Integration weighs on Intesa’s 2007
results…
Raiffeisen’s significant CEE retail banking
boost…
Go deeper with GlobalData
UK’s FSA admits to big Northern Rock
failings…
Germany’s Deutsche increases Hua Xia
stake…
RESULTS
Integration weighs on Intesa’s 2007 results
Intesa Sanpaolo, Italy’s second-largest bank by market cap, has
announced its 2007 full year pre-tax profits were below
expectations as integration costs weighed heavily on results.
Net income was €7.3 billion ($11.5 billion), up from €4.7 billion
in 2006, but this was boosted largely by capital gains from one-off
asset disposals (mainly the disposal of Cariparma, Friul¬Adria and
202 branches to Crédit Agricole). The underlying outlook was less
rosy. The bank, formed officially on 1 January 2007 following the
merger between Banca Intesa and Sanpaolo IMI, said operating income
rose just 0.5 percent to €18 billion. Net fees and commissions
declined 2.9 percent to €6.2 billion.
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By GlobalDataThat reduction, the bank said, was down to a commercial policy to
realign fees and commissions to the best terms previously offered
by Banca Intesa and Sanpaolo IMI. The policy included the annulment
of commissions on ATM transactions between the banks, extending
products across the network and lower placement of high-fee
products.
Current account acquisition fell 9.2 percent, and securities and
portfolio management fell 9.8 percent. But distribution of
insurance products was up 4.6 percent. Overall, Intesa Sanpaolo
said it would start to see the benefits of the merger ahead of
schedule, in the second half of 2008, through the integration of
operating systems.
MERGERS AND ACQUISITIONS
Maybank wins Bank Internasional auction
Maybank, Malaysia’s largest financial services group, has won the
auction to buy a 56 percent stake in Indonesia’s Bank Internasional
(BII), Indonesia’s sixth-largest bank, for $1.5 billion, beating
heavyweights HSBC and Bank of China.
Maybank has secured an agreement to buy the stake in BII through
the Indonesian bank’s majority shareholder, Sorak Financial. Sorak
is 75 percent owned by a wholly owned subsidiary of Singapore’s
sovereign wealth fund, Temasek, and 25 percent owned by Korea’s
Kookmin Bank. Maybank has also offered $1.2 billion to BII’s
shareholders for the remaining 44 percent.
BII has 230 branches and 700 ATMs, as well as established internet
banking and call centre operations. Maybank said it planned to
expand the products on offer at BII to include Islamic banking and
Islamic insurance (Takaful). Indonesia is the world’s
fourth most populous nation and has an underpenetrated banking
sector, according to Maybank.
RESULTS
Raiffeisen’s significant CEE retail banking
boost
Raiffeisen International, the international operation of Austrian
banking group RZB, continued its remarkable growth story with
strong 2007 full-year results. The bank said profit before tax rose
39.2 percent, from €891 million in 2006 to €1.2 billion, driven by
an impressive 85 percent improvement in its retail segment.
Consolidated profit after tax was €841 million, which the bank
forecast would improve to €1 billion by the end of 2008.
Herbert Stepic, CEO of Raiffeisen International, said: “The
increase in consolidated profit of €247 million in 2007 is larger
than our total consolidated profit was in 2004, at €209 million.
This underlines that the traditional customer-focused banking
business in our markets is characterised by both strong growth and
strong profitability.”
Net interest income increased 37.1 percent to €2.4 billion and net
commission income rose 33.9 percent to €1.25 billion. The bank,
which recently opened its 3,000th branch in Central and Eastern
Europe, said retail banking earnings before tax were €487 million,
up from €264 million. It said the result was down to investment in
new business outlets and products.
Raiffeisen International operates in 17 markets across Europe and
has 14 million customers.
STRATEGY
BBVA rejigs branches in consumer banking drive
BBVA, Spain’s second-largest bank, has said it is establishing
retail banking centres (CBCs) to better coordinate branch sales.
The CBCs are new management units and will be linked on average to
a cluster of five local branches. They will help enhance customer
relationships and provide an additional sales force, including
financial advisers and business managers, according to the
bank.
The new model has three primary objectives: to increase sales
capacity and enhance client relationships by encouraging
segmentation and boosting its specialised sales force; to optimise
organisational efficiency, and move management closer to the
consumer; and to increase productivity and efficiency by
centralising administrative functions, and freeing branches from
back office tasks.
The scheme is part of BBVA’s wider branch transformation strategy,
launched in May 2007 and due to be completed by 2010.
