KBC: Finally reached agreement on the KBL divestment

This morning, KBC announced that they will sell their private banking activities (grouped in KBL) to Precision Capital for a total of €1.1bn (with a potential €50m conditional earn out). For KBC, the transaction releases €700m in capital with a 0.6% positive impact on the Tier 1 ratio, after the potential sale already resulted in a €115m relief due to a reduction in RWAs. Additionally, a book loss will be recognised in 3Q11 of approximately €400m and the full transaction is expected to close in 1Q12 driven by EC requirements.

In May 2010, the Indian Hinduja was already announced as buyer of KBL, but this transaction was finally terminated due to regulatory concerns. Prices that were mentioned at that time were approximately €1.4bn, so clearly the recent multiple deterioration has had a negative impact on the current selling price.

At the end of 2Q11, KBL had a total of €47bn AuM and €38.2bn AuC and, through their 51.1% stake in EFA, also an interest in their €87.5bn AuM. Therefore this reflects a selling price of PER FY10 of c. 7.5x (versus a previous 9.5x) and 2.2% over AuM (versus a previous of 2.9%).

Precision Capital is Luxembourg based but represents Qatari investors.

Despite the relative low price paid we believe the news to be received positive as execution on capital relieve is what the market is looking for.

Price: €19. Last published: target price: €21; recommendation: HOLD



DEXIA: break-up a fact now - bad bank plus option on cap gains DBB

Nationalisation of Dexia Bank Belgium is a fact now, but important details still lack to estimate value left for remaining (minority) shareholders in the bad bank and given pending discussion on sale of activities in France and Luxembourg. Dexia Bank Belgium will be nationalized (excluding Dexia Asset Management) for €4bn (P/Core Equity 2010 0.5x and PER 6.0x). Based on 1H11 this would result in a book loss of €3.8bn and simultaneous decrease of AFS reserve of €2.2bn. Short term funding requirement will decline by over €14bn and will enhance solvency by 200bp (mainly due to RWA reduction). Dexia shareholders will benefit for 100% for any capital gain realized on sale within 18 months (unlikely in our view) and after each semester this amount will decline by 6.25%.

To estimate equity (and fair value) of the bad bank details are required on. 1) Price to be paid by CDC/La Postale for the French activities including DEXMA rumoured in the De Tijd €0.6-0.7bn. If sold would reduce ST funding by €10bn. 2) Outcome on exclusive talk over sale of Dexia Banque Internationale Luxembourg to a group of international investors (exclusivity ends within two weeks). Total core equity amounted to €2.5bn (reported €2.4bn) and price mentioned in media is €0.9bn or 4.3x PER 2010. 3) State guarantees provided on Dexia SA and Dexia Credit Locale with ceiling of €90bn. Details on fees need to be announced still (upfront fee to be paid by bad bank according to De Tijd €450m + annual fee). The guarantee split is similar to that of 2008: 60.5/36.5/3 between Belgium/France/Luxembourg. The guarantee is provided for period of 10 years, highlighting the long duration of assets in bad bank. Finally unclear remains what happens with asset like RBC Dexia, Asset Management division and Turkish Denizbank. Also unclear what happens to Holding Communal (stake 14.1%) which has negative equity and could result in loss to shareholders as we believe Dexia has provided a loan in range of €0.7-1.0bn.

Given lack of important details we recommend to remain cautious on the stock. It is unclear whether trading will resume in the stock as of 10:00 CET. A press conference is planned at 9:00 CET.

Price: €0.85. Last published: target price: €1.50; recommendation: SELL

10:21 Écrit par swingteam-cc | Lien permanent | Commentaires (0) |  Facebook |

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