Thursday 13 December 2018
C002D5556
BUSINESS DAY
FINANCIAL TIMES
47
COMPANIES & MARKETS
@ FINANCIAL TIMES LIMITED
Credit Suisse buyback plan falls flat with investors Swiss bank pledges to buy back as much as SFr3bn of its shares over two years Stephen Morris and Ralph Atkins
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redit Suisse’s plans to buy back as much as SFr3bn of shares and modestly increase its dividend received a lukewarm reception from analysts and investors, who were pushing for more capital to be returned after a sharp fall in the stock. The Swiss bank said it expected to repurchase SFr1bn ($1bn) in each of the next two years and would attempt to buy back a further SFr1bn if market conditions allow, while increasing the dividend by 5 per cent a year. Executives also reiterated their aspiration to make at least a 10 per cent return on tangible equity in 2019, which was at the low end of its expected profitability range, at an investor event in London on Wednesday. “We hoped for more. Overall we see the targets as unambitious,” said Citigroup analyst Andrew Coombs, who had forecast at least SFr5bn in buybacks through 2020 and a bigger rise to the “very low” dividend. Chief executive Tidjane Thiam has transformed the 162-year-old lender since joining in July 2015, slashing the volatile and capital-intensive trading operations to expand the higher returning and more predictable wealth management and private banking units, particularly in Asia. The CEO has received little credit from investors thus far with shares down about a quarter in the past six months — the fifth-worst performance among major European banks and a larger decline than struggling rivals Deutsche Bank and UniCredit. After the announcement on Wednesday morning, the shares rose 1.8 per cent. Mr Thiam, the 56-year-old former head of UK-listed insurer Prudential, had been counting on Wednesday’s event to draw a line under his turbulent first three years in charge and rally support from investors for the next phase of his strategy. He and other executives moved to
head off disappointment with their modest capital return plans, emphasising they were erring on the side of caution in the face of heightened geopolitical tensions and a gloomier outlook for the global economy, especially in Asia, the region where it is growing fastest. “We have clearly chosen to have a low but growing dividend, rather than something spectacular,” Mr Thiam said at the event in London. He stressed the 10 percentreturntargetwasachievablewithout any additional revenue growth, and would improve if the bank earned more. His chief adviser Adam Gishen added the bank would not “hoard surplus capital” and that if an “Armageddon scenario” in global markets meant there was no way to profitably reinvest earnings, more would be returned to shareholders. MrThiamalsosaidfundingcostswere falling after the bank retired expensive debt raised from Saudi Arabia and Qatar at the peak of the financial crisis and completedthewind-downofitsbadbank ahead of schedule. Analysts were disappointed the struggling trading operations weren’t addressedinmoredetail,aftertheydrovethe investmentbanktoanunexpectedpre-tax loss of SFr96m in the third quarter when fixed-income revenues plunged 20 per cent. That shock overshadowed an otherwise improving set of results in which overall pre-tax profit surged 70 per cent. Executives said the fourth quarter had once again been “tricky” as client volume slowed and admitted the Asian trading unit may end up making a loss in 2018. “It’s very tough out there — clearly, we have seen a very significant correction in markets, but especially in APAC,” Mr Gishen said on a call with reporters. “That is reflected in the revenue . . . [which is] roughly between 8 and 10 per cent down.” Credit Suisse said it expected to report overall pre-tax income of between SFr3.2bn and SFr3.4bn this year — up from SFr1.8bn in 2017. The forecast demonstrates some green shoots for Mr Thiam’s restructuring, which has come at a steep cost.
Opec forecasts fall in demand for cartel’s crude next year Rising US shale output to weigh on global demand for Opec’s oil Anjli Raval
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pec estimates the world will need 31.4m barrels a day of the cartel’s crude next year, 2.1m b/d less than demand from 2017, as production from US shale fields continues to swell. The figure underscores the dilemma facing big producer countries which have ramped up output in recent months, but seen oil prices fall by 30 per cent since October. Not only have Saudi Arabia, Russia and others kept production high, US shale oil companies have also been increasing their output - creating a situation somewhat resembling the 2014 downturn. But this time Opec and its allies are not willing to let the market balance itself because of the economic pain faced by their countries, even if other nations such as the US can benefit at their expense. Opec and producers outside of the cartel led by Russia agreed last
week to curb production in 2019 by 1.2m b/d to balance the market, in defiance of US President Donald Trump. He has called on producers to maintain output at elevated levels, to compensate for losses from Iran, after the reimposition of sanctions, and to keep prices low. If oil prices remain in check, the group - whose production hit almost 33m b/d in November - will have to confront swelling US supplies. NonOpec production, led by the US, is estimated to grow by 2.16m b/d in 2019, an upward revision of 60,000 b/d from July. “The forecast for the next year is subject to considerable uncertainties, particularly with regard to continued improvements in the productivity of US shale,” said Opec. In 2019, world oil demand is anticipated to rise by 1.29m b/d - which is lower than the 1.45m b/d it forecast in July - taking total consumption to 100.1m b/d.
