FT : UBS, UniCredit and Nomura fined €371m over European bond cartel

UBS, UniCredit and Nomura fined €371m over European bond cartel
Watchdog finds banks exchanged sensitive information before auctions between 2007 and 2011

The EU antitrust watchdog has fined UBS, UniCredit and Nomura a total of €371m for their role in a bond trading cartel that operated during the region’s sovereign debt crisis.

Regulators found that traders at a total of seven banks provided each other with updates on their bidding strategies, prices and volumes in the run-up to auctions at which countries sold euro-denominated bonds. 

The commercially sensitive information was shared in chat rooms on Bloomberg terminals between 2007 and 2011, according to the European Commission which announced the fines on Thursday.

EU competition regulators also said that NatWest, Bank of America, Natixis and Portuguese lender Portigon breached antitrust rules, but did not impose fines on the banks.

“Our decision against Bank of America, Natixis, Nomura, [NatWest], UBS, UniCredit and [Portigon] sends a clear message that the commission will not tolerate any kind of collusive behaviour,” said Margrethe Vestager, executive vice-president of the regulator. 

“It is unacceptable that, in the middle of the financial crisis, when many financial institutions had to be rescued by public funding, these investment banks colluded in this market at the expense of EU member states.”

The fines are the latest in a series of actions taken by the commission against banks for manipulating financial markets. Two years ago it fined Barclays, Citigroup, NatWest, JPMorgan and Japan’s MUFG a total of more than €1bn for rigging the multitrillion dollar foreign exchange market after the global financial crash.

It has also investigated banks over the manipulation of Libor, a key rate that underpins the price of loans around the world, as well the rigging of foreign exchange markets.

Regulators on Thursday handed UBS a €172m fine — reduced by 45 per cent due to its co-operation in the investigation — while Nomura was fined €130m and UniCredit was fined €69m.

NatWest escaped a €260m penalty as it reported the cartel to the commission, while Bank of America and Natixis were not fined because their infringements occurred outside the limitation period, which was more than five years before the commission started its investigation.

Portigon, which was formally called WestLB, did not generate any net turnover in the most recent business year, so its €4.8m fine was reduced to zero.

UniCredit said it would appeal against the decision before the European courts. “The group vigorously contests the decision and maintains that the findings do not demonstrate any wrongdoing on the part of UniCredit,” the bank said in a statement.

UBS also said it was considering appealing the fine. “This is a legacy issue dating back to 2007-11 and we have taken appropriate action years ago to mitigate and improve processes,” it said.

“Taking into account relevant provisions, this matter may have an impact of up to $100m on UBS’s second quarter 2021 results.”

Nomura said it too was considering an appeal. “Since the time of the relevant conduct, Nomura has introduced increased measures to ensure that we conduct our business with the highest levels of integrity at all times,” it added.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • KSS -8%, BEKE -7.2%, SCVL -6.7%, GDS -6.7%, WOOF -5.7%, CSCO -5.5%, BJ -3.8%, LB -1.9% (also appoints CFOs for standalone Bath & Body Works and Victoria's Secret)

Other news:

  • BDTX -25.8% (ASCO-related announcement)
  • HOOK -10.5% (ASCO-related announcement)
  • SEEL -5.2% (stock offering)
  • VYGR -3% (announces strategic shift towards its next-generation AAV capsid platform; CEO Andre Turenne to step down)
  • LAD -2.4% (prices offering of 3,105,590 shares of its Class A common stock at $322.00 per share)
  • ALPN -1.9% (ASCO-related announcement)
  • PSFE -1.3% (stock offering)
  • SNCY -1.2% (prices secondary offering of 7.25 mln shares of common stock at $34.50 per share)
  • EXAS -0.9% (ASCO-related announcement)

Analyst comments:

