French banks say ‘Non’ to SEPA progress…

RBS becomes 60% state-owned, starts selling off
assets…

Consolidation talks gather pace in
Ireland…

National Bank of Greece cancels Ethniki Insurance
sale….

REGULATION
French banks say ‘Non’ to SEPA progress

The European Central Bank’s (ECB) latest progress report on the
development of the Single Euro Payments Area (SEPA) has outlined
concerns over competition, delays and direct debits.

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By GlobalData

While the ECB acknowledged “significant progress” has been made
since its progress report in July 2007, it stated “motivation for
the project has been fading away among market participants.”

According to the ECB, the current priority is for banks to
address “without delay” the deadline for the launch of SEPA direct
debits, scheduled for 1 November 2009. The ECB says the issue of
multilateral exchange fees for direct debits must be resolved as
soon as possible, with more regulatory clarity on the launch date
and existing mandates.

Within 48 hours of the ECB report being published on 24
November, French banks suspended the launch of new pan-European
payment services due to confusion over tariffs.

SEPA-compliant credit transfers were launched in January, but
the French Banking Federation has said its members have suspended
work pending clarification from European authorities on tariffs, in
particular charging for services that banks supply to each
other.

STRATEGY
GE Capital seeks government bailout

US conglomerate General Electric is to reorganise its ailing
commercial and consumer finance division, GE Capital, in an effort
to save $2 billion in 2009.

The division, which has generated in excess of 40 percent of
GE’s group profits, posted a 33 percent fall in profits in the
third quarter as GE’s group profits fell by 22 percent.

GE’s share price has fallen by more than 60 percent this year,
hitting $13.30 on 20 November, a 12-year low. It has denied
reports, however, which suggested it had sought to raise fresh
capital from sovereign wealth funds, to add to the $15 billion it
raised in October.

In a separate announcement, GE said it had secured the temporary
backing of the Federal Deposit Insurance Corporation for up to $139
billion of the debt of its finance arm.

MARKETING
First Direct shares its little black book

HSBC’s UK direct banking arm, First Direct, has rolled out
‘Little Black Book’, a user-generated website allowing customers to
share reviews of restaurants, shops and places of interest. The
site, First Direct’s first step into the world of Web 2.0, also
offers a Google map search facility where customers can enter their
postcode to locate recommended attractions in their area.

The site went live at the end of November, following a trial
involving 20,000 customers.

“This is not just a directory of referrals and reviews, it’s
about feeling like you’re in an exclusive club. Little Black Book
is a way for us to give something back other than through direct
banking,” said First Direct’s head of e-marketing Jenny
Southwell.

The launch has been supported by an advertising campaign in the
UK national press, lifestyle magazines and online.

STRATEGY
RBS becomes 60% state-owned, starts selling off assets

The UK government has became the majority owner of Royal Bank of
Scotland with a stake of almost 60 percent after RBS revealed that
just 0.24 percent of its capital raising had been taken up by
investors. Stephen Hester, RBS’s new chief executive, said: “We
regret that existing shareholders did not take up their pre-emptive
rights but understand that market sentiment toward the banking
sector made this uneconomic in the short term.”

News of the shareholder vote coincided with RBS agreeing the
sale of its 65-branch retail banking network in the US state of
Indiana to local player Old National Bancorp. Old National will pay
$15.9 million to RBS’ Citizens Financial unit in consideration of
the deposit premium and will assume around $397.4 million of
deposits and $15.9 million of loans. The branches operate under the
Charter One name and are located largely in the Indianapolis
area.

In the UK, RBS’ insurance division remains on the block, with an
expected price of £5 billion.

PRODUCTS
Bank of America rolls out SafePass

Bank of America (BofA) has released SafePass, a wallet-sized
card designed to guard against online banking fraud and identity
theft. The new product requires cardholders to push an embedded
button on the card to receive a one-time-use, six-digit security
code.

SafePass will be offered as an alternative to its existing
security offering, a one-time code sent to customers’ mobile phone
handsets by text message. The card, which offers customers
increased account transfer limits, contains no personal account
information in case it is lost or stolen.

BofA will charge a one-off fee of $19.99 for the card; the
mobile phone-based service remains a free service to all
customers.

STRATEGY
Deutsche Bank to increase retail focus

Germany’s largest bank, Deutsche Bank, has announced plans to
place a greater focus on its retail unit as part of a wide-ranging
policy overhaul, designed to bolster capital, cut debt and exit
unprofitable businesses.

The bank’s CEO, Josef Ackerman, said: “We have agreed a number
of immediate initiatives which address the near-term challenges of
our current market.’’

