Eurozone’s broken banks
GerMAny doubtless is the strongest economy in the eU. Through the european Central Bank’s emergency financial assistance it is single-handedly propping up italy (£393bn at last count) and much of the eurozone.
yet its banking system is a mess. deutsche Bank is hanging on by its fingertips after Standard & Poor’s lowered its credit rating to BBB+ and the US regulator, the Federal reserve, described it as ‘troubled’.
new chief executive Christian Sewing insists: ‘our financial strength is beyond doubt.’ deutsche failed in its quest to become a global investment bank and lacks domestic heft so needs to find a european clientele if it wants to progress.
The normal answer for a bank that has lost its way is to be taken over. in the heat of the financial crisis, JP Morgan absorbed Bear Stearns and Washington Mutual, Santander UK took on Alliance & Leicester and Bradford & Bingley, and Germany’s second and third banks Commerzbank and dresdner came together. But Commerzbank is a minnow with a market value of just £10bn.
other choices might be trans-european takeovers. But the failure of efforts to create new european champions, notably royal Bank of Scotland and ABn Amro and the Franco-Belgian bank dexia, discredited this model. indeed, many european banks, most notably in italy, are still struggling with the legacy of the crisis, with nonperforming loans across the eurozone put at £792bn by the iMF.
eurozone nationalism would presumably preclude deutsche falling into the hands of hSBC or a Wall Street powerhouse.
There is an underlying truth difficult for Brussels and remain supporters to accept. The City is europe’s dominant financial centre and will continue to be so after Brexit because there is nowhere else with the same expertise or willingness to take on the risk.
Bank of england governor Mark Carney is convinced of this and said much the same at the G7 in British Columbia this week, noting the real prize in commerce is freeing up the trade in services.
TV times
JUne 13 is the key date in the long pursuit of Sky by its largest shareholder, rupert Murdoch’s 21st Century Fox.
That is the final deadline for Culture Secretary Matt hancock to give the deal the green light after an 18-month pursuit.
Arguably, a far more important date for investors will come a day earlier when a federal judge in Washington is due to rule on the Trump administration’s anti-trust case, seeking to block the £78bn takeover of the CBS network by telecoms giant AT&T.
if the CBS deal is cleared it opens the way for the shadow bidding war between disney and cable giant Comcast for control of most of 21st Century Fox to spring to life.
There are three formal bids on the table. They are Fox’s offer for the minority in Sky it doesn’t own, Comcast’s formal £22bn offer for Sky and disney’s £38bn offer for a range of Fox assets excluding news channels. Comcast has said it is willing to make an all-cash offer for 21st Century Fox of £44bn and would take on £11bn of debt. Fox has gone from also-ran with falling network viewers and declining pay TV subscribers to its most attractive asset.
American broadcasters fear that netflix and Amazon Prime are ready to eat their cake. The result likely will be a bidding war between disney and Comcast, which could see 21st Century Fox shares soar beyond the current price of £29 – granting the Murdoch family, with a 17pc economic stake, riches beyond wildest dreams.
But the loss of Sky to overseas ownership could undermine creative Britain.
Family affairs
PenSionS regulator Lesley Titcomb, who was savaged by the Commons select committee report over Carillion, is stepping down to spend more time with her family.
Stephen haddrill, chief executive of audit regulator the Financial reporting Council (FrC), also received a drubbing
eight years after what is alleged to have been an enormous accounting failure at Autonomy, the FrC is swinging into action against audit partners at deloitte and former finance boss Sushovan hussain, who is convicted of fraud in the US.
The time delay alone should be enough for haddrill to join all those ‘formers’ spending more time with family.