильдербергского клуба. 1-4 июня в США в небольшом городке Шантильи, штат Вирджиния, проходило его 65-е ежегодное заседание. Клуб заседал в роскошном отеле Уэстфилдс Мариотт. Что-то притягивает бильдербергеров в этот городок – ранее клуб собирался здесь уже трижды: в 2002, 2008 и 2012 годах. Вообще, клуб предпочитает менять места своих заседаний. Четыре встречи в одном месте –...
Чистая прибыль нидерландской банковско-страховой корпорации ING Group N.V. по итогам первого квартала 2017 года составила 1,143 миллиарда евро, сократившись в годовом выражении на 9,1%, говорится в отчетности группы.
Just two work days after we reported that Home Capital had already used up half of its C$2 billion emergency "lifeline" credit facility (yielding 22.5%) and was seeking additional emergency funding, on Monday Canada's most troubled alt-mortgage lender provided a liquidity update in which it said that it had drawn an addition C$400 million on its loan, leaving just C$600 million available. At the same time, the company confirmed that the bank run at subsidiary Home Trust has failed to slowdown, and as of May 8 "deposit balances are expected to be approximately $192 million." According to the latest data, another 50% of deposits have been pulled in the past week, and are now down over 90% since March 28. Additionally, the company announced that its all important Total Guaranteed Investment Certificate (GIC) deposits, including Oaken and broker GICs, stood at $12.64 billion as at May 5, 2017 compared with $12.86 billion as at April 28, 2017. Oaken savings accounts stood at $167 million as at May 5, 2017 compared $222 million as at April 28, 2017. As a reminder, Home Capital's GICs are the final lifeline that keeps it alive: as they mature, unless replaced with frash liquidity, the company's day of reckoning gets dangerously close. Home Capital also said that as of the close of Friday, its total liquid assets stood at $1.160 billion, a number which is shrinking rapidly with each passing day. In an amusing addition, the company said that "its advisers continue to work towards seeking lower cost sustainable funding solutions and to evaluate strategic alternatives to solidify and strengthen its successful mortgage origination platform. " Good luck with that. Full statement below: Home Capital Group Inc. (“The Company” TSX: HCG) today announced that it has drawn down a total of $1.4 billion from its $2 billion credit line, the terms of which were announced by the Company on April 27, 2017. The Company and its advisers continue to work towards seeking lower cost sustainable funding solutions and to evaluate strategic alternatives to solidify and strengthen its successful mortgage origination platform. In addition, the Company announced the suspension of its quarterly dividend to prudently manage liquidity. The Company’s existing mortgage portfolio continues to perform well. The Company’s liquid assets stood at $1.160 billion as of end of day May 5, 2017. Home Trust’s High Interest Savings Account (HISA) deposit balances are expected to be approximately $192 million on Monday, May 8, 2017 after the settlement of transactions that took place on Friday, May 5, 2017. Total Guaranteed Investment Certificate (GIC) deposits, including Oaken and broker GICs, stood at $12.64 billion as at May 5, 2017 compared with $12.86 billion as at April 28, 2017. Oaken savings accounts stood at $167 million as at May 5, 2017 compared $222 million as at April 28, 2017. Home Trust’s GICs and HISA deposits are eligible for Canada Deposit Insurance Corp. coverage. In a separate release, Home Capital announced that it was adding 3 new members to its board as it was continuing “governance renewal process,” adding Claude Lamoureux, former Ontario Teachers’ Pension Plan CEO/co-founder of Canadian Coalition for Good Governance, Paul Haggis, former Omers CEO, and Sharon Sallows to board. HCG also appointed Brenda Eprile board chair; Eprile joined board as an independent director in 2016; replaces Kevin Smith, who remains on board as independent director. HCG confirmed that as reported previously, William Falk stepping down. Finally, HCG set the annual meeting for June 29 in Toronto. It is sure to be an exciting affair.
Is ING Groep a great pick from the value investor's perspective right now? Read on to know more.
The relationship between interest rates and insurance companies is linear and straightforward, meaning the higher the rate, the greater the growth.
