Mergers and acquisitions
China’s Ping An snaps up stake in Fortis
Ping An, China’s second-largest life insurer, has paid $2.7 billion
for a 4.2 percent stake in Belgian-Dutch bancassurer Fortis. The
deal, which is the largest overseas acquisition by a Chinese
insurer, makes Ping An – 17 percent owned by HSBC – the largest
shareholder in Fortis.
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The agreement takes Chinese state-owned overseas financial
services investment this year to almost $20 billion, following
deals involving Citic, Barclays, South Africa’s Standard Bank and
Blackstone Group.
In a statement, Fortis welcomed the investment and invited Ping An
president Louis Cheung Chi Yan to join the board.
“In line with our strategy to selectively grow in Asia, we are
delighted to invite Louis to the board of Fortis,” said Fortis
chairman Maurice Lippens. “It will raise Fortis’s profile in China,
which, combined with an expected increased access to the Chinese
market, will lift our overall growth potential.”
On 26 November, China Life, the world’s largest insurer by market
capitalisation, confirmed it was also keen to make overseas
investments, especially in the financial services sector.
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By GlobalDataMergers and
acquisitions
Northern Rock sale process heats up
The auction process for beleaguered UK mortgage bank Northern Rock,
once the UK’s fifth-largest mortgage lender, accelerated on 26
November, with the bank naming a consortium led by entrepreneur
Richard Branson’s Virgin Money as the preferred bidder.
However, the bank’s two largest shareholders, hedge funds SRM and
RAB Capital, which own 9.1 percent and 6.7 percent of Northern
Rock’s shares, respectively, continue to press the case of rival
bidder Olivant, arguing that Virgin’s proposals undervalue the
bank. The two argue that Virgin’s proposals grossly exaggerate the
value of the Virgin Money brand, which last year reported profits
of £10 million ($20 million).
The UK government is pressing for a quick deal, with its primary
objective to obtain the earliest possible repayment to the Bank of
England of around £25 billion of emergency loans.
On the day Northern Rock announced Virgin’s preferred bidder
status, Branson, a skilled public relations practitioner, ran a
series of full-page advertisements in UK newspapers setting out his
vision for a rebranded Northern Rock.
“Northern Rock confirms that the Virgin announcement has had a very
positive, reassuring impact on our customers,” a Northern Rock
spokesman said.
Branding is a key dispute between the Olivant and Virgin consortia.
The former has said it believes that the Northern Rock brand can be
retained while Virgin argues that the brand is now worthless.
M-payments
Number of mobile payments trials rises
The roll-out of contactless payments using a mobile phone
accelerated during November, with a number of trials planned with
the aim of gauging consumer acceptance of the mobile phone as the
next step in the payments evolution.
In the UK, Barclaycard has teamed up with mobile network O2 and
handset manufacturer Nokia to test Visa’s payWave contactless
payment system using near field communication (NFC) technology. In
Norway consumers will try out MasterCard’s rival PayPass NFC system
in a trial starting early in 2008 involving DnB NOR and mobile
operator Telenor.
“New, contactless technology can be adapted for mobile phones just
as well as for payment cards,” said Peer Theien, senior
vice-president, group payments and infrastructure at DnB NOR.
According to Visa, the O2 mobile payments pilot represents the
first large-scale NFC trial in the UK – it involves over 500 O2
customers. The trial started on 28 November and runs until May
2008. Participants have been given a Barclaycard Visa prepaid card
loaded onto their handset, enabling them to use it to make cashless
payments under £10 at outlets in London that currently accept Visa
payWave transactions, including London’s public transport
system.
In a separate announcement, the UK’s second-largest bank, Royal
Bank of Scotland, has announced plans to launch a public trial of
mobile phone debit payments using the PayPass system in the new
year.
M-banking
BofA’s mobile service breaks 500,000 barrier
More than 500,000 Bank of America (BofA) customers have signed up
to its mobile banking service, according to the bank, six months
after it rolled out its m-banking offering to customers nationwide
(see RBI 565).
According to a report by consultancy TowerGroup, BofA has more
mobile banking customers than all other US banks combined.
“We’re thrilled with the initial customer response and expect this
trend to continue as more people discover the convenience of
accessing their accounts while on the go,” said Lance Drummond,
BofA’s e-commerce and ATM executive.
“Mobile banking gives our customers the freedom, control and
security to bank anywhere, any time.”
