STRATEGY
 UK Post Office targets mortgage market

In an attempt to become one of the
country’s top 10 lenders, the UK Post Office has launched a range
of mortgage products as part of its joint venture with Bank of
Ireland (BoI).

Following a successful trial which kicked off
two years ago in which mortgages were available in a small number
of branches, mortgage information was made available at all 12,000
of its outlets from 19 October. Customers are now able to discuss
their borrowing needs with a dedicated member of the branch team in
more than 250 larger branches.

That is, however, the extent of the Post
Office in-branch service as the mortgage application has still to
be dealt with by BoI’s call centre.

But, according to UK Prime Minister Gordon
Brown, the Post Office has the potential to transform itself into a
‘People’s Bank’.

In September Brown said: “I want the Post
Office to play a much bigger role bringing banking services back to
the heart of people’s communities.” A Post Office spokeswoman told
RBI its plans to introduce a current account next year
were on track, while additional product launches in partnership
with BoI were under consideration.Meantime, the Post Office has
started an investment programme across its branch network.

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The spokeswoman added: “A programme to
refurbish the larger Post Office ‘Crown’ branches [those directly
owned and managed by the Post Office] is already underway including
the introduction of a dedicated service area, located away from the
main counter to facilitate a more private environment.”

MARKETING
Barclays spends £82m extending soccer deal

Barclays has confirmed the renewal of its
title sponsorship of English soccer’s Premier League for a further
three years in a deal to the end of the 2012-2013 season worth £82
million ($134 million), a 25 percent increase on the existing £65
million three year deal which was due to expire next summer.

Barclays’ successful conclusion of a deal with
the league – a bank spokesman told RBI in September that
talks were progressing well – is the second major English soccer
bank sponsorship deal in a month, following Standard Chartered
signing up to sponsor Liverpool football club for four years in an
£80 million deal (see RBI 619).

Barclays has been the biggest sponsor of
English soccer for the past decade having sponsored the league
since 2001; for the three years to 2004 the title sponsorship was
in the name of its Barclaycard unit.

RESULTS
BBVA, Santander post solid Q3 earnings

Spain’s second-largest bank BBVA has
posted a resilient set of results for the third quarter with net
income down less than 1 percent compared to a year ago at €1.38
billion ($2 billion); for the nine months to 30 September, net
profits also held firm at €4.2 billion compared with €4.3 billion
in the year-ago period.

In its domestic Spanish market, where BBVA has
focused on margins and credit risk rather than chasing market share
gains in the past year, retail banking profit was down only 3
percent year-on-year and represented 40 percent of group profit,
despite the deteriorating economy.

The bank’s US operations posted net earnings
of €18 million, down 58 percent year-on-year, representing 3
percent of group profit, broadly in line with analyst forecasts as
higher loan provisions offset resilient pre-provision
profitability.

Though BBVA is still digesting its August
purchase of Texas-based Guaranty, the $13 billion lender it snapped
up to augment its 2007 purchase of Compass, BBVA’s recently
appointed chief executive Angel Cano told analysts the bank
remained on the lookout for further buys in the US.

Third-quarter profits also held up at rival
Santander, at €2.22 billion compared with €2.21 billion in the
year-ago period. The bank said it remained on target to match its
2008 net earnings of €8.9 billion for the full year.

But in contrast to BBVA’s M&A ambitions,
Santander chief executive Alfredo Saenz told analysts he had no
plans to make further acquisitions in the meantime, with the bank’s
focus on organic growth and the integration of its recent
buys.

REGULATION
Good bank, bad bank split for Northern Rock

The European Commission (EC) has
agreed to a request from the UK government to split failed mortgage
lender Northern Rock into two parts, paving the way for the
government to sell the Rock’s good assets to a new entrant to the
UK retail sector in an attempt to inject more competition into the
market.

Assets remaining in the ‘bad bank’, mainly the
high loan-to-value (LTV) mortgages sold at the height of the credit
boom, such as the Rock’s now notorious Together mortgage which
offered LTVs of up to 125 percent, will remain under state
control.

The EC announcement concerning the Rock on 28
October came on the same day that retailer Tesco, considered one of
the likely bidders for the Rock’s good assets, said its recently
rebranded Tesco Bank would create 1,000 customer sales and service
jobs for its home and motor insurance customers in the northern
city of Newcastle, where the Rock is based.

