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☆ Ukraine banks’ robust health masks big challenges
▼ + stars: | 2023-05-11 | by ( Pierre Briancon | ) www.reuters.com time to read: +8 min

Across the banking sector, deposits are as abundant as they’ve ever been, and the country’s lenders have found ways to remain profitable. The National Bank of Ukraine, the country’s central bank, deserves plaudits for both its preparations before the war and after it began. NPLs crept up to 38% of total sector loans as of January 1 this year, according to the central bank. It has the equivalent of $4.8 billion in non-performing loans, a staggering 67.5% of its loan portfolio, according to central bank numbers. The fact that Ukraine’s banks not only still exist but are thriving is an achievement in itself.

☆ Rebuilding Ukraine depends on luring private money
▼ + stars: | 2023-05-10 | by ( Pierre Briancon | ) www.reuters.com time to read: +7 min

KYIV, May 10 (Reuters Breakingviews) - Oleksandr Gryban is already thinking of the moment when Ukraine can build again. But the real challenge is to convince sceptical private investors both at home and abroad that Ukraine is a good destination for their cash. Investors can take solace that the team tasked with rebuilding Ukraine has proven competent and resourceful. There is a bull case for private investment in Ukraine. The other factor that might lure private capital involves Ukraine helping itself, by completing reforms initiated in the last few years.

☆ How Vodafone-Three can woo competition regulators
▼ + stars: | 2023-05-04 | by ( ) www.reuters.com time to read: +2 min

LONDON, May 4 (Reuters Breakingviews) - Vodafone (VOD.L) hopes that three will be its magic number. A merger of Vodafone’s domestic unit with Three UK, the Hong Kong conglomerate’s British business, would shrink the number of mobile operators to three from four. Mobile operators throughout Europe have long lamented antitrust authorities’ preference for keeping at least four players in a market to ensure price competition. Yet Vodafone’s case would be easier to defend if UK operators hadn’t hiked their tariffs in unison by about 11% last spring, a move they seem likely to repeat again this year. That would place the competition watchdog with a tougher choice: slick 5G networks, or four low-priced operators.

☆ Cellnex may flip from buyer to seller with new CEO
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +2 min

LONDON, April 28 (Reuters Breakingviews) - Cellnex's (CLNX.MC) decision to pick former Telecom Italia (TLIT.MI) CEO Marco Patuano as its new boss increases the odds of seeing the 27 billion euro mobile phone tower operator returning to the M&A negotiating table – as a seller. The appointment ends months of boardroom infighting that culminated with the departure of former Chairman Bertrand Kan on April 4. He is a former CEO of the Benettons' holding company Edizione and previously led Telecom Italia between 2013 and 2016. His track record of carving out the former monopoly's mobile tower business INWIT may be significant. But while tackling the company's turnaround, Patuano may also be lured into takeover negotiations with heavyweight investors as industry consolidation is underway.

☆ European drug discounts will ruffle U.S. funder
▼ + stars: | 2023-04-28 | by ( ) www.reuters.com time to read: +2 min

LODNON, April 28 (Reuters Breakingviews) - Europe’s plan to slash prices on pharmaceutical drugs could set off tensions with the U.S. The European Union proposed on Wednesday a legislative overhaul of the sector across the 27-nation bloc. This would incentivise drug makers like AstraZeneca (AZN.L) and GSK (GSK.L) to sell to all European countries at once. And although the U.S. is trying to tackle soaring prices with the Inflation Reduction Act, Europe’s falling drug costs will widen the gap once again. This creates a problem for the U.S. government, which funds more drug development than any other country.

☆ Oil AGMs presage awkward investor decoupling
▼ + stars: | 2023-04-28 | by ( Yawen Chen | ) www.reuters.com time to read: +3 min

Chair Helge Lund defended a sudden reversal in February to now cut less oil and gas production by 2030. Big Oil had more than doubled its profits in 2022 as energy prices spiked after Western sanctions on Russian energy. Pension investors like the Universities Superannuation Scheme, for example, are strengthening their climate investment policies and targeting board members to drive change. The traditional oil investor base may soon start to question why companies aren’t doing much more in oil and gas, if that’s what drives profitability and market performance. The oil world’s own awkward