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Thursday's headlines, Financials edition

Street Talk Episode 40 - Digital Banks Take a Page Out of 'Mad Men'

Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

Thursday's headlines, Financials edition

ECB taper talk spooksEurozone bond markets Reuters
ECB sees no risk ofbanking crisis in eurozone - Angeloni Reuters
Bankbail-in advice from first EU country ever to try one out Bloomberg News
IMF backs ECB indispute with banks FinancialTimes
IMF says global debt tops$152 trillion, urges some to spend more Reuters
TheIMF is worried about the world's $152 trillion debt pile Bloomberg News
IMF sees non-performingloans in European banks at about €900 billion Reuters
EU plans insolvencyearly warning alerts to cut banks' bad loans Reuters
EU executive aims toimprove investment plan reach to poorer EU states Reuters
Nobel laureate Stiglitzsees Italy, others leaving eurozone in coming years Reuters
European stocks slideon concern about ECB moves Irish Independent


Maypledges activist government as Britain adjusts to Brexit Bloomberg News
Theresa May criticizesBank of England for making people poorer City A.M.
Bankof England was too pessimistic about Brexit vote – deputy governor The Guardian
UK Chancellor PhilipHammond to tell Wall Street that London still top finance hub despite BrexitReuters
Philip Hammond on WallStreet charm offensive FinancialTimes
Hard Brexit could seeScotland lose 80,000 jobs, cost £2,000 a head The Guardian
Small firms are takinga pragmatic view of Brexit, says BDO The Daily Telegraph
Pension fund managerL&G urges firms to publish pay gap between bosses, workers The Daily Telegraph
Only a quarter of UKinsurers now support Solvency II Post

Aviva fined £8.2 million by FCA onoutsourcing issues BloombergNews

Barclays private bankers defect before OCBCacquisition Bloomberg News
Barclays trader says he was thrown to wolvesamid FX scandal BloombergNews

Hastings Group
Hastings investors tosell £99.8 million stake Post

MBNA bidders seekassurances over future PPI liability Sky News

Permanent TSB
Permanent TSB lines upCerberus for UK buy-to-let sale - sources Reuters
Cerberus bites off morePermanent TSB loans Irish Independent
PTSB shares hit five-month high as Cerberus picked for UK loans The Irish Times

Royal Bank of Scotland
RBS boss says Irishtakeovers back on the agenda Irish Independent

Standard Chartered
Standard Chartered appoints CFO forAfrica, Middle East

Standard Life
Irish central bankmarkets supervision director to join Standard Life The Irish Times

SVG Capital
SVG Capital says Goldman,CPPIB propose to buy its portfolio Reuters
HarbourVest's takeoverof SVG Capital hit by withdrawal of support City A.M.
HarbourVest says Aviva,Legal & General withdraw support for SVG Capital bid Reuters


Aareal Bank
AarealBank to extend syndication of loans Börsen-Zeitung

Credit Suisse Group
Credit Suisse fined bySEC for misleading investors FinancialTimes
Credit Suisse admitswrongdoing in asset measure, to pay $90 million Reuters
CreditSuisse names new head of Channel Islands business

Deutsche Bank
Berlin pursues discreettalks with US officials on Deutsche Bank Reuters
DeutscheBank needs to show its business model viable – IMF Reuters
IMF officials downplayrisk of imminent Deutsche Bank crisis Reuters
Shareholder Union Investment saysDeutsche Bank not 'in crisis'
DeutscheBank's $14 billion scare Bloomberg News
Deutsche Bank is introuble after £11 billion US fine – is it too big to fail? The Independent

Falcon Private Bank
Swiss private bankFalcon says not for saleReuters

HSBC Trinkaus & Burkhardt
HSBC Germany names head of private banking Börsen-Zeitung

Raiffeisen Bank International
Raiffeisen merger toincrease shares in issue Reuters
Austria's Raiffeisenbanks give go-ahead for merger Reuters
Raiffeisen BankInternational says it and Raiffeisen Zentralbank have passed resolution tomerge Reuters
Raiffeisen gets moretime for negotiating Polish unit sale Reuters

UBS Group
UBS is dismissed in US silverlawsuit, other claims narrowed Reuters

Union Bancaire Privée
UBP adds amember to its Paris convertible bonds team


IMF: Dutch nationaldebt continues to decline DeTelegraaf

AXA to build, floodhome in resilience test Insurance Times
AXA Germany names chief spokesmanBörsen-Zeitung

