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Macro :

- IFO Sees Brexit Net Trade Costs at EU16B for U.K., EU44B for EU

- Merkel Seeks to Expedite Infrastructure Projects in Germany

- Spain to Start 5G Network Frequency Auctions, Expansion Reports

- Europe Chemicals Seen as ‘Super’ Sector at Deutsche Bank

- Intesa CEO Says Bitcoin Is ’Speculative Bubble’: TG5

- U.K.’s Clark Expects Agreement on Brexit Issues: Handelsblatt

Keep an eye on :

- ADS GY : Adidas CEO Wants Spending Caps for Soccer Clubs: Rheinische

- AET US : Aetna’s Board Is Said Set to Approve $68B Sale to CVS: Reuters

- CRG IM : Intesa, Unipol, Generali to Take Part in Carige Cap Hike: Ansa

- DIS US : Disney Is Said to Have Re-Engaged in Talks for Fox Assets: WSJ

- EOAN GY : Germany Should Make CO2 Polluters Pay More: EON CEO to Spiegel

- FCA IM : Fiat in Talks With U.S. to Settle Diesel Case, Marchionne Says

- FCA IM : Marchionne in Talks With Hyundai on Partnership, Not Merger, Fiat To Push Ahead With Marelli, Comau Spinoffs: Marchionne, Alfa Romeo-Maserati Spinoff Not For Many Years: Marchionne

- GSK LN : GSK Is Said to Invest in U.K. Research Ahead of Brexit: FT

- ISAT LN : potential target for Echostar & Dish - FT

- LHA GY : Lufthansa Plans Extra Charge for Business-Seat Selection: WiWo

- LHN SW : Three Men Charged as Part of French Lafarge Syria Probe

- MRK GY : Nestle, Stada Are Said to Prepare Rival Bids for Merck Unit:Rtrs

- MUV2 GY : Munich Re to Increase Investment in Equities: Boersen-Zeitung

- NESN VX : Nestle, Stada Are Said to Prepare Rival Bids for Merck Unit:Rtrs

- NOKIA FH : Nokia Is Said to Stop Pursuing Juniper After Reports: CNBC

- PRY IM : Prysmian readying all-cash bid for General Cable; could also seek to buy Nokia's Alcatel Submarine Network

- ROG VX : Roche Granted FDA Orphan Drug Status for Idasanutlin, Takeda Pharma Treatment Granted Orphan Drug Status by FDA

- RYA LN : Ryanair Bids for Landing Rights at Berlin Tegel Airport

- SAN FP : Sanofi Ends Development of Clostridium Difficile Vaccine

- TIT IM : Telecom Italia Board Is Said to Discuss Network Options: Reuters

- TEVA IT : Teva Rises With Mylan on Prospects For Own Herceptin Biosimilar

- TMG NA : De Mol Sells Entire TMG Stake To Largest Shareholder Mediahuis

- TRYG DC : Tryg Says It’s in Talks on a Potential Acquisition of Alka

- VOD LN : Vodafone May Seek New Audit Firm to Replace PwC: Sky

- VOW3 GY : Detained VW Manager Says Company Told Him to Lie, Bild Reports

- VOW3 GY : VW Is Said in Talks to Buy Stake in Russia’s GAZ: Reuters

Move comes ahead of regulatory review expected to hit sector profits

Investors in Yorkshire Water are rushing to sell their stakes for an estimated £4bn ahead of a tough regulatory review this month that is expected to hit profits across the industry.

Yorkshire Water, which supplies water and sewage services to around 5m people and 130,000 businesses, is owned by parent company Kelda Group, which is registered in Jersey. Two of its investors — Deutsche Asset Management and the private equity fund Corsair Capital — are selling their stakes, which together amount to a majority of 55 per cent, according to people briefed on their plans.

The attempt is one of several potential stake sales in the market, as privatised water companies come under increasing pressure from regulators and politicians. The opposition Labour party has threatened to renationalise the sector, accusing private owners of water companies of profiteering and failing to invest.

Water regulator Ofwat has warned of a “tough new regime” that will reduce the prices water companies can charge customers. It is due to confirm its plans on December 13 for the next five-year regulatory period, which starts in 2019.

One water company investor said Ofwat’s review was likely to be priced into the stake sales. “The vendors will be thinking this is not the risk/return they want. It’s all got a little too heated,” he said.

He added that there was “a lot of hostility between water companies and the regulator”.

“Nobody minds tough regulation but they do mind when it’s unpredictable and hostile. It’s an angry dog barking to keep the burglars away when actually what you want is a proper security system.”

Last week Ofwat criticised, Thames Water, Bristol Water, Dee Valley Water and Southern Water for “basic data errors” on issues ranging from customer bills to the number of leaks they suffer. It put them in its lowest category and said they would have to publish plans on how they will improve their data presentation before they publish their annual reports.

