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Spain’s Sabadell rejects €12 billion offer from rival BBVA – Industry roundup: 7 May

Spain’s Sabadell rejects rival BBVA’s €12 billion merger proposal

Sabadell, Spain’s fourth-largest bank, has rejected a proposal by larger rival Banco Bilbao Vizcaya Argentaria (BBVA) for a €12 billion (US$12.93 billion) all-share merger, after board members met on Monday to consider the terms.

The bank said its board believed BBVA's proposal significantly undervalues the potential of Banco Sabadell and its growth prospects, calling the offer unsolicited.

Sabadell said its board was highly confident in its growth strategy and its financial targets and its members believed its rejection of the BBVA offer was aligned with the interest of Sabadell's clients and employees.

The board reiterated its commitment to distribute, on an ongoing basis, any excess capital above 13% to its shareholders. “The excess capital to be generated over 2024 and 2025, together with recurrent dividends during this period, according to a successful completion of the current business plan, is projected to be €2.4 billion," Sabadell said.

Last week, BBVA had offered an exchange ratio of one newly issued BBVA share for every 4.83 Sabadell shares, a premium of 30% over April 29 closing prices. In a statement to the stock market supervisor, Sabadell said the recent material decline and volatility in the BBVA share price increased the uncertainty around the value of the proposal.

“We regret that the board of Sabadell has rejected such an attractive offer,” a spokesperson for BBVA said in response. It is the group’s second rebuff: in November 2020, Sabadell and BBVA called off merger talks as they did not agree on the terms, including the price tag.

Last week, BBVA said it was ready to “move forward immediately with the transaction” and Chairman Carlos Torres in a letter called on Sabadell's board to give its assessment of the proposal as soon as possible.

In its offer unveiled last Wednesday, BBVA said it aimed to create a lender with more than 100 million customers globally and total assets exceeding €1 trillion, second only to its rival Santander among Spanish banks.

Based on the 6 May closing prices of €9.840 for BBVA and €1.8895 for Sabadell, shares in Sabadell were well below the €2.2587 per share BBVA was offering taking into account the 30% premium against 29 April. Since the indicative offer was announced by BBVA, Sabadell have risen 8.8% while shares in BBVA have fallen 9.7%.


Reserve Bank of Australia holds interest rate at 4.35%

The Reserve Bank of Australia (RBA) has decided against its 14th interest rate rise in two years, but the respite may only be temporary unless inflationary pressures recede.

The RBA left its cash rate on hold at 4.35% for a fourth consecutive meeting on Tuesday. The result was widely expected with just one economist – Capital Economics – predicting the central bank would hike. In May 2022 the bank lifted the cash rate to 0.35% from its pandemic low of 0.10% and in its 21 subsequent meetings has hiked rrates on 13 occasions.

Prior to last month’s release ofhigher than expected inflation figures for the March quarter, most economists and investors had been forecasting RBA rate cuts from as early as September.

That surprise, including core inflation running at a 4% annual pace, prompted some to predict the RBA would resort to at least one more rate increase to ensure price rises returned to the bank’s 2%-3% target range by the end of 2025.

Australia was relatively slow to start hiking interest rates and they remain lower than most comparable economies even though inflation is higher. In the US, for instance, the key interest rate is 5.25%-5.5% and inflation is 3.5%; in the UK the interest rate is 5.25% and inflation at 3.2%.

Analysts suggest that the RBA can possibly afford to be more patient because Australians are relatively exposed to variable interest rates and are being squeezed by the fastest ramping of borrowing costs in three decades. The central bank also has a dual mandate to try to maintain full employment as well as battling inflation.

They will now likely focus on whether RBA governor Michele Bullock shifts her language to imply that another rate rise is likely unless the bank is more confident about inflation receding.

Analysts will also scrutinise next Tuesday’s federal budget to assess whether the Labor government of premier Anthony Albanese is helping or hindering the RBA’s inflation-quelling efforts.


