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Mexico, Peru hold key rates; farmers ask Banco Nación to restructure their debts

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Technology, Media & Telecommunications

Spotify’s Direct Listing Gamble Pays Off


Mexico, Peru hold key rates; farmers ask Banco Nación to restructure their debts

* Mexico's central bank on April 12 maintained its benchmark interest rate at 7.5% as general inflation decreased to 5.04% in March from 5.55% in January, in terms of both core and noncore inflation. Inflation expectations for the end of 2018 were maintained at around 3.5%.

* The Peruvian central bank also maintained its benchmark rate at 2.75%, noting that inflation fell in March for a fifth consecutive month, below the lower band of the target range of 1%. The regulator expects annual inflation will climb back to the target range by the second quarter of the year, before reaching 2% at end-2018.

* A group of Argentine farmers lodged a legal appeal to ask state-owned Banco de la Nación Argentina to restructure their 25-year-old debts, La Nación reported. The farmers said the loans from Banco Nación in the 1990s reportedly "contain interest rates and conditions tainted by usury."

BRAZIL

* The appointments of Dyogo Oliveira and Nelson Antônio de Souza as the new CEOs at state-owned banks Banco Nacional de Desenvolvimento Econômico e Social and Caixa Econômica Federal, respectively, will not likely affect the banks' strategic direction or ratings, Fitch Ratings said. The banks' ratings are parallel with that of the Brazilian sovereign and neither is assigned a viability rating, Fitch added.

* Banco do Brasil SA Executive Vice-President Marcelo Labuto said the company is planning to offer its Ourocard brand to non-clients in the second half of 2018 to expand its credit card portfolio, Reuters reported. As of December 2017, the bank had about 17.3 million card users.

* Itaú Unibanco Holding SA said it has created a Latin America Strategic Council which will push the Brazilian bank's strategy in other Latin American countries. EVP Ricardo Villela Marino will become chairman of the council.

ANDEAN

* Former Peruvian President Pedro Pablo Kuczynski, who resigned in March, warned that ongoing political disorder in the country poses a threat to both investor confidence and growth in Peru, The Wall Street Journal reported.

* Colombia's attorney general said the sentences on three former executives convicted of fraud at the InterBolsa SA brokerage firm have been increased to 12 years and three months from five years and nine months, La Republica reported. Juan Carlos Ortiz, Tomás Jaramillo and Ricardo Martínez were convicted for the crimes in 2017.

SOUTHERN CONE

* Uruguay offered on April 12 a bond maturing in 2055 worth $1.50 billion, El Cronista reported. The operation, which included the repurchase of nearer term debt, received offers from investors totaling $6.7 billion.

* Argentina's Financial Information Unit unveiled new regulations to crack down on money laundering in the financial system aimed at the most vulnerable sectors such as casinos, Clarin reported.

* Banco Santander Chile led the profits of Chilean lenders during the first quarter, posting a net income of 151.02 billion pesos during the period, up 6% year-over-year, Pulso reported, citing preliminary results. Itaú CorpBanca's quarterly net profit jumped 75% to 42.75 billion pesos, the biggest increase of leading lenders.

* Chile's Itaú Corpbanca defended its decision to close the bank account of cryptocurrency trading platform Buda during a trial, Pulso reported. In the court hearing, the bank's lawyers said the account had been closed to meet compliance rules related to anti-money laundering and terrorism financing controls.

* The rebound that Chile's economy is expected to stage in 2018 will not be enough for the country to recover the credit rating it lost last year, Pulso reported, citing Joydeep Mukherji, head of sovereign ratings for the Americas at S&P Global Ratings. He said cyclical recoveries do not normally affect credit ratings, adding that his evaluation will focus on structural issues such as fiscal policy and economic diversification.

PAN LATIN AMERICA

* Banco Santander (Brasil) SA has launched an international transfer service using blockchain technology, allowing resources to be transferred between banks within two hours instead of about two days previously, Diário Comércio Indústria & Serviços reported. Meanwhile, 90% of Latin America's financial technology is concentrated in Brazil, Mexico, Colombia, Argentina and Chile, Gestión reported, citing experts who attended a meeting organized by the Inter-American Development Bank in Lima, Peru.