This year the Australian infrastructure bank Macquarie sold off its final stake in Thames Water. The infrastructure fund 3i is understood to be selling its 15 per cent stake in Anglian Water to a consortium of pension funds. South Staffordshire Water is also rumoured to be up for sale.

International pension and sovereign wealth funds are the most likely buyers for Yorkshire Water. “It’s partly debt and part equity but it’s still a big cheque; it’s hard to find investors with that kind of capital in the UK,” said one investor in the water industry.

Yorkshire Water was the first water company to publicly pledge to clean up its act. In October it told a conference held by rating agency Moody’s on the potential renationalisation of the industry that it would review the Jersey registration of its holding company and would close three subsidiary companies in the Cayman Islands. “There is a real challenge to the water industry’s legitimacy at the moment,” said Liz Barber, Yorkshire Water’s group director of finance, regulation and markets.

Other companies have followed, with Thames Water, Britain’s biggest water company, pledging to close its subsidiaries in the Cayman Islands and halting dividends to shareholders for the next year.

Splitting the top job can work, but only with two self-effacing bosses

\The ego of the typical investment banker, cynics say, is a paradox like the universe: infinite yet constantly expanding. That makes it hard to imagine co-chief executives running Goldman Sachs, a possibility sole CEO Lloyd Blankfein countenanced this week. Splitting the top job can work, but only with two self-effacing bosses.

Collegiality is more remunerative at a partnership, whose members split profits, than a quoted group, where shareholders want a slice. Goldmans was run successfully by duos until it shed its partnership status in 1999.

Co-chief executives can do a good job at listed groups too, on the rare occasions when they occur. A 2012 US study suggested co-CEOs generated extra risk-adjusted returns of 2.6 per cent a year. That should please investors at Standard Life Aberdeen, a UK savings group run by the pairing of Keith Skeoch and Martin Gilbert.

The division of labour follows a merger, a common cause. Usually, one co-CEO steps down in time. There are only two businesses in the S&P 500 with co-chief executives, according to S&P Global — Texan insurer Torchmark and Californian tech group Synopsys.

Goldman is unlikely to join their tiny club. The bank needs firm leadership. The shares have lagged behind the S&P 500 this year. One woe is industry-wide: increased capital requirements that have shrunk returns on securities trading. Another is specific within the top tier of US banks: the lack of a big retail business to compensate for tough wholesale conditions. Goldman has failed to adapt as new technology squeezes fund management margins, adds analyst Dick Bove of Vertical.

Mr Blankfein was engaging in the mature American male practice of “joshing” (as in: “Fie, Davenport, I was merely joshing when I disparaged your ascot!”). But joshing to a purpose. Co-chief operating officers Harvey Schwartz and David Solomon are vying to succeed him. Mr Blankfein was reminding them to keep it civil, just in case they are a permanent double act.

Wall Street rebuilds operations under Trump’s lighter-touch regulatory regime

Big Wall Street banks have begun to rebuild their trading arsenals under the lighter-touch regime of Donald Trump, who has promised to rip up Obama-era rules designed to rein in risk-taking.

The likes of Goldman Sachs and Morgan Stanley spent the years since the crisis winnowing their inventories of stocks and bonds held for trading, as new constraints on capital, and new rules such as the Volcker ban on proprietary trades, bit hard.

But over the past nine months the trading arsenals of the big six banks have grown by more than $170bn, bringing the total to $1.71tn, the highest level since the end of 2012, according to an FT analysis of public filings.

Gains range from $14bn at Wells Fargo, which has the smallest trading operation of the group, to $48bn at JPMorgan Chase, which runs the world’s largest investment bank.

Analysts said the gains have several drivers — increased client activity, higher market valuations and a concerted push by a few banks, such as Bank of America, to court hedge funds through so-called “prime brokerage” businesses. But one common theme is a willingness among the banks to increase their balance sheets, suggesting they are more comfortable with the regulatory climate emerging under Mr Trump.

“Post-crisis . . . capital rules were becoming increasingly stringent with each new proposal,” said Jason Goldberg, analyst at Barclays. “Now you’re at the point where no one expects capital requirements to increase and you’re even starting to see some rollback, with the possibility of more.”

The six banks declined to comment.

Bank stocks in the US are up more than 35 per cent since last November’s election, buoyed by interest-rate increases from the Federal Reserve and the prospects of relief under a new suite of regulators. Last week Jay Powell, President Trump’s nominee to replace Janet Yellen as Fed chairman, told a Senate hearing that post-crisis reforms had solved the problem of some banks being “too big to fail”. Relaxations of rules are now in order, he said, focused on regional and community banks.

