European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

On 20 April, <a href="https://www.smartkarma.com/entities/credit-agricole-sa" target="_blank" data-smartkarma-citation="entities:21373:1" rel="noopener">Credit Agricole Sa (ACA FP)</a> boosted its offer for <a href="https://www.smartkarma.com/entities/credito-valtellinese-spa" target="_blank" data-smartkarma-citation="entities:21175:1" rel="noopener">Credito Valtellinese SpA (CVAL IM)</a> to €12.50/share from €12.20, regardless of any threshold met, 0.8% above my TP on <a href="https://www.smartkarma.com/insights/creval-credit-agricole-grounds-for-an-improved-offer" target="_blank" data-smartkarma-citation="insights:50036" rel="noopener">CreVal - Crédit Agricole: Grounds for an Improved Offer</a>).
Crédit Agricole holds now 91.17% of CreVal. As per the offer document, conditions for the purchase obligation are met.
<ul>
<li>
Crédit Agricole Italy will still buy your shares at a fair price should you decide to sell (probably the wisest decision, as Borsa Italiana will order the delisting).
</li>
<li>
CreVal closed at €12.29 on 26 April, a gross spread of 1.7%, and the annualised spread should, at worst, be c. 7%.
</li>
<li>
The exact payment date for shares tendered under the purchase obligation is not specified, but "as soon as possible and, in any case, no later than three months from the payment date" (30 April 2021).
</li>
<li>
Liquidity is thinner now, button exactly illiquid, c. €1.8 mn on 16 April.
</li>
<li>
Recommendation is long AND exercise the purchase obligation.
</li>
</ul>

On 20 April, Credit Agricole Sa (ACA FP) boosted its offer for Credito Valtellinese SpA (CVAL IM) to €12.50/share from €12.20, regardless of any threshold met, 0.8% above my TP on CreVal - Crédit Agricole: Grounds for an Improved Offer).
Crédit Agricole holds now 91.17% of CreVal. As per the offer document, conditions for the purchase obligation are met.


Crédit Agricole Italy will still buy your shares at a fair price should you decide to sell (probably the wisest decision, as Borsa Italiana will order the delisting).


CreVal closed at €12.29 on 26 April, a gross spread of 1.7%, and the annualised spread should, at worst, be c. 7%.


The exact payment date for shares tendered under the purchase obligation is not specified, but "as soon as possible and, in any case, no later than three months from the payment date" (30 April 2021).


Liquidity is thinner now, button exactly illiquid, c. €1.8 mn on 16 April.


Recommendation is long AND exercise the purchase obligation.



Credit Agricole/CreVal: Purchase Obligation

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Equity Bottom-Up

Credit Agricole and Societe Generale have reported dismal quarterly results. This may have negative implications for HSBC in the region. We continue to believe that HSBC Holdings will not fare as well as many banks globally, and perhaps its operations in France are just one reason for this.

Credit Agricole and Societe Generale have reported dismal quarterly results. This may have negative implications for HSBC in the region. We continue to believe that HSBC Holdings will not fare as well as many banks globally, and perhaps its operations in France are just one reason for this. 

On 23 November, <a href="https://www.smartkarma.com/entities/credit-agricole-sa" target="_blank" data-smartkarma-citation="entities:21373:1" rel="noopener">Credit Agricole Sa (ACA FP)</a> , through its Italian subsidiary, launched a voluntary public tender offer entirely in cash for all ordinary shares of <a href="https://www.smartkarma.com/entities/credito-valtellinese-spa" target="_blank" data-smartkarma-citation="entities:21175:1" rel="noopener">Credito Valtellinese Sc (CVAL IM)</a> at €10.50 per share.
<ul>
<li>The offer is addressed to the remaining 90.15% shares of Creval that Crédit Agricole does not already own, for a total amount of €664.39 mn.</li>
<li>Valuing the total equity of Creval at c. €736.57 mn. (for comparison, Crédit Agricole's market cap is €28.5 bn).</li>
<li>Representing 22.8x P/Forward EPS, and 0.43x P/TBV.</li>
</ul>
Creval closed on 26 November at €11.5.
<ul>
<li>8.7% above Crédit Agricole's offer and 0.47x P/TBV.</li>
<li>which indicates that the market expects a sweetened bid.</li>
</ul>
The Board of Directors of Creval issued a press release on 25 November calling the offer "unexpected and unsolicited", and indicating that it will hire financial and legal advisors.
<ul>
<li>Of course this should be read as "the offer is too low".</li>
</ul>
The offer seems a tad opportunistic on the back of cheap bank valuations, to which ECB's negative-interest rates policy and the fact that banks aren't allowed to distribute dividends are contributing.
The median target price on Capital IQ is €10.45, so the offer at €10.50 seems bang on, but Creval's Board has signalled it considers the offer too low. The stock is no longer trading on fundamentals, but the bid price will act as support.
<ul>
<li>I believe in the end shareholders will likely accept a sweetened offer, which could come at around €12.0 per share, a 38% premium and c. 0.49x P/TBV, which does not sound excessive.</li>
</ul>