And while Ackerman railed against the extent of the fall in
Deutsche Bank’s share price – its shares are down by almost 75
percent this year – he acknowledged investor concern about the
potential for additional asset write-downs.

He also repeated the bank’s aim to increase its Tier 1 capital
ratio to 10 percent, but said it would not need help from the
German government and would instead rely on “internal
measures”.

Analysts have suggested Deutsche may need to raise in the region
of €6 to €9 billion of fresh capital to meet its capital
target.

MERGERS AND ACQUISITIONS
Consolidation talks gather pace in Ireland

Market rumours persist of a government-brokered consolidation
among Ireland’s six banks, in the light of a dramatic downturn in
the Irish banking sector.

Ahead of any merger activity, the country’s banks, in particular
the Big Two – AIB and Bank of Ireland – have acknowledged the
market is demanding higher capital ratios. Both banks have put
plans in place to limit loan growth, make non-core disposals and
postpone dividends.

According to local media reports, Dutch co-operative Rabobank
was interested in acquiring EBS, Irish Life & Permanent and
part of Irish Nationwide Building Society; however both Irish
Nationwide and EBS would have to be demutualised in order for any
such deal to proceed.

While Rabo has not commented on the Irish press reports, Irish
Life & Permanent has confirmed that it held takeover
discussions with EBS in mid-November.

Bank of Ireland has also confirmed it has had discussions with
private equity groups seeking to invest in the bank and has been
linked to a possible merger with Irish Life & Permanent.

The country’s largest bank, AIB, which has suffered more than an
80 percent fall in its market cap during 2008, issued a profits
warning, cancelled its dividend and more than doubled the charge it
makes for future bad loans in early November.

STRATEGY
Standard Chartered looks to raise £1.8bn, cuts
dividend

UK-headquartered but Asia-focused Standard Chartered (StanChart)
has confirmed it is to launch a £1.8 billion ($2.75 billion) rights
issue to boost its core capital ratios, which had started to appear
relatively low compared to its peers.

The new shares, to be offered at £3.90, a 50 percent discount to
its share price of £7.96 on 26 November, will increase its core
Tier 1 ratio to around 7.4 percent by the end of the year, compared
with 6.1 percent on 30 June.

The bank will also cut its dividend by 25 percent, its first
dividend cut for 18 years. In the past year StanChart shares have
lost 60 percent of their value, falling from a peak of £19.60.

The bank’s largest shareholder, Singaporean sovereign wealth
fund Temasek, with a 19 percent holding, immediately announced it
would take up its rights to the offering. The rights issue
announcement coincided with an upbeat trading statement from the
bank, which said it had achieved record profits for the 10 months
to October.

MERGERS AND ACQUISITIONS
Lloyds closing in on HBOS deal

The UK government-brokered takeover of HBOS by Lloyds TSB, to
create the country’s largest retail bank, has moved a step closer
after Lloyds’ shareholders voted in favour of the deal.

Lloyds TSB investors also supported the bank’s plan to sell £5.5
billion of shares as part of the UK government’s £37 billion bank
bailout plan.

HBOS shareholders are now expected to agree the deal and approve
its own £11.5 billion government bailout at a meeting on 12
December, with the takeover scheduled to close in January.

The newly merged bank, to be known as Lloyds Banking Group, will
have in excess of 30 percent of the UK current account market,
around 28 percent of the country’s mortgage market and a branch
network in excess of 3,000 units. In response to heavy political
lobbying, in particular from HBOS’s Scottish base, Lloyds has said
it will retain the Bank of Scotland brand, with the bank’s English
retail operations to be branded as Lloyds.

Annual pre-tax cost saving arising from the merger will,
according to Lloyds, be in the region of £1.5 billion per year
until the end of 2011, including annual retail banking savings of
£790 million.

In the event shareholders of Lloyds and HBOS do not take up
their rights to buy stock in offerings planned for 9 January 2009
at £1.73 and £1.13 respectively – a likely prospect given share
prices of £1.52 and £0.88 respectively on 26 November – the UK
government will end up holding 43.5 percent of the newly merged
bank. Such an outcome would leave the government nursing paper
losses in excess of £1 billion.

MERGERS AND ACQUISITIONS
Commerzbank speeds up Dresdner deal

Commerzbank is to accelerate its deal to acquire Dresdner Bank
and will do so at a massive €4.7 billion ($6 billion) discount,
underlining insurer Allianz’ enthusiasm to be rid of its
troublesome Dresdner unit.

Germany’s second-largest bank Commerzbank now expects to
finalise the acquisition in January, instead of the second half of
the year as originally planned.

“We are accelerating the transaction and thus speeding up the
integration process,” said Commerzbank chairman Martin
Blessing.

