TheChek News Flow

(GS) Frencg Banks BNP upgraded to Buy Natixis downgraded to Sell

High yields reflect regulatory headwinds; Buy optionality at BNP

Upcoming regulatory changes have scope to lower capital ratios…

The Basel committee has issued proposals on credit, market and operational

RWAs, which in our view have scope to increase RWA densities at French

banks. The aim of the reforms is to benchmark the banks’ internal calculations

against an updated, more granular standard approach to capital requirements.

While cautioning that the proposals are still to be finalized, and that the

outcome could be considerably different, we attempt to estimate their impact.

Overall, we estimate on a conservative basis a 210 bp capital impact (of which

70 bp stems from the risk of removal of the Danish compromise), leaving the

four banks we cover with an aggregate 8.6% pro-forma fully loaded CET1 as

of now. It is possible, albeit not certain, that high asset intensity businesses

such as those operated by French banks are more vulnerable to increases.

…posing a risk to dividends, depending on phasing & calibration…

Assuming our forecasts for earnings and RWA inflation are correct, we

estimate that the banks will start reaching a 10% FL CET1 ratio net of

capital impacts in 2018, before mitigation. While this seems a reasonable

phase-in period, we are wary that market pressure will push the banks to

move faster towards higher capital ratios, in which case dividends cuts

could happen, unless other strategic options are considered.

…but not evenly priced in for the banks; BNP to Buy, CNAT to Sell

The four French banks trade on I/B/E/S consensus dividend yields of 4.6%-

4.9% (2015-17), vs. the sector on 3.8%, partially pricing in these headwinds.

But this is achieved on different payout ratios and capital sensitivities vary.

On balance, we see BNP and SG as more attractively priced for the

potential regulatory changes as they have lower payout ratios, while CASA

and Natixis’ share prices seemingly fully reflect the cushion provided by the

support of their parent shareholders. We prefer BNP as: (1) its valuation

multiple is low (8.8x 2015-17E avg. P/E and 4.7% yield vs. 13x and 3.8% for

the sector); and (2) we see ample room to generate capital with limited

earnings dilution, thereby safeguarding the dividend. We upgrade the stock

to Buy from Neutral. Conversely, we see CASA (Sell) and Natixis as more

exposed to RWA inflation, while trading at higher P/Es. Although only c.40%

of its revenues comes from asset management, Natixis also trades at a

premium to asset managers and we downgrade the shares to Sell from

Neutral on valuation grounds. We adjust our estimates for the French

banks ahead of 2Q15 results, and roll forward our valuation period to 2015-

19 (from 2015-17) to capture a gradual increase in capital requirements.

Download FrenchBanks_gs_27072015.pdf

(CS) Syngenta Gearing up for Round 2

We increase our Syngenta target price to CHF450/share and retain our OUTPERFORM rating following the 1H result (average 1-2% EBITDA increases). Our increased target price is a reflection of: 1) 75% chance of a CHF480/share bid being successful; and 2) 25% chance of the bid not being successful (underlying valuation CHF362/share).

* Syngenta's 1H result (in line with consensus after accounting adjustments) provides some earnings/valuation support against the Monsanto proposal at this point in the ag cycle. Earnings quality (considering low cash flow and

adjustments) somewhat impedes the sustainability of the report. However, we believe this is sufficient for Syngenta shareholders to consider a raised bid (CS has previously suggested CHF480/share is still ~5% accretive to Monsanto) as more palatable to shareholders.

* Key Investor Concerns and Regulatory Hurdles Need to Be Addressed: In our view, one of the largest misconceptions pertaining to a MON/SYNN combination is that an "excel analysis" yielding EPS accretion is far from the complete picture and ignores key long term considerations. Based on our analysis, we believe some key regulatory, customer and cultural risks remain underappreciated. While currently the market appears to be giving the "benefit of the doubt" on the financial risk front (fair considering consolidated entity gearing <3x ND/EBITDA), we believe the aforementioned risks still need to be addressed in the intermediate/long term and are not necessarily mutually exclusive.