On 23 November, Credit Agricole Sa (ACA FP) , through its Italian subsidiary, launched a voluntary public tender offer entirely in cash for all ordinary shares of Credito Valtellinese Sc (CVAL IM) at €10.50 per share.

The offer is addressed to the remaining 90.15% shares of Creval that Crédit Agricole does not already own, for a total amount of €664.39 mn.
Valuing the total equity of Creval at c. €736.57 mn. (for comparison, Crédit Agricole's market cap is €28.5 bn).
Representing 22.8x P/Forward EPS, and 0.43x P/TBV.

Creval closed on 26 November at €11.5.

8.7% above Crédit Agricole's offer and 0.47x P/TBV.
which indicates that the market expects a sweetened bid.

The Board of Directors of Creval issued a press release on 25 November calling the offer "unexpected and unsolicited", and indicating that it will hire financial and legal advisors.

Of course this should be read as "the offer is too low".

The offer seems a tad opportunistic on the back of cheap bank valuations, to which ECB's negative-interest rates policy and the fact that banks aren't allowed to distribute dividends are contributing.
The median target price on Capital IQ is €10.45, so the offer at €10.50 seems bang on, but Creval's Board has signalled it considers the offer too low. The stock is no longer trading on fundamentals, but the bid price will act as support.

I believe in the end shareholders will likely accept a sweetened offer, which could come at around €12.0 per share, a 38% premium and c. 0.49x P/TBV, which does not sound excessive.


Creval - Crédit Agricole: Playing Hard to Get

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/credit-agricole-sa" target="_blank" data-smartkarma-citation="entities:21373:1" rel="noopener">Credit Agricole Sa (ACA FP)</a> -  CASA – has made a cash offer of €10.50 per share for <a href="https://www.smartkarma.com/entities/credito-valtellinese-spa" target="_blank" data-smartkarma-citation="entities:21175:1" rel="noopener">Credito Valtellinese Sc (CVAL IM)</a> which values it at €736m, equivalent to 0.4x PBV</li>
<li>The successful acquisition will consolidate Credit Agricole Italia as the seventh largest bank by total assets in the country, with a 5% bank branch market share</li>
<li>The cash acquisition is expected to impact CredAg’s CET1 ratio – which was 12.6% at 3Q20 – by less than 20bps</li>
<li>CredAg Italia’s NPL ratio was 6.6% at 3Q20, with CreVal’s favourably comparable NPL ratio of 6.4%; CredAg Italia does, nonetheless, have better NPL coverage than CreVal</li>
<li>CredAg was rumoured to be a potential bidder for <a href="https://www.smartkarma.com/entities/banco-bpm-spa" target="_blank" data-smartkarma-citation="entities:28121:1" rel="noopener">Banco BPM SpA (BAMI IM)</a>, but management has opted for the smaller and more digestible CreVal as its Italian acquisition, with limited impact on CASA’S and CredAg Italia’s capital adequacy and credit quality</li>
<li>Banco BPM, with its market capitalisation of €2.8bn, its NPL ratio of 8.6% and NPL coverage of 48% at 3Q20 is a riskier proposition</li>
<li>Shares in Banco BPM were down 3.7% on the 23rd November, with CASA’s shares rising 4%, no doubt on shareholder relief that it did not acquire Banco BPM</li>
<li>We see further near term downside for Banco BPM shares, in view of the CreVal news; yet we are positive on BPM’s medium term fundamentals as management continues to successful de-risk the credit portfolio going forward and build core capital</li>
<li>BPM management should be thinking more in terms of domestic consolidation candidates</li>
<li>Risks to our near term negative view on Banco BPM include the emergence of a bidder or merger partner in the near term</li>
</ul>



