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ING faces union ire; Novo Banco sees Chinese interest; Russian central bank overhauls

Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

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

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

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

ING faces union ire; Novo Banco sees Chinese interest; Russian central bank overhauls

Mersch speaksagainst low rates: ECB Executive Board member Yves Mersch saidlow interest rates put pressure on banks' profitability and noted analystforecasts that ROE will fall to 2% from 6.5% over the next five years.

* Moody's said increasing nonperforming loans in Italy, Spain and Ireland continue toweigh on banks' balance sheets, the housing market and credit availability. Therating agency stressed that while securitization can help ease pressure onbanks' balance sheets to an extent, the efficiency of recovery processes playsa vital role in collateral performance.

* The European Commission will not hold talks with U.K.Prime Minister Theresa May until Article 50 of the Lisbon Treaty isofficially triggered, Bloomberg News writes.

* The Britishgovernment is poised to rule out an interim agreement with the EU that willmaintain financial services firms' access to the EU single market beyond thetwo-year period, insiders tell Bloomberg News. The pound yesterday fell 1.1% to $1.2834 — its weakest level since the referendum — amid growingspeculation that May could be prepared to give up membership of the Europeansingle market.

* CitigroupInc.'s U.K. head, JamesBardrick, said banks are likely to consider moving London-based jobs to otherEU countries even if Britain is able to negotiate access to the EU financialservices market, Reuters writes.


Stress test scenariosdouble for UK banks: The Bank of England yesterday that its 2017 stress testwill, for the first time, include two scenarios. The annual cyclical scenariowill be used in next year's test alongside a so-called exploratory scenario.The results of this year's stress test is set to be published Nov. 30.

*  said AngusWink retired as CEO for Europe, the Middle East and Africa after 26 years at thecompany. Tullett Prebon also announced the members of the global executive committee of TP ICAP, the enlargedcompany that will emerge on completion of its acquisition ofICAP Plc's globalhybrid voice broking and information business. Frits Vogels will become CEO ofTP ICAP EMEA, John Abularrage will become CEO of TP ICAP Americas and HughGallagher will become CEO of TP ICAP in Asia-Pacific, among other appointments.

*  appointedTorry Berntsen CEO and head of corporate and institutional banking for theAmericas region, Reuters notes.

*  agreedto pay $120 million to settle an investigation by the U.S. state ofConnecticut into the lender's underwriting of RMBS in the run-up to the2008 financial crisis, Reuters reports.

* Some 140 small businesses that claim RBS drove them to insolvency for its own gain are poised to launch acoordinated lawsuit against the bank early next year, City A.M. writes.

* Santander UKPlc is teaming up with equity crowdfunding site Crowdfunder toprovide £200,000 to social enterprises across the U.K., the Financial Times notes.The deal marks the first tie-up between a high street lender and an alternativefinance company.

* Gerry Cross, director of policy and risk at the CentralBank of Ireland, rejected the notion that the authorization process forfinancial firms seeking to move to Ireland from the U.K. could be expeditedjust because the firms had already been authorized by British regulators,Reuters reports.


UniCredit BankAustria names CFO: UniCreditBank Austria AG reshuffled its top management following the transferof its central and eastern European division to parent company , Die Presse reports.The bank named Gregor Hofstätter-Pobst CFO, replacing Mirko Bianchi, who movesto UniCredit in Milan. Hofstätter-Pobst most recently served as CFO anddirector of UniCredit Bank CzechRepublic and Slovakia a.s. Carlo Vivaldi, UniCredit Bank AustriaDeputy CEO and head of CEE banking, moves to the parent group and will bereplaced as deputy CEO in Vienna by current COO Romeo Collina.

*  named Brian Pitzco-head of its internet investment banking group alongside Riaz Ladhabhoy,Reuters notes. Pitz previously served as a managing director in equity research atJefferies Group.

* AutonomousResearch said Deutsche Bank will likely conduct a rights issue to raise fundsto cope with mounting legal costs, Bloomberg News writes.

