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Wednesday's headlines, Financials edition

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

Wednesday's headlines, Financials edition

EUmembers at odds over new bank capital rules Financial Times
Baselgives banks breathing space over new accounting rules Reuters
Sovereigninvestors look to securities lending to boost returns Reuters
Europedrafting transaction tax law but key details still missing Reuters
Bankboards increasingly cautious about cyber security City A.M.
Riskreduction is becoming increasingly difficult for investment banks, says Moody's
'Thecheapest ETF is usually not the best,' say experts Börsen-Zeitung
ILSaids integrated approach to managing extreme events, says Geneva AssociationArtemis
Alternativecapital could fill capacity gaps left by reinsurance M&A, says FitchArtemis


Bankof England policymaker worried about spillover from EU banking woes Reuters
Treasurysays UK in 'strong place' to keep bank links with EU Bloomberg News
Pressuremounts on FCA to introduce overdraft cap City A.M.
Citygrandee backtracks over peer-to-peer lending Financial Times
Ex-FSAboss Turner turns from critic to fan of online lending Bloomberg News
MorganStanley, Aviva join chorus warning May on Brexit risks Bloomberg News
JacobRees-Mogg launches rant on UK Treasury after £66 billion annual cost reportleaked City A.M.
LondonMayor Sadiq Khan warns against 'irresponsible hard Brexit' Sky News
Topbankers warn of risk of 2017 exodus from Britain Reuters
Bankerswarn Brexit could force jobs out of London The Guardian
Cityminister reassures financial services sector it will get a seat at the Brexitnegotiations table City A.M.
UKgovernment bond trading volume gets a huge Brexit boost Reuters
UKpensions giant issues Brexit warning to Irish clients Irish Independent
UK-basedinsurers urged to consider Switzerland, Liechtenstein for relocation afterBrexit
Insurance Day
Irelandto divert millions in protection for Brexit fall-out Sky News
Irelandto set up 'rainy day fund' as buffer against Brexit shock The Guardian
Irishfinance minister to target vulture funds with €50 million tax bill The Irish Times
BritishInsurance Brokers Association hostsmeeting between SSP and brokers Post

Allianz UK
AllianzUK completes employers' liability run-off sale Insurance Times

Allied Irish Banks
AIBIPO never decided to be in 2017, says Irish finance minister Reuters

AonRisk Solutions agrees to acquire cyber risk specialist Stroz Friedberg Post

Atlas Mara
BobDiamond to become interim chairman of Atlas Mara Financial Times

Avivaoffers leak detector to policyholders Post

Bupaappoints Alex Perry CEO off Bupa Insurance Post

Esure Group
Esurereleases timeline for Go Compare demerger Post

Old Mutual
OldMutual receives approaches for UK operation Financial Times
OldMutual Wealth's client flows drop as parent plans break-up Reuters

Permanent TSB Group Holdings
Fearsof industrial action as Permanent TSB staff 'overwhelmingly' reject pay dealIrish Independent

Royal Bank of Scotland Group
WhyRBS may be facing its most damaging scandal yet The Daily Telegraph

Willis Towers Watson
WillisTowers Watson looking to strengthen presence in France Les Echos


Bankersworry over Geneva's status

Aareal Bank
AarealBank wants to learn from 'Bankathon' Börsen-Zeitung

Commerzbanknet job cuts stand at 7,000 not 9,600, says trade union Verdi Reuters
Commerzbankcutting only 7,000 jobs instead of 9,600, says Verdi

Credit Suisse Group
CreditSuisse hires China investment banking head from UBS - memo Reuters
MarcSmart to join Credit Suisse's investor relations team Reuters

Deutsche Bank
DeutscheBank Asia Pacific wealth management head leaving to join UBS - sourceReuters
DeutscheBank said to boost private bond sale to $4.5 billion Bloomberg News
BoEofficial hits out at Deutsche Bank stress test Financial Times
EUfinance ministers did not discuss Deutsche Bank, says Slovakia's KazimirReuters
DeutscheBank wants to play greater role in stock exchanges, market placements