* Catalyst: Recommencement of discussions between Monsanto/Syngenta, potential for raised bid. Valuation: Monsanto’s current proposed bid (CHF449) implies EV/EBITDA of 14.8x (premised upon FY15F guidance). This represents a ~30% premium to two year averages. At CHF480 (bid price incorporated within our target price) we estimate an implied 15.8x EV/EBITDA.

Download Syngenta_CS_27072015.pdf

FT : Fed accidentally releases staff forecasts

Confusion surrounding an inadvertent release of staff forecasts by the Federal Reserve deepened on Friday evening after the central bank said that some of the numbers accidentally put on its website last month were wrong.

The central bank said earlier that it had accidentally released confidential staff projections that were used in the Federal Open Market Committee’s meeting on June 16-17.

The data were posted by a staffer on the website on June 29, some time after Fed chair Janet Yellen’s press conference presenting the FOMC policymakers’ own economic outlooks and rate forecasts. The error was only discovered recently.

Tonight, however, the Fed had to correct part of the forecasts that were on the site, saying only some of them were the numbers that were actually presented to the Federal Open Market Committee last month.

Several of the growth and inflation projections were inaccurate, although projections for the Fed funds rate were the actual ones presented to policymakers at the meeting, the Fed said.

The release is a serious embarrassment to the Fed, which is already facing investigations into a leak of information in 2012. Normally Fed staff forecasts are not revealed until five years after the relevant meeting.

The mishap had already left the central bank open to a fresh round of criticism from Congress, with Jeb Hensarling, the Republican chair of the House Financial Services Committee, saying earlier the “recurring leaks” from the central bank pointed to an urgent need for accountability reforms.

The staff forecasts are a critical input into the Fed’s debate over what to do with monetary policy, although they are secondary to the FOMC members’ own views. They come amid fevered speculation over when the central bank will first lift short-term interest rates, with many analysts predicting the first move will come in September.

The FOMC will meet next week, when the committee is expected to leave rates unchanged, leaving the focus on how its language describing the economy evolves from its last statement. The earliest likely date for a rise from the current near-zero levels is in September, with the median FOMC forecast signalling another move around December.

The staff projections imply relatively sluggish growth even under a shallower path of rate hikes than envisaged by the FOMC members themselves.

The staff envisage the Fed funds rate averaging 0.35 per cent in the fourth quarter this year, rising to 1.26 per cent the same time in 2016 and 2.12 per cent in 2017. That is a lower path of hikes than the median projection by the FOMC, where the rate is seen at 1.625 per cent by the end of 2016 and 2.875 per cent at the end of 2017.

Under those conditions growth would be lacklustre. The now-corrected staff figures suggested that the economy would grow just 1.6 per cent this year, before accelerating to 2.4 per cent in 2016 and 2.2 per cent in 2017, then, sinking back below 2 per cent from 2018 onwards.

Inflation remains below the Fed’s two per cent target until 2020 — although the corrected figures showed it is only a marginal miss. And despite growth running above the economy’s potential rate of around 1.7 per cent in 2016 and 2017, the unemployment rate bottoms out at around 5.2 per cent, only a little below its current 5.3 per cent rate.

That sticky unemployment rate suggests that Fed staff believe there are still a large number of workers sitting on the sidelines who could return to the jobs market and swell the labour force, raising the participation rate.

Janet Yellen, the Fed chair, told congress earlier this month that she still saw some “slack” in the labour market.

The Fed said in a statement that the release of information had been referred to the Board’s Inspector General. “The projections that were inadvertently released are staff projections that do not incorporate policymakers’ views, including their views on monetary policy,” it said.