Work on reform is already under way. The Office of the Comptroller of the Currency, for example, is ploughing through 60 “substantive” letters on ways to improve the application and administration of the Volcker rule, according to a spokesperson. The rule was designed to prevent banks from holding trading inventories in excess of near-term client demand.

Meanwhile, Randy Quarles, the new lead bank supervisor at the Fed, has said he wants to “change the tenor” of supervision, suggesting that the previous administration was too abrasive towards the banks.

“There is a different mandate now,” said Tim Adams, chief executive of the Institute of International Finance. “How do you ensure the system is safe and sound and resilient, while also ensuring you have balanced growth and that financial institutions can support economic activity.”

On a call with credit analysts in late October, John Gerspach, Citigroup’s chief financial officer, said the bank was seeing “pretty broad-based growth” in debt trading, thanks largely to corporate clients. In equities, meanwhile, the bank was “able to provide more of our balance sheet” to hedge funds seeking assets and leverage.

Across Wall Street there is a mood of guarded optimism, said Mike Mayo, analyst at Wells Fargo. Revenues and profits from trading businesses are still down a lot from the pre-crisis peak, but “there is the potential . . . to get back in business ahead”. he said.

Lenders warn new proposals could force groups to exit European businesses

Large UK banks are teaming up with their Swiss and Japanese counterparts to warn that Brussels’ proposals to ringfence foreign capital could force lenders to exit their European businesses.

The salvo from what constitutes the majority of banks targeted by the proposal came in a letter to EU officials overseeing the consultation on so-called intermediate parent undertakings.

The plans would force the world’s biggest banks to have additional capital and liquidity in the EU so their subsidiaries could better withstand a crisis and be separately wound up if needed by European authorities. The rules are Brussels’ retaliation to similar measures introduced by the US in the wake of the financial crisis

“We believe there is a risk that severe direct and indirect negative consequences might ensue,” reads the letter, seen by the Financial Times. “If the EU businesses of third country groups suffer increased costs entailed by the IPU requirement, such groups may well decide to exit such businesses, reducing choice for EU consumers of financial services and reducing competition.”

The proposal, first made last November, immediately sparked controversy, with the UK pledging to fight the measure. It is shaping up to be a big fight between the UK and Brussels before Brexit. Luxembourg has also emerged as a strong opponent of the plan. Some other governments have called on Brussels to carry out an “impact assessment” of how the measure would work in practice.

If Brussels pushes ahead with IPUs, the banks want a four-year lead time, particularly because they are already having to restructure their European operations because of Brexit, the letter reads. The banks argue that the proposal runs counter to pledges made on a global level for supervisors to work more closely together when winding up big banks, and for those lenders to hold special debt that can be converted into equity.

They are also calling only for the assets of EU subsidiaries of global banks to be used in calculations for the IPU, urging officials not to impose any additional capital requirements.

The European Commission declined to comment, citing continuing discussions around the proposals.

The proposals for intermediate holding companies form part of a far broader EU banking reform proposal that is being scrutinised by governments.

Estonia, which holds the rotating presidency of the EU, had sought to broker a deal on the draft law by the end of this year but this has proved impossible because of splits between countries over parts of the proposals, which cover everything from new rules for banks trading books to requirements for them to issue loss-absorbing debt.

Prysmian [BIT:PRY], the Milan-based cable company, is readying its final all-cash bid for Kentucky-based General Cable [NYSE:BGC] in a move that could be valued at USD 1.1bn or more, according to a newswire report.

Reuters cited sources familiar with the matter in reporting today that Prysmian wants to beat rivals by submitting a binding bid and beginning exclusive discussions by the middle of this month with General Cable.

The Italian company is seen as the frontrunner in a bid, with Nexans [EPA:NEX] of France also interested, and NKT [CPH:NKT] as well as Chinese suitors also viewed as potential bidders, the article reported. Binding bids will be due in the next few days, the sources told Reuters.

A source reportedly told the newswire that Prysmian would expand its balance sheet if a deal is right, because acquisitions and mergers are viewed as critical to its own growth.

JPMorgan was hired in July by General Cable for a strategic review. The company has a USD 1.08bn market cap.

At the same time, Prysmian is working on a bid to buy Alcatel Submarine Networks from Nokia [HEL:NOKIA], sources told Reuters, which added that Nokia would not comment.

The sources indicated General Cable was a higher priority to Prysmian than is the Nokia network, the article reported.

The sources also told Reuters that Prysmian wouldn't need to raise funds to finance these acquisitions, as its revenues for 2016 were nearly EUR 7.5bn.

Link : https://uk.reuters.com/article/uk-general-cable-m-a-prysmian/italys-prysmian-lines-up-binding-bid-for-general-cable-sources-idUKKBN1DV5HW