Dealmaking slumps; rate hikes hammer gold; transaction banking revenues jump

In this edition of Insight Weekly, we put a spotlight on the global slump in dealmaking. Only 14 U.S. bank M&A deals were announced in August compared with 17 deals in July. However, aggregate deal value jumped to $891.4 million from $457.5 million, according to S&P Global Market Intelligence. Due to tight monetary policy and increased regulatory scrutiny for large deals, some superregional banks are looking for nonbank M&A. In the European financial sector, 62 deals were recorded in August, the lowest monthly total year-to-date, according to Market Intelligence data. With the rise in the cost of financing, many companies in the tech space have suffered declines in valuations. In the oil and gas industry, the number of whole-company and minority-stake deals declined to 21 in August from 32 a year ago.

Aggressive interest rate hikes to tame inflation have led to an 18.9% slump in gold prices since March, according to Market Intelligence data. The price of gold fell $389 per ounce to $1,667.10/oz on Sept. 15 from a peak of $2,056.10/oz on March 8. Some analysts see the retreat as a blip and predict higher prices in the years ahead.

Transaction banking revenues have reached their highest levels since the global financial crisis as the industry benefits from interest rate hikes and huge corporate demand for financing. The world's 10 largest transaction banks reported combined revenue of $15.6 billion in the first half of 2022, according to data by Coalition Greenwich, an S&P Global-owned company. Supply chain disruptions resulting from Russia's invasion of Ukraine in sectors such as agricultural commodities and energy have led to a greater corporate need for supply chain finance and commodity trade finance.

Fall in M&A deals in focus

Bank M&A 2022 Deal Tracker: 14 deals announced in August

The number of U.S. bank M&A deals dropped to 14 in August from 17 in July, but the aggregate deal value nearly doubled to $891.4 million during the same period.

European financials M&A activity slumps to YTD-low in August

Only 62 deals were reached in the European financial sector in August, the weakest month since the beginning of 2022, according to Market Intelligence data.

Oil, gas deal tracker: M&A value plunges YOY in August despite $9B deal

The combined value of whole-company and minority-stake deals dropped about 42% from the year-ago period.

Deep dives

In-depth features looking at the impact of major news developments in key industries.

Financials

Transaction banking revenues hit highest level since global financial crisis

The world's 10 largest transaction banks posted combined revenue of $15.6 billion from cash management and trade finance in the first six months of 2022, up from $12.8 billion in the same period last year, according to new data.

Only 1 US bank crosses key $10B asset mark in Q2

While just one U.S. community bank crossed $10 billion in total assets at the end of the second quarter, another eight sat right below the threshold, with at least $9 billion in total assets.

US banks exceeding CRE regulatory guidance hit multiyear high in Q2

Also, the delinquency rate on commercial real estate loans at U.S. banks rose by 1 basis point for the second quarter in a row.

Bonus cap removal: What it would mean for UK banks

Britain's banks may be able to offer higher bonus pay and more effectively compete with banks around the world for executive talent if the country scraps an EU cap.

US-listed Chinese companies' homecoming to buoy mainland, Hong Kong exchanges

Authorities in the U.S. and China signed an agreement in August enabling inspections and investigations of registered public accounting firms headquartered in mainland China and Hong Kong.

Insurance

Workers' comp Q2 loss ratios improve as Hartford, Travelers release reserves

U.S. workers' compensation premiums grew 8.2% year over year in the second quarter, and the industry's direct loss ratio improved by 2.0 percentage points.

Real estate

US REIT average short interest down 8 bps in 2nd half of August

The hotel sector had the biggest drop in average short interest, down 26 basis points, while the "other retail" segment had the biggest increase, gaining 4 basis points as of Aug. 31.

Credit and markets

US Weekly Economic Commentary: Weak growth, high inflation

The outlook for U.S. GDP growth remains weak for the third quarter and beyond. Total retail and food services sales rose 0.3% in August.

Short interest in communications, consumer stocks near 2022 low point

Short interest in communication services and consumer stocks at the end of August was at its lowest level since mid-January, Market Intelligence data shows.

Energy and utilities

RRA Research: Columbia Gas withdraws Green Path proposal as part of Md. rate case settlement

The settlement calls for the company to implement a $4.8 million rate increase in December 2022.

'Stacked' tax credits make green hydrogen economic for 1st time in US – report

The impact of the Inflation Reduction Act is especially dramatic for green hydrogen-fueled power plants, which would benefit from three tax credits simultaneously.

Global power firms pledge to cooperate, coordinate move to electrification

The accord left little or no room for direct natural gas use in the movement to electrify the globe's energy grid as part of the effort to slow climate change.

Technology, media and telecommunications

US regulators scrutinize mobile data practices, raising enforcement questions

The Federal Communications Commission is looking to tighten standards to protect mobile geolocation data after finding inconsistent industry practices regarding data storage. The Federal Trade Commission may also step in.

Kagan Research: SVOD service subscription length and use, Q1'22

As would be expected, the subscription video-on-demand services that have been around the longest have the largest shares of long-term subscribers (over a year), according to data from Kagan's U.S. online consumer survey, conducted in March.

Metals and mining

Gold drops 18.9% since early March as policymakers try to restrain inflation

Interest rate hikes and other factors are driving down the price of gold, but some analysts see more bullish days ahead for the safe-haven asset.

Metals and Mining Research: IM September 2022 – Drilling activity recovers slightly from 19-month low

Projects drilling recovered slightly from a 19-month low in August with increases in gold and base metals projects reporting, but the total number of drillholes fell to a 20-month low.

The Week in M&A

Store Capital privatization hints at further life for REIT M&A

SoftBank eyeing investment options after heavy tech losses in Vision funds

Deal Profile: Southern Missouri Bancorp to acquire Citizens Bancshares in $140M deal

M&A Replay: Agnico's $580M JV deal with Teck leads mining M&A for week ended Sept. 16

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Panjiva is the supply chain research unit of S&P Global Market Intelligence, a division of S&P Global Inc.

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