BNP Paribas
BNP Paribas bolstersindustrials team Reuters

Delta Lloyd
Delta Lloyd to mergeits life insurance entities in Netherlands and Belgium Reuters
Delta Lloyd, Endurance seenheralding spate of insurance deals
Bloomberg News
'Streamlining Delta Lloyd no direct impact onstaff' says Delta Lloyd Life CEO De Tijd

ING Groep
Belgium concerned afterING's decision to cut jobs LesEchos

NN Group
NN Group launches €2.4billion bid for Delta Lloyd Reuters

Rothschild & Co.
Senior industrialsbanker Wolfson leaves Rothschild - sources Reuters


Banco Popular Español
Spanish bank Popularsays returns to cash dividend in 2017 Reuters


Italy should do more totackle banks' bad loans - IMFReuters
Italy quake insuredloss estimated at just €34 million by PERILS Artemis
ECB lowersemergency funding cap for Greek banks to €51.8 billion Reuters
ECB lowers emergencyfund ceiling for Greek banks by €100 million Naftemporiki

Banca Generali
Banca Generali totalnet inflows in September at €259 million Reuters


Norway prime ministersays must discuss tighter long-term fiscal spending rule Reuters
IPO festputs Copenhagen in big league as offshore cash flows in Bloomberg News
Danishfinancial institutions to make wave of fintech company acquisitions
Mortgage lenders' prices on home loansslammed by Danish central bank governor Berlingske Business

DNB makes fixed rates more expensive E24

Skandinaviska Enskilda Banken
SEB triples commercial lending in Denmark FinansWatch


Polish central bank sayssees deflation easing in coming months Reuters
Polish regulator imposes capital buffers onsystemic institutions PAP
Banks in Russia will have to discloseinformation on guarantees – Russian central bank
Central bank of Russia takes steps to introduce blockchain in country Kommersant
Russian's central bank clarifies anti-money laundering rules
International reserves of Hungarian centralbank drop, stay well over short-term debt in Q2
Budapest Business Journal
Corporatelending continues to decrease in Romania Romania Insider

AS PrivatBank
Bank of Italy ordersclosure of AS PrivatBank's Italian branch by Dec. 31 Reuters

AsyaKatilim Bankasi
Bank Asya'sshareholders to receive payments after liquidation process Hürriyet

Bank Handlowy wWarszawie
Bank Handlowy expects no impact on dividend or lending from extracapital buffer - CEO PAP

VEB to appoint new executives at two of its subsidiaries Kommersant

The Daily Dose Europe"Headlines" edition aggregates banking, financial services and insuranceheadlines from the websites of a limited number of major European publicationtitles and newswires, with an editorial deadline of 6 a.m. London time. Someexternal links may require a subscription. Language translations to English areprovided by an automated service and may not be entirely accurate.

Listen: Street Talk Episode 40 - Digital Banks Take a Page Out of 'Mad Men'

Mar. 20 2019 — Some fintech companies are making hay with digital platforms that tout their differences with banks, even though they are often offering virtually the same products. In the episode, we discuss with colleagues Rachel Stone and Kiah Haslett the deposit strategies employed by the likes of Chime, Aspiration and other incumbent players such as Ally Financial, Discover and Capital One. Those efforts conjure up memories of a Don Draper pitch in Mad Men and likely will enjoy continued success.

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Technology, Media & Telecom
Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot


The segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

The following post comes from Kagan, a research group within S&P Global Market Intelligence.

To learn more about our TMT (Technology, Media & Telecommunications) products and/or research, please request a demo.

Mar. 20 2019 — The U.S. broadband-only home segment logged its largest net adds on record in 2018, validating Comcast Corp.'s and Charter Communications Inc.'s moves to make broadband, or connectivity, the keystone of their cable communication businesses.

The size and momentum of the segment also put in perspective the recent high-profile online-video video announcements by the top two cable operators as well as AT&T Inc.'s WarnerMedia shake-up and plans to go toe-to-toe with Netflix in the subscription video-on-demand arena in the next 12 months.

We estimate that wireline broadband households not subscribing to traditional multichannel, or broadband-only homes, rose by nearly 4.3 million in 2018, topping the gains from the previous year by roughly 22%. Overall, the segment stood at an estimated 23.6 million as of Dec. 31, 2018, accounting for 24% of all wireline high-speed data homes.

For perspective, broadband-only homes stood at an estimated 11.3 million a mere four years ago, accounting for 13% of residential cable and telco broadband subscribers.

