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Wall Street moves through Sept. 28

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

Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

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

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


Wall Street moves through Sept. 28

S&P Global MarketIntelligence presents a weekly rundown of selected executive management changesamong the major Wall Street investment banks and other notable moves. Thechanges are listed by announcement date in reverse chronological order.

Sept. 28

Bailey Southwell & Co. hiredStephen Scott as a managing director and Lance Bell as senior vice president inits Nashville office, the Nashville Postreported. Scott previously served as managing director and Bell served as adirector at Avondale PartnersLLC.


UBS Group AG named Bob Foresman vice chairman of its investment bank,effective Oct. 3, Reuters reported. Foresman, who previously served as head ofBarclays Plc'sRussian business,will be based in the U.S.


Scott Margolis as a managingdirector and head of convertible sales and trading. Prior tojoining JMP Securities, Margolis was a managing director at


Former executives David Schiff and Andrew Dym launched InnovatusCapital Partners LLC, a New York-based independent investmentadviser and portfolio management firm.

Schiff and Dym worked as portfolio managerand partner, respectively, for the Perella Weinberg asset based value strategy.Innovatus CEO Schiff and President Dym are joined by Amy Cohen, head ofmarketing and investor relations, who previously worked at Perella WeinbergPartners as managing director and product strategist for the asset based valuestrategy.


FBR & Co. hired Stephen Moss, an equity research analyst whopreviously covered financial institutions for Evercore ISI. In August, dropped coverage onsome of the regional banks Moss was following.


managing director in itsinstitutional equities group. Corcoran previously was head of New York salestrading at FBR Capital Markets& Co.


Macquarie Capital Prabhu Raman and JohnWieker managing directors in its real estate group.

Raman most recently served asglobal COO and portfolio manager for Bank of America Merrill Lynch's globalreal estate investments division. Wieker joined the company from ,where he was a director in real estate investment banking.


Sept. 27

National Holdings Corp.'s board approved the of Glenn Worman asCFO, effective Oct. 10. Worman currently serves as executive vice president forfinance. Current CFO Alan Levin resigned, effective Oct. 10.


Christopher Maraimanaging director and senior analyst for biotechnology in its U.S. equityresearch department. Previously, Marai was a managing director and senioranalyst covering the biotechnology sector at Oppenheimer & Co.


Former Wells Fargo financialadvisers Larry Natale, Mark Johnson and Dino Johnson Steward Partners as foundingpartners in the company's new Albany, N.Y. office. Natale, Mark Johnson andDino Johnson collectively managed $160 million in client assets and had $1.6million in revenue while at Wells Fargo.


Investment Technology Group Inc. Ruben Costa-Santos as director andhead of foreign exchange, Reuters reported. Costa-Santos joins ITG fromDeutsche Bank AG,where he was head of foreign exchange platforms for the Americas.

Additionally, ITG named Andre Nogueiraa director in its analytics team. Nogueira earlier worked on multi-asset classtrading analytics at Bloomberg LP, Reuters reported.


Sept. 26

A team of financial advisersjoined afterleaving MorganStanley, InvestmentNews reported.

The team, which managed more than$600 million of client assets at Morgan Stanley, will be headed by MichaelDechiario, managing director, and Thomas Charmley, senior vice president. Theteam also includes Thomas Soden, senior vice president; Dean Vetsikas,associate vice president; and Stacy Robinson, a financial adviser, the newsoutlet said.


hasadded four managingdirectors in 2016, and the company has a goal to add significantly more in2017, CEO Scott Bok said.Speaking Sept. 27 during a JMP Securities investor conference, he said it ispossible that Greenhill can add one or two more managing directors beforeyear-end.


Brandon Eck, former managing director at ,joined investmentbanking firm Mufson Howe Hunter as managing director and head of technologyservices coverage.


Former Raymond James & Associates Inc. investment bankerKeith Meyers has taken over as head of Keefe Bruyette & Woods Inc.'s diversified financialsinvestment banking after the departure of Halle Benett, S&P Global MarketIntelligence reported.


Marc van Grondelle joined Lincoln International LLC as a managing director andhead of joint venture and partnering advisory, along with other senior membersof his team from KPMG. Van Grondelle previously served as a partner and globalhead of joint venture and partnering advisory at KPMG.


Sept. 23

Laurie Fitch is leaving Morgan Stanley to join PJTPartners Inc. as a partner in London, Bloomberg News reported.Fitch served as co-head of EMEA industrials at Morgan Stanley.


Bryan Weadock, Bank of America Corp.'s co-head of global fixed-incomesales who took a personalleave in March, will not return to the bank, Business Insider reported.Sanaz Zaimi will be the sole head of the unit, according to the report.


Heidi Cruz is returning to Goldman Sachs Group Inc. to assume a newly createdposition, Bloomberg News reported. Before going on unpaid leave last year, shewas a managing director and headed the Houston office, to which she will nowreturn. 


SeanDargan joined Wells Fargo Securities LLC from WellsFargo initiated research coverage on four life insurance companies and resumedcoverage of eight with Dargan.


Sept. 22

Deutsche Bank tapped Mark Fedorcik, former head of debt capital markets, to succeedPaul Stefanick as head of the U.S. corporate and investment bank, The Wall Street Journal reported.Stefanick has been made global chairman of the business.


Andrew Halliday joined Hugh Johnson Advisors LLC as a managing director. Hallidaywas previously the president and chairman of Halliday Financial LLC.


StifelFinancial Corp.'s Miller Buckfire Richard Klein managing director inNew York. Klein joins the investment bank from , where he was a managingdirector in the restructuring and recapitalization group.


Specialty finance investment bankers Keith Meyers, MichaelJones and James Chester left Raymond James & Associates, S&P GlobalMarket Intelligence reported.


Eric Hirschfield joined Rothschild & Co's Rothschild Global Advisory as amanaging director and head of its new Chicago office. Hirschfield previouslyserved as a managing director at Goldman Sachs.


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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Technology, Media & Telecom
Broadband Only Homes Skyrocket In 2018 Validating Top MSOs Connectivity Pivot

Highlights

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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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:https://eba.europa.eu/documents/10180/2419200/2018-EU-wide-stress-test-Results.pdf

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2019 Credit Risk Perspectives: Is The Credit Cycle Turning? A Market-Driven View

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