* TalanxAG is forging partnerships with Silicon Valley innovation platformPlug and Play and London-based startup accelerator Startupbootcamp as it seeks tosecure a hold in the growing field of insurtechs. The company has alsoestablished its own digital laboratory, Handelsblattreports.

* Swiss property specialist Avobis appointed formerBank Julius Baer & Co.Ltd. executive Alessandro Carroccia CEO, reports.

* German tax investigators from the state of NorthRhine-Westphalia launched tax-evasion probes against 57 banks in Switzerland,Liechtenstein, Austria and Luxembourg over the last two years, Süddeutsche Zeitung reports.


Union uproar followsING strategy update: Belgian unions have called for a strike on Fridayafter the Belgian unit of INGGroep NV was hit hard in a drastic overhaul of the business, Het Financieele Dagblad reports.Belgian Prime Minister Charles Michel said on Twitter he is "supportive ofthe workers." Following the restructuring, ING's Belgian branch networkwill drop to 650, with Record Bank disappearing from Belgian streetsaltogether. ING BelgiëNV currently has 709 local offices while Record Bank has 536franchises. LesEchos and L'Echo alsoreport.

* BNP ParibasSA appointed Daniel Thielemans CEO of its operations in theNetherlands, replacing Anne Marie Verstraeten who was promoted to lead BNP'sBritish unit, Het Financieele Dagbladreports.

* AXA's AXA Investment Managers unit will merge itsstructured finance and alternative solutions teams to form a global alternativecredit platform headed by Deborah Shire, L'Agefireports.

* A French government bill aimed at reducing the cost ofrepatriating employees to France from the U.K. as a result of Brexit,especially in the banking and finance sector, is being pushed throughparliament, Les Echos reports.The government is alsoconsidering lowering payroll taxes in the finance sector.

* The €2.2 billion tax credit obtained by in connection withthe Jérôme Kerviel affair might be re-examined in light of court rulings thatthe bank was jointly responsible for the loss, the French junior minister incharge of the budget toldBFM Business.


China MinshengBanking in fray for Novo Banco: Chinese group hasbeen negotiating since May a potential acquisition of , Públicoreports. Observador writesthat Novo Banco has targeted the Chinese bank as a leading investor if aprivate placement were to take place. Jornalde Negócios also notes.

* MillenniumBCP CEO Nuno Amado believes negotiations with Chinese groupFosun Industrial HoldingsLtd. on the acquisition of a stake in the lender are progressingtoward a successful deal, Expresso reports.

* Customers hit by the collapse of refused Banco Santander Totta SA's solution to recover moneylost during the resolution of Banif, according to Jornal de Negócios. Totta said that in light of the refusal,negotiations with customers are over.

* The government of Portugal ruled out the possibility of asecond economic bailout, Jornal deNegócios writes. Observadoralso notes.

* Banco de Portugal Governor Carlos Costa saidlocal banks are in "criticalneed" of additional capital, Reuters writes.


Pioneer's new ownerto be picked after referendum: UniCreditwill wait until the Dec. 4 referendum on Italian Prime Minister MatteoRenzi's constitutional reform before choosing a buyer for unit ,insiders tell Reuters.

* Italian Economy Minister Pier Carlo Padoan met with Bankof Italy Governor Ignazio Visco and senior Italian bankers to discuss ways toproceed with the sale of the four banks rescued last year, Reuters writes. The Atlante fund, whose topmanagement was present at the meeting, could acquire 3.4 billion in bad loans present on the four banks'books, La Repubblica writes. Padoan said he saw no need fornationalizing troubled Italian banks, Reuters writes.

*  isprepared to acquire three of the four rescued Italian banks, but only at a"symbolic price," insiders tell Reuters.

* BancaPopolare di Milano Scarl chief Giuseppe Castagna tellsIl Sole 24 Ore that the bank could be taken over should shareholders notapprove its planned merger with Banco Popolare Società Cooperativa.

* Italian asset manager Azimut Holding SpA will pay an extraordinary dividend of1 per shareafter completing an internal reorganization, MF says.

* BancaPopolare dell'Emilia Romagna SC is simplifying its corporatestructure, reducing the number of organizational units to 339 from 650, MFwrites.

