Financials Unshackled Issue 26: 23-31 Dec Banking Update (UK / Irish / Global Developments)
Snippets on UK / Irish / Global Banking Developments
The material below does NOT constitute investment research or advice - please scroll to the end of this publication for the full Disclaimer
Good evening - and welcome to the latest edition of Financials Unshackled. It’s an uncharacteristically short note this time given the dearth of newsflow over the Christmas period - and it is split into three sections: i) UK Snippets (key UK sectoral and company developments in the last week); ii) Irish Snippets (key Irish sectoral and company developments in the last week); and iii) Global / European Snippets (select key developments in a Global / European context).
Good wishes to all my readers for the year ahead. I’ll be back in your inboxes on Sunday 5th January with a wrap of the key news that emerges over the coming days and I’ll have some more to say on how the Financials Unshackled product suite is set to evolve in the new year at that point!
UK Snippets
Sector Focus
Hamptons has published its December 2024 market update (read it here), noting that the volume of residential property sales agreed is ending the year strongly as buyers look to purchase a home ahead of the increases to stamp duty rates that are set to kick in from April. Other housing / mortgage-related newsflow / articles include: i) a piece in The Sunday Times on the impending rush of sale agreed transaction activity that is expected in January, particularly given the upcoming changes to stamp duty rates (read it here); ii) This Is Money today on how Halifax (LLOY) and Leeds Building Society are set to reduce some of their mortgage rates materially with effect from tomorrow, 1st January - speculating that more will follow (that is typically the early January trend every year; you can read the piece here); and iii) Ruby Hinchliffe at The Telegraph writes today about the doom facing the buy-to-let market in 2025 which I suggest you digest with a good pinch of salt (read it here).
A few articles appeared on how the pick-up in acquisitions of UK-listed corporates will drive a significant increase in banker bonuses for 2024, with Dealogic reporting that the value of M&A involving British companies has climbed 36% y/y to £250bn in 2024 - with various commentators predictably commenting to the press that they expect this trend to continue in 2025 given the low valuation multiples ascribed to UK equities. It was also interesting to note comments made by Vhernie Manickavasagar, PWC UK Capital Markets Partner, to the effect that “Preparations for a number of significant IPOs are already underway, providing momentum for what is hoped to be a big year for the UK markets in 2025”. You can read about this in The Times here, The Telegraph here, and This Is Money here.
Company Focus
Standard Chartered (STAN) published a RNS at 18:05 BST on Monday 23rd December noting that Norges’ shareholding in the lender reduced to 2.98% (previously disclosed shareholding: 3.00%) following a transaction on Friday 20th December.
I reported on Monday 23rd December that Secure Trust Bank (STB) issued a RNS that afternoon noting that UBS AM has amassed a shareholding of 5.39% in the lender (previously disclosed shareholding: nil). I wish to correct this as it should have stated UBS Group AG (it does not seem it was the UBS Asset Management arm) and a RNS on Tuesday 24th December noted that UBS Group’s shareholding in STB fell back to nil following a transaction on Friday 20th December (this seems likely to be just a nominee account).
The FT reported on Sunday 29th December on US credit card industry data collated by BankRegData which show that write-offs soared by 50% y/y in the first nine months of 2024 (read it here) - of relevance to Barclays (BARC). It’s interesting to see the data - but note that it is collated from bank earnings reports (including BARC) so there is nothing new in this of relevance to an evaluation of individual lenders’ balance sheets. The article also notes comments made by Odysseas Papadimitriou of WalletHub who noted that “Delinquencies are pointing to more pain ahead”.
The Observer published a review of how Starling Bank has evolved, zoning in on how the bank failed to adhere to a voluntary requirement (VREQ) that the bank agreed with the FCA in September 2021 not to open any new accounts for high or higher risk customers while it improved its anti-money laundering (AML) control framework as well as issues with the bank’s financial sanctions framework (this was covered in Financials Unshackled Issue 10 here and you can access the newspaper article here). I was delighted to be quoted in the piece on where Starling goes from here - my own view is that management will continue to focus significant attention to developing the BaaS proposition further and I would be surprised to see the owners pursuing an IPO in the near to medium-term (though that is somewhat contingent on the pace at which Starling can secure new contract wins for its BaaS offering).
Patrick Hosking at The Times penned an interesting piece on Thursday 26th December on how Atom Bank has acquired 10 hectares of woodland as a novel means of offsetting its carbon emissions - with the lender reportedly reckoning that by the time the wood matures it should be capable of absorbing 7,000 tonnes of carbon, which is almost exactly how much it calculates it has emitted in its first 10 years as a business. A post appeared on this initiative on the company’s website on 20th October last (which you can retrieve here) which I missed at the time. It seems a sensible move and the piece (which you can access here) is well worth a read.
Irish Snippets
Sector Focus
There have been a few ‘year in review’ / ‘year ahead outlook’ pieces on the Irish banks in the Irish media in recent days. Nothing particularly new in the articles but you can access The Irish Times piece here and the Business Post piece here if you want to freshen up.
There was an interesting article in The Irish Times on Thursday 26th December penned by David Howard, Deputy Director of Financial Services Ireland on how the new government should support the creation of a national fintech hub - with Howard writing about the opportunity for Ireland to become “a world leader in fintech” as well as play a leading role in a sustainable finance context. Read it here.
It’s also worth quickly flagging a well-informed article that featured in The Irish Times on Tuesday 24th December noting that sources in Fine Gael and Fianna Fail (the main coalition government partners) are doubtful that the parties will have finalised agreements with independent TDs ahead of the return of the Dail (Parliament) on Wednesday 22nd January. Read it here.
Company Focus
AIB Group (AIBG) published a RNS on Tuesday 24th December noting that BlackRock’s’ shareholding in the lender increased further to 10.59% (previously disclosed shareholding: 10.06%) following a transaction on Friday 20th December.
PTSB issued a RNS today noting that Goldman Sachs’ shareholding in the lender has fallen back to nil (previously disclosed shareholding: 6.54%) following a transaction on Tuesday 24th December. This is likely to have been a shareholding held in a nominee capacity so nothing to look into here.
Global / European Snippets
The FT reported on Tuesday 24th December that a Moody’s report shows that defaults in the global leveraged loan market (the vast bulk of which is in the US) grew to 7.2% in the 12 months to end-October, which is the highest rate since the end of 2020. The article also notes that Ruth Yang, Head of Private Market Analytics at S&P Global commented that distressed loan exchanges have accounted for more than 50% of defaults in 2024 - which is a historical high. Read the article here.
A Bloomberg article on Tuesday 24th December focused on how European banking sector M&A activity in 2024 hit its highest level since 2020 - and includes views from a portfolio manager and a sell-side analyst at JPM to the effect that 2025 should be another buoyant year for M&A transactions (with those lenders who are trading at discounted valuations likely to be most in focus). Read it here.
The Wall Street Journal reported on Tuesday 24th December that RBC Capital Markets has noted that European banks still trade at a heavy discount to other sectors despite their strong share price performance in 2024 (which was discussed in a FT article on Monday 30th December here) - trading at a discount of 46% to the wider European market and at a 41% discount to US banks. However, the analysts reportedly note that “We expect the political/economic/regulatory uncertainty to weigh on the sector and its earnings momentum at least in the near term”. Interestingly, Barclays (BARC) and OSB Group (OSB) feature on their Global Financials Best Ideas list - with these names currently trading at a significant discount to other banks in a P/TBV context (and a materially higher implied CoE).
Disclaimer
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