Despite its widely telegraphed $8.5 billion public offering with another $2 billion expected to be raised from asset sales, Germany's biggest lender is down sharply this morning as much as 6.9% (currently 6.1% lower) as Wall Street analysts dig through the details of the bank's latest massive restructuring, which as reported yesterday seeks to undo many of the changes implemented by CEO John Cryan over the past two years (and which will lead to an 80% reduction in the bank's 2016 bonus pool). The key concern, as some analysts most notably Citi have noted, is that DB's attempt to shore up capital may not be enough with the bank potentially needing another €2 billion to a grand total of €12.8 billion, while some have pointed out that DB may have opened a Pandora's Box for other, similarly undercapitalized European banks. Here are some of the early reactions this morning from a wide selection of sellside analysts: Citigroup (sell/high risk) In a worst -case scenario Deutsche Bank may need EU12.8b in additional capital instead of EU10b that’s currently planned Leverage ratio is the key capital constraint, saw 2018 leverage ratio at 4.0% before announcement of latest capital increase, says that’s a shortfall of ~EU5.8b to leverage ratio target of 4.5% Says that estimate included EU1.8b from successful sale of 70% stake in Postbank Also Deutsche has announced additional revamp costs of EU2b New cost target for 2018 adj. costs is still EU22b, but now includes reintegration of Postbank that will cost about EU3b; target for 2021 costs is EU21b Plan to keep all of Postbank and IPO 25% stake in asset management will boost analysts’ estimates for EPS by 2% Says rights issue will push CET1 ratio to 14.1% which is above the company’s target of more than 13% and above SREP requirement of 12.25% Goldman Sachs (neutral) Says the management actions as necessary and sufficient to decisively conclude the capital debate and thus have an overall positive impact on the financial stability of the group. That said, expect the market to scrutinize implied dilution and ongoing profitability challenges. Need for capital: known and necessary. The fact that DBK needed to improve its capital position was widely understood – we had estimated DBK’s capital shortfall at €6.7 bn (most recently in our January 27 report: “Deutsche Bank: Franchise damage, capital gap and need to detail recap path”). Therefore, the announced recap action, in itself, will not come as a surprise. Quantum of cap hike: high, but puts an end to capital debate. The total targeted increase in capital is ~€10 bn, consisting of an €8 bn rights issue and >€2 bn from planned asset disposals. In our view, the quantum of capital targeted is sufficient for this (long running) capital debate to conclude. Strategic and profitability debates will continue. DBK has been faced with two basic challenges: (1) its capital position, which has now been addressed; and (2) lack of a high-ROE platform, which continues. In this context, we view the 10% “normalized” ROTE target as ambitious. Morgan Stanley Details of the strategic plan will be key from here New cost target looks tough at first glance, is 5% better than MS’s estimate for EU23.1b that it considered optimistic and 11% better than consensus Dividend plan is signal of confidence in rehabilitation of business, capital position Reversal of negative flows in Asset Management in past 2 months is encouraging Litigation is not over yet with long list of smaller cases outstanding Management needs to address "credible integration of Postbank," provide clarity on revamp of Investment Banking and new CIB portfolio, stabilize outflows and restore confidence in Wealth and asset management businesses Equinet (buy) Capital increase is unexpected, should end investor debate about low capitalization Holding on to Postbank makes sense strategically, also given low valuation in current market Partial IPO of Deutsche Asset Management is negative as it means bank is giving up some of its stable business with low capital consumption New financial targets look achievable, unchanged ROTE target of at least 10% is more ambitious given higher capital base Higher capital ratios, low cost base should be well received by investors JPMorgan (neutral) Sees economic earnings dilution of 23% from capital increase of EU8b, or ~687.5m shares Sees that partly compensated by ~17% earnings benefit from lower costs Assumed minority stake in IPO in Asset Management is ~4% earnings dilutive All-in-all sees 2018 earnings dilution at 11% Sees 2018 fully-loaded CET1 ratio at 14.1%, if additional EU40b in Basel 4 Risk Weighted Assets are included, pro-forma 2018 CET1 seen at 12.8% New cost targets are a "material improvement" on old targets Cost details matter, including divisional breakdown, how much hinges on agreement of works council, what impact they’ll have on revenue Kepler Cheuvreux (not rated) Sees new market price of EU16.7%/share given EU8b rights issue at likely discount of 39% vs Friday’s close for price of EU11.65/share with issuance of 637.5m new shares CET1 ratio of 14.1% post capital increase plus EU2b in