Indian Banks: Were Investors blinded?

Volatility erupted in India's stock market as Yes Bank Ltd. and Dewan Housing Finance Corp. fell heavily, triggering an exit from financial shares.

Yes Bank sank after India's banking regulator refused to extend the tenure of the lender's chief executive officer, while Dewan suddenly tumbled as much as 60 percent in early afternoon trading, its steepest loss on record.

Sharp equity losses risk raising concern among investors already nervous about financial shares after a recent debt default by Indian shadow bank Infrastructure Leasing & Financial Services Ltd. 

Investors fret that more bad loans may come to the light as RBI may take stricter action following under reporting of bad loans by some of larger lenders including Yes Bank.

The RBI has also taken a tough line with other private-sector bank CEOs in recent months. The central bank refused to extend Axis Bank's CEO tenure.

 


Abu Dhabi consolidation?

Discussions to combine Abu Dhabi Commercial Bank PJSC, Union National Bank PJSC and privately-held Al Hilal Bank are underway it seems. The potential merger would create the fifth-largest bank in the Gulf Cooperation Council.

The emirate's two largest lenders -- National Bank of Abu Dhabi and First Gulf Bank -- completed a merger last year to create First Abu Dhabi Bank PJSC. A tie-up between Mubadala Investment Co. and the Abu Dhabi Investment Council in March created a sovereign wealth fund with about $220 billion of assets. Mubadala holds a majority stake in ADCB and UNB. 

  

European Bank consolidation?

Media reports this year have flagged discussions between UniCredit SpA, the largest Italian lender, and Societe Generale SA, given that UniCredit's top executive has held senior roles at both institutions. In the U.K., reports have speculated about a tie-up between Barclays Plc and Standard Chartered Plc. Deutsche Bank Chairman Paul Achleitner spoke with top shareholders and key government officials about possibly combining with Commerzbank. 

Emirates NBD casts a vote for Turkey

Emirates NBD PJSC is buying Deniz from Russia's Sberbank at a time when the country is struggling with a beleaguered lira, a wave of debt restructurings, up and coming elections and political intervention in the finance industry. The purchase is both Turkey's largest M&A deal since 2012 and the Dubai bank's largest acquisition. 

The purchase was agreed at 1.17x book value at the end of October, although that multiple is expected to decline to about 1.05 to 1.06x book value after including profit since then, subtracting interest payments, and taking into consideration the lira over this period. 

HSBC and RBS: Coming and Going in KSA

HSBC's Saudi Arabia unit offered to pay a 29 percent premium to acquire RBS's local venture in a $5 billion stock deal.

In the preliminary agreement between RBS-backed Alawwal Bank and Saudi British Bank, Alawwal shareholders will receive 0.485 SABB shares. The deal values Alawwal's existing share capital at about 18.6 billion riyals ($5 billion).

A merger would be KSA's first bank combination for almost 20 years and would make SABB the kingdom's third-biggest lender with assets of about $73 billion. International lenders are grappling with how to approach the Middle East's biggest economy, which is embarking on an unprecedented diversification and privatization plan, but still blocks foreign control of local banks. 

SABB's agreement with Alawwal follows the combination of other regional banks as they battle with low oil prices, slower economic growth and a decline in asset quality. National Bank of Abu Dhabi PJSC and First Gulf Bank PJSC merged last year while Qatar is in talks to combine three banks to create the country's largest shariah-compliant lender.

Credit Agricole SA last year agreed to sell half of its 32 percent stake in Banque Saudi Fransi to Prince Alwaleed bin Talal in a $1.54 billion deal.