The once all-powerful, must-have live linear TV model, which individuals and families essentially treated as a utility upon moving into a new residence, increasingly is viewed as too expensive and unwieldy in the era of affordable, nimble internet-based video alternatives. This has resulted in a sizable drop in penetration of occupied households.

As a result, continued legacy cord cutting is baked in and broadband-only homes are expected to continue to rise at a fast clip, with the segment's momentum in the next few years compounded by Comcast's, Charter's and AT&T's ambitious moves into online-video territory.

Note: we revised historical broadband-only home estimates as part of our fourth-quarter 2018, following restatements of historical telco broadband subscriber figures and residential traditional multichannel subscriber adjustments.

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Q4'18 multichannel video losses propel full-year drop to edge of 4 million

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Q4'18 multiproduct analysis sheds more light on video's fall from grace

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Watch: Power Forecast Briefing: As retirements accelerate, can renewable energy fill the gap?

Mar. 19 2019 — Steve Piper shares the outlook for U.S. power markets, discussing capacity retirements and whether continued development of wind and solar power plants may mitigate the generation shortfall.

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Credit Analysis
2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Fundamentals View

Mar. 15 2019 — On November 20, 2018, a joint event hosted by S&P Global Market Intelligence and S&P Global Ratings took place in London, focusing on credit risk and 2019 perspectives.

Pascal Hartwig, Credit Product Specialist, and I provided a review of the latest trends observed across non-financial corporate firms through the lens of S&P Global Market Intelligence’s statistical models.1 In particular, Pascal focused on the outputs produced by a statistical model that uses market information to estimate credit risk of public companies; if you want to know more, you can visit here.

I focused on an analysis of how different Brexit scenarios may impact the credit risk of European Union (EU) private companies that are included on S&P Capital IQ platform.

Before, this, I looked at the evolution of their credit risk profile from 2013 to 2017, as shown in Figure 1. Scores were generated via Credit Analytics’ PD Model Fundamentals Private, a statistical model that uses company financials and other socio-economic factors to estimate the PD of private companies globally. Credit scores are mapped to PD values, which are based on/derived from S&P Global Ratings Observed Default Rates.

Figure 1: EU private company scores generated by PD Model Fundamentals Private, between 2013 and 2017.

Source: S&P Global Market Intelligence.2 As of October 2018.

For any given year, the distribution of credit scores of EU private companies is concentrated below the ‘a’ level, due to the large number of small revenue and unrated firms on the S&P Capital IQ platform. An overall improvement of the risk profile is visible, with the score distribution moving leftwards between 2013 and 2017. A similar picture is visible when comparing companies by country or industry sector,3 confirming that there were no clear signs of a turning point in the credit cycle of private companies in any EU country or industry sector. However, this view is backward looking and does not take into account the potential effects of an imminent and major political and economic event in the (short) history of the EU: Brexit.

To this purpose, S&P Global Market Intelligence has developed a statistical model: the Credit Analytics Macro-scenario model enables users to study how potential future macroeconomic scenarios may affect the evolution of the credit risk profile of EU private companies. This model was developed by looking at the historical evolution of S&P Global Ratings’ rated companies under different macroeconomic conditions, and can be applied to smaller companies after the PD is mapped to a S&P Global Market Intelligence credit score.

“Soft Brexit” (Figure 2): This scenario is based on the baseline forecast made by economists at S&P Global Ratings and is characterized by a gentle slow-down of economic growth, a progressive monetary policy tightening, and low yet volatile stock-market growth.4

Figure 2: “Soft Brexit” macro scenario.5

Source: S&P Global Ratings Economists. As of October 2018.

Applying the Macro-scenario model, we analyze the evolution of the credit risk profile of EU companies over a three-year period from 2018 to 2020, by industry sector and by country:

  • Sector Analysis (Figure 3):
    • The median credit risk score within specific industry sectors (Aerospace & Defense, Pharmaceuticals, Telecoms, Utilities, and Real Estate) shows a good degree of resilience, rising by less than half a notch by 2020 and remaining comfortably below the ‘b+’ threshold.
    • The median credit score of the Retail and Consumer Products sectors, however, is severely impacted, breaching the high risk threshold (here defined at the ‘b-’ level).
    • The remaining industry sectors show various dynamics, but essentially remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 3: “Soft Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

  • Country Analysis (Figure 4):
    • Although the median credit risk score may not change significantly in certain countries, the associated default rates need to be adjusted for the impact of the credit cycle.6 The “spider-web plot” shows the median PD values for private companies within EU countries, adjusted for the credit cycle. Here we include only countries with a minimum number of private companies within the Credit Analytics pre-scored database, to ensure a robust statistical analysis.
    • Countries are ordered by increasing level of median PD, moving clock-wise from Netherlands to Greece.
    • Under a soft Brexit scenario, the PD of UK private companies increases between 2018 and 2020, but still remains below the yellow threshold (corresponding to a ‘b+’ level).
    • Interestingly, Italian private companies suffer more than their Spanish peers, albeit starting from a slightly lower PD level in 2017.