ECB rate cut case strengthening, says chief economist Lane

The case for a European Central Bank (ECB) interest rate cut next June is getting stronger as services inflation is finally starting to ease, said ECB Chief Economist Philip Lane in an interview with Spanish daily El Confidencial.

The ECB has indicated that a rate cut will be announced at its 6 June meeting, provided incoming data strengthen policymakers’ belief that inflation will head back to its 2% target by the middle of 2025.

“Both the April flash estimate for euro area inflation and the first quarter gross domestic product (GDP) number that came out improve my confidence that inflation should return to target in a timely manner,” Lane told the newspaper.

“So, as of today, my personal confidence level has improved compared with our April meeting,” Lane said, adding that more crucial data is still to be published in the weeks ahead.

Investors also appear confident that a cut in June is all but a done deal, but doubts about subsequent moves have increased in recent weeks after the US Federal Reserve signalled that its own policy easing could be delayed.

While the ECB insists it is not dependent on the Fed, a widening interest rate gap between the world's biggest central banks would weaken the euro and boost European inflation, likely limiting the ECB's appetite for going it alone.

Lane said that April inflation data finally showed progress on services prices but the bank would continue to focus on services to make sure it did not derail disinflation later on.

Overall inflation stood at 2.4% last month and the ECB expects it to fluctuate around this level for most of this year, before falling again in 2025.


Japan bids to host 2027 ADB meeting

Japan’s Finance Minister Shunichi Suzuki has announced a bid to host the 60th annual meeting of the Asian Development Bank (ADB) in Japan in 2027.

Suzuki made the announcement in a speech on the final day of this year’s ADB annual meeting in the Georgian capital of Tbilisi. Japan last hosted an ADB annual meeting in Yokohama in 2017.

He also said Japan will contribute about ¥ (JPY)162 billion (US$1.05 billion) to the Asian Development Fund, which provides aid to the ADB's low-income members.

“In the hope that the ADB will continue playing a major role in the prosperity of the region, we want to bring (the 2027 meeting) to Japan,” Suzuki said.

During this year’s annual meeting, participants discussed resources for the ADF. They agreed that a total of US$5 billion will be secured for the four years from 2025, half of which will be put up by the ADB members. With the ¥162-billion pledge, Japan will be the biggest contributor among the members.

The latest ADF replenishment is the 13th since the fund’s establishment in 1974 and will support grant operations for the period 2025 to 2028. Replenished every four years, the ADF is ADB’s largest source of grants for operations in its poorest and most vulnerable developing members.

“This remarkable replenishment demonstrates ADF donors’ continued partnership with ADB to address the pressing development challenges of those most in need,” Masatsugu Asakawa, ADB president, said in a statement.

The ADB’s next annual meeting is scheduled to take place in Milan, Italy, in May 2025.


Saudi Arabia and UAE vie for finance hub status

The United Arab Emirates (UAE) and Saudi Arabia, the Middle East’s two powerhouses, are engaged in a no-holds barred competition to claim the coveted title of the region’s business and financial capital, according to a report by Arabian Post News.

Until recently, the UAE had virtual monopoly, with Dubai remaining unchallenged as a magnet for foreign investments. But the balance of power is changing as Saudi Arabia embarks on a new mission to diversify its economy away from oil.

Dubai, the UAE’s commercial heart, has long been the undisputed leader in attracting foreign investment thanks to liberal regulations, world-class infrastructure, and freewheeling business environment. New initiatives by Saudi Arabia, however, show that the kingdom, with its vast oil reserves and strategic location, is determined to challenge this dominance.

A key battleground in this contest is the race to attract major global corporations to establish their regional headquarters. Traditionally, Dubai, particularly Abu Dhabi, has been the preferred location for such headquarters, offering companies a launchpad for the wider Middle East and North Africa (MENA) region. This advantage was significantly challenged by a recent Saudi move requiring foreign companies bidding for government contracts to base their regional headquarters within the kingdom by 2024.