Shares in Commerzbank had fallen by more than 60 percent since
the deal, then valued at €9.8 billion, originally announced on 31
August. According to Commerzbank, the total value of the
transaction will now be €5.1 billion. On 3 November, Commerzbank
agreed a €8.2 billion deal with the German government, becoming the
first public sector bank in the country to participate in the
German financial services bailout plan.

MERGERS AND ACQUISITIONS
Banco do Brasil snaps up Nossa Caixa

Hot on the heels of Banco Itaú’s acquisition of Unibanco to
create Brazil’s largest bank (see RBI 602), the country’s
former biggest bank, the government-controlled Banco do Brasil, has
agreed a BRL5.39 ($2.25 billion) deal to acquire Sao Paulo
state-owned Nossa Caixa.

The deal represented a 38 percent premium over Nossa Caixa’s
share price on 19 November, the day prior to the acquisition being
announced and amounts to a multiple of around 2.4 times Nossa
Caixa’s book value. By contrast, Banco Itaú paid around two times
Unibanco’s book value.

Once the deal closes, Banco do Brasil’s total assets will
increase to BRL512.4 billion, compared with BRL575 billon of
Itaú/Unibanco.

Banco do Brasil had been in merger discussions with Nossa Caixa
since April; talks are said to have intensified following news of
the Itaú/Unibanco.

In response to the wave of consolidation in the country’s
banking sector, Itaú’s arch-rival Bradesco has said it is in no
hurry to make an acquisition. Speaking at an investor presentation
on 25 November, Bradesco’s chief executive Marcio Cypriano also
ruled out any international expansion plans in the short term.

“What interests us is efficiency [and] returns for our
shareholders,” said Cypriano.

STRATEGY
Dubai faces up to credit crunch

The United Arab Emirates (UAE) government has announced plans to
merge Amlak Finance and Tamweel, two leading Sharia-compliant
mortgage lenders, into public-sector owned Real Estate Bank and
Emirates Industrial Bank.

The move follows the recent AED50 billion ($13.6 billion)
capital injection by the country’s central bank into local banks,
as a part of an AED120 billion liquidity programme, designed to
help offset the impact of the credit crisis.

In a separate statement, five public-sector companies in Abu
Dhabi – Abu Dhabi Commercial Bank, Aldar Properties, Mubadala
Development, Sorouh Real Estate and the Tourism Development &
Investment Company – announced plans to launch a new mortgage
provider.

The new lender, Abu Dhabi Finance, said it aimed to “play a
major role in helping Abu Dhabi meet its long-term goals of
sustainable economic growth by financing the growing demand for
real estate”.

COMPETITION
Visa, MasterCard to go head to head in Canada

Canadian banks are finally to be allowed to issue both Visa and
MasterCard-branded credit cards, after the country’s Competition
Bureau said that allowing banks to issue both brands would usher in
greater choice for consumers and increase competition in the
marketplace. Hitherto, Canadian banks were only able to offer
either Visa or MasterCard branded cards.

Visa currently has the largest market share in the country,
thanks to tie-ups with banks including Scotiabank and Toronto
Dominion.

MasterCard, which numbers Bank of Montreal among its Canadian
partners, unsurprisingly welcomed the Competition Bureau decision
and said in a statement: “MasterCard has enjoyed the highest
increase in purchase volume, card growth, and number of
transactions, making MasterCard the fastest-growing payments brand
in Canada.

“A dual market will allow MasterCard to build on this trend by
providing greater opportunities through access to new issuers and
cardholders.”

MERGERS AND ACQUISITIONS
BofA raises China Construction Bank stake

Bank of America is to raise its stake in China Construction Bank
(CCB), the country’s second-largest retail bank, to 19.1 percent
from the 10.75 percent it currently holds. BofA, which acquired the
option from China SAFE Investments Limited in connection with its
investment in CCB back in June 2005, says it expects the purchase
will be completed by the end of November.

The shares being acquired under the option may not be sold until
29 August 2011 without CCB’s consent – but BofA has stressed it
“intends to remain a long-term and significant strategic investor
in CCB”. In addition, both companies say they intend to further
their mutual cooperation and other initiatives under the 2005
Strategic Assistance Agreement.

CCB’s latest quarterly figures, released at the end of October,
showed net profit up 47.6 percent to CNY84.27 billion ($12.34
billion) for the first nine months of 2008. CCB’s weighted
annualised return on average equity was 24.91 percent and net
interest margin was 3.30 percent, respectively, an increase of 2.81
and 0.15 percentage points year-on-year. Its nonperforming loan
ratio was 2.17 percent, a decrease of 0.66 percentage points.