  • HFC -2.9% (downgraded to Sell from Neutral at Goldman)
  • LUMN -1% (downgraded to Perform from Outperform at Oppenheimer)
  • CPT -0.8% (downgraded to Neutral from Overweight at JP Morgan)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • GENI +6.5%, VLRS +4.3%, ZTO +3.5%, CPRT +3%, TGI +2.1%, SQM +1.6%, HRL +1.5%, SNPS +1.3%, NGG +0.9%

Other news:

  • SPCE +16.8% (confirmed that the next rocket-powered test flight of SpaceShipTwo Unity will be conducted on May 22, pending weather and technical checks)
  • ALLO +11.6% (CD19 Forum Highlights Positive Results from Phase 1 Studies of ALLO-501 and ALLO-501A)
  • ADAP +11.2% (ASCO-related announcement)
  • ONCT +8.6% (ASCO-related announcement)
  • IMNM +7.6% (announces additional $4.3 mln award by DOD following positive preclinical testing results on COVID-19 variants of concern)
  • MOGO +5.2% (has been granted a Visa Ready certification through its Visa Ready for Fintech Enablers program)
  • SNSE +4.8% (announces new Phase 1/2 data for SNS-301)
  • GTH +4.6% (announced a strategic partnership with JD Health, a subsidiary of JD.com (JD))
  • IOVA +3.5% (ASCO-related announcement)
  • DTIL +3.5% (ASCO-related announcement)
  • ONCY +3.5% (announces data demonstrating clinical proof-of-concept for pelareorep-checkpoint inhibitor combination therapy in pancreatic cancer)
  • CSII +3.4% (reports results from coherence tomography imaging study of coronary OAS patients)
  • AVEO +2.9% (ASCO-related announcement)
  • AFG +2.5% (to declare special dividend of $12-14/sh)
  • CLVS +2.3% (ASCO-related announcement)
  • ADCT +2.2% (ASCO-related announcement)
  • MEIP +2.2% (ASCO-related announcement)
  • RCUS +2.1% (ASCO-related announcement)
  • F +1.7% (to launch battery JV with SK Innovation to support EV rollout, according to Reuters)
  • BGNE +1.6% (ASCO-related announcement)
  • SNY +1.5% (ASCO-related announcement)

Analyst comments:

  • HIMS +4.9% (upgraded to Outperform from Neutral at Credit Suisse)
  • SHLS +4.2% (upgraded to Buy from Neutral at Goldman)
  • CMG +2.8% (upgraded to Buy from Neutral at UBS)
  • VIAC +2.8% (upgraded to Buy from Neutral at BofA Securities)
  • SEDG +2.4% (upgraded to Buy from Neutral at Goldman)
  • DAO +1.7% (upgraded to Overweight from Equal-Weight at Morgan Stanley)
  • IR +1.2% (upgraded to Buy from Hold at Deutsche Bank)
  • ADI +0.9% (upgraded to Outperform from Mkt Perform at Bernstein)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • ONCT +9.9%, ADAP +8.6%, ALLO +8.3%, AFG +7.7%, DTIL +4.6%, SNSE +3.8%, ZTO +3.5%, CSII +3.4%, SRNE +3.2%, GTH +2.9%, CPRT +2.9%, YMAB +2.8%, ADCT +2.2%, MEIP +2.2%, RCUS +2.1%, IOVA +2%, SNPS +2%, BGNE +1.9%, NVVE +1.5%, SQM +1.3%, SNY +1.1%, NXTC +1.1%, AZN +0.8%, NGG +0.8%, TAK +0.7%, CGEM +0.6%, CLVS +0.6%, AMGN +0.6%
  • Gapping down:
    • BDTX -16.7%, GDS -9.1%, BEKE -8.1%, SCVL -7.1%, CSCO -5.9%, SEEL -5.8%, VYGR -3%, IMGN -3%, CSIQ -2.6%, ALPN -1.9%, KEYS -1.6%, APO -1.2%, SNCY -1.1%, EXAS -0.9%, LLY -0.8%, PXD -0.8%, BPMC -0.7%, ASXC -0.5%, BMY -0.5%, LAD -0.5%

FT : Where is all the US bank M&A?

