FT: Unicredit ready to make rival takeover for Commerzbank

The Italian bank Unicredit (UCG) is ready to make a rival takeover for German Commerzbank (CBK). According to Financial Times, the Unicredit would also merge the Hypo Vereinsbank with Commerzbank at the same time, if the deal gets through.

Deutsche Bank (DBK) and Commerzbank have been discussing regarding the bankmerger for some time now. If this deal is to be finalized, it would create the second largest banking group in the eurozone. On other hand, the future personnel layoffs have caused negative sentiment for the merger among labour unions.

None of the banks did comment the FT story.

The balance of Commerzbank is 462 billion euros and the bank has 13 million customers. The biggest owners in Commerzbank are the German Goverment (15,5%), Cerberus (5%), Blackrock (4%), Vanguard (3,1%), Capital Group Companies (2,9%) and Norges Bank (2,5%).

The bank shares were mixed today, while the Commerzbank was up 3,50 % to 7,41 euros in Germany and the Deutsche Bank was down -1,81% to 7,49 euros. In Milan the shares of Unicredit were down 1,43 % to 12,01 euros. The market cap for the Unicredit is about 27 billion euros.

 

Business Finance

Brexit: House of Lords will have their say today

The Brexit deadline is on the next week Friday. The UK Parliament voted on Wednesday that the UK approves the delay law, but it also makes it possible for the Parliament to propose different lenght of the Brexit extension than for example the Goverment has proposed. The meaning of this law was also to prevent the situation with no-deal Brexit.

The law passed the House of Commons with votes 313 – 312 and it is expected that the House of Lords will have their say about the law today.

The UK Prime Minister Theresa May and the Labour party leader Jeremy Corbyn met also yesterday in order to seek more co-operation and integration. According to several media sources, the meeting went well, and was “constructive” but there are still things to do.

According to Bloomberg News, the customs might be the area, where compromises are possible to seek and according to Chancellor of the Exchequer Philip Hammond “some kind of customs arrangements is clearly going to be a part of the future structure.”

The EU leaders summit will be next week Wednesday in Brussels and Prime Minister May would need some kind of  Brexit plan to present in order to get more extension.

According to EU Commission President Jean-Claude Juncker, EU is not giving Brexit extension and he repeated that the UK Parliament must back the exit deal by April 12th in order to get the extension to the May 22th. Otherwise the UK will be forced to longer extension and possible with the EU elections as well.

Yesterday the financial markets closed up in Wall Street. Dow Jones ended up 0,15 % to 26218 points, S&P 500 0,21 % to 2873 points and Nasdaq 0,60 % to 7895 points.

Today the trading has been mixed in the Asian markets. Hang Seng in Hong Kong has been down 0,52 % to 29 831 points, but the Nikkei has been up 0,03 % to 21 719 points. The South Korean Kospi has been up 0,12 % to 2205 points.

The sterling is up 0,11 % to 1,3173 US-dollars and the euro is up 0,08 % to 1,124 dollars.

 

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Brexit: UK Goverment and talks about the steps further

The UK Goverment is now having discussions how to proceed with Brexit, while yesterday evening the UK Parliament rejected all the proposals related to Brexit. The deadline for the UK to leave the EU is the April 12th.

According to Bloomberg News, the ministers are likely to be asked to postpone the date for leaving the block until potentially year-end or beyond in order to allow more time to resolve the deadlock in the Parliament.

Postponing the deadline would also mean that the UK would have to take part in the EU elections in May. There has also been speculation of general elections in a way out of the deadlock.

On the other hand Brexit Secretary Steve Barclay has commented  today that if the Parliament could agree the deal during this week, it could be possible to avoid the extension of the deal and the EU elections.

The UK sterling was down 0,47 % to 1,304 dollars in today´s trading. During one month period, the stocks have gained in major markets: FTSE 100 -index +3,24 %, DAX +0,8 %, CAC40- index +2,70%, S&P 500 -index +,226%, Nasdaq+3,07 % and Dow Jones -index +0,89% in New York.

 

Business Finance

UK Parliament committee: Break-up of the Big Four audit and consultancy

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The UK Parliament´s Business, Energy and Industry Strategy Committee says that it favours model that the Big Four companies should aim for the full structural break-up into audit and non-audit businesses.

The Parliament Committee has taken more target-oriented view than other reports, which have suggested that operational spilt would be enough. According to the Committee summary this way the break-up would be more effective in tackling conflicts of interest and providing proffessional argument needed to deliver high-quality audits.