Strategy
Nordea ready to discuss possible mergers
Nordea, Sweden’s largest bank by assets, is willing to consider
merger discussions with other European banks, which would take it
to “the next level”, its chief executive, Christian Clausen, told
the newswire Reuters.
“We are ready to move on to the next level in terms of
economies of scale, if it is possible. If there are any other banks
that are willing, we are ready to discuss it today,” said
Clausen.
However, he did not disclose the possible size of any deal the bank
might consider and also declined to speculate on which banks Nordea
would consider as potential partners.
“I can, but I will not. There are a number of possible
combinations,” added Clausen.
In a separate announcement, the Swedish government has confirmed
that it will press on with the proposed sale of its 19.9 percent
stake in Nordea, a move which may well bring potential merger
partners out into the open. Media reports in September suggested
that Swedish rival SEB was keen to acquire a large part of the
government’s stake in Nordea.
Products
Capital One launches Card Lab product
tool
Capital One has introduced an online tool called the Capital One
Card Lab, which lets customers choose the terms and options most
important to them and to build their own credit card.
A new micro-site – www.capitalone.com/cardlab
– offers customers a range of six interactive options, including
the interest rates to apply to purchases and balance transfers, the
annual fee for the card, rewards programmes and the card
design.
As choices are made, the tool narrows the options in the remaining
categories, eliminating options that cannot be combined.
Cardholders who select a 1.25 percent cashback option, for
instance, will forgo the option of an introductory 0 percent
balance transfer, and customers who are willing to pay an annual
fee ($79) will earn double loyalty points.
“Consumers today want control and expect the ability to customise
products to meet their needs,” said Capital One spokesperson Pam
Girardo.
Strategy
ICBC’s Standard Bank deal a ‘win-win’
alliance
Jiang Jianqing, chairman of the Industrial and Commercial Bank of
China (ICBC), has described the acquisition of a 20 percent stake
in South Africa’s Standard Bank as a win-win strategic alliance,
and outlined areas in which the banks can generate future revenue
streams.
In an address to analysts, Jianqing said a strategic co-operation
committee has been set up to identify how the banks can develop
their partnership. “We will form a strategic alliance that will
involve customer, network and information resources sharing and
co-operation in areas such as trade finance, treasury, fund
investments and NPL [non-performing loan] resolution,” he
said.
ICBC’s investment in Standard Bank was the largest foreign direct
investment ever made by a Chinese company – nearly $5.5 billion
(see RBI 581). The two banks are the biggest in their
respective markets, South Africa and Asia. Jianqing added that
Chinese and African markets have the greatest growth potential in
the world.
Distribution
Westpac and Virgin end Australian cards distribution
agreement
Westpac, Australia’s fourth-largest banking group, has called an
end to its five-year credit card distribution partnership with
UK-based Virgin Money. The joint venture was launched in 2003, with
Westpac issuing Virgin- branded cards and providing the
infrastructure and credit management. Virgin Money has issued
around 800,000 cards, capturing a 6 percent share of the local
market.
The agreement will conclude in May after a six-month notice period
has been served. Westpac has said it will then enter negotiations
with Virgin Money relating to the sale of the Virgin credit card
book from Westpac.
In a statement, Virgin Money Australia said it was in talks to buy
the credit card portfolio from Westpac to allow the company to
bring in a new partner. “Successful purchase of the portfolio would
mark an exciting new phase for Virgin Money and its customers.
Virgin Money plans to continue its shake-up of the credit card
market and introduce a new suite of cards including an SME card, a
rewards card and a prepaid card,” said the company.
Strategy
E*Trade to return to basics, CEO out
Online US brokerage E*Trade, which shocked the market on 18 October
by reporting a third-quarter loss (see RBI 582), is to
receive a $2.55 billion cash infusion from a group led by US hedge
fund Citadel Investment Group. E*Trade, the fourth-biggest US
discount brokerage behind Charles Schwab, Fidelity Investments and
TD Ameritrade, said it will sell its entire $3 billion portfolio of
asset-backed securities (ABS) to Citadel for $800 million and book
a $2.2 billion charge on the sale. It also announced that its CEO,
Mitchell Caplan, has stepped down.
E*Trade will receive $1.6 billion of capital, including
contributions by investment firm BlackRock, in exchange for 12.5
percent senior unsecured notes and shares. E*Trade expects to issue
just under 20 percent of outstanding shares when the investment
closes.
E*Trade shares collapsed from a high of $25.79 in June to as low as
$3.55 on 12 November. The plunge in the share price prompted an
analyst at Citi to warn that E*Trade faced a 15 percent chance of
bankruptcy.