Where is all the US bank M&A?
Activity has increased slightly but it still remains easier to talk than to deal

US banks announced 19 merger or acquisition deals last month, compared with just nine in the whole second quarter of last year.

The conditions are ripe. With US interest rates near zero and weak demand for loans, acquisitions are currently one of the few viable paths to growth for many smaller banks. Many of these regionals are emerging from the pandemic with massive cash reserves and estimated bank valuations are at shocking highs, making their shares an attractive currency for dealmaking.

At the same time, the abrupt transition of most activities from branches to mobile phones has highlighted deficiencies in many banks’ digital customer experience, pushing executives to look to mergers and acquisitions to bring in modern technology.

Little wonder investment bankers report that interest in acquisitions from regional banks has surged over the past few months. The question is whether this really will translate to a step-change in M&A activity in America’s fragmented and often antiquated banking sector.

“Banks are turning to mergers as an effective way to navigate the headwinds they are facing as an industry,” said Anu Aiyengar, co-head of global M&A at JPMorgan, who has advised on six US bank deals over the past six months.

But the inflation in share prices that has emboldened wannabe buyers has, of course, made acquisition targets more expensive, too. The KBW Regional Banking index has climbed 37 per cent year-to-date compared with a 13 per cent increase on the S&P 500, after trailing the broader market for the previous two years.


Price-to-earnings ratios for banks have already zoomed above pre-pandemic levels and Wall Street analysts say they would be higher still if earnings were not currently inflated by the release of loan loss reserves.

“Bank valuations are kind of in ‘oh my God’ territory right now,” said David Wagner, portfolio manager at Aptus Capital Advisors. 

Home Bancshares chief executive Johnny Allison recently told analysts that the Arkansas-based bank was engaging in talks to buy smaller banks, but some negotiations fell apart early. 

“We’ve taken a couple off the table because they weren’t realistic and the bankers were really — I don’t know if they bumped their head or what they did,” he said. “They were somewhat unrealistic.”


The difficulties are even more acute when it comes to newer, digital banks and financial technology groups for which many bank executives have a particular ardour.

The pandemic helped to “speed up this whole analysis of where to go with this from a digitalisation standpoint”, said Stephen Valentino, global co-head of the financial institutions group at Deutsche Bank. Improving customer satisfaction was key to stealing market share, he said.

When Wendy Cai-Lee launched her digital commercial lender Piermont Bank, she expected it would take years to get scale and the attention of potential buyers.

Her company, based in New York City, has assets of just $254m, but it aims to modernise many of the still manual aspects of business banking with “legacy-free technology” and a subscription model that would allow many clients to reduce their fees.

After just 18 months in business, Cai-Lee has already turned down several offers from traditional bricks-and-mortar rivals. “I did not expect phone calls like that until at least a few more years until I get the bank to a certain asset size,” she said.

A few years ago, more of these neobanks would probably have been receptive to the deals. Affiliations with banks could give them cheap funding and direct access to their acquirer’s big and loyal customer bases. 

“If you could put two plus two together, you’d basically fill in all the corners of the value-added chain, and two plus two could equal five,” said Nigel Morris, founder of the fintech venture capital group QED Investors, who has been pitching fintechs to banks for years. 

But he concedes: “There may only be a small window between when [banks] want to do the deal, and when they can do the deal.”

The power dynamics at those negotiating tables have changed, according to regional banking, fintech and investment banking sources.

Investors typically value banks on multiples of tangible book value, whereas fintechs are valued at lofty growth multiples — and those have soared during the pandemic along with other high-tech and growth companies. Many fintechs are now larger than banks.

Additionally, many fintechs feel they can grow faster independently than by becoming part of an established bank.

Last month Plaid, whose technology is used by financial companies such as the brokerage Robinhood and the payments app Venmo to link to customer bank accounts, almost tripled its valuation to $13.4bn in a private fundraising, just months after its agreed $4.9bn sale to Visa fell apart.

