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RBS unveils ring-fenced face; layoffs loom at ING; Sberbank's blockchain push

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

RBS unveils ring-fenced face; layoffs loom at ING; Sberbank's blockchain push

Brussels draws lineon bank capital rules: European Commission Vice President ValdisDombrovskis warned that Brussels would reject any banking reforms that couldlead to a significant increase in the overall capital requirements of Europeanbanks, the Financial Times writes.BloombergNews and Reutersalso have reports.

* Meanwhile, ECB Governing Council member Ewald Nowotny saidEurope is not facing a new banking crisis and is instead in a"transitional and learning phase," Reuters reports.

* Separately, ECB Governing Council member Boštjan Jazbecsaid it remains unclear whether buying stocks would be an appropriate tool forthe central bank to boost inflation and growth in the eurozone, Reuters reports.Jazbec also said the ECB is looking for ways to make its quantitative easingprogram more efficient, Bloomberg News notes.

* Inflation in Germany and Spain increased in September, inwhat is considered a sign that the ECB's loose monetary policy is producingresults, Reuters notes.

* Data from Thomson Reuters Equity Capital Markets showedthat year-to-date equity fundraising across the globe declined 30% from a yearearlier to $463.5 billion despite an increase in the third quarter, Reuters reports.Bankers expect conditions to improve over the next two quarters, but equitydeals are unlikely to reach 2015 levels.

* IMF research indicates that the rise of the shadow bankingsector is giving monetary policy a boost, Bloomberg News reports.The fund also found that shadow banks tend to adjust balance sheets faster thantraditional financial institutions.

* Deutsche BankAG, UBS GroupAG and Royal Bank ofScotland Group Plc are considering selling their shares in TradewebMarkets LLC, insiders tellBloomberg News. Potential buyers also approached and about their stakesin the New York-based bonds and derivatives trading system.


RBS unveilsring-fenced structure: RBS unveiled this morning a sweepingoverhaul of its structure and banking brands as it mapped out plans toseparate its retail operations from its riskier investment business by 2019.Among other changes, the lender said its ring-fenced bank would be calledNatWest Holdings, comprising its core NatWest, Coutts & Co., Ulster BankLtd. and Ulster Bank Ireland DAC brands.

* HeliosUnderwriting Plc is looking to place through an accelerated bookbuildingprocess up to 3.5 million new ordinary shares to raise £5.25 million. Thecompany seeks to raise a further £3.2 million through a conditional open offerto existing shareholders.

* Fiera Capital Corp. and Charlemagne Capital Ltd. agreed on the terms of an offerby the former company to acquire Charlemagne Capital.

* The U.K. Financial Conduct Authority launched aconsultation on its third set of implementation proposals for the Markets inFinancial Instruments Directive II. The key proposals, which include extendingthe telephone taping requirement for certain bankers to financial advisers, arepart of the regulator's crackdown on bad behavior and market abuse, The Daily Telegraph notes.

* The Association of British Insurers signaled that it willseek changes to the Solvency II regime post-Brexit, accordingto the Financial Times.

* U.K. Chancellor Philip Hammond said the government willend its Help to Buy scheme at the end of 2016, Sky News reports.

* Irish Finance Minister Michael Noonan said an IPO of 25%of Allied Irish BanksPlc is possible in 2017 if market conditions improve, Reuters reports.


Commerzbank 4.0:Commerzbank AG willscrap 7,300 net jobs, cancel its dividend "for the time being" andtarget a 6% return on tangible equity by 2020 under its "Commerzbank4.0" strategy. The restructuring process will cost the lender €1.1 billion.

* Commerzbank's head of corporate lending, Markus Beumer, isset to leave by October-end as the group seeks to split up the unit heoversees, Reuters reports.

* UBS Group CEO Sergio Ermotti said the lender experienced a"challenging" third quarter and is mulling over ways of passing onnegative interest rates to a "broader client base" than justcorporate depositors and wealthy private account holders, Handelszeitungnotes.

* Meanwhile, UBS opened a technology lab at its Hong Kongbranch that will function as a think tank for innovative fintech solutions,

* Separately, Deutsche Bank openedits digital factory in Frankfurt where approximately 800 software and ITspecialists will develop new digital banking products.

* Ralph Müller, board member for corporates and markets atDeutsche Postbank AG,toldHandelsblatt that the bank wants to expand its market share of creditvolume for small and medium-sized enterprises to 50% and increase the number ofbranches specialized in advising corporate clients to 50 from 15 in themedium-term.

* Sascha Klaus, new CEO of , toldBörsen-Zeitung that he wants to increase the bank's business incommercial property. He also said he doubts whether a discussed merger ofBerlin Hyp with DekaBank DeutscheGirozentrale and Landesbank Hessen-Thüringen Girozentrale would makesense.

* Russia's deposit protection fund plans a lawsuit againstMeinl Bank AG inrelation to an escrow loan it granted to now-bankrupt Moscow-based Witas Bank,Die Presse reports.

* Private health insurers in Germany will raise premiums byup to 12% beginning in 2017, Frankfurter Allgemeine Zeitung writes.Stuttgarter Zeitung also has a report.


Layoffs loom at ING:ING Groep NV, whichwill announce its restructuring plans Monday, is preparing for a majorreorganization, Het Financieele Dagbladreports.CEO Ralph Hamers says thousands of jobs are on the line. Accordingto L'Echo, in Belgium, the plan couldinvolve the merger between ING and subsidiary Record Bank. Meanwhile, De Tijd writes,citing La Capitale, that several jobcuts are expected at ING BelgiëNV, with about 4,000 employees to be affected.

* Fintech fund NewAlpha AM and invested more thanhalf of the €7 million raised by mobile payment platform Lydia, L'Agefi says.