capital accretion over 2 years "seems solid" All-in-all new financial targets see profitability target of ~10% post-tax ROTE vs former target of >1 0% post-tax ROTE Says revenues and/or increased restructuring costs seem damp financial results Notes positive developments in terms of adj. costs of less than EU21b including Postbank Finally, as WSJ writes, in an interesting sales desk note to clients over the weekend, Bernstein Research, which does not officially cover Deutsche Bank, said candidly that Deutsche has opened the Pandora’s Box and European banks are more than an ocean apart from their American counterparts, which are much healthier. Bernstein wrote: IS DBK DOING THE RIGHT THING? Of course it is. But the right thing in banks doesn’t mean you’re a “buy”. Cost control (esp at bonus time) was the right thing for shareholders. Interesting, and if you recall, they also didn’t clean up in FICC in 4Q – something the world and its wife had expected them to do. Remember cleaning up in FICC is like going to the casino: even if the odds are heavily in your favour (which they were in 4Q) you still need to bet big, and this consumes RWAs and capital – which they don’t have. DBK’s in retrenchment mode and if these headlines are correct, it cements a core view amongst many that DBK’s capital bridge really can not be met by organic earnings alone. More importantly, European bank tailwinds in the past 9 months are being met with capital raises where needed. All at a time when JPM is close to paying 100% of its earnings. We’re world’s apart. The biggest bank in Germany, the country that’s the biggest subsidiser of the European project, the home of the European regulator, is raising equity. For everyone else, what’s their get-out-of-jail free card now? Until now, the counter-argument will always have been that DBK was short – so pick on your own country’s banks before you pick on mine! Well that doesn’t work anymore. Whilst it’s easy to be sensationalist here, it’s definitely worth thinking about what responses the more levered plays (French/CBK/Weaker Southern Europeans) will have now. On balance, I don’t think we quite head in such an extreme direction so quickly – but the divergence between US and European Financials becomes even greater. Tailwinds in Europe are much more likely to be met with raises… Source: Bloomberg, primary sources
Confirming last week's report of an imminent share sale, on Sunday the biggest German lender announced it would raise €8 billion ($8.5 billion) in new capital through a rights offering sale of 687.5 million new shares, and sell parts of its asset management business in its latest attempt to shore capital following €8 billion in losses in the past two years after a major operational and balance sheet restructuring was launched by CEO John Cryan in 2015, settling misconduct investigations and scaling back capital-intensive debt-trading businesses. The bank also announced that CFO Marcus Schenck, 51, and Christian Sewing, who oversees wealth management and consumer banking, would become co-deputy CEOs. The company will find a new CFO “in due course.” “A strong capital base is essential if we’re to succeed in charting this strategy,” Cryan wrote in a letter to employees. The share sale will “remove a major source of uncertainty. That should make us significantly more attractive for our clients.” The timing of the share sale takes advantage of the recent resurgence in Deutsche Bank’s share price, which has almost doubled from multiyear lows near €10 in September. The shares closed Friday at €19.14 in European trading. Last year, corporate clients and hedge funds pulled balances and other business from Deutsche Bank over concerns about its legal costs and weak capital position. Deutsche Bank on Friday night confirmed investor expectations that it needs a capital injection, saying it was doing “preparatory work” for a share sale and considering other strategic moves. The announcement marks the bank's third time to tap capital markets since early 2013. Since taking over in mid-2015, Mr. Cryan said he wanted to avoid selling shares, which will hurt existing shareholders, however it was concerns over the bank's capitalization, and at time liquidty, that prompted a vicious selloff in August and September of 2016, sending DB's shares to all time lows on concerns the bank's RMBS settlement with the DOJ would drain the company's funding to dangerously low levels. According to the bank, the share sale would boost its common equity Tier 1 ratio to 14.1% and set a new target of “comfortably above” 13%. The measure stood at 11.9% at the end of 2016, shy of the then-target of 12.5% for the end of 2018. In an amusing twist, during a media call, DB CEO said the Bank hopes to return to attractive dividend ratio from 2018, suggesting that while the bank is raising capital now, it hopes to return it back to shareholders next year. As part of the restructuring, the firm plans to cut more than €2 billion of costs from the €24.1 billion in adjusted expenses it had last year. The bank will cut another 1 billion euros by 2021. It expects €2 billion of severance and