E*Trade’s acting CEO, Jarrett Lilien, told analysts that the
Citadel cash injection would enable E*Trade to get “back to its
real business. It is a great deal [and] a good price,” he said.
“Our belief is that our business is in great shape.”
According to Lilien, E*Trade customers had withdrawn $6 billion
from the business this month, with the majority of withdrawals
being made from E*Trade’s high-interest savings account product. At
the end of October, E*Trade had around 4.7 million customer
accounts worldwide and $227 billion in assets under management.
Products
Barclaycard expands eco-friendly card range
The UK’s Barclaycard is to launch a linked credit
card and loan product aimed at UK homeowners that want to reduce
household carbon emissions and make their homes more energy
efficient. The bank’s new Breathe Easy card and loan product is
expected to be launched next summer.
Customers using the Breathe Easy card to buy home-efficiency
products from selected retail partners will receive an initial
discount on the purchase.
They then repay the cost of the purchase as a loan wherein their
monthly repayments are expected to be in line with the savings they
would make on their energy costs.
Barclays chairman, Marcus Agius, said: “Barclaycard Breathe Easy is
a good example of the role financial institutions can play in
helping consumers reduce household carbon emissions.”
This marks the fourth eco-friendly card launch from Barclays over
the past 12 months (see RBI 582).
Distribution
ATM numbers grow in China and India
The ATM markets in China and India have grown strongly over the
past five years, according to new research from US consultancy
Celent. The next three to five years will see an even greater
increase – from about 125,000 ATMs in 2006 to 350,000 ATMs by 2010
– according to Celent’s report, The Dragon and Tiger of the ATM
Markets: China and India.
Celent states that the growth of ATMs is closely related to the
growth in debit and credit cards in China and India. In China, the
issuance of bank cards has grown at a CAGR of 24.6 percent since
2002, reaching a total of 1.13 trillion cards at the end of 2006.
The credit card CAGR of 39 percent since 2002 in India is similar
to the ATM CAGR of 41 percent over the same period.
At the end of 2006, there were 102,000 ATMs across China,
concentrated mostly in urban areas. Celent says it expects ATM
installations to increase by more than 20 percent year-on-year,
reaching 233,000 ATMs by the end of 2010. Major growth will come
from mid-sized and small cities as well as suburban areas.
Products
New ANZ card offers repayments rewards
Australia’s ANZ has launched what it claims is a first in the
Australian market: a credit card that rewards customers for every
dollar they repay off their balance rather than every dollar they
spend.
Jenny Fagg, managing director of consumer finance at the bank,
said: “Our research found that customers want to reduce debt and be
rewarded for payments to their credit card, but don’t want to miss
out on a rewards programme by choosing a card with a lower interest
rate.
“ANZ Balance Visa is the only credit card of its kind in Australia
– indeed, one of the first in the world – and it further delivers
on our strategy to provide customers with more convenient banking,
based on products that are simple to understand and delivered in a
responsible manner.”
The ANZ Balance Visa card offers one reward point for every A$1
($0.90) repaid to the account balance, including repayments to
interest, fees, cash advances and balance transfers. Cardholders
can set up an automatic redemption to receive chosen rewards as
soon as they accumulate the required points, and can also
personalise their cards.
MARKETING NEWS DIGEST
Sports sponsorship
HSBC to support Lions rugby union tour
HSBC, one of the financial sectors biggest corporate sponsors of
sport, has agreed a shirt sponsorship deal estimated to be worth
around £4 million ($8 million) for the 2009 British & Irish
Lions rugby union tour of South Africa. The bank will also be
developing business-to-business, consumer and grassroots activity
in the build-up to and during the tour, which will begin in May
2009.
The British & Irish Lions – a team made up of the best players
from England, Scotland, Ireland and Wales – will play ten games
during the tour, including three internationals against newly
crowned rugby world champions South Africa.
“This is a fantastic opportunity for HSBC to be part of a great
sporting event and to get involved in a range of programmes to
support the growth of rugby at the grassroots level, both here and
in South Africa,” said Dyfrig John, chief executive of HSBC in the
UK.
Advertising
Old Mutual unveils new US ad campaign
UK-listed financial services company Old Mutual has kicked off an
advertising campaign in the US designed to promote its brand among
US consumers.
The ad consists of several scenes where people substitute the name
Old Mutual for common phrases, including a football coach telling a
player to “protect the Old Mutual” and a woman telling a taxi
driver to take the bridge because it’s “much more Old Mutual this
time of day.” A voice-over states that the phrasing may “sound
strange now, but with our new thinking about your financial future,
it won’t for long”.