MERGERS AND ACQUISITIONS
Erste sells insurance operation to focus on distribution
income
Austria’s Erste Bank has sold parts of its insurance business for
€1.5 billion to Vienna Insurance Group (VIG) as it looks to shore
up its capital base and concentrate on selling financial
services.
Erste and VIG have signed a 15-year distribution agreement, meaning
the two businesses will be “preferred partners” and continue to
distribute each other’s products. The agreement provides VIG with
access to Erste’s 2,900 branches and 16 million customers across
Europe. Erste will benefit from VIG’s 10 million insurance
customers, which it said would create additional cross-selling
potential.
The deal will see the sale of Erste Bank’s s Versicherung and other
Central and Eastern European insurance subsidiaries, including the
insurance unit of recently-acquired BCR, Erste’s profitable
Romanian bank (see RBI 587).
But Erste, Austria’s largest banking group, will maintain a 5
percent stake in each of its local life insurance companies.
The proceeds of the deal, set to close in the third quarter of
2008, will be used to strengthen the bank’s Tier 1 ratio, which
will improve by around 70 basis points, according to Erste.
REGULATION
UK’s FSA admits to big Northern Rock failings
The UK’s Financial Services Authority (FSA), the country’s main
financial regulator, has admitted to a series of failings following
an internal report into its handling of the Northern Rock crisis.
The UK’s fifth-largest mortgage lender was supervised by the FSA
before it ran into difficulties last summer because of the drying
up of funds in the wholesale markets (see RBI 578). The
bank was eventually forced to apply for emergency funding from the
Bank of England and, following a fruitless search for a private
buyer, was nationalised in February.
The financial regulatory body admitted there was an inadequate
number of staff dealing with Northern Rock, and, in addition, high
staff turnover. As a result, there was limited communication with
senior executives at the bank. The FSA met with Northern Rock
officials just seven times in the first eight months of 2007, the
period leading up to the start of the bank’s difficulties. That
compared to an average of 22 meetings with each of its retail
banking peers.
RESULTS
Alpha Bank sees strong growth in lending and
bancassurance
Alpha Bank, the third largest bank in Greece by market value, has
reported a net profit of €850 million ($1.3 billion) for 2007, a 54
percent year-on-year increase the bank says has been fuelled by
strong growth in south-east Europe and its domestic market.
The bank said it would continue to focus on developing its retail
banking activities in 2008 through the opening of 50 new branches
in Greece. The bank opened 20 new branches in Greece in 2007, an
expansion coupled with strong growth in retail lending. Consumer
loans rose by 34.8 percent and mortgages by 17.8 percent, according
to full-year figures.
In total the bank added 133 new branches across all regions in
2007, and saw loans and advances to customers rise by 29.3 percent
to €42.9 billion.
Alpha also doubled banc¬assurance premium volume last year, in part
through the sale of AXA insurance products at its branches – a
partnership put in place following AXA’s purchase of Alpha Bank
subsidiary Alpha Insurance for €255 million in October 2006.
STRATEGY
Dresdner retail to split from investment
bank
Allianz, Europe’s largest insurer, is to split its banking arm,
Dresdner Bank, into separate retail and investment units, the
German group has said. The move will see the units legally
separated under a single holding, Dresdner, which aims to benefit
from increased flexibility as a result of the decision.
The split has increased speculation that Allianz will make a bid
for Deutsche Postbank, Germany’s largest commercial retail bank.
Postbank parent Deutsche Post is thought to be considering selling
its majority stake in the banking unit (see RBI
587).
Dresdner Bank generated an operating profit of €710 million in
2007, down substantially from 2006’s €1.35 billion. The Investment
Banking division was affected by the credit crisis in the second
half of the year, leading to a write-down of €1.28 billion at
Dresdner Kleinwort. These charges were partially offset by an
increase in operating profit for the Private & Corporate
Clients division, which rose by just under 13 percent to a record
€884 million.
STRATEGY
$19bn Visa IPO sets new market record
Visa’s high-profile initial public offering (IPO) has raised $19.1
billion after selling 406 million shares at a higher than expected
price of $44 per share. Underwriters then exercised an option for a
further 40.6 million shares, taking the estimated proceeds from
$17.9 billion to $19.1 billion.
The card giant saw its shares increase in value by some 22 percent
on its initial day of trading on the New York Stock Exchange,
ending the day at $56.5 per share. The IPO almost doubled the
previous US record of $10.6 billion, raised by AT&T Wireless in
2000.
Bank of America stands to pocket $600 million from the deal and
Citi should make $300 million. As Visa’s largest shareholder,
JPMorgan Chase is in line to make a profit of approximately $1.2
billion.