restructuring costs, most of which will come over the next two years. Deutsche Bank also said it would reconfigure its business structure, combining its global markets and its corporate and investment bank, reversing a separation of the investment bank a year and a half ago. The bank said it will keep its Postbank consumer division and still aims to reduce total costs to €22 billion by 2018. The megabank also said it will sell a minority stake in its asset management unit through an initial public offering in the next two years. That, along with asset disposals at the investment bank, will help raise another 2 billion euros of capital. The bank will propose a dividend in May of 0.19 euros per share. As the WSJ notes, Cryan has tried to preserve capital by cutting costs, axing employee bonuses and canceling annual shareholder dividend payouts. But those steps haven’t done enough. Cryan’s hopes were overwhelmed by multibillion-dollar legal bills, toughening capital regulations and sagging profits in key businesses ranging from German retail banking to deal-advising and trading. The bank said it expects around €2 billion in restructuring and severance costs in connection with its plans. On Sunday afternoon, after a meeting of the supervisory board, Deutsche Bank also said as expected that it plans to sell a minority piece of its asset-management business via a public sale of shares. The plan is part of a bid to stabilize that business after it has suffered a long spate of asset declines. Selling a stake would dent the advantage Deutsche Bank gains from the asset-management division’s profits, which are predictable compared with more-volatile investment-banking and trading profits. A stake sale would allow the lender to hold on to a business that Deutsche Bank officials including Mr. Cryan have praised as an important part of the bank. A partial float could help the bank once again expand the division while boosting its capital incrementally, some investors say. Deutsche Bank also said Sunday it plans to fold its German retail-banking unit, Postbank, back into its ongoing operations. That is a reversal of costly plans announced in 2015 to separate the business in preparation for a spinoff. The bank was unable to find buyers willing to pay an attractive price for the unit in a crowded market where low interest rates have hurt retail-banking profits. As part of Sunday's announcement, DB said that Jeff Urwin, who led the investment banking division, will retire from the management board after a transition period, according to Bloomberg. Cryan will take direct oversight for the U.S. operations, and the firm is recombining its investment banking and trading units after splitting the two in 2015. Schenck will run the combined unit with Garth Ritchie, who currently leads the trading division. While the stock has largely priced in the recent share offering, made possible by the recent near double in the stock price, among the other winners of today's announcement are holders of the bank's Contingent Converts, which has soared from a low of 70 during the selling panic in September to just shy of par. The bank also announced the following new financial targets: 2018 Adjusted Costs of approximately EUR 22 billion and a further reduction to approximately EUR 21 billion by 2021, both include Postbank’s Adjusted Costs Post-tax RoTE of approximately 10% in a normalized operating environment Targeting a competitive dividend payout ratio for fiscal year 2018 and thereafter Fully loaded CET1 ratio to be comfortably above 13% Leverage ratio of 4.5% In addition to the capital raise, operational restructuring and fine-tuned projections, Deutsche Bank also provided an update on current trading activity. The bank said it "has made a positive start in the first two trading months of 2017." Among the highlights: Global Markets has performed strongly against a weaker comparable period in 2016 with Debt Sales & Trading revenues up over 30% while Equities Sales & Trading was flat year on year. Corporate Finance year to date performance was strong with revenues up over 15% year on year reflecting positive momentum in primary markets that drove significant increases in debt and equity issuance. Global Transaction Banking saw resilience in its client franchise, but single digit lower revenue performance in a macro environment that remains challenging and from the consequences of intentional reductions in client perimeter during 2016. In Private Wealth & Commercial Clients (PW&CC), revenues were flat versus the comparable period in 2016 as the impact of low interest rates was mainly offset by positive developments in investment products supported by asset and deposit inflows. In Postbank, operating performance was flat, but reported revenues were slightly down given the absence of one-off gains in the prior year and weaker hedging results. Deutsche Asset Management had a modest improvement in revenues as well as the reversal of negative asset flows seen in 2016. DB announced an analyst event will take place tomorrow, March 6, at 14:00 GMT in London to detail these actions and updated targets.