DISTRIBUTION
CIMB targets 25% rise in online customers

Malaysia’s second-largest bank by
assets, CIMB Bank, has rolled out a CIMB Clicks app for the Apple
iPhone as part of an ambitious plan to grow its online customer
base of 900,000 by one-quarter in the next 12 months.

“The iPhone application enables users to check
their CIMB bank account balances in an instant without having to
log in to the bank’s internet banking portal,” said CIMB head of
retail Peter England.

He said that the service, the first to be
offered by a Malaysian bank, also enabled customers to locate bank
branches and ATMs as well as featuring a currency converter and
home loan calculator.

RESULTS
Wells Fargo Q3 beats analyst forecasts

Boosted by strong retail deposits
and lending growth, including the mortgage unit acquired last year
from Wachovia, Wells Fargo has posted third-quarter net income of
$3.2 billion, up 98 percent compared with the year ago period and
beating analyst forecasts.

For the nine months to 30 September, the bank
reported net income of $9.5 billion up 75 percent from last
year.

Third-quarter retail highlights included
average checking and savings deposits up 11 percent, while the bank
secured a record cross-sell ratio of 5.9 products per households
within its legacy Wells Fargo retail unit.

Despite the positives, credit quality
deteriorated further with credit-loss provisions of $6.1 billion,
up 144 percent from a year earlier and 20.2 percent from the prior
quarter.

By contrast with Wells, Citi’s third-quarter
results disappointed analysts, the bank reporting net income of
$101 million boosted largely by one-off accounting gains, while
credit losses totaled $8 billion for the quarter.

At Bank of America, rising retail lending
losses contributed to a quarterly loss of $1.04 billion; credit
losses more than doubled from $4.3 billion a year ago to $9.6
billion for the quarter.

REGULATION
The Netherlands’ DSB Bank consigned to bankruptcy

DSB Bank, the mid-tier Dutch retail
bank which was temporarily taken over by the Dutch central bank in
early October (see RBI 620), has been declared bankrupt
after failing to find a buyer before the 19 October deadline set by
a domestic court.

Talks with a potential buyer from the US did
not result in an acquisition, while a proposal that the government
inject €100 million ($149 million) into DSB as well as converting
an equivalent amount of customer deposits into shares proved
similarly unsuccessful.

Under the terms of the Dutch state’s customer
deposit guarantee, which ensures the return of up to €100,000 per
customer, the country’s leading banks face a guarantee of up to
€3.25 billion which is to be calculated according to proportional
market shares.

Asset disposals are likely to lower this
figure, however, potentially reducing the amount required to be
paid by the country’s market leaders Rabobank and ING.

STRATEGY
Greece’s Alpha Bank announces rights issue; rivals say ‘no plans to
follow suit’

Alpha Bank, the third-largest Greek
bank by assets, has announced a €986 million ($1.47 billion) rights
issue that it says will enable it to buy back preferred shares
currently owned by the Greek government and hence resume paying
dividends.

By contrast, rival Piraeus Bank, the country’s
fourth-largest bank and one which also sold preferred shares to the
government earlier this year, responded to the move by saying on 19
October that it had no need for a rights issue as it possessed
“sound capital adequacy”.

Similarly, EFG Eurobank, the country’s
second-largest bank, said on 21 October that it too had “no reason”
to launch a rights issue.

Alpha Bank said its rights issue would close
in December, making the bank the first Greek institution to repay
the government; its core Tier 1 ratio will rise to 9.3 percent from
a 30 June level of 9.1 percent.

DISTRIBUTION
European banks look to bancassurance strategic
partnerships

A clutch of European bancas-surance
deals that have taken place in recent weeks has indicated a renewed
interest in the insurance sector from financial institutions
looking to broaden their product bases.

In the Czech Republic, Société Générale
subsidiary Komercni Banka announced a strategic partnership with
Ceská Pojištovna on 30
September.

The deal will see Komercni and Ceská
Pojištovna distribute each other’s products through around 800
points of sale as well as through the insurance firm’s network of
several hundred insurance brokers.

The agreement will also be marked with
the launch of a new joint product aimed at providing insurance
cover for environmentally-minded consumers looking to install solar
panels on their properties.

In Greece, meanwhile, a similar
agreement has seen the country’s fourth-largest bank, Piraeus, sign
a ten-year bancassurance deal with Munich Re subsidiary Victoria
General Insurance that will result in Piraeus distributing Victoria
General insurance products through its branch network until 2019 on
an exclusive basis.

French mutual Crédit Mutuel is also in
the process of finalising a bancassurance agreement with Italy’s
Banca Popolare di Milano.