There is little precedent for deals between regional banks and consumer-facing fintech companies. The few that have been done are often used as cautionary tales. Earlier this month the Spanish lender BBVA shut down operations for Simple, a digital US consumer bank that combined budgeting tools with traditional banking it acquired in 2014.

“Fintechs don’t want to get bought by banks, because that is death,” said Brian Hamilton, chief executive of One Financial, a digital bank he founded after being a seed investor in Simple. “It is death to your innovation. It is death to your growth.”

In lieu of all-out acquisitions, regional banks are increasingly picking up small equity stakes in fintechs, typically 5 per cent or less, said Greg Lyons co-chair of the financial institutions group at the law firm Debevoise & Plimpton. Most of the partnerships are with business-to-business fintechs rather than consumer-facing ones and have service contracts built in so that banks can plug the new technology into their existing systems.

“What the bank wants is the access to the service, as much as the investment return,” Lyons said.

Some are still optimistic that the two sectors will be able to strike merger agreements that combine the best of both worlds, but others have resigned to sticking with the business they know best.

“I’ll never be Google or others in terms of the financial capacity to invest in technology,” said Phil Green, chief executive of Frost Bank. He is letting his excess cash sit idle for now and focusing on organic growth rather than hunting for fintechs or trying to buy smaller banks. “You will never win that arms race.”

FT : German MPs take battle with EY over classified Wirecard documents to court

German MPs take battle with EY over classified Wirecard documents to court
Parliamentary committee and Big Four firm clash over release of full report

Germany’s highest court will be asked to decide whether a cache of classified EY documents linked to Wirecard can be published, after MPs investigating the scandal and the Big Four audit firm clashed over their release.

The parliamentary committee examining the collapse of the payments firm has agreed to turn to the Federal High Court of Justice, according to people familiar with the matter, to resolve an escalating battle with Wirecard’s former auditor.

The dispute centres on more than 150 internal EY audit documents cited in a report the committee commissioned into the firm’s work for Wirecard, which received a decade of unqualified audits until it collapsed last June in one of Europe’s largest frauds.

The committee wants to publish the documents alongside the full report, which was written by Martin Wambach, a partner at accounting firm Rödl & Partner. EY says that the release of the documents and the full report, which are both currently deemed classified under German law, would jeopardise its business secrets as well as infringe the rights of its employees.

“We all agree that there aren’t any business secrets in those documents,” Kay Gottschalk, an MP for the far-right Alternative for Germany party and the chair of the committee, told the Financial Times. “The Wirecard victims are entitled to know why EY failed to spot the fraud earlier.”

A preliminary version of the report, which was submitted to the committee last month, found a series of serious shortcomings in EY’s work. The firm failed to spot fraud risk indicators, did not fully implement professional guidelines and, on key questions, relied on verbal assurances from executives, the report found.

In a statement, EY said that it had “no objection to the publication of the key findings of the special investigators’ report”, but added that it needed to be done “in a manner that respects EY Germany’s business secrets and the personal rights of its employees.”

The firm said it had suggested how this could be done, but “in spite of constructive discussions, the [parliamentary committee] unfortunately did not agree to this solution.” It now “welcomes the intended clarification by the highest court.”

The decision to resort to Germany’s top court followed weeks of protracted discussions with EY over how to release documents. The committee initially agreed to disclose a much smaller slice of the documents before abandoning the plan, according to a person familiar with the matter.

An option to create second version of the report that would not directly cite the classified EY documents was dismissed by Wambach, according to people familiar with the matter. Wambach declined to comment.

The committee is expected on Thursday to formally ratify the decision to send the dispute to Germany’s highest court. Last year the court in Karlsruhe adjudicated on a clash over EY’s confidentiality obligations in a ruling that opened the door to the firm’s partners testifying before the committee.

“The Wirecard case cannot be understood without the [unqualified] audits by EY,” said Florian Toncar, an MP for the pro-business Free Democrats, arguing the documents and the report should be published in full. “Anything else would equal a partial ban of the committee’s work.”