(BFW) Altice, NextRadioTV Sign Partnership; JV to Bid for NextRadioTV

ONE 07/27 06:01 Altice SA: NextRadioTV and Altice announce a strategic partnership
BN 07/27 06:04 *ALTICE-NEXTRADIOTV JV WILL BID FOR NEXTRADIOTV AT 37EU/SHR
BN 07/27 06:03 *ALAIN WEILL TO HOLD 51% OF ALTICE-NEXTRADIOTV JV
BN 07/27 06:03 *ALTICE SA: NEXTRADIOTV, ALTICE REPORT PARTNERSHIP

Altice, NextRadioTV Sign Partnership; JV to Bid for NextRadioTV
2015-07-27 06:09:43.87 GMT

By Kasper Viita
(Bloomberg) -- Altice-NextRadioTV JV will bid for
NextRadioTV at EU37/shr, 30.5% premium to 6-mo. volume-weighted
avg.

* Alan Weill, main shareholder of NextRadioTV, will control
51% of JV; will join Altice’s executive committee
responsible for media activities
* JV dedicated to investments in media companies w/ focus on
international diversification outside of France

Link to Statement:Link
Link to Company News:{ATC NA <Equity> CN <GO>}
Link to Company News:{NXTV FP <Equity> CN <GO>}

For Related News and Information:
First Word scrolling panel: {FIRST<GO>}
First Word newswire: {NH BFW<GO>}

To contact the editor responsible for this story:
Kasper Viita at +44-203-525-9219 or
kviita1@bloomberg.net

>>> What to look at today - 27th of July 2015

China markets are leading the selloff in the Asia Pacific, tracking another down day on Wall Street on Friday. Industrial profits decline and some profit-taking going into this week's Fed meeting are also cited behind the cautious sentiment, even though commentary from local officials was optimistic. State Information Center expects foreign trade stabilizing in H2 of this year, with 4% y/y rise in exports and imports falling just over 10%. Unemployment rate is seen at just above 4%, lower than 4.5%. Former PBoC adviser Li also anticipating economic slowdown to be short-lived, with medium term growth estimated around 7%. Lastly, National Energy Administration (NEA) forecast 2015 power consumption - one of Premier Li's preferred indicators to rise 3%, down from 3.8% last year. Controversial expansion of authorization for use of Japan's defense capacity continues to bear heavy political cost for PM Abe and his cabinet. On the monetary front, BOJ Dep Gov Nakaso reiterated the central bank is prepared to adjust policy if needed based on upside and downside risks. Nakaso also pointed to lower oil prices slowing recovery in inflation, noting CPI would be 1% higher if oil price did not decline. Of note in Greece, former Fin Min Varoufakis denied speculation that he and other left-wing members of Syriza govt plotted on raiding Greek central bank reserves and hacking taxpayer accounts to pave the way for return of Drachma currency. Separately, ECB has rejected proposals by Greece to reopen financial markets on Monday and will likely set some temporary trading restrictions on funds from Greek bank accounts before stock trading can resume.

Nikkei-1.13% Hang Seng -2.62% Shanghai-2.76%

Eur$ 1.1004 JPY 123.54 GBP 1.5520 EURCHF 1.05711 RUB $58.35 WTI $47.96(-0.37%)

S&P +0.05% EuroStoxx -0.47% Dax-0.44% SMI-0.04%

Macro :

- Saudi Arabia-Led Coalition to Start Yemen Cease-fire Sunday: SPA

- Egypt in Talks to Buy 2 Corvette Warships From France: AFP

- Italy GDP Seen Rising 0.7% This Yr, ABI Banking Association Says

- Germany Will Help Fund Euro-Region Budget: Schaeuble in Spiegel

- Estonia Affirmed by Moody’s, Outlook Stable

- Greece Seeks New Loan Facility From the IMF: Finance Ministry

- Greece Said to Still Wait for ECB View on Bourse Reopening

Keep an eye on :

- ABBN VX : ABB CEO Declines to Comment on Talks With Shareholder Cevian: SZ

- AAL LN : Anglo American may sell more assets if market toughens - Reuters Link : http://bit.ly/1TZoyEc

- AGN US : Allergan Said to Be Exploring Breaking Up Into 2 Businesses

- ALU FP : Alcatel Says Nokia Deal May Close Earlier Than Planned: Re/code Link ; http://on.recode.net/1KqongS

- BARC LN : UK Banks Hold Out For Bumper Visa Price Tag - SkyNews Link : http://bit.ly/1SHFYmh