Tidjane Thiam has transformed the 162-year-old lender since joining in July 2015 © Reuters
Norwegian oil group DNO starts clock on Faroe takeover bid Myles McCormick
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orwegian oil producer DNO has started the clock on its bid to take over Faroe Petroleum, giving shareholders three weeks to accept its offer of 152p per share. DNO on Wednesday published an offer document confirming the price it offered shareholders last month and setting 2 January as its first closing date, as it pushes forward with a hostile takeover attempt of its rival North Sea producer. “This full and fair offer provides Faroe shareholders a rare opportunity to exit their relatively illiquid Aim-listed positions at an attractive price in a volatile and uncertain market for oil and equities,” said Bijan MossavarRahmani, executive chairman of DNO. The offer values Faroe at £610m on a fully diluted basis — a level which Faroe’s board has said undervalues the
company. DNO already owns a 28.2 per cent stake in Faroe — or 26.2 per cent on a fully diluted basis. If the offer lapses, DNO cannot make a new offer for another 12 months and said “there can be no assurances” as to its long-term ambitions. DNO accused Faroe of failing to deliver consistent shareholder returns since its listing 15 years ago. It also criticised a recent asset swap with Equinor, which saw Faroe trade a number of development stage assets for producing assets, saying the company had “jettisoned a crown jewel asset for mature production”. Faroe said DNO’s criticisms were “unfounded” and “purely a tactic to distract from the simple fact that its offer substantially undervalues the company.” It said DNO was trying to exploit the recent fall in the price of oil to acquire it “on the cheap” and urged
shareholders to take no action. “DNO’s highly opportunistic offer is not only at a substantial discount to the value of the company but also at a substantial discount to comparable portfolio transactions and a substantial discount to the average of all UK takeovers in the last 10 years,” said John Bentley, non-executive chairman of Faroe. “Faroe shareholders should receive an appropriate premium which is not currently reflected in DNO’s offer.” “Ultimately I think this deal is going to get done. I think there’s a possibility of a slight premium on 152p but I think the [more substantial] premium hopes of October and November are gone now,” said Al Stanton, an analyst at RBC. “If DNO cant get deal approval they’ll sit there with their stake and frustrate management and push for seats on the board and probably come back in 12 months time,” he added.
SoftBank’s Vision Fund helps Indonesia’s Tokopedia raise $1.1bn Ecommerce site valued at ‘more than $7bn’ after funding round led by Japanese group Louise Lucas and Nian Liu
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oftBank’s Vision Fund has led a $1.1bn funding round for Indonesian ecommerce site Tokopedia in a move that underscores the Japanese group’s growing presence in Asia’s tech scene. The deal comes just months after SoftBank took a leading role in the $3bn raised by ByteDance, valuing the Chinese news feed and video company at $75bn. The $100bn Vision Fund, which is backed by Saudi Arabia’s sovereign wealth fund, is also in the process of setting up an investment team in China. The moves are seen as a boost of confidence in Asia’s tech sector, especially after multiple Chinese tech companies, such as Xiaomi and
Meituan, have disappointed investors following their initial public offerings earlier this year. Investment in start-ups in China, and increasingly in south-east Asia, has long been dominated by Chinese tech titans Alibaba and Tencent. SoftBank has a 29 per cent stake in Alibaba, and the two have co-invested in a number of companies, including China’s ridesharing company Didi Chuxing and Paytm, the Indian ecommerce group. In the case of Tokopedia, the Vision Fund joined Alibaba to lead the $1.1bn funding round, which reportedly valued the company at more than $7bn. Like Alibaba, Tokopedia has expanded beyond ecommerce to offer other services such as online payments.
“We see our mission — to make it easy to do business anywhere — reflected in Tokopedia’s journey,” said Kenny Ho, head of investment in south-east Asia and India at Alibaba. ByteDance has also rapidly expanded in recent months. It acquired lip-syncing app Musical.ly for $800m last year, and has taken steps into messaging, a move that pits it against Tencent. Unlike other Chinese start-ups, it has taken no funding from Tencent or Alibaba to date. “For someone like [ByteDance, taking funds from SoftBank] makes sense because it keeps them relatively neutral while raising money at a high valuation,” said Ben Harburg, managing partner of venture capital firm MSA Capital.
Vatebra up-skills 100 youths on blockchain at tech meet-up
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atebra Limited has provided a platform for over 100 tech enthusiasts to learn the basics of high-level blockchain programming at the second edition of its Codify Tech Meet-up held in Lagos recently. The tech meet-up is aimed at helping young coders collaborate, network and code; while highlighting the increasing importance of coding as the building block of today and tomorrow’s technological advancements. Blockchain technology is an avenue for untrusted parties to agree on a common digital history in this era when digital assets and transactions are easily faked or duplicated. It achieves this through an intermediary mutually trusted by
all parties. At this year’s Vatebra tech meet-up tagged ‘the Anatomy of Code’, participants included university and high school graduates, young coders as well at tech enthusiasts. Reputed speakers with solid technological backgrounds shared their insights on a variety of topics, among them Evans Okosodo, Sai Kumar of Belfrics, Mike Aigbe and Nnene Adaora. “For us, Codify 2.0 was conceived to bridge the technology skill gap we have observed in Nigeria,” said Mike Aigbe, deputy managing director, Vatebra Limited. “We foresee that with initiatives like this, we will not only help broaden the horizons of our budding technology experts, but also rank them
among the best in the industry in the months and years to come.” Participants were also treated to related cutting-edge topics such as test-driven developments of android applications, relevance of research design in the development of quality software and live development of a sample membership portal using c#, among others. The Vatebra Innovation Hub, like the Vatebra Academy which offers tech-incubation and co-sharing opportunities, has been strategically positioned to revolutionise the information technology industry by training and providing competent professionals with relevant knowledge in the tech ecosystem.