EY has repeatedly said it was deceived by the fraud and that “the EY Germany auditors performed their audit procedures at Wirecard professionally, to the best of their knowledge and in good faith.”

>>> Stoxx 600 Pre-Market Indications

  • Nordic Semiconductor (N0S TH) +11%
    • STMicroelectronics May Be Interested in Nordic Semiconductor: MF
  • Vodafone (VODI TH) +2.5%
  • Unilever (UNVB TH) +2.5%
  • Rio Tinto (RIO1 TH) +2.3%
    • Watch European Mining Stocks as Iron Ore Falls, Copper Rebounds
  • Siemens Gamesa (GTQ1 TH) +2%
  • EQT (6EQ TH) +1.9%
  • Anglo American (NGLB TH) +1.8%
  • Nel (D7G TH) +1.8%
  • ASML (ASME TH) +1.4%
  • Ericsson (ERCB TH) -0.5%
    • Watch Nokia, Ericsson After Cisco Forecast Hurt by Chip Costs
  • Voestalpine (VAS TH) -0.5%
  • Shop Apotheke (SAE TH) -0.8%
  • Nokia (NOA3 TH) -0.9%
  • Signify (G14 TH) -1.9%
  • Argenx (1AE TH) -2.4%

>>> TradeGate Pre-Market Indications

DAX:
  • Infineon (IFX TH) +1.4%
  • Deutsche Telekom (DTE TH) +1.2%
    • Deutsche Telekom to Boost Profits in Three-Year Growth Plan
  • Siemens (SIE TH) +1%
  • Bayer (BAYN TH) -0.1%
    • Bayer-Roundup Judge Questions Future Claims Settlement Plan (2)
MDAX:
  • Nordex (NDX1 TH) +2.1%
  • Freenet (FNTN TH) +1.6%
  • Porsche SE (PAH3 TH) +1.4%
  • Fraport (FRA TH) +1.4%
    • Fraport Completes Facelift for Greek Airports as Tourists Return
  • Telefonica Deutschland (O2D TH) +1.1%
  • Evonik (EVK TH) +0.7%
SDAX:
  • Leoni (LEO TH) +2.7%
  • Instone Real Estate (INS TH) +1.6%
    • Instone Real Estate 1Q Adjusted Ebit EU26.7M Vs. EU18M Y/y
  • LPKF (LPK TH) +1%
  • Schaeffler (SHA TH) +1%
  • Hensoldt AG (HAG TH) +0.9%
  • Borussia Dortmund (BVB TH) -0.9%
  • Global Fashion Group (GFG TH) -1.2%

>>> What to look at today - 20th of May 2021

Asian stocks were steady Thursday and Treasury yields held an advance as traders weighed Federal Reserve minutes that flagged the possibility of a debate on scaling back asset purchases. Commodities remained under pressure.
Equities edge up in Japan, posted losses in Hong Kong and China, and outperformed in Australia. U.S. futures fluctuated after the S&P 500 pulled back for a third day. The Nasdaq 100 notched a small advance, boosted by late-day gains in tech stocks including Facebook Inc. European contracts were in the green.
The minutes indicated some Fed officials may be open “at some point” to discussing adjustments to the pace of massive bond purchases if the U.S. economy keeps progressing rapidly. The benchmark 10-year Treasury yield was steady after climbing to 1.67%. A dollar gauge trimmed a rally.
Commodities have slid amid concern about inflation, potential curbs on monetary stimulus and China’s efforts to rein in raw material prices. Volatility swept over cryptocurrencies, with Bitcoin posting a same-day plunge and rally of about 30% Wednesday. The sector was more stable Thursday.