Deutsche Börse
RocketInternet to join SDAX, says Deutsche Börse Reuters

DF Deutsche Forfait
DeutscheForfait names two board members Börsen-Zeitung

HSBC Private Bank (Suisse)
HSBCPrivate Bank brings former Credit Suisse banker to board of

UBS Group
UBS:Appetite for smaller rolls
Citadelhires top UBS ETF trader Kirk Reuters


ABNAMRO board member leaves De Telegraaf

Achmeacompletes acquisition of Staalbankiers portfolio De Telegraaf

Allianz France
AllianzFrance, Monetivia want to upset life market L'Agefi

Covéanames commercial underwriting director Insurance Times

Delta Lloyd
Majorshareholder unlikely to move forward with full takeover of Delta Lloyd De Telegraaf

Euronextreorganizes its rating services to improve efficiency L'Agefi

La Banque Postale
LaBanque Postale selected to finance part of rolling stock renewal L'Agefi

Natixisexpanding sales Börsen-Zeitung


Portugueseprime minister says UK ties will weather Brexit Bloomberg News
Portuguesebanks increase funding from ECB
Jornal De Negócios
Spanishminister says local banks will be least affected by Basel III revisionEuropa Press
DeGuindos denies Spanish banks received discriminatory treatment in EBA stresstest Europa Press

Millennium BCP
MillenniumBCP entices old customers to fixed rate Jornal De Negócios


Italy'sinsurance crisis stumbles over financial tampering with Ligresti arrest WirtschaftsBlatt
FormerFonSai CEO, Ligresti sentenced to 6 years MF
Bankof Italy suffering increasing with rise in mortgage rates ANSA
Greekfinance minister told Draghi that country is bankrupt, says Greek central bankgovernor
Greeceanxious to tap financial markets as soon as possible, says Greek central bankgovernor Reuters
Fitch:Greece disbursement shows progress, ongoing challenges Reuters

BancaCarige tightens on NPL disposal MF

BancaMediolanum CEO warns not to overdo restrictive rules MF

BancaMonte dei Paschi di Siena
Majorshareholders considering exchanging shares for Monte dei Paschi debt
Jornal De Negócios

BancaPopolare di Milano
PopolareMilano CEO 'serene' on outcome of ECB inspections on loans Reuters

BancaPopolare di Vicenza
PopolareVicenza considers partial reimbursement to shareholders Reuters
PopolareVicenza seeks peace with shareholders MF
Courtmeeting for Popolare Vicenza's restructuring plan MF

UniCreditnames German equity capital markets co-head Reuters
UniCreditrevamps investment banking team

Unionedi Banche Italiane
UBIgiven 15 days for good bank portfolio acquisition MF

UnipolGruppo Finanziario
Fitchaffirms Unipol Gruppo Finanziario IDR at BBB-; outlook stable Reuters


CopenhagenStock Exchange starts hunt for new CEO FinansWatch

DanskeBank offers 8,000 employees voluntary severance package Politiken
DanskeBank asks thousands of employees to consider retirement BerlingskeBusiness
DanskeBank hopes to avoid further layoffs after massive offer of resignations Børsen

DNB Bank
DNBsticks to Reg S dollar for AT1 return Reuters

SkandinaviskaEnskilda Banken
SEBlaunches new ethical fund FinansWatch

Trygposts Q3 results FinansWatch


Russiancentral bank to ensure interests of policyholders regarding MTPL insurers Vedomosti
Russianbanks have reduced country's foreign debt at $50 billion
Russian-ownedERB bank failing to meet obligations, says Czech central bank Reuters
Slovenia'sbanks perform better as economy improves Reuters
Romaniapostpones vote to approve Swiss franc loan conversion Reuters

ExpobankCZ completes acquisition of Serbian lender Marfin Bank E15

MonetaMoney Bank
ArcaCapital sues over sale Agrobanka, GE Money Bank E15

VTB Bank
Brexitset to push VTB's Europe hub out of London Financial Times

The Daily Dose Europe "Headlines" editionaggregates banking, financial services and insurance headlines from thewebsites of a limited number of major European publication titles andnewswires, with an editorial deadline of 6 a.m. London time. Some externallinks may require a subscription. Language translations to English are providedby an automated service and may not be entirely accurate.

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.

Learn more about Market Intelligence
Request Demo

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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