* Chile's Grupo Security SA wants to boost its insurance operations in Peru and does not rule out further acquisitions, according to CEO Renato Peñafiel, Pulso reported. It already has an annuity business in Peru after buying Protecta SA Compañía de Seguros in 2015. Aside from selling insurance products, Peñafiel said the company would also be interested in the possibility of competing with AFP pension funds.

* A scenario of moderate growth, low interest rates and low inflation is benefiting credit insurers in developed economies, and these factors are also helping offset competitive price pressures for emerging markets, according to Moody's Vice President and Senior Credit Officer Brandan Holmes. Moody's adds underwriting profitability for credit insurers has been strong in the years since the financial crisis.

IN OTHER PARTS OF THE WORLD

* Middle East & Africa: Hapoalim eyes up to CHF23M from Swiss sale; Bank Muscat Q1 profit ticks up YOY

* Europe: LSE names CEO; MPS eyes €1B net profit margin; Sabadell selling €7.5B of assets

Helen Popper contributed to this article.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings.

S&P Global Market Intelligence provides links to external sites where these offer further, relevant information to our readers. While we ensure that such links are functional at the time of publication, we are not responsible in instances where those links are unavailable later.

The Daily Dose has an editorial deadline of 8:00 a.m. São Paulo time, and scans news sources published in English, Portuguese and Spanish. Some external links may require a subscription.


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Technology, Media & Telecommunications
Spotify’s Direct Listing Gamble Pays Off

Highlights

Spotify Technology SA shares rose 13% above its $132.00 reference price to close at $149.01 the day of the company’s IPO April 3, resulting in a public market valuation of 4.0x estimated 2018 revenue of €5.22 billion and 16.5x gross profit of €1.28 billion.

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Spotify Technology SA shares rose 13% above its $132.00 reference price to close at $149.01 the day of the company’s IPO April 3, resulting in a public market valuation of 4.0x estimated 2018 revenue of €5.22 billion and 16.5x gross profit of €1.28 billion. That compares to a trading multiple of just 1.0x revenue for Pandora as of the same date, but Spotify’s higher trading multiple is justified by its higher proportion of paying subscribers among its listeners and its growth outside the U.S.

Spotify Technology is the parent of Spotify AB, the Swedish operator of the popular Spotify streaming service.

Company guidance for full year 2018, provided in Spotify's March 26 8-K filing, is revenue of €4.9 billion to €5.3 billion, up 20% to 30% year over year, and a gross profit margin of 23% to 25%, with an operating loss of €230 million to €330 million including an estimated total cost for the direct listing of roughly €35 million to €40 million in the second quarter.

Spotify Technology S.A. share price and market capitalization

The 8-K also shows Spotify has ambitious monthly active user, or MAU, and premium subscriber growth targets for 2018, with MAUs projected to increase by 26% to 32% year-over-year to 198 million to 208 million and total premium subs growing 30% to 36% to a range of 92 million to 96 million.

At the end of 2017, Spotify had reported 157 million MAUs and 71 million premium subs. Apple Music came in second place with a reported 36 million subs as of February 2018; based on reports from the Wall Street Journal, the company is growing at a monthly rate of 5% compared to 2% at Spotify. According to a Forbes article on April 4, Apple Music just reached 40 million paid subscribers.

Amazon.com Inc. has indicated it is the third-largest on-demand streaming music company behind Spotify and Apple Inc.'s Apple Music with a reported 16 million subscribers between Prime Music and Amazon Music Unlimited. That leaves Pandora Media Inc. in fourth place with 5.5 million paid subscribers, although it has a larger ad-supported user base with 74.1 million MAUs reported at the end of 2017.

Based on reports by Music Business Worldwide on April 4, Sony Corp.'s Sony Music, which had owned 5.71% of Spotify shares prior to the first day of trading, sold 17.2% of its stake in the company, representing a little less than a 1% total share, for over $250 million based on the April 3 closing price of $149.01.

In Spotify's prospectus filed April 3, Sony Music, before the April 3 shares sale in the first day of Spotify trading, was the fifth-largest shareholder behind Spotify co-founders Daniel Ek (27.1%) and Martin Lorentzon (13.1%), followed by Tencent Holdings Ltd. (9.1%) and Tiger Global (7.2%).

As reported by Music Business Worldwide, according to a memo released by Sony, the company projects that the unrealized valuation gain and the proceeds from the sale of Spotify shares will amount to roughly 105 billion Japanese yen, approximately US$1 billion, for the first quarter of the fiscal year ending March 31, 2019.