Credit Agricole Sa (ACA FP) -  CASA – has made a cash offer of €10.50 per share for Credito Valtellinese Sc (CVAL IM) which values it at €736m, equivalent to 0.4x PBV
The successful acquisition will consolidate Credit Agricole Italia as the seventh largest bank by total assets in the country, with a 5% bank branch market share
The cash acquisition is expected to impact CredAg’s CET1 ratio – which was 12.6% at 3Q20 – by less than 20bps
CredAg Italia’s NPL ratio was 6.6% at 3Q20, with CreVal’s favourably comparable NPL ratio of 6.4%; CredAg Italia does, nonetheless, have better NPL coverage than CreVal
CredAg was rumoured to be a potential bidder for Banco BPM SpA (BAMI IM), but management has opted for the smaller and more digestible CreVal as its Italian acquisition, with limited impact on CASA’S and CredAg Italia’s capital adequacy and credit quality
Banco BPM, with its market capitalisation of €2.8bn, its NPL ratio of 8.6% and NPL coverage of 48% at 3Q20 is a riskier proposition
Shares in Banco BPM were down 3.7% on the 23rd November, with CASA’s shares rising 4%, no doubt on shareholder relief that it did not acquire Banco BPM
We see further near term downside for Banco BPM shares, in view of the CreVal news; yet we are positive on BPM’s medium term fundamentals as management continues to successful de-risk the credit portfolio going forward and build core capital
BPM management should be thinking more in terms of domestic consolidation candidates
Risks to our near term negative view on Banco BPM include the emergence of a bidder or merger partner in the near term


Credit Agricole SA Opts for CreVal M&A, Banco BPM (BAMI IM) Side-Lined

Australia & New Zealand Bankin / Equity Bottom-Up

The theme of lowering credit costs is only just beginning. We see this in spades for <a href="https://www.smartkarma.com/entities/aust-and-nz-banking-group" target="_blank" data-smartkarma-citation="entities:443:1" rel="noopener">Australia And New Zealand Banking Group ("ANZ") (ANZ AU)</a>. ANZ’s newly released figures for its June quarter. Strong macro data continues in many countries, with new US private sector output showing a particularly sharp rise for August. Even with ANZ’s mammoth decline in credit costs during the June quarter, its provision expenses in the first nine months of the fiscal year are around three times for all of last year, and also the year before.  Charges can still remain low during fiscal 4Q20, while being well-cushioned compared with the past.

The theme of lowering credit costs is only just beginning. We see this in spades for Australia And New Zealand Banking Group ("ANZ") (ANZ AU). ANZ’s newly released figures for its June quarter. Strong macro data continues in many countries, with new US private sector output showing a particularly sharp rise for August. Even with ANZ’s mammoth decline in credit costs during the June quarter, its provision expenses in the first nine months of the fiscal year are around three times for all of last year, and also the year before.  Charges can still remain low during fiscal 4Q20, while being well-cushioned compared with the past. 

France

Credit Agricole S.A. is the lead bank of the Credit Agricole Group.  The Company acts as the central bank of the Group, coordinates its sales and marketing strategy and ensures the liquidity & solvency of each of the Caisses Regionales. Credit Agricole S.A., through its subsidiaries, designs and manages specialized financial products that are distributed primarily by the Caisses Regionales.

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Credit Agricole Sa (ACA FP)

Credit Agricole/CreVal: Purchase Obligation

Crédit Agricole Italy will exercise the purchase obligation. Borsa Italiana will order the delisting. CreVal closed at €12.29 on 26 April, a gross...

Jesus Rodriguez Aguilar

HSBC – Vive La France!

Credit Agricole and Societe Generale have reported dismal quarterly results. This may have negative implications for HSBC in the region.

Daniel Tabbush

Creval - Crédit Agricole: Playing Hard to Get

I believe in the end Creval's shareholders will likely accept a sweetened offer, which could come at around €12.0 per share, a 38% premium and c....

Jesus Rodriguez Aguilar

Credit Agricole SA Opts for CreVal M&A, Banco BPM (BAMI IM) Side-Lined

CredAg was rumoured to be a potential bidder for Banco BPM, but management has opted for the smaller CreVal as its Italian consolidation choice; we...

Victor Galliano

ANZ – Credit Cost Recovery

The theme of lowering credit costs is only just beginning. We see this in spades for Australia And New Zealand Banking Group ("ANZ") (ANZ AU)....

Daniel Tabbush

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