DISTRIBUTION
Mashreq unveils mobile banking service

Mashreq, the second-largest banking group in Dubai, has rolled
out one of the Middle East region’s most powerful m-banking
applications. Mashreq Mobile Banking will provide the bank’s
customers with fully transactional access to their bank accounts
through their mobile phones from any GPRS/3G/wireless (Wi-Fi)
network anywhere in the world.

Mashreq’s head of retail banking, Douglas Beckett, said: “We are
enabling 6 million users across the UAE who have mobile phones to
connect with their bank account in a more convenient way than any
of our competitors.”

Services include full access to the details and transactions of
personal bank accounts, as well as making credit card and utility
bill payments and transferring funds instantly. Users have to
register for the service through MashreqOnline and then download a
mobile banking application to their phones; once installed, the
service is free to use.

In the US, such downloadable applications have proved unpopular
with banks and their customers. Bank of America and Wells Fargo
have opted for an open browser platform instead; Citi recently
followed suit after initially running a downloadable ‘thin’
application (see RBI 601, 594).

PAYMENTS
Asia gets first real-time remittance service

Singapore’s DBS Bank and MasterCard have launched an online
money transfer service that allows DBS customers to send
remittances to participating banks in five Asian countries – India,
Indonesia, Malaysia, Philippines and Thailand. DBS says it is the
first bank in Asia to offer this “24/7 real-time cross-border
online remittance service”.

MasterCard MoneySend enables DBS/POSB MasterCard cardholders or
DBS internet banking users to transfer money across the MasterCard
global network to more than 50 banks.

Vincent Tan, managing director of DBS Cards & Unsecured
Loans, said: “The bulk of remittances out of Singapore fall under
[these five countries]. Discussions are already underway with
MasterCard to expand the network of markets as well as
participating banks.”

DBS, which says it has one million online banking users, is
using full two-factor customer authentication to maximise security.
Customers can remit a maximum of SGD1,000 per day, up to a maximum
of SGD3,000 ($1,900) per month, and as part of the launch, the
service will be free for a limited period

Based on statistics from Asian Development Bank, over S$1
billion is transferred annually from Singapore to Asian countries,
mainly India, Indonesia, Malaysia and Philippines.

MARKETING
SocGen web campaign based around staff

Société Générale has launched a series of 30-minute films to be
broadcast initially over the internet – and later on French
television – based around ‘everyday’ stories of some of its
frontline banking staff. The web campaign is focused on eight
markets: France, the UK, Germany, Italy, Spain, Hong Kong,
Singapore and China.

The 13 ‘stories’ will be shown on a proprietary website,
http://www.bankersstories.com/.

“We wanted this campaign to be real. We wanted to show the
enthusiasm, the professionalism and client commitment that
motivates our team,” said Jean Bourdoncle, director of Société
Générale’s brand.

The campaign was designed by agency Harrison & Wolf.

STRATEGY
Tesco ups UK retail banking momentum

Tesco, the UK’s largest retail chain (and the world’s third
largest), is ploughing firmly ahead with its plans to compete
significantly in the UK retail banking market, four months after it
bought out Royal Bank of Scotland from their joint venture, Tesco
Personal Finance (TPF) (see RBI 597).

Chief executive Benny Higgins has already poached senior
executives from Royal Bank of Scotland and HBOS for
Scotland-headquartered TPF, and signalled the unit will not only
look to enter the crisis-hit UK mortgage and current account
markets but also expand into key emerging economies such as China
and South Korea. Tesco has retailing operations in 13 countries in
all, including the US, Turkey and Poland.

Higgins told the newspaper Scotland on Sunday: “I have
recruited some of the very best people I have ever worked with.
They joined because they wanted to be part of this operation… I am
sure we will hire more people who will want to move because of the
current circumstances at the banks.”

TPF has five million customer accounts and Higgins said the
unit, building on Tesco’s wider consumer knowledge, can benefit
from the credit crunch. In October, TPF received more applications
to open savings accounts than during the whole of 2007.

STRATEGY
National Bank of Greece cancels Ethniki Insurance sale

National Bank of Greece (NBG) has decided not to seek an
international insurer as strategic partner for its insurance
business “in light of the severe crisis in global financial
markets” just two months after saying that it was looking to
“maximise the potential of its insurance unit” via a strategic sale
or partnership (see RBI 599).

NBG now says it “believes in the growth prospects of the
insurance industry in Greece as well as in south east Europe and
Turkey… With its strong brand name, healthy solvency margin and
leading position in the industry, Ethniki Insurance is well
positioned to benefit from the opportunities that have emerged from
the recent developments in global financial markets, and offers
stability and security to its customers and other
stakeholders”.

By September, Ethniki management had already completed a
three-year reorganisation of the company and “identified
significant growth opportunities domestically and internationally”,
NBG said.