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BoE holds rate; Intesa denies Generali bid; Turkish banks downgraded

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Banking Essentials Newsletter: May Edition


BoE holds rate; Intesa denies Generali bid; Turkish banks downgraded

* ECB Supervisory Board member Julie Dickson said the bank's Single Supervisory Mechanism would give considerable attention to any pan-European takeovers or mergers between lenders. Dickson's comments come as the SSM is set to assess the proposed merger between London Stock Exchange Group Plc and Deutsche Börse AG, as some of their units are licensed as banks, Reuters notes.

* Banks are examining loopholes, including back-to-back trades and reverse solicitation, that could allow their U.K. operations to continue doing business with EU clients even after the U.K. loses its passporting rights to the bloc's single market following a hard Brexit, the Financial Times writes.

* An ECB study published yesterday showed that resolving any one of the euro area's 26 largest banks by applying the bail-in tool of the EU's new bank failure rules would not bring down another lender, Bloomberg News reports. Spillovers among the top group would be small and those outside of the network contained.

UK AND IRELAND

* The U.K. government published a so-called white paper on its strategy for negotiating the country's departure from the EU. It broadly reflects the 12 priorities Prime Minister Theresa May laid out during a Jan. 17 speech, which include controlling immigration and "taking control of our own laws," as well as providing as much certainty as possible throughout the process and securing free trade with the EU and new trade agreements with other countries.

* As expected, the Bank of England kept its base rate unchanged at 0.25% and its program of asset purchases at £435 billion, including £10 billion of corporate bonds, but again raised its forecasts for GDP growth as the U.K. economy continues to outstrip its previous expectations of a post-Brexit vote slowdown.

* BoE Governor Mark Carney warned that "twists and turns" could still be ahead as the U.K. starts the formal process of leaving the EU, noting that the bank is prepared to respond accordingly, Bloomberg writes.

* Separately, Carney said attempts to relocate London-based financial markets following Brexit could pose big risks to Europe's financial stability, according to Reuters.

* A British judge yesterday sentenced former HBOS Plc bankers Lynden Scourfield and Mark Dobson, along with four business partners, to between 3.5 and 15 years in jail for orchestrating a $307 million loan scam, Reuters reports.

* The EU's Single Resolution Board advised Bank of Ireland that the preferred resolution strategy for the lender is a single point of entry bail-in strategy through a group holding company, which would be established as the lender's parent company. Meanwhile, the preferred resolution strategy for Allied Irish Banks Plc is a single point of entry via a holding company.

GERMANY, SWITZERLAND AND AUSTRIA

* Andreas Dombret, a member the Deutsche Bundesbank's board, opposed tougher banking regulations for smaller banks in Germany that could arise from the amended Basel III regime, Handelsblatt reports. Having the same rules for large international banks and investment giants and small regional savings cooperatives is "inappropriate," Dombret said.

* Deutsche Bank AG CFO Marcus Schenck said the bank has "clear intentions" to repay its outstanding contingent convertibles bonds this year without having to dip into its reserves, Handelsblatt writes.

* Allianz Group acquired the remaining 33.5% stake in Allianz-Irish Life Holdings that it does not own for €160 million from Canada Life Financial Corp. and other shareholders.

* Georg Fahrenschon, president of the German Savings Bank Association, said the cumulated operating results of German savings banks dropped by 7% or €800 million to €10.8 billion in 2016 from 2015, mainly owing to the low interest rate environment, Handelsblatt reports.

* Meanwhile, Johannes Riegler, president of the association of German public banks, said pressure on earnings will persist "for several years" and banks will have to adapt their business models toward higher efficiency and to start charging for services that were previously free to master these challenges, Handelsblatt writes.

* Hannover Re raised its guidance for group net income in 2017 to more than €1 billion, up from more than €950 million previously.

* Julius Bär Gruppe AG acquired Zurich-based Wergen & Partner Vermögensverwaltungs AG and will merge it into its own wealth management unit WMPartners Wealth Management Ltd.

* Swiss regulator FINMA ordered Coutts & Co Ltd. to disgorge CHF6.5 million of unlawfully generated profits related to transactions with 1Malaysia Development Bhd., the scandal-plagued Malaysian sovereign wealth fund.

