Fortis shocks with surprise €8bn
cash call…
BCA acquires 1 percent of Bank DBS Indonesia…
BofA gets approval to buy Countrywide…
Japan’s Bank of Tokyo-Mitsubishi gets licence for m-banking
venture…
And the winners are…
STRATEGY
Fortis shocks with surprise €8bn cash call
Go deeper with GlobalData
Fortis has become the latest casualty of the global financial
malaise, outlining details of a capital-raising package to shore up
its finances by €8 billion ($12.5 billion) despite being viewed by
many industry analysts, so far, as one of the more resilient
players. But the Belgian-Dutch financial services group has been
forced to take what it calls “exceptional measures” in the face of
tough market conditions and the fall-out of its part in the
$103-billion takeover of ABN AMRO last year.
Fortis, which has just rolled out its first global multimedia ad
campaign called Life is a Curve, said it would sell about 6 percent
more shares to institutions to raise €1.5 billion, plus up to €2
billion of non-dilutive preference shares. It will save €1.3
billion by not paying an interim 2008 dividend, sell €2 billion of
non-core assets, sell and lease back real estate, and pay its
full-year dividend in shares.
Fortis completed a €13.4 billion rights issue last October to
help fund the acquisition of ABN AMRO’s Dutch operations as well as
its global private banking and asset management businesses
(see RBI 594).
MERGERS AND ACQUISITIONS
BCA acquires 1
percent of Bank DBS Indonesia
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By GlobalDataBank Central Asia (BCA), one of the biggest banks in Indonesia
with 7 million customers and 814 branches, and Singapore’s DBS Bank
have announced that BCA has acquired a 1 percent shareholding in
Bank DBS Indonesia (DBSI), DBS’s Indonesian subsidiary.
Rajan Raju, head of consumer banking at DBS Bank, Singapore’s
largest financial services group, said in a statement: “We continue
to invest and grow in Indonesia for the long term. Over the past 18
months, DBSI has been rapidly growing its network in the country;
it added 17 new branches and sub-branches to serve its enterprise
banking and [mass affluent] DBS Treasures Priority Banking
customers.”
MERGERS AND ACQUISITIONS
BofA gets approval
to buy Countrywide
Despite a growing regulatory and legal backlash against
Countrywide Financial and its part in the US subprime collapse,
Bank of America has received approval to proceed with its $2.5
billion acquisition of Countrywide, saying it will complete the
purchase on 1 July this year.
Bank of America says it anticipates about 7,500 positions will
be eliminated by combining the two companies.
But Countrywide Financial, among a number of other US banks, is
starting to face an increasing number of lawsuits and
investigations into its business practices. Countrywide has been
named in civil suits filed by attorneys-general in Florida,
Illinois and California – raising questions over the extent of Bank
of America’s exposure to Countrywide’s potential legal
liabilities.
The suits claim the lender, once the leading mortgage player in
the US (see RBI 585), oversold loan products to borrowers
who could not afford them.
In related news, a senior FBI officer has told the BBC that more
arrests will be made as part of its probe into mortgage fraud and
the credit crunch. Section chief for Financial Crimes, Sharon
Ormsby, said hundreds of arrests already made were just a “good
start”.
DISTRIBUTION
Japan’s Bank of Tokyo-Mitsubishi
gets licence for m-banking venture
Jibun Bank, a joint venture m-banking service between Japan’s
second-largest telco, KDDI, and the country’s largest bank, Bank of
Tokyo-Mitsubishi UFJ, will start accepting deposits in July after
obtaining a banking licence in mid-June.
First announced two years ago, the service will initially offer
yen deposits and payment services but look to expand into foreign
currency deposits, credit cards, credit card loans, financial
products intermediation and sales of insurance.
Jibun is projecting that by 2011, the service will be profitable
with some 2.4 million people signed up and deposits of ¥1 trillion
($9.5 billion). By 2013, there will be 3.4 million accounts and
¥1.5 trillion in deposits.
AWARDS
And the winners are…
Cards International, the sister newsletter to RBI, has announced
the winners of its 2008 Cards & Payment Europe industry
awards.
At a ceremony held in Brussels on the evening of 19 June
attended by 200 industry figures, BNP Paribas’s Cetelem was crowned
Best Consumer Finance Company while the award for Card Processor of
the Year went to SinSYS.