The ads debuted on Thanksgiving Day, and will air on all four major
broadcast networks as well as a number of cable channels, including
CNN, ESPN, Fox News and HGTV.
“Old Mutual is driven by a deep desire to challenge the status quo,
and our inaugural consumer campaign reflects that,” said Scott
Powers, chief executive officer of Old Mutual US.
Advertising
Lloyds TSB to promote UK 2012 Olympics
deal
Lloyds TSB is planning to ramp up its publicity efforts to
highlight its status as the official banking partner of the London
2012 Olympics.
To date, Lloyds TSB has remained relatively low-key about its
association with the event, limiting its profile to the use of the
official London 2012 logo in advertising and customer
communications.
However, the bank will seek to leverage its status as a 2012
sponsor by adding an Olympics theme to its ongoing ‘For the
journey’ ad campaign early next year in the run-up to the 2008
Games in Beijing.
Lloyds TSB was the first brand to agree a top-level domestic
partnership with the London 2012 event.
Advertising
Bank of America changes ad strategy
Bank of America (BofA) is to drop its five-year-old strategy of
working with just one advertising holding company for all of its
marketing activity. The bank will look to work with agencies from
other advertising holding companies as it seeks to attract more
consumers to its wide range of businesses.
This change in strategy will start in March next year, after the
bank’s current holding company contract ends with Omnicom
Group.
BofA has asked Omnicom subsidiary BBDO Worldwide to set up a plan
by which it would act as lead agency, co-ordinating additional work
with other advertising firms. “While Bank of America gained
operational efficiencies from the holding-company model, the
approach limited our ability to align the best agencies and
capabilities to our businesses,” said Bank of America chief
marketing officer Anne Finucane, in a statement.
Technology
Kookmin launches multimedia credit
card
Korea’s Kookmin Bank has unveiled a new multimedia credit card and
holder developed in association with electronics giant Samsung that
allows users to watch video clips and view photographs.
The card also enables customers to look up their transaction
records, browse their banking histories and check their credit card
loyalty points balance.
Kookmin intends to roll out the cards, which will cost between $32
and $107, in February next year.
“We’re working to develop a credit card that has the display panel
on it instead of using the card case,” said the bank in a
statement, although such cards may take up to two years to
develop.
Sponsorship
Credit Suisse strengthens
partnership with Salzburg Festival
Credit Suisse has extended to 2012 its partnership with the
Salzburg Festival, one of the world’s leading cultural festivals,
which is renowned for its opera and theatre. The bank has been
active as a main sponsor since 2006, and recently expanded its
presence in Austria with new branches in Vienna and Salzburg.
Credit Suisse’s partnership with the Salzburg Festival complements
the bank’s existing cultural sponsorships, such as its sponsorship
of the Bolshoi Theatre in Moscow, the New York Philharmonic
Orchestra and the Lucerne Festival in Switzerland.
“The Salzburg Festival is an outstanding partner for us because of
the many values it shares with Credit Suisse. In addition to
setting the highest standards of quality, the festival also
combines its traditional heritage with a bold and innovative
spirit,” said Michael Rüdiger, the bank’s head of market in
Austria, Germany and Luxembourg.
Sports
sponsorship
Société Générale signs Evian Masters golf
deal
Société Générale, France’s third-largest bank, has signed a
five-year deal to sponsor the Evian Masters, one of the top events
in women’s golf. The tournament takes place on the 24 July 2008
with a field including teenage star Michelle Wie and veterans Laura
Davies and Annika Sorenstam.
The bank, which has been an official partner of the French Golfing
Federation since 2001, joins a group of sponsors including Rolex,
Evian and Lacoste, as the Ladies Professional Golf Association
event prepares for its 15th year.
Segmentation
ANZ promotes financial planning for
women
ANZ, Australia’s third-largest bank by assets, has launched a
website designed to help women become more familiar with financial
services.
The website, http://www.bemoneyconfident.com/,
provides advice on lifestyle, career, work, home and family issues,
as well as on financial products such as pensions. It was created
after an ANZ survey concluded women felt comfortable managing
day-to-day finances but are not as confident about making decisions
about investments and wealth creation.
The survey of 2,155 women found only one-third of respondents felt
they were financially secure, and one in four said they spent more
than they earn. More than one-half mentioned “uncertainty” when
asked what kind of words come to mind when thinking about
investments, while 20 percent said “danger”.