Figure 4: “Soft Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

“Hard Brexit” (Figure 5): This scenario is extracted from the 2018 Stress-Testing exercise of the European Banking Authority (EBA) and the Bank of England.7 Under this scenario, both the EU and UK may go into a recession similar to the 2008 global crisis. Arguably, this may seem a harsh scenario for the whole of the EU, but a recent report by the Bank of England warned that a disorderly Brexit may trigger a UK crisis worse than 2008.8

Figure 5: “Hard Brexit” macro scenario.9

Sources:”2018 EU-wide stress test – methodological note” (European Banking Authority, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies“ (Bank of England, March 2018).

Also in this case, we apply the Macro-scenario model to analyze the evolution of the credit risk profile of EU companies over the same three-year period, by industry sector and by country:

  • Sector Analysis (Figure 6):
    • Despite all industry sectors being severely impacted, the Pharmaceuticals and Utilities sectors remain below the ‘b+’ level (yellow threshold).
    • Conversely, the Airlines and Energy sectors join Retail and Consumer Products in the “danger zone” above the ‘b-’ level (red threshold).
    • The remaining industry sectors will either move into or remain within the intermediate risk band (here defined between the ‘b+’ and the ‘b-’ level).

Figure 6: “Hard Brexit” impact on the median credit risk level of EU private companies, by industry.

Source: S&P Global Market Intelligence. As of October 2018.

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  • Country Analysis (Figure 7):
    • Under a hard Brexit scenario, the PD of UK private companies increases between 2017 and 2020, entering the intermediate risk band and suffering even more than its Irish peers.
    • Notably, by 2020 the French private sector may suffer more than the Italian private sector, reaching the attention threshold (here shown as a red circle, and corresponding to a ‘b-’ level).
    • While it is hard to do an exact like-for-like comparison, it is worth noting that our conclusions are broadly aligned with the findings from the 48 banks participating in the 2018 stress-testing exercise, as recently published by the EBA:10 the major share of 2018-2020 new credit risk losses in the stressed scenario will concentrate among counterparties in the UK, Italy, France, Spain, and Germany (leaving aside the usual suspects, such as Greece, Portugal, etc.).

Figure 7: “Hard Brexit” impact on the median credit risk level of EU private companies, by country.

Source: S&P Global Market Intelligence. As of October 2018.

In conclusion: In Europe, the private companies’ credit risk landscape does not yet signal a distinct turning point, however Brexit may act as a pivot point and a catalyst for a credit cycle inversion, with an intensity that will be dependent on the Brexit type of landing (i.e., soft versus hard).

1 S&P Global Ratings does not contribute to or participate in the creation of credit scores generated by S&P Global Market Intelligence.
2 Lowercase nomenclature is used to differentiate S&P Global Market Intelligence credit scores from the credit ratings issued by S&P Global Ratings.
3 Not shown here.
4 Measured via Gross Domestic Product (GDP) Growth, Long-term / Short-term (L/S) European Central Bank Interest Rate Spread, and FTSE100 or STOXX50 stock market growth, respectively.
5 Macroeconomic forecast for 2018-2020 (end of year) by economists at S&P Global Ratings; the baseline case assumes the UK and the EU will reach a Brexit deal (e.g. a “soft Brexit”).
6 When the credit cycle deteriorates (improves), default rates are expected to increase (decrease).
7 Source: “2018 EU-wide stress test – methodological note” (EBA, November 2017) and “Stress Testing the UK Banking system: 2018 guidance for participating banks and building societies”. (Bank of England, March 2018).
8 Source: “EU withdrawal scenarios and monetary and financial stability – A response to the House of Commons Treasury Committee”. (Bank of England, November 2018).
9 As a hard Brexit scenario, we adopt the stressed scenario included in the 2018 stress testing exercise and defined by the EBA and the Bank of England.
10 See, for example, Figure 18 in “2018 EU-Wide Stress Test Result” (EBA November 2018), found at:

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2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Market-Driven View

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