According to the Committee recommendations:

  • consider extending the scope of audit to cover the entire annual report, albeit with different levels of assurance and reporting. Critical areas such as corporate governance and payment practices ought to be subject to a robust assurance process and meaningful reporting by the auditor.
  • Auditors should be encouraged and empowered by the new regulator to speak their mind openly and clearly in audit reports, without fear or favour.
  • They should call out poor management when they see it. If there are barriers to auditors taking on more responsibilities and reporting on them candidly (such as unlimited liability and skills issues), the Brydon Review should include proposals for removing these barriers
  • We believe that requiring auditors to present at the AGM (annual general meeting) is a good way to generate engagement. This direct dialogue with shareholders would also remind auditors who they are accountable to. It would require them to demonstrate their independence and evidence their willingness to challenge management to a wider audience than the Audit Committee
  • There should be a requirement in the new Stewardship Code for investors and asset owners to consider audit matters.

  • Auditors should make a presentation at the AGM to show how they have challenged management and exercised professional scepticism to underpin their audit opinion, and to raise any major issues

  • in order to be useful, information must be timely. The FRC and its successor should consider requiring companies to publish the audit report at the same time as results are announced (instead of waiting for the full annual report to be published, which often happens a month later, even though the audit report is ready and signed off before results are announced)
  • An economic separation of audit and non-audit is highly desirable. We recommend that the CMA (The Competition and Markets Authority)  at the very least implements the proposed operational split to achieve the separation of economic interests.
  • We encourage the CMA to aim for full legal separation of audit and non-audit services. The CMA should look to the long term, and not let one-off, short-term implementation costs weigh too much in its calculations. If the operational split is chosen instead, the CMA and ARGA should conduct a review of the arrangements after three years to determine whether the split has ended cross-subsidies and improved culture, independence and transparency. If not, we recommend that the CMA then move to implement a full structural break-up of the Big Four intoaudit and non-audit businesses in the UK.
  • We recommend that because of their strategic importance the Government should examine the auditing of banks to explore whether additional safeguards are required in this sector

The Committee also reminds that the Big Four companies (EY, PwC, KPMG and Deloitte) accounted for 97 per cent of FTSE 350 audits and 99 per cent of FTSE 100 audits in the years 2016-2017.

– To improve resilience and choice, the report recommends a segmented market cap and the use of joint audits, on a pilot basis, for the most complex audits to enable the challenger firms to step up, the report higlights.

The report also recommends increasing the frequency of audit rotations to seven-year non-renewable terms and (should the CMA go ahead with an operational split) a cooling off period of three years, in which non-audit services cannot be offered to a former audit client.

– Change is needed to deliver for investors, workers and the public. The Big Four may not like it, they may seek to undermine the case for reform, but vested interests should not be allowed to get in the way of positive change. We must not wait for the next corporate collapse. Government and regulators need to get on and legislate to deliver these reforms and ensure that audits deliver what businesses, investors, pension-holders and the public expect, says Rachel Reeves MP, Chair of the Business, Energy and Industrial Strategy Committee.

The report  also see the UK version of Sarbenes-Oxley as a possible outcome in the future.

– The report welcomes the Government’s commitment to consider and consult on the possible introduction of a strengthened framework around internal controls on a similar basis to Sarbanes-Oxley. The report suggests that if adapted to the UK regulatory system, a UK equivalent could make a significant contribution to improving the reliability of financial reporting, the report says.

The Business, Energy and Industrial Strategy Committee is appointed by the House of Commons to examine the administration, expenditure and policy of the Department for Business, Energy and Industrial Strategy (BEIS).

Business Finance

Brexit: New votes tonight in the Parliament

The UK Parliament is about to vote of the new indicative votes tonight. It has been speculated in the UK Media, that there will be softer Brexit tonight.

On the other hand, there might also be a second referendum or general elections. The UK is now leaving the EU on the 12th April if no new agreement or Brexit deal is agreed. The results of the votes are expected to be ready around 10 GMT tonight.

Business Finance

Chinese bond markets Big Bang – structural changes ahead

Chinese financial markets and specially bond markets are facing big changes ahead. It is expected that over 100 billion dollars of new foreign investments will flow into the Chinese debt markets  yearly due to the market liberalization.

One can say that the Big Bang started today when Bloomberg announced that they will include the China Goverment bonds into the Bloomberg Barclays Global Aggregate index, starting from today.  This means that renminbi will be the 4.th largest currency in the index. It is also expected that JP Morgan and FTSE will do the same index-changes during this year.

According to several market analysts and strategist, these changes will bring more than 100 billion dollars to the Chinese bond markets yearly and thus help to keep the demand for yuan-related financial products high. This will also help the overall economy growth and trade balance. Also the number of international investors have already shown increase and the overall interest and knowledge of the markets will rise.

Chinese bond markets are the third largest in the world with over 13 trillion dollars, after the US and Japan.

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May: Brexit deal has not enough support

The UK Prime Minister Theresa May have commented today that the Goverment does not have enough support for the Brexit deal as “things stand”.  She was speaking in the UK Parliament.

According to BBC,  she said she would continue trying to get MPs to back it before putting it to the Commons for a third time this week.

– So I cannot commit the Government to delivering the outcome of any votes held by this House, but I do commit to engaging constructively with this process, she said.

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