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Brexit triggered; Deutsche Börse-LSE merger shot down

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Brexit triggered; Deutsche Börse-LSE merger shot down

S&P Global Market Intelligence offers our top picks of banking news stories and more published throughout the week.

UK pulls Brexit trigger

* Britain has formally invoked Article 50 of the Lisbon Treaty to begin its exit from the EU. The U.K. wants a future trade agreement to retain as much access to EU markets as possible. European Council President Donald Tusk suggested that free-trade talks between the two sides could begin before the end of 2017.

* Meanwhile, banks interested in moving their operations to Frankfurt from London due to Brexit have reportedly held "interesting discussions" with Andreas Dombret, a senior board member of the Deutsche Bundesbank.

* Business and finance lobby group Paris Europlace will hold road shows in the U.S. to encourage American business to the French capital in light of Brexit. JPMorgan Chase & Co. is said to be looking for new cities to place its Europe-based businesses, while Citigroup Inc. is reportedly considering relocating jobs from the U.K. and establishing a new brokerage in the EU in case of a "hard" Brexit.

* The ECB earlier this week warned that some EU states are engaging in a regulatory race to the bottom in order to attract U.K.-based firms looking to establish a foothold on the continent after Britain quits the union.

Deutsche Börse-LSE merger update, and other deal news

* The European Commission rejected the planned merger of Deutsche Börse AG and London Stock Exchange Group Plc, with European Competition Commissioner Margrethe Vestager saying the combination would have given the new holding company a "de facto monopoly" in fixed-income instruments clearing.

* Meanwhile, Shawbrook Group Plc's board rejected a virtually unchanged offer by Marlin Bidco Ltd., a new company jointly owned by funds handled by Pollen Street Capital Ltd. and BC Partners LLP, to take over the U.K. challenger bank. Marlin Bidco maintained its offer price of 330 pence per share for the entire issued and to-be-issued share capital of Shawbrook, plus any final dividend in respect of 2016 earnings, but changed the transaction structure from a scheme of arrangement to a takeover offer.

Loan portfolio disposals

* U.K. Chancellor Philip Hammond authorized the sale of Bradford & Bingley Plc loans to Prudential Plc and funds managed by Blackstone Group LP for £11.8 billion. The fair value of the loan book is less than its book value, reflecting the low interest rates payable on the loans.

* Bankia SA has sold a bad-loans portfolio related to its real estate exposure, valued at €103 million. The sale will reduce the bank's stock of doubtful loans by €77.2 million.

* Norwegian Finans Holding ASA unit Bank Norwegian AS agreed to sell a Swedish nonperforming loan portfolio with a book value of 585 million Swedish kronor to debt collection and purchase firm Axactor. The deal, which is expected to close April 21, will have an estimated impact of 43 million kronor on the bank's earnings.

* Credito Valtellinese SpA agreed to sell a nonperforming loan portfolio to an institutional investor. The portfolio has a gross book value of roughly €50 million and a valuation representing nearly 44% of the gross book value.

* Meanwhile, PAO Sberbank of Russia has agreed to sell Ukrainian unit PJSC Sberbank to a consortium of investors, including Latvian lender JSC Norvik Banka. The transaction is not expected to have a material effect on Sberbank Group's consolidated IFRS results.

Bottom line

* Alpha Bank AE reported full-year 2016 profit attributable to shareholders of €42.3 million, compared to a restated year-ago loss of €1.37 billion. The bank's executives warned that delays in the ongoing review of Greece's third international bailout are causing liquidity shortages, loan defaults and investment postponement, hurting both the financial sector and the wider economy of the crisis-stricken country.

* National Bank of Greece SA swung to a full-year 2016 profit after tax from continuing operations of €53 million from a loss of €2.49 billion in 2015. CEO Leonidas Fragkiadakis told analysts that targets from the Single Supervisory Mechanism for the bank to reduce its balance of soured loans in 2017 are "achievable."

* Eurobank Ergasias SA reported full-year profit of €230 million, compared to a loss of €1.18 billion in 2015. CEO Fokion Karavias said the bank was on track to reduce its €22.9 billion of nonperforming exposures by 10% before the end of 2017, in line with or even ahead of targets set by the ECB.

* Meanwhile, HSH Nordbank AG reported a full-year 2016 group net result attributable to shareholders of €67 million, down from €99 million in 2015.

In other news

* Commerzbank AG has entered exclusive negotiations with HSBC Holdings Plc to transfer its securities settlement business to the U.K.-based banking group, insiders told Reuters.

* U.S. prosecutors reportedly arrested Mehmet Hakan Atilla, a deputy general manager at Türkiye Halk Bankasi AS, on charges of conspiring to commit bank fraud and violating U.S. sanctions against Iran. Atilla is accused of colluding with Turkish-Iranian gold trader Reza Zarrab to carry out millions of dollars of alleged illicit transactions through U.S. banks on behalf of the Iranian government and Iran-based companies.

Featured during the week on S&P Global Market Intelligence

EU hints at Ukraine-style deal for Brexiting UK: The U.K. will trade with the EU on less favorable terms after it leaves the bloc, a draft document said. But there was also the prospect of a deal that could provide considerable access to the single market.

Portuguese convertible bond opens up market for others — at a price: Caixa Geral de Depositos' Additional Tier 1 issue shows investors are not completely averse to Portuguese bank bonds, but only if they come with the right price.

Russian-owned banks face Ukraine squeeze-out as bad loans soar: A hostile public and regulators are likely to push Russian state-owned banks out of Ukraine.

EU passporting for fintechs won't dim London's appeal: The EC has suggested that fintech companies might be granted European passporting rights, but this will not necessarily undercut London's appeal as a hub for fintech, industry insiders say.