* Nethys Group is taking a 25% stake in brokerAlliance-Bokiau for €1.4 million and has an option to take over 100% of thecompany, L'Echo writes.


BPI may pull NovoBanco interest: may drop out of therace to buy Novo BancoSA due to opposition from leading shareholder , which has launched afull takeover bid for BPI, BloombergNews and DinheiroVivo report. Diário Económico, Expresso and Jornal de Negócios also cover this news.

* NovoBanco will have to cut another 500 jobs if the bank is not sold by the end ofthe year, Jornalde Negócios says. The paper adds that a government resolutionto extend maturities on state loans to the country's bank resolution fund didnot assume any revenue from the sale of Novo Banco, meaning it couldtheoretically be sold for €1.

* Some1,000 former customers of filed a classaction against the governor of the central bank and the state over theinstitutions' handling of the bank's collapse, Económico and Expresso report.

* MAPFRESA will appoint Fernando Mata Verdejo CFO, effective Jan. 1, 2017,Reuters reports.Esteban Tejera Montalvo, head of finance, is set to retire at year-end.

* BancoSantander SA is holding its annual Investor Day in London today topresent its updated strategic plan and objectives for 2018, Expansión writes.


Atlante II could seeOctober launch: The Atlante II fund will be ready to be kicked off bymid-October and will have an endowment of €3 billion, Il Sole 24 Ore writes.

* The Uilca union, which along with Fabi represents the majorunions of Banca Popolare diMilano Scarl, said it will vote in favor of a merger withBanco Popolare SocietàCooperativa, MF reports.

* The supervisory and management boards of are onalert for a meeting today to approve a nonbinding offer for , and Cassa diRisparmio della Provincia di Chieti SpA, three of the four bailed-outlenders, MF writes. According to Il Messaggero, UBI is willing to pay less than €400 million.Reuters also reportson this story.

* The industrial plan that willpresent Oct. 11 includes 1,000 redundancies, MF writes. Union sources tell LaRepubblica redundancies are expected to total 2,000.

* The findings of the ECB's probe into are expected to bereleased in November, MF reports.

* After completing a financial turnaround, faces an industrialturnaround, CEO Philippe Donnet told Il Sole 24 Ore.

* Following reports thatAttica Bank SA isreluctant to comply with the central bank's directives, the Greek bank said itis willing to follow the Bank of Greece's instructions and plans to propose anew business plan, Kerdos reports.The lender yesterday reporteda first-half group after-tax loss of €8.7 million, compared to the year-agoloss of €300.3 million.


Ex-Danske exec headsFSA: Former CFO HenrikRamlau-Hansen was named chairman of Finanstilsynet, the Danish FSA, Børsen reports.

* Danishbanks are bolstering the surveillance and reporting side of their operations tomore effectively comply with anti-money laundering regulations, Politiken reports.

* The Danish Tax Authority paid nearly 6 million kroner inexchange for information on Danish citizens exposed in the Panama Papers,Bloomberg News reports.


Sberbank inblockchain push: PAO Sberbankof Russia joined the Hyperledger blockchain project, Kommersant reports. Sberbank is also a member of the R3 blockchain consortium.

* A tool thatwill help Russian banks refinance mortgages by issuing mortgage bondsguaranteed by the Agency for Housing Mortgage Lending will become available tolocal lenders next month, Kommersant reports.

* The Czech central bank delayed the earliest possible endof FX interventions until the second quarter of 2017, Reuters reports.

* The Ukrainian central bank intends to introducemarket-makers, which will limit the access of lenders to the regulator's forexauctions, reports.

* The banking agency of theFederation of Bosnia and Herzegovina decided to revoke the license of PrivrednaBanka Sarajevo due to its merger with BOR Banka, SEENews reports. The merged lender will provide services asPrivredna Banka Sarajevo.

* FitchRatings upgraded the viability ratings of Kereskedelmi es Hitelbank Zrt, and to reflect thestabilization of the operating and regulatory environments for Hungarian banks.


Asia-Pacific:ADB to lend Bangladesh US$8B; Fedissues consent order to China AgBank

Middle East & Africa: New ratings for Iranian banks; Kenyan rate cap boostslending

Latin America: Generali selling Guatemalan business; no agreement in Brazilianbanking labor strike

North America: Senators not done with Stumpf; Scottrade Financial said to be forsale

North America Insurance: Assured Guaranty to acquire MBIA UK Insurance; Justice Departmentamends lawsuit to block Anthem/Cigna deal


Commerzbank's'ambitious' 6% return target provokes skepticism: A 6% return ontangible equity would be unlikely to cover Commerzbank's cost of capital, butanalysts nevertheless described it as ambitious given recent history.

Greek banksoffload recycled politicos, but bad loans remain: National Bank ofGreece must find a new chairman while its peer Piraeus Bank has been on thehunt for a new CEO since January. New Greek laws againstpoliticians-turned-bankers, plus towering NPL stocks, mean that the pool of candidatescould be small.

Data DispatchEurope: State aid rumors haunt Deutsche Bank amid capital fears:Rumors of German state aid continue to emerge as Deutsche Bank struggles tomeet its capital and earnings targets.

Risk &Regulation: NAIC leader warns Congress that Germany could face reinsurancemarket retaliation for Solvency II measures: A successful insurancecovered agreement would prevent jurisdictions from penalizing each other, theFederal Insurance Office director said.

Xana Kakoty, ArnoMaierbrugger, Meike Wijers, Gerard O'Dwyer, Beata Fojcik, Thanasis Kakalis, AliKayalar, Yael Schrage, Stephanie Salti, Praxilla Trabattoni and Helen Poppercontributed 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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