Other winners included Discover Motiva (Best New Credit Card
Launch); Société Générale Franfinance Golf MasterCard (Best New
Co-branded or Affinity Card); Garanti Bonus Trink Sticker (Best
Innovation in a Loyalty Programme); Euronet/ICICI Bank (Merchant
Acquirer of the Year); and Standard Chartered (Best Regional Card
Issuer).
MARKETING
Visa links with social networking
giant
Visa has announced it will be paying online social networking
giant Facebook $2 million to advertise its small business service
on the website.
Visa Business Network has been designed to give small business
owners tools and tips with which to attract new customers, reduce
expenditure and boost overall revenue.
Some of these tools include products from Google such as online
maps and calendars to help promote efficiency.
Visa will also be giving away $100 advertising credits to the
first 20,000 US start-up companies that download its service via
Facebook. Around 80,000 small businesses already have profiles up
and running on the website. With more than 80 million active users
worldwide, Facebook says it offers businesses a “great opportunity
to connect with customers”.
STRATEGY
TD Financial updates on ambitious US
plans
Ed Clark, president and CEO of Canada’s Toronto-Dominion Bank
Financial Group, has stated that despite the worsening US economic
downturn, TD Commerce Bank, the group’s US consumer bank, is on
track to deliver C$750 million in earnings in 2008 and C$1.2
billion in 2009. He also stressed synergy savings in the wake of
last year’s $8 billion TD Banknorth and Commerce Bank merger
(see RBI 580) remain on target at $310
million.
Talking at an investor presentation on 19 June, Clark said:
“This bank is going to create a personal and commercial bank that
runs the same model and offers the same Wow! customer experience
across all of our networks of over 2,000 branches.”
Some of the bank’s goals include doubling its US mortgage book
by 2013 to $8.2 billion and raising credit card outstandings from
an estimated $500 million in 2009 to $2 billion by 2013. The
Wow-the-customer strategy includes opening branches seven days a
week, 361 days a year – according to its own figures, some 65,000
teller transactions are handled per hour on Sundays across its
network compared to 78,000 on Mondays.
Talking about the credit crunch, Clark said: “We think we’re
dealing with an old-fashioned credit downturn with some risk of a
second wave of weakness. But we do continue to feel confident TD
Commerce will be a positive outlier because of our position going
into this downturn.”
STRATEGY
Portugal’s BES says it will reach
ambitious targets
Banco Espirito Santo (BES), Portugal’s second-largest private
sector banking group after Millennium, says it is confident of
reaching its 2010 target of €850 million ($1.32 billion) in net
profit. It is also aiming for a return on equity of 19 percent by
2010, up from 16.6 percent in 2007, as well as aiming to increase
its domestic market share in Portugal to 22 percent by 2010 from
20.4 percent in 2007.
The group reported a net profit of €607 million for 2007, and
added a probable slowdown in business at home would be offset by
its exposure to fast-growing economies. The key change in the plan
was an increase in the international contribution from 25 percent
of net profit to 32-35 percent in 2010, driven by strong prospects
in Angola and Brazil.
BES’s first quarter 2008 net income totalled €145.9 million, up
4.4 percent year-on-year. As of the end of March, the group had 717
branches in Portugal – a net increase of 90 since March 2007 – of
which 35 were assurfinance branches under partnerships with
insurance agents.
STRATEGY
Intesa Sanpaolo to save e180 million
via CariFirenze synergies
Italy’s largest banking group, Intesa Sanpaolo, says it will
benefit from €180 million in synergies by 2010 through its merger
with the 900-branch-strong CariFirenze group. In January, Intesa
Sanpaolo agreed to buy the 41 percent of Tuscany-based CariFirenze
it does not already own for €2.29 billion, and now says it owns 90
percent of the group.
The integration process involves, among other things, the
transfer of 130 Intesa Sanpaolo branches to the CariFirenze Group
and the disposal of 29 Intesa branches due to regulatory and
competition concerns. Overall, Intesa Sanpaolo says it will realise
€180 million in synergies by 2010, with €60 million from revenues
and €120 million from costs. On the revenue side, the retail
segment will contribute approximately €35 million, product
factories approximately €15 million and the SME segment
approximately €10 million.
Upon completion of the integration process, CariFirenze, which
will retain its brand, says it will rank eighth in Italy overall
with 900 branches.
MARKETING
Scotiabank establishes relationship
with India’s HDFC Bank
Canada’s Scotiabank, the country’s third-largest banking group,
is setting up a formal customer referral process with India’s HDFC
Bank to capitalise on the increasing flow of people between the two
countries.
For the year ended 31 March, HDFC Bank reported a net profit of
INR15.90 billion ($375 million), up 39.3 percent. HDFC Bank now has
a network of 1,167 branches across India. At the end of May, it was
given the go ahead for its $2.6 billion merger with Centurion Bank
of Punjab, the largest bank M&A deal in India to date
(see RBI 587), which will increase
branch numbers to 1,500.
According to Statistics Canada, between 2001 and 2006, 155,000
people migrated to Canada from India.
PAYMENTS
MasterCard rolls out US mobile P2P
service
MasterCard has become the latest financial services company to
partner up with California-based person-to-person (P2P) specialist
Obopay, in a deal to provide an on-demand P2P mobile payments
service to US cardholders. The system allows registered users to
send and receive funds through any mobile phone.
The service – offered via MasterCard’s P2P money transfer
system, MoneySend – will enable issuing banks to provide a mobile
payments service to cardholders on all credit, debit and prepaid
MasterCard-branded products.
MasterCard cites research from consultant TowerGroup which
estimates that in the US, adoption of consumer mobile banking has
surged in the past 12 months from 1.1 million active users to 5.7
million. It predicts the numbers will hit 40.9 million in 2012.
MERGERS AND ACQUISITIONS
Citi buys Brazilian
retail brokerage unit
Looking to rapidly focus its business onto high growth emerging
economies (see RBI 594), Citi has beefed up its 250-branch
Brazilian operation by acquiring one of the country’s leading
brokerage firms, Intra SA Corretora de Câmbio e Valores. No details
about costs were released.
Intra has BLR$1.2 billion ($745 million) in client assets and
15,000 active client accounts.
In a statement, Citi said: “The acquisition positions Citi as a
leading personal financial services provider in Brazil and is
consistent with the company’s strategy to invest and expand in core
emerging markets.”
Citi has 120 consumer banking branches in Brazil, more than
400,000 client accounts, some 7,000 employees, and a presence in 10
Brazilian states. CitiFinancial, the consumer finance business, has
130 locations in 20 states across Brazil.
STRATEGY
Santander to report €10bn profit for
2008
Santander chairman Emilio Botín has stated his group will break
the €10 billion profit mark for 2008 as it capitalises on limited
sub-prime related losses, strong risk controls and booming emerging
markets.
In 2007, Santander earned attributable net profit of €9.06
billion, 19.3 percent up on 2006.
“Last year was part of a very consistent trend that allowed us
to obtain, over the last decade, an accumulated annual increase in
attributable net profit of 25.7 percent and in earnings per share
of 15.5 percent,” said Botín.
“Our strategy, business model, focus on commercial banking, risk
management, efficiency and good liquidity and capital management –
in all these areas, we are outstanding among our international
competitors.”
Santander has more branches – 13,178 – than any other
international bank (see RBI 592) and 84 percent of its
income is sourced from consumer banking.
COUNTRY SNAPSHOT
Foreign banks in China
forecast buoyant revenue growth in 2008
According to a survey by consultant PricewaterhouseCoopers
(PwC), the number of foreign banks in China may reach 100 by 2011.
The majority of the foreign banks currently in China anticipate
strong revenue growth over the next few years, with clusters
foreseeing 50 percent annual revenue growth rates. Nine of the
current 42 foreign banks expect to double revenue growth in
2008.
Despite the prosperous market outlook and strong confidence,
foreign banks continue to identify the regulatory environment and
staff retention as the biggest challenges. The latter issue has
increased in importance since 2005, with the three most difficult
positions to fill being senior executives, compliance officers and
wealth management officers. Salary increases for these sorts of
roles in 2008 are expected to be around 30 percent.
Mervyn Jacob, PwC financial services leader for China and Hong
Kong, said: “Over 80 percent of the respondents were confident
their market share would grow. The two most important reasons for
this given by respondents were the banks’ product offerings and
capabilities, and their global client relationships.”