This policy shift, seen by many as a direct shot at the UAE, is part of Saudi Arabia’s ambitious Vision 2030 economic reform programme, which aims to transform the kingdom into a diversified economic powerhouse, says the report.

The kingdom expects the consequent influx of foreign firms to create a ripple effect on the Saudi economy, generating employment opportunities for both local and international talent. The kingdom’s strategic location, connecting Asia, Africa, and Europe, offers convenient access to a vast market. Additionally, the government has implemented various reforms aimed at improving the business environment, including streamlining regulations and offering tax incentives. These efforts are aimed at positioning Saudi Arabia as a competitive destination for international investors.

The implications of this competition are multifaceted. While it could potentially lead to a zero-sum game where one country wins at the other’s expense, there’s also a possibility of a rising tide lifting all boats. The competition could push both nations to further liberalise their economies, streamline regulations, and invest in infrastructure, ultimately benefiting the entire region by creating a more attractive business environment.

However, the rivalry also carries the risk of fragmenting the Gulf Cooperation Council (GCC), a regional economic and political alliance of which both countries are members. A fractured GCC could hinder regional integration efforts and make the member states less competitive on the global stage.


Bank of Thailand to launch QR code cross-border payments to India

The Bank of Thailand (BOT) has announced its initiative to launch secure and fast Quick Response (QR) code cross-border payments between Thailand and India by the third quarter 2024.

Following the announcement, the BOT plans to extend the system in order to become a multinational payment network across the region of Asia. In addition, the payments linkage with India is set to be implemented in Q3, following collaborative efforts with several countries outside of the Asean grouping. India is expected to be the final addition to the cross-border payment network, according to Bangkok Post.

The BOT “will focus on meeting the needs, preferences, and demands of customers in an ever-evolving market, while also prioritising the process of remaining compliant with the regulatory requirements and laws of the industry,” a report stated.

The Bank has already established the QR code cross-border payment links with Singapore, Malaysia, Indonesia, Laos, Vietnam, Cambodia, Hong Kong, and Japan, aiming to improve the payment experience of customers in these regions, as well as give them the opportunity to benefit from fast and secure international transactions. 

The cross-border transactions are facilitated by PromtPay, Thailand’s national electronic payment platform. In addition, in the case of Singapore, the cross-border payment links encompass both the QR code payments and the overall remittance services. 

Following this launch, the next phase of cross-border payments will include money transfers across areas through multinational linkages, which are set to optimise the efficiency of payment systems compared with the current overall bilateral arrangements. This initiative of cross-border remittances was launched initially with Singapore and is set to expand to other countries in the region soon. 


Canada’s TD Bank fined by agency for AML failings

Canada’s anti-money laundering agency said it had imposed its biggest-ever penalty of nearly C$9.2 million (US$6.71 million) on TD Bank over non-compliance of anti-money laundering (AML) regulations.

The bank has struggled with regulatory probes over its AML compliance programme both at home and in the United States, which have adversely impacted on the stock's performance.

The Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) said the administrative monetary penalty on TD Bank was imposed on 9 April, following a compliance examination in 2023.

FINTRAC said it found that TD Bank had failed to submit suspicious transaction reports as well as assess and document money laundering and terrorist activity financing risks.

“As part of their regular review of Canadian financial entities, FINTRAC identified five specific administrative findings that require our attention. Improvements have been made and more are underway,” TD Bank spokesperson Lisa Hodgins said.

The penalty came shortly after Canada's second-biggest bank had set aside US$450 million in relation to ongoing discussions with a US regulator over its AML compliance programme.

Last month, TD Chief Executive Officer Bharat Masrani acknowledged that its AML compliance programme needed improving and the bank was working on addressing the issues.

FINTRAC also said that TD Bank had failed to conduct ongoing monitoring of business relationships as well as take the prescribed special measures for high risk.

The administrative monetary penalty has been paid in full by the bank and the proceedings have ended said the agency, which has stepped up monitoring after the federal government added new powers relating to national security.