- BPTY LN : GVC Teams With Cerberus to Bid for Bwin, S. Times Reports

- CIG US : Cigna push for more Anthem equity was key in deal talks - Deal Reporter

- CNA LN : Centrica to Cut Costs as British Gas Profits ‘Soar’: Telegraph

- CSGN VX : Credit Suisse Shouldn’t Blindly Cut Inv. Bank, Herro Tells F&W

- DAI GY : Daimler Seeks to Test Self-Drive Trucks on Highway This Yr: FAS

- DB1 GY : Deutsche Boerse in Definitive Pact to Buy 360T for EU725M

- EDF FP : EDF Board Is Said to Approve Talks on Areva’s Nuclear Business

- EDF FP : French Electricity Bills Could Fall 10% After Tax Reform: JDD

- EXO IM : Exor Confirms Discussion for Possible Economist Stake Increase

- F2i (not quoted) : F2i Raises EU1.25b for Infrastructure Investment Fund: Corriere

- FB US : Facebook’s Marcus Tells Le Temps WhatsApp Will Stay Separate

- FCA IM : Fiat Chrysler to Recall 1.7 Million Trucks for Air-Bag Faults, May Face $105m NHTSA Fine for Recalls: WSJ http://on.wsj.com/1LJnqTT

- FNC IM : Finmeccanica Reverses Decision to Sell DRS Technologies Unit: FT

- GE US : GE Books $2.5 Billion African Orders From Oil to Locomotives (1)

- NOK1V FH : Baidu CEO Says ‘Still Interested’ in Nokia Mapping Unit: Re/Code Link : http://on.recode.net/1S0TXIV

- ORA FP : Orange Buys Additional 9% of Meditel, Raises Stake to 49%

- PSON LN : Pearson Confirms Talks With Economist on Sale of 50% Stake

- PSON LN : Economist Shareholders in Talks to Buy Out Pearson: FT

- UG FP : Peugeot, Santander Extend Financing Partnership to Brazil

- PHIA NA : Philips 2Q Adj. Ebita Beats Estimates

- RYA LN : Ryanair 1Q Net In Line; Sees FY Profit at Upper End of Forecast

- SAN FP : Sanofi, Regeneron Set Praluent Price at $1,120 Every 28 Days Link : http://1.usa.gov/1eoCtne

- SKY LN : Apax in Talks With Advisers on Options for Top Right Group: Sky

- TEVA IT : Teva in Talks to Buy Allergan Generics Business for $40b-$45b

- UBSN Vx : UBS to Post 2Q Profit of About CHF 1.5b, SonntagsZeitung Reports

- FR FP : Valeo 1H Net Rises 34%, Sees FY Margin Growth

- VOW3 GY : VW Considering Cutting Output at China Factories: Spiegel

Press Digest : (all in your inbox)

- FT : Greece bailout monitors question access to ministries

- FT : Oil groups have shelved $200bn in new projects as low prices bite

- FT : Finmeccanica changes tack on US sale

- Reuters : Iran launches charm offensive among wary Gulf Arabs

- FT : More than half of FTSE 350 companies have risky pensions

- FT : Worst-performing hedge funds of the year revealed

- FT : DHL braced for home turf fight with FedEx after TNT deal

- NY Post : Is Apple relying too heavily on the iPhone?

- WSJ : Teva in Advanced Talks to Buy Allergan’s Generic-Drug Unit

- (Barron's) The Slow Economic Recovery Has a Surprising Culprit

- (Recode.net) Baidu CEO: We’re Still Interested in Nokia’s Here Maps

- (Re/code.net) Alcatel-Lucent CEO Says Nokia Deal Could Close Earlier Than Planne