US After Hours CSCO -5.4% falls on earnings; lots of ASCO-related announcements after the close

Nikkei +0.08% Hang Seng -0.74% CSI +0.04% Shanghai -0.29% Shenzen +0.04%

Eur$ 1.2182 CNH 6.4382 CNY 6.4385 JPY 109.15 GBP 1.4112 CHF 0.9036 RUB 73.7303 TRY 8.4145 WTI$63.53 +0.25% Gold 1,875.32 +0.31% BTC 39,250 -490 ETH 2520 -340

S&P -0.05% Nasdaq -0.08% EuroStoxx +0.53% FTSE +0.86% Dax +0.57% SMI +0.58%

Macro :
- Goldman Sachs Is Said to Invest in Josh Kushner’s Thrive Capital
- *FED MINUTES: ECONOMY REMAINS FAR FROM COMMITTEE'S GOALS
- Bonds Have Never Been So Useless as a Hedge to Stocks Since 1999
- Swiss Trader Accused of Laundering Mafia Money With Diamonds
- Hedge Fund Picks at Sohn 2020 Show Perils of Pandemic Investing

Spacs :
- Accor to Raise About EU300M to Sponsor Corporate SPAC in Paris
- Flying-Taxi SPAC Faces U.S. Probe Over Trade Secrets, Rival Says
- Mobile-Game Maker Jam City Is Said to Go Public Via SPAC Merger

Keep an eye on :
- AC FP : Accor to Raise About EU300M to Sponsor Corporate SPAC in Paris
- ACK BB : Ackermans 1Q Net Cash EU73.5M Vs. Cash EU68.0M Q/q
- AIR FP : Boeing Resumes 737 Max Deliveries After Fixing Electrical Glitch
- ALTR PL : Altri Says Greenvolt Unit Made Binding Proposal to Buy Tilbury
- AMGO LN : Amigo Holdings Ordinary Shares to Remain Temporarily Suspended
- APAX LN :
- AUSS NO : Austevoll Seafood 1Q Ebit Beats Estimates
- B2H NO : B2Holding 1Q Net Income Beats Estimates
- BA/ LN : BAE Systems Starts Search for Next Chairman: Sky News
- BDT GY : Bertrandt 1H Ebit EU11.1M Vs. EU21.2M Y/y
- EN FP : Bouygues 1Q Current Operating Loss EU77M, Est. Loss EU145.0M
- CCL LN : Seabourn to Sail Alaska, Pacific/East Coast, Canada in 2023
- CFEB BB : CFE 1Q Revenue EU742.1M Vs. EU760.9M Y/y
- EVO FP : CTS Eventim 1Q Revenue EU19.6M Vs. EU184.6M Y/y
- CVAL IM : Credit Agricole: Has Crossed 95% Threshold of Creval Shares
- DAI GY : Daimler Showcases the Truckmaking Behemoth It Will Soon Spin Off
- DUFN SW : Dufry 1Q Organic Revenue -66.7%
- RF FP : Eurazeo SE 1Q Net Asset Value Per Share EU85.50
- FRA GY : Fraport Completes Facelift for Greek Airports as Tourists Return
- GIMB BB : Gimv FY Net Income EU205.7M
- INS GY : Instone Real Estate 1Q Adjusted Ebit EU26.7M Vs. EU18M Y/y
- LSGNO : Leroy 1Q Adjusted Ebit Misses Estimates
- LHA GY : Lufthansa to Suspend Coupon Payments on 2015 Hybrid Bond
- DRLCO DC : Maersk Drilling 1Q Revenue Beats Estimates
- MOBA SS : Moba Network Offers SEK110 m Shares via ABG Sundal Collier
- NENTB SS : Nent to Launch Viaplay Streaming Service in Netherlands in 1Q22
- MT IM : NextChem, Mytilineos in Green Hydrogen Plant Feasibility Study
- SANN SW :
- SOLON NO ; SBB to Become Largest Shareholder in Solon with 15% Stake
- TIT IM : Telecom Italia’s Premium Push Helps to Stabilize Fixed-Line Unit
- YNGN LN : Young’s Confirms Talks on Possible Sale of Tenanted Estate