* The Swiss government plans to extend its automatic exchange of information on financial accounts network by 23 countries, Handelszeitung notes.

* BAWAG P.S.K. ran into trouble with Austria's financial market supervisory authority because it refused to open so-called "basis accounts" for a number of clients even if they are legally entitled to such an account, Die Presse notes. Der Standard also has a report.

FRANCE AND BENELUX

* CNP Assurances SA has terminated its 700.0 million Brazilian reais agreement to acquire a 51% stake in Pan Seguros SA and Pan Corretora from Banco BTG Pactual SA, saying that some of the conditions precedent to the deal's completion failed to be met.

* Banque Edel SNC has taken a minority shareholding in fintech Morning with a view to refocusing the activity of the startup on services for companies, Les Echos writes. Morning founder Eric Charpentier has left the company and has been replaced by Edel management.

* Delta Lloyd NV Chairman of the Executive Board Hans van der Noordaa will leave the insurer once the company is taken over by NN Group NV, Het Financieele Dagblad reports.

* Rabobank chief executives could face court over crimes of a Mexican drug cartel, De Volkskrant writes. Criminal Lawyer Goran Sluiter filed a complaint with the Dutch public prosecutor after Rabobank's wholly owned subsidiary was accused of laundering drug money.

SPAIN AND PORTUGAL

* Banco Popular Español SA today reported a loss attributed to the controlling company of €3.49 billion for 2016, compared to a year-ago profit of €105.4 million, and said its nonperforming loans coverage ratio rose about 10 percentage points to 52.3%. The full-year 2016 result was affected, among others, by €229 million in provisions for the sale of interest rate floors on mortgage contracts, €4.20 billion in loan provisions and a €240 million impact from lower profitability of Targobank SA.

* U.S. fund Blackrock announced it had strengthened its position as a shareholder in Spanish banking groups Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, Europa Press reports.

* Four shareholders of Banco BPI SA have filed a judicial claim against the sale of the bank's 2% stake in Banco de Fomento Angola SA to Unitel, Dinheiro Vivo reports. The bank claims that the base of the arguments used to invalidate the transaction are flawed and says it will challenge the claim.

ITALY AND GREECE

* Intesa Sanpaolo SpA denied that it was working on an all-share bid for Generali, Reuters says. The news agency notes that it is unclear whether Intesa has dropped its interest in Generali completely or exploring different options.

* Italian bank rescue fund Atlante said it would play no role for now in the disposal of bad loans by Banca Monte dei Paschi di Siena SpA, Reuters writes.

* BPER Banca SpABanca Popolare dell'Emilia Romagna SC will write down the value of its €100 million investment in the Atlante fund, MF says, the day after the Cariplo banking foundation announced it was writing down the value of its own €500 million investment.

* State aid is one of the options being considered to recapitalize Banca Popolare di Vicenza SpA and Veneto Banca SpA, according to Paolo Petrignani, CEO of Atlante manager Quaestio, Reuters reports. Atlante owns both banks. Veneto Banca has issued €3.5 billion in two state-guaranteed bonds, Reuters also says.

* The Cariverona foundation will subscribe a maximum of 73% of its current stake in UniCredit SpA in the bank's €13 billion capital increase for a maximum investment of €211.6 million, diluting its stake to about 1.8% from a current 2.23%, MF says.

* The ECB's Governing Council did not object to the Bank of Greece's request to reduce the ceiling on emergency liquidity assistance available to Greek banks by €200 million to €46.3 billion until Feb. 15.

NORDIC COUNTRIES

* Swedish investment company Öresund is to become the majority owner of Norwegian insurance company Insr Insurance Group after a private placement, Realtid reports. Öresund was assigned 6 million shares at a price of 7 Norwegian kroner per share, and will be the largest shareholder with 16% of the share capital.

* DNB ASA has appealed a ruling by the Oslo District Court that the Norwegian Consumer Council may bring a case on behalf of 180,000 customers of DNB Norway, Avanse Norge and Postbanken Norge as a class action, Dagens Næringsliv reports. DNB said that the conditions for group process have not been met and that there are significant differences between the unitholders.