*GVC HOLDINGS OFFERS 122.5P/SHR FOR BWIN.PARTY IN CASH, SHARES

>>> Europe : Brokers Upgrades & Downgrades - 27th of July 2015

>>> Up

*AIR FRANCE-KLM RAISED TO BUY VS HOLD AT HSBC

*AT&S RAISED TO BUY VS HOLD AT HSBC

*AUTOGRILL SET AS A NEW LONG AT MEDIOBANCA, REPLACES RCS

*BNP PARIBAS RAISED TO BUY VS NEUTRAL AT GOLDMAN

*DRAX GROUP RAISED TO HOLD VS SELL AT SOCGEN

*FAURECIA RAISED TO BUY VS HOLD AT SOCGEN

*SAFT GROUPE RAISED TO BUY VS HOLD AT HSBC

*SOGEFI RAISED TO BUY VS HOLD AT KEPLER CHEUVREUX

*WEATHERFORD INTL RAISED TO EQUALWEIGHT AT BARCLAYS

>>> Down

*AKZO NOBEL CUT TO NEUTRAL VS BUY AT CITI

*BPOST CUT TO UNDERWEIGHT VS NEUTRAL AT JPMORGAN

*CEMENTIR SET AS A NEW SHORT AT MEDIOBANCA, REPLACES SOGEFI

*INTESA SANPAOLO CUT TO NEUTRAL VS CONVICTION BUY AT GOLDMAN

*LONMIN CUT TO HOLD VS BUY AT HSBC (EARLIER)

*MAPFRE CUT TO NEUTRAL VS OUTPERFORM AT MAINFIRST

*NATIXIS CUT TO SELL VS NEUTRAL AT GOLDMAN

*RIETER CUT TO NEUTRAL VS BUY AT UBS

*TECHNOTRANS CUT TO HOLD AT HSBC

>>> PT Change

>>> Initiation

*CENTRICA RATED NEW EQUALWEIGHT AT BARCLAYS, PT 270P

*COOR SERVICE MANAGEMENT RATED NEW BUY AT UBS, PT SEK45

*SSE RATED NEW OVERWEIGHT AT BARCLAYS, PT 1,700P

>>> Call

>>> Asian Update

Asian Mid-session Update: China markets resume decline as industrial profits contract; Japan cabinet popularity plummets further

***Economic Data***

- (CN) CHINA JUNE INDUSTRIAL PROFITS Y/Y: -0.3% V +0.6% PRIOR; YTD: -0.7% v -0.8% PRIOR

- (JP) JAPAN JUNE PPI SERVICES Y/Y: 0.4% V 0.6%E; 2-year low

***Index Snapshot (as of 03:30 GMT)***

- Nikkei225 -0.7%, S&P/ASX -0.1%, Kospi -0.5%, Shanghai Composite -1.2%, Hang Seng -2.3%, Sept S&P500 +0.1% at 2,078

***Commodities/Fixed Income***

- Aug gold +1.1% at $1,097/oz, Sept crude oil -0.2% at $48.03/brl, Sept copper -0.1% at $2.38/lb

- (KR) South Korea sells 20-yr govt bond, avg yield at 2.560%

- USD/CNY CICC: China may widen trading band to 3% from 2% within next 2 months

***Market Focal Points/FX***

- China markets are leading the selloff in the Asia Pacific, tracking another down day on Wall Street on Friday. Industrial profits decline and some profit-taking going into this week's Fed meeting are also cited behind the cautious sentiment, even though commentary from local officials was optimistic. State Information Center expects foreign trade stabilizing in H2 of this year, with 4% y/y rise in exports and imports falling just over 10%. Unemployment rate is seen at just above 4%, lower than 4.5%. Former PBoC adviser Li also anticipating economic slowdown to be short-lived, with medium term growth estimated around 7%. Lastly, National Energy Administration (NEA) forecast 2015 power consumption - one of Premier Li's preferred indicators to rise 3%, down from 3.8% last year.

- Controversial expansion of authorization for use of Japan's defense capacity continues to bear heavy political cost for PM Abe and his cabinet. Two separate press sources now see disapproval rating for Abe around 50% - his personal high - while one saw approval rating falling to a new low of 38%. That report also suggesting only 26% support the defense legislation. On the monetary front, BOJ Dep Gov Nakaso reiterated the central bank is prepared to adjust policy if needed based on upside and downside risks. Nakaso also pointed to lower oil prices slowing recovery in inflation, noting CPI would be 1% higher if oil price did not decline.