The alliance is
expected to be formalised in November, adding to the list of
European bancassurance agreements in 2009, which also includes
Barclays signing a 25-year deal in September with
France-headquartered CNP Assurance to market and distribute life
insurance and pension products in Spain, Portugal and Italy
(see RBI 619).

REGULATION
Banamex divestment fears resurface for troubled Citi

Troubled US institution Citigroup
may be forced to sell its successful Mexican banking subsidiary
Banamex after outcry from a group of opposition politicians in
Mexico prompted the country’s supreme court to consider the legal
position of the bank.

National regulations in Mexico prevent foreign
governments from holding stakes in the country’s banks, a
requirement which came into focus earlier this year following the
US government taking a 34 percent stake in Citi.

The court has the power to overrule a
statement from the Mexican finance industry in March that absolved
Citi of the need to sell Banamex, which currently accounts for
around 15 percent of its parent group’s net profit, due to the
temporary nature of the US government’s stake.

DISTRIBUTION
Bank of the Philippine Islands cleared for m-banking microfinance
project

Bank of the Philippine Islands (BPI)
and Filipino telecoms firm Globe Telecom have received regulatory
approval to transform BPI subsidiary Pilipinas Savings Bank (PSBI)
into a business dedicated to microfinance.

PSBI will focus on using mobile technology to
distribute loans to microfinance institutions across the
Philippines, under a deal which will see BPI transfer 40 percent of
PSBI’s shares to Globe and a separate 20 percent to Ayala
Corporation, the parent company of both Globe and BPI.

Further regulatory approval is still required
to change PSBI’s name and to secure an electronic banking licence
for the bank, which will have an initial capital base of $10.8
million.

Globe already provides microfinance services
via its mobile G-Cash initiative, which enables users to pay and
collect loans as well as transferring money.

REGULATION
BBVA Compass trials text overdraft alerts as political pressure
mounts

BBVA Compass, the US wholly-owned
subsidiary of Spain’s BBVA, has launched a pilot programme in four
test markets which will provide customers with text message alerts
when their account becomes overdrawn.

The bank, which expects to extend the
programme to its remaining markets by the end of the first quarter
of 2010, added that it was changing its wider overdraft policy
structure to align itself with “evolving customer preferences”.

In doing so, it will remove overdraft fees for
accounts overdrawn by $5 or less, provide new customers with the
choice to opt-in to overdraft schemes and do more to promote its
Savings Overdraft Protection service.

The changes follow similar moves from major US
banks including Bank of America, JPMorgan Chase and Wells Fargo
(see RBI 619).

Draft legislation on overdrafts published by
the US senate banking committee on 19 October has proposed that
fees should be “proportional” to processing costs and should total
no more than one a month or six a year.

Text, email or postal messaging in the event
of an overdrawn account was another requirement outlined by the
committee’s plan.

RESULTS
VTB posts interim loss as NPLs rise sharply

VTB, the second-largest bank in Russia,
has reported a loss of RUB31.5 billion ($1.08 billion) for the
first half of 2009, with the second quarter seeing a loss of RUB11
billion and bringing with it a sharp spike in non-performing loans
(NPLs).

NPLs rose from 4.3 percent at the end
of the first quarter to 9.1 percent at the end of the second, but
VTB chairman Andrei Kostin nonetheless affirmed that the bank
believed it had “now passed the lowest point of the economic
cycle”.

Retail deposits rose by 24.9 percent
over the first six months of the year, while retail loans rose by
6.7 percent to RUB413.2 billion over the same period.

Meanwhile, Sberbank, Russia’s largest
bank, posted net profit of RUB9.1 billion for the first nine months
of 2009 versus a RUB102.9 billion profit for the comparable period
in 2008.

The bank reported a seven-fold increase
in provisions year on year but said that outflows in corporate
deposits had been offset by continued retail deposit inflows.

PRODUCTS
Wells Fargo unveils new
version of Way2Save

Wells Fargo, the second-largest US bank
by deposits, has announced changes to Wachovia’s popular Way2Save
loyalty programme following its acquisition of the customer service
champion in October 2008.

Announcing the changes on its blog,
Wells Fargo said that the Wachovia programme, which gave customers
5 percent interest on their savings during the first year, falling
to 2 percent in the second and third years, would change to 3
percent during the first 13 months on balances up to $500 before
falling to 0.06 percent in years two and three.

First-year bonuses will also fall from
5 percent to 3 percent.