PRODUCTS
Wells Fargo unveils online virtual
safe
The US’s fifth-largest retail bank, Wells Fargo, has announced the
launch of a ‘personal online safe’ designed to allow customers to
easily access crucial financial and legal documents while keeping
such materials in a secure environment.
The vSafe service offers an online storage solution for retail
banking customers’ financial statements, loan and tax documents,
wills, passports and birth, marriage and death certificates
integrated into Wells Fargo’s existing online banking service. All
data uploaded is automatically encrypted from the moment of
transmission, with additional security protection available as an
optional extra.
A few other banks around the world have begun to offer a similar
service, including Commerce Bank in the US and France’s Caisses
d’Epargne (see RBI 579).
MERGERS AND ACQUISITIONS
Nomura-led consortium to buy Ashikaga Bank
A consortium of investors headed by Nomura Holdings, Japan’s
largest securities brokerage, is to buy Japanese bank Ashikaga Bank
for ¥280 billion ($2.8 billion), according to a report from news
agency Reuters.
After struggling with bad debts, Ashikaga Bank was nationalised in
2003. The sale comes after a bidding process that began in
September 2006 before becoming hampered by local opposition to a
potential sale to a foreign buyer.
Under the terms of the agreement, Nomura will buy Ashikaga shares
for ¥120 billion as well as infusing ¥160 billion in additional
capital. Nomura says it plans to raise funds for Ashikaga, which
employed over 2,000 people as of September 2007, through the
issuance of common and preferred shares and subordinated
debt.
STRATEGY
Standard & Poor’s sees end to
write-downs
Ratings agency Standard & Poor’s has raised its estimation of
the value of subprime mortgage write-downs to $285 billion but says
that the end of a long season of losses is now in sight for larger
institutions.
The company says it has increased its estimate from an initial
figure of $265 billion due to an assumption that high-grade
collateralised debt obligations of asset-backed securities will
account for a higher percentage of total write-downs. However,
Standard & Poor’s believes that most write-downs have now been
announced by banks.
“Based on available information, we believe that the largest
players can be seen as having undertaken a rigorous valuation
methodology to come up with conservative valuations,” said Standard
& Poor’s company credit analyst Tanya Azarchs. Azarchs added
that downward market forces and worsening real estate and credit
markets would still have an impact in the coming months.
Separately, Goldman Sachs has estimated that global credit losses
stemming from the current market turmoil will reach $1.2 trillion,
with Wall Street banks accounting for nearly 40 percent of the
losses.
US leveraged institutions, which include banks, brokers-dealers,
hedge funds and government-sponsored enterprises, will suffer
roughly $460 billion in credit losses after loan loss provisions,
Goldman Sachs economists wrote in a research note.
STRATEGY
Germany’s Deutsche increases Hua Xia
stake
Deutsche Bank is to increase its stake in Hua Xia Bank, China’s
12th largest bank by assets, to 13.7 percent, via an agreement to
subscribe to around 265.6 million newly issued shares in the
Chinese institution for a total price of CNY3.9 billion ($550
million).
Deutsche Bank purchased a 9.9 percent stake in the Chinese retail
bank for $329 million in May 2006 and began a joint credit card
operation in China in June 2007. The German bank sees Hua Xia as a
key means of gaining a foothold in China as it looks for direct
participation in the country’s burgeoning financial services
market.
Hua Xia recorded a profit increase of 44.2 percent to CNY2.1
billion in 2007, with net interest income rising 52.3 percent to
CNY11.25 billion.
BRANDING
Toronto Dominion unveils new TD Commerce Bank
name
US institutions Commerce Bank and TD Banknorth will be known as TD
Commerce Bank from 10 April following the completion of
Toronto-Dominion’s purchase of Commerce Bank.
The new bank will adopt Commerce Bank’s existing tagline,
‘America’s Most Convenient Bank’, and will launch a multi-channel
advertising campaign across New England, Florida and the
mid-Atlantic region. The multi-million dollar campaign will feature
television, in-store, print and online marketing efforts. Commerce
Bank branches will be re-branded in 2008, with TD Banknorth outlets
expected to follow suit in 2009.
The banks’ customers can continue to use current products and
services, and will also be able to access the companies’ 2,700 ATMs
across America, as well as 2,500 ATMs at TD Canada Trust branches
in Canada, free of charge.
“Commerce Bank customers can continue to count on seven-day banking
with the same great hours. TD Banknorth customers can look forward
to even longer hours and a wider range of ATMs from Maine to
Florida,” said Commerce Bank chairman Dennis DiFlorio.