* did not manage to raisethe entire €748 million it needed in its capital hike, leaving a capital gap of€70 million, Euro2day says. Measures to fill the hole are expectedto be finalized by Monday.


CET1 needs at Nordea,Handelsbanken: The Swedish FSA increased the Common Equity Tier 1 ratiorequirement for Nordea Bank AB(publ) to 17.3%. Nordea, which had a CET1 ratio of 16.8% at the endof June, said it expects to meet the requirement by the end of the thirdquarter. The bank also said a final decision on its dividend policy will betaken by its shareholders meeting in 2017.

* Meanwhile, saidthe Swedish FSA assesses that its requirement for CET1 capital at 2016-endcorresponds to a 21.1% CET1, Reuters writes. The bank's CET1 ratio at the end ofJune was 23.0%.

* Separately,Handelsbanken appointed Carina Åkerström deputy group CEO. Åkerström currently serves as head ofHandelsbanken in Stockholm.


Russian central bankoverhaul: Russian central bank head Elvira Nabiullina took overresponsibility for monetary policy from First Deputy Dmitry Tulin, who willtake responsibility for banking supervision, replacing Mikhail Sukhov andAlexei Simanovsky, Vedomosti,Kommersant and RBK Dailyreport. Sukhov will leave the central bank, while Simanovsky will serve asNabiullina's adviser. Nabiullina said that the current supervision system needsan overhaul because it is unable to solve problems in the banking sector.Bloomberg News also reports.

* Vnesheconombank units GLOBEX Commercial Bank JSC and were excluded from thecentral bank's list of lenders in which asset managers can keep pension fundsas well as funds under military mortgage programs, Kommersant reports.

* The Russian Ministry of Agriculture is considering cuttingfunds earmarked for the 2017 recapitalization of to 5billion rubles from 10 billion rubles, Vedomostireports.

* The joint venture between 's SantanderConsumer Finance and Banque PSA Finance, the financial arm of automobile groupPSA Peugeot Citroën, is now fully operational in Poland, Expansión reports.

* PZUSA presented its new capital and dividend policy through 2020,under which not more than 20% of profits will be used to finance organic growthand innovations and up to 30% earmarked for potential M&A, Puls Biznesu reports. No less than 50% will be recommendedfor dividend payments.

* As of July 2017, the Czech central bank will have theauthority to set mortgage loan parameters for banks, E15 says.


Asia-Pacific: Australian banks to face probe; Canadian fund manager to buy stakein Edelweiss unit

Middle East & Africa: Kenya's Family Bank to shed jobs; Mozambican banks 'in goodhealth'

Latin America: Colombians reject FARC peace deal; MAPFRE Chile gets new CEO

North America: Janus, Henderson to merge; Illinois ready to suspend business withWells

North America Insurance: Wisconsin health co-op gets capital infusion; health insurers preferHMO over PPO plan


Janus,Henderson Global execs see shared industry vision as drivingmerger: The principal figures in a merger between Janus Capital andHenderson Group are confident that a proposed transaction will help spur diversification,while helping the companies expand their global presence.

Santanderlowers forecasts for UK, but analysts see light in emergingmarkets: The fallout of Britain's vote to leave the EU prompted adownward revision in targets for Santander's U.K. operations, but analystsexpressed optimism about units in a number of emerging markets, includingBrazil.

Data Dispatch:UK Lloyd's market a top target for deal-hungry, deep-pocketed insurers:Lloyd's of London has become a popular hunting ground for companies willing topay a premium for international growth, after Canada Pension Plan InvestmentBoard became the ninth acquirer in less than two years to pay more than $1billion for a Lloyd's platform.

Xana Kakoty, Ed Meza,Danielle Rossingh, Esben Svendsen, Beata Fojcik, Thanasis Kakalis, Ali Kayalar,Heather O'Brian, Brian McCulloch, Praxilla Trabattoni and Mariana Aldanocontributed to this report.

The Daily Dose has aneditorial deadline of 7 a.m. London time. Some external links may require asubscription.

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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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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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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