Last year, it fined two of the country's big banks — Royal Bank of Canada and CIBC — for a total of C$9 million over violations that included failure to submit suspicious transactions.


BNP Paribas calls time on South African business

BNP Paribas, the eurozone’s biggest bank and sixth-largest bank in the world, is no longer operating as a bank in South Africa. The group has wound down its corporate and investment banking services in the country, 12 years after launching there.

The French bank, which has €415 billion (ZAR8.2 trillion) in assets under management, was given permission to conduct business as a bank in South Africa by means of a branch in 2012, allowing it to offer corporate and investment banking services.

However, the group has since started scaling back from its non-core operations across Africa to focus more on Europe and Asia.

In a government gazette signed by Prudential Authority and South African Reserve Bank Deputy Governor Nomfundo Tshazibana, BNP Paribas’s ability to conduct the business of a bank via a branch was withdrawn with effect from 8 March 2024.

Despite technically no longer operating as a bank in South Africa, BNP Paribas is still the owner of credit provider RCS. In 2022, the group reportedly hired Barclays to sell RCS as part of its wider scaling back, but the RCS website still states that BNP Paribas owns it.

Separately, BNP Paribas is reported to be calling time on the cobranded Visa card that the bank launched with Accor Group after less than four years. Announced in October 2020, the plan was for the card to initially be launched in France for members of Accor’s loyalty programme before being rolled out across Europe.”

“BNP has communicated quite frankly about the product’s lack of commercial success, which is why it will be terminated by the end of 2024 (the exact date is unclear),” said the LoyaltyLobby website.


China Construction and Singapore’s Gprnt partner on sustainable finance

China Construction Bank Corporation’s Singapore branch (CCB Singapore) has signed a Statement of Intent (SoI) with the environmental, social and governance (ESG) data solution platform Gprnt – pronounced Greenprint – to explore ESG data model interoperability, assessment framework normalisation, and product innovation to better deploy sustainable financing to corporate clients, especially small and medium-sized enterprises (SMEs).

The partnership marks the first collaboration between a major Chinese financial institution and Gprnt and is described “as a significant step in fostering international collaboration” between CCB the two to promote sustainable finance, through technology and data, and facilitate the green transformation of SMEs in both countries.

Gprnt was launched by the Monetary Authority of Singapore (MAS) to support SMEs’ decarbonisation and transition financing needs. It marks  the culmination of MAS' Project Greenprint and offers an enhanced digital reporting solution for businesses by harnessing technologies such as data integration and artificial intelligence (AI) to simplify the way ESG data are originated, organised and utilised.

When fully implemented, Gprnt's reporting solution is expected to help companies automate their ESG reporting process, and allow end users (such as financial institutions, regulators and large corporates) to access relevant data and timely insights to support their sustainability-related decision making. The platform will also work with the wider ecosystem to support enhanced data access and product innovation by the ESG community.


OCBC acquires Indonesian lender PTBC

The Indonesian unit of Singapore’s OCBC (Oversea-Chinese Banking Corporation) has finalised its acquisition of CommBank’s Indonesian banking outfit PT Bank Commonwealth Indonesia (PTBC), in a deal worth rupiah (INR) 2.2 trillion (S$191 million/US$141 million).

PTBC was established in 1997 as a joint venture (JV) between Commonwealth Bank of Australia (CBA) and Bank International Indonesia. OCBC is seeking to complete it integration with PTBC in the fourth quarter of 2024 while operating independently until that time. OCBC Indonesia “offers a comprehensive product and service range servicing SMEs, large corporates and private banking clients with 200 branches, mobile and internet banking channels,” a release stated.

“This acquisition builds on our already strong presence in Indonesia,” OCBC Group CEO Helen Wong. “It signals our commitment to accelerating growth in the country, and to support our customers as they seek growth across multiple markets.

“Rising ASEAN-Greater China flows is a focal point of Asia’s growth story and a big opportunity for us. Chinese companies, for instance, are looking to expand into Indonesia to tap its large young population and abundance of natural resources.”

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