* Nordnet AB (publ) will be delisted from Nasdaq Stockholm, with the last day of trading of shares being Feb. 17.

EASTERN EUROPE

* The Russian government approved a 17 billion Russian ruble privatization program, under which it plans, among other things, to reduce its stake in JSC VTB Bank from 60.9% to 25% plus one share within three years, Reuters writes.

* Consumer lending started to grow again in Russia in 2016, with state lenders playing a key role in the process, Kommersant says. Five state-owned banks expanded their portfolio of loans to individuals by 464.3 billion Russian rubles.

* Fitch Ratings downgraded the long-term foreign-currency issuer default ratings of 18 Turkish banks and their subsidiaries following a similar move on Turkey's long-term foreign-currency issuer default ratings.

* Yapi ve Kredi Bankasi AS reported full-year 2016 consolidated net profit of 2.93 billion Turkish lira, compared to the restated 1.91 billion lira a year ago.

* Türkiye Is Bankasi AS reported full-year 2016 consolidated net profit of 5.68 billion lira, compared to 3.74 billion lira in the year-ago period.

* ING Bank Slaski SA expects 2017 to bring many ownership changes in the Polish financial sector and will also be on the lookout for potential M&A targets, Rzeczpospolita reports.

* State-controlled PZU SA is looking for acquisition opportunities abroad and will support its unit, Alior Bank SA, in potential M&A deals if interesting opportunities arise, news agency PAP reports, citing the Polish Development Ministry.

* Polish FSA head Marek Chrzanowski said Poland would like the European Bank Authority and other financial institutions to move their offices from London to Poland after Brexit, Reuters reports after Puls Biznesu.

* Zavarovalnica Triglav dd signed an agreement with Germany's KGAL Beteiligungsverwaltungs to establish a new company, Trigal, which will serve as a regional platform for alternative investments, SEENews reports.

IN OTHER PARTS OF THE WORLD

Asia-Pacific: Bank of England holds rates; ASEAN governments ramp up spending

Middle East & Africa: Loan cap weighs on Kenya growth; Emirates NBD sees retail lending surge

Latin America: CNP cancels Pan Seguros deal; Bradesco's Q4'16 profit falls 17.5%

North America: Scaramucci reportedly loses liaison gig; Hamilton Lane files for IPO

North America Insurance: NAMIC seeks to close Federal Insurance Office; Medicare Advantage rates may rise

NOW FEATURED ON S&P GLOBAL MARKET INTELLIGENCE

Deutsche Bank's Cryan: No strategic change, but return to profitability in 2017: The German lender will not change its strategic course, the CEO said in a press conference after the release of its 2016 results.

London PE funds look to Luxembourg for post-Brexit single-market access: While industry experts expect London to remain a pre-eminent center for private equity in Europe after Brexit, its relative importance will most likely decline, with some fund managers already looking to set up EU-based entities.

ING CEO warns of further margin pressure in Belgium: Investors should brace themselves for a further deterioration in margins in the Belgian retail business, ING CEO Ralph Hamers said.

CaixaBank expects modest interest income growth in 2017, trims 2018 return goal: CaixaBank expects an improvement in net interest income in 2017 as lending grows and funding costs fall, but profitability will continue to come under pressure from the low interest rate environment.

DNB sees positive impairment trends as it eyes restart of share buyback: Exposures at default in the oil-related sector remained a "challenge" for the Norwegian lender but it saw no spillover into its wider portfolio, CFO Bjørn Erik Næss said.

Danske Bank bullish on wealth management: The Danish lender's recently launched wealth management business is in pole position to capitalize on the "mega-trends" of asset accumulation and ageing populations, CEO Thomas Borgen told analysts.

Swedbank cautious on outlook for oil as impairments rise: Swedbank CEO Birgitte Bonnesen said she is still cautious on the prospects for lending to the oil and gas sector, despite a rebound in oil prices.

Sheryl Obejera, Arno Maierbrugger, Meike Wijers, Esben Svendsen, Beata Fojcik, Thanasis Kakalis, Ali Kayalar, Heather O'Brian, Stephanie Salti, Praxilla Trabattoni and Mariana Aldano contributed to this report.

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