- In FX, USD majors saw modest greenback weakness across the board, tracking declines in US rates for much of last week. USD/JPY fell about 40pips below 123.50, EUR/USD was up nearly 50pips above 1.1010 at its high, and NZD/USD was up about 40pips above 0.66 at its highs. AUD/USD gains were more marginal of just over 30pips toward 0.73. Economists with Westpac said the aussie could fall below $0.70 if commodities continue to fall and Federal Reserve comes out with two 25bp hikes this year in Sept and December.

- Of note in Greece, former Fin Min Varoufakis denied speculation that he and other left-wing members of Syriza govt plotted on raiding Greek central bank reserves and hacking taxpayer accounts to pave the way for return of Drachma currency. Separately, ECB has rejected proposals by Greece to reopen financial markets on Monday and will likely set some temporary trading restrictions on funds from Greek bank accounts before stock trading can resume.

***Equities***

Notable movers by sector:

- Consumer discretionary: Shenguan Holdings Group Ltd 829.HK -5.8% (H1 guidance); Gome Electrical Appliances Holdings 493.HK -8.2% (acquisition); Navitas Ltd. NVT.AU -5.7% (FY15 result)

- Financials: DBS Group Holdings DBS.SG -1.3% (Q2 result)

- Industrials: China Railway Erju Co Ltd 600528.CN -4.2% (parent company being probed); Orient Overseas International 316.HK -2.8% (Q2 result); Sany Heavy Equipment International Holdings Co 631.HK -5.8% (H1 guidance); Yuexiu Transport Infrastructure 1052.HK -2.1% (H1 result); Doosan Infracore 042670.KR +15.6% (Q2 result); Fuji Heavy Industries Ltd 7270.JP +0.2% (Q1 result speculation); Nippon Yusen 9101.JP +2.1% (Q1 result speculation)

- Materials: Allied Cement 1312.HK -7.0% (H1 guidance); Asia Cement China Holdings Corp 743.HK -3.1% (H1 guidance); Millennium Minerals MOY.AU +12.0% (Q2 result); Nippon Steel & Sumitomo Metal Corp 5401.JP -1.3% (FY115/16 result speculation)

- Technology: Boyaa Interactive International Ltd 434.HK -12.8% (H1 guidance); Shenzhen Infogem Technologies Co 300085.CN +2.2% (draft plan for internet insurance)

- Energy: Shaanxi Coal and Chemical Industry Group Co 601225.CN -4.9% (H1 guidance); China Shenhua Energy 1088.HK -2.9% (separate listing of wind farm assets speculation)

>>> What to look at this Week End - 25th & 26th of July 2015

DowNasdaq-2.21% S&P-2.86%-2.33% Russell-3.24% Nikkei-0.27% Hang Seng-1.13% ShanghEuroStoxx+2.87% ai-1.92% FTSE-2.88%2.21 CAC-2.30% SMI1.08% MIB--1.49% Ibex-2.79% Dax-1.31%

Earnings season has not been kind to equity markets this week. The DJIA fell 2.9%, and the S&P500 and Nasdaq each declined approximately 2.2% through Friday as a broad spectrum of corporate names offered weak June quarter reports. Commodity prices saw the recent declines accelerate aided by a strengthening US dollar: WTI broke below $50 for the first time since early April, copper reached its lowest level since 2009 and gold dropped to levels last seen in 2010, with both metals down more than 3% on the week. Chinese stocks were less volatile in the wake of the massive stabilization effort mounted by the government in recent weeks, but saw more disappointing China PMI data. Greece faded from the headlines even as Prime Minister Tspiras forced through two parliamentary votes to secure political support for a third bailout. The US Treasury market trended higher and by Friday the 10-year note was testing the 200-day moving average for the first time in weeks. The curve flattened when long end rates fell faster than short yields, suggesting traders maybe placing bets the Fed will indeed be able to raise rates later this year.

Macro :