ADVERTISING
BofA hands multi-million dollar ad account to
Starcom
Bank of America (BofA), estimated to spend $250 million a year on
advertising and marketing, has selected media agency Starcom USA to
handle its media strategies, planning and buying for the bank’s
domestic market following an internal review of the bank’s
marketing activities.
The bank’s chief marketing officer, Anne Finucane, has said that
the current environment “demands and enables big changes in
marketing”. Starcom will handle both traditional and online media
strategy for BofA.
Recent BofA marketing initiatives have included the launch of its
first retirement advertising campaign, developed in conjunction
with the Hill Holliday agency and aimed at promoting the bank’s
individual retirement accounts (IRAs), and the introduction of an
interactive online banking site where customers can find
information on BofA online and m-banking products.
The bank has said that Starcom will work in conjunction with Hill
Holliday and its other key agencies, such as New York-based BBDO,
on future projects.
SEGMENTATION
Intesa Sanpaolo targets female-run businesses
Intesa Sanpaolo, Italy’s second-biggest bank, is launching a new
advisory service, Corner Rosa, across the Piedmont region targeting
female entrepreneurs and young people. The bank has installed the
service in 20 locations, designed as dedicated in-branch areas
staffed with female employees trained to deal with the business
needs of women and young people.
Intesa Sanpaolo is also offering unsecured loans of between €5,000
and €40,000, repayable over a maximum 60-month period, to these
demographics. Some 80 percent of each loan is backed by a guarantee
issued by FinPiemonte, Piedmont’s financial body, against a
regional fund. The bank believes Piedmont has high growth potential
because of the preponderance of prospective female customers.
Almost a quarter of all businesses in the region are female run,
the bank says.
“We’ll cover the need for insurance and pension protection or
guidelines on government incentives, markets and administrative
processes. We’ll work in conjunction with all the key local
players: accountants, trade associations, public bodies, to give
across-the-board support,” said Marina Tabacco, head of the Turin
and Province area at the bank.
BRANDING
Capital One completes North Fork
transition
Capital One has said that North Fork Bank has been integrated into
its national platform following the completion of a rebranding
strategy initiated in 2006, when the bank acquired North Fork for
$14.6 billion.
As of 10 March, North Fork Bank branches have been rebranded as
Capital One Bank outlets, with customers now able to take advantage
of Capital One products and savings, according to the bank. “A
great deal of work has been done to ensure that the transition is a
seamless and positive change for our customers. Everything that
made North Fork Bank a great bank and a great business partner for
our clients will remain the same,” said president of Capital One
Banking, Lynn Pike.
Capital One says that the acquisition of the New York-based North
Fork, coupled with that of Louisiana’s Hibernia Corporation in
2005, mean it is now the 14th largest retail bank in the US by
deposits, and the 10th largest US bank by managed loans.
SPORTS SPONSORSHIP
ING F1 campaign moves up starting grid
Dutch bancassurance giant ING has launched a 2008 global
advertising campaign centred on its successful Formula One (F1)
sponsorship strategy and featuring a television advert starring F1
driver Fernando Alonso.
In November 2007 ING reported that the first year of its deal with
the Renault F1 team, along with its sponsorship of a number of F1
races, had produced a 25 percent increase in positive perceptions
of the bank (see RBI 583).
ING’s 2008 campaign centres on the group’s ‘cutting through the
clutter’ message, designed to help simplify financial matters for
customers. ING now has on-track branding at 13 of the 18 annual F1
Grand Prix, in addition to title sponsorship of the Australian,
Hungarian and Belgian events. The Alonso advert will air in 30
countries during F1 race weekends and will be supported by separate
print and online advertising efforts. Alonso will also appear in an
ING Direct advertisement for the Spanish market.
SPORTS SPONSORSHIP
BNP Paribas serves up Bulgarian tennis
deal
BNP Paribas has reaffirmed its commitment to tennis sponsorship
with the announcement that it has entered into a strategic
partnership with the Bulgarian Tennis Federation.
The bank will become the federation’s main sponsor and has
committed to helping develop Bulgarian tennis across all
demographics, including at school and local levels. BNP Paribas
will also encourage take-up of the sport among disabled and
underprivileged children in Bulgaria.
The French institution has a long history of tennis sponsorship,
having had a partnership with the French Open for the past 35
years. Last year the bank announced that it had extended this deal
for a further five years, running until 2011. BNP Paribas sponsors
the Davis Cup, the Federation Cup and a number of Masters Series
tournaments. The bank also has a presence at a community level,
sponsoring more than 550 local tournaments across the globe.