Following unconfirmed sources earlier warning about a major capital raise for the world's most sysetmically dangerous bank, Bloomberg reports that Deutsche Bank AG is nearing a plan to boost capital by more than 10 billion euros ($10.6 billion) through an equity offering and the partial sale of its asset management unit, according to people with knowledge of the discussions. The measures, which executives may review as soon as this weekend, would be a way for the bank to boost capital buffers instead of by selling its Postbank unit, said the people, who asked not to be identified because the plans haven’t been announced. Deutsche Bank is now leaning toward reintegrating the consumer banking business, the people said. It’s also studying management changes, including a new role for Chief Financial Officer Marcus Schenck, some of the people said. The firm is weighing recombining its investment banking and trading divisions, with Schenck gaining some oversight of the business, some of the people said. The supervisory board is scheduled to meet for two days starting March 16 to discuss potential measures, three people said earlier Friday. The bounce back from the earlier drop has been erased...
After some strength in Europe overnight, Deutsche Bank shares are tumbling this morning after reports that the world's most systemically dangerous bank plans to review strategic options over coming weeks that include a capital increase and the partial sale of its asset management business. As Bloomberg reports, the supervisory board is scheduled to meet on March 16 and March 17 to discuss potential measures, according to three people with knowledge of the plans, who asked not to be identified because they weren’t authorized to speak publicly. A stock sale would help Germany’s biggest bank replenish buffers that may come under pressure if it decides to reintegrate its Postbank subsidiary, said the people. No decision has been made on whether to sell its own stock or hold an initial public offering of the asset management unit, said the people. A majority of the supervisory board favors reintegrating Postbank, accompanied by a capital increase, one of the people said. A spokeswoman for Deutsche Bank declined to comment. Chief Financial Officer Marcus Schenck last month said the lender would only sell Postbank if a deal provided “meaningful capital relief” to Deutsche Bank. Deutsche Bank’s management board earlier planned to wait for the completion of new banking standards that could force the bank to hold yet more capital, including for Postbank, before finalizing fresh measures. After failing to deliver a deal in early January, global regulators meeting at the Basel Committee on Banking Supervision once again left the table this week without an agreement, fueling uncertainty over the timing. At 11.9 percent at the end of 2016, the bank’s common equity Tier 1 ratio is still 60 basis points shy of its end-2018 target. With revenue under pressure from low interest rates, Deutsche Bank is also trying to build capital up organically by improving profitability. The lender has withdrawn from several countries and it recently announced that it will drastically cut bonuses for about a quarter of its staff.
Some of hedge fund billionaire George Soros' short positions dating back to 2012 were published on the Dutch financial market regulator’s website this week due to "human error" according to the regulator AFM, according to Bloomberg. Dutch bank ING is among the positions exposed and its stock price is tumbling... As Bloomberg notes, the short positions, bets on a stock declining, were “between 0.2 percent and 0.5 percent,” of shares outstanding in the companies shorted, AFM spokesman Ward Snijders said by phone on Thursday. The Dutch regulator publishes shorts of 0.5 percent or higher on its website on a daily basis. The smaller amounts were posted by mistake, he said. The Financial Times earlier reported that some of the positions, including bets against Dutch banks, including ING Groep NV, appeared briefly on the website on Tuesday evening. ING declined to comment on Thursday. Short positions, which are typically closely guarded, in Deutsche Bank AG jumped when it was revealed in June that Soros had bet that the stock would fall after the U.K. voted to leave the European Union. The German bank fell 14 percent on the first day after the ballot. The Dutch regulator’s spokesman couldn’t disclose whether there has been contact with Soros following Tuesday’s error. A spokesman for Soros didn’t immediately respond to an e-mail seeking comment.