The programme, currently only available
in the states of Washington and Minnesota, will allow customers to
make deposits into their accounts in stores, at ATMs or online, and
will no longer limit the number of monthly transfers that are able
to be made.

The bank added that no changes will be
made to existing accounts until Wachovia branches in the relevant
state convert to the Wells Fargo brand.

MERGERS AND
ACQUISITIONS
Malaysia’s RHB becomes latest
Indonesian bank purchaser

Malaysia’s RHB Bank has agreed to
purchase Indonesia’s PT Bank Mestika in a RM1.16 billion ($340
million) deal, a further indication of how the world’s fourth most
populous country is becoming increasingly attractive to overseas
financial institutions.

The deal, which RHB said would help it
achieve its goal of becoming one of the leading financial services
providers in the Association of South East Asian Nations by 2020,
follows on from recent acquisitions in the country by the UK’s
Barclays and HSBC as well as Australia’s ANZ.

The agreement will see RHB take an 80
percent stake in Bank Mestika, which had assets of IDR1.1 trillion
($122 million) as of 31 December 2008.

MERGERS AND
ACQUISITIONS
Barclays acquires Standard Life
Bank

The UK’s Barclays has strengthened its
position in its domestic retail banking market by agreeing to
purchase Standard Life Bank from insurer Standard Life for £226
million ($370 million).

The purchase will see Barclays add
287,000 UK savings accounts with a total balance of £5.5 billion to
its existing book of 13 million savings accounts and £88.5 billion
in deposits. It will also add 78,000 Standard Life mortgage
accounts to its existing total of 824,000.

Barclays said the Standard Life
mortgages have an average indexed loan-to-value (LTV) of 48
percent, roughly comparable to its own book average LTV of 44
percent.

Barclays added
that the terms of the agreement would also see it enter into a
strategic partnership with Standard Life to explore opportunities
in the UK retail long-term savings and investments sector, with the
initial focus to be on the development of a “multi-channel,
simplified pension product”.

RESULTS
India’s HDFC reports strong interim results

India’s HDFC Bank has an-nounced an
interim net profit of INR12.9 billion ($274 million) for the six
months to 30 September 2009, an increase of 30.4 percent on the
corresponding figure for the six months to 30 September 2008.

The bank said total current and savings
accounts deposits rose by 28 percent year-on-year, with current
account deposits standing at INR32.2 billion and savings account
deposits at INR43.3 billion. The figures also represented a 15
percent increase on 30 June 2009 totals.

Gross advances rose by 14.8 percent in the
first half of the year, with retail loans standing at INR62.7
billion and constituting 54.4 percent of the total. The bank’s
branch network rose to 1,506 versus 1,412 a year previous. In
September HDFC managing director Aditya Puri told RBI the
bank would have 1,700 branches by March 2010.

REGULATION
New credit card clampdowns outlined in UK, Canada

New credit card proposals are being
readied in the UK and Canada which could usher in a crackdown on
lending in much the same way as the US Credit Card Accountability,
Responsibility and Disclosure (CARD) Act has done in the US.

The new UK measures, in consultation until 19
January 2010 following an initial announcement on 27 October,
examine raising the minimum monthly repayment levels in order to
encourage consumers to pay off their debt more quickly, banning the
practice of increasing credit limits without prior consent, placing
restrictions on increasing interest rates on existing debt and
changing the order of payments so that the most expensive debts are
paid off first.

In Canada, meanwhile, finance minister
Jim Flaherty said on 26 October that the government was in the
process of finalising a “voluntary code of conduct” ahead of Visa
and MasterCard’s imminent expansion within the country’s payments
market.

Flaherty caused
controversy earlier in the month by announcing that he intended to
prevent banks from marketing insurance products over the
internet.

STRATEGY
Virgin Money applies for banking licence

Virgin Money UK, part of the
financial services arm of Richard Branson’s Virgin Group, has
applied for a banking licence with the UK regulator the Financial
Services Authority as it seeks to carve a niche for itself within
the troubled sector.

The business said it had applied for the
licence in early October, but FSA approval may nonetheless take
several months to be granted. Virgin added it was looking to offer
customers current accounts and mortgages once the process was
complete.

Virgin Money was the preferred bidder for the
collapsed Northern Rock in late 2007, but the UK government ruled
that the takeover bid did not provide adequate guarantees to the
taxpayer and subsequently nationalised the failed lender.

Virgin had previously sold mortgage business
Virgin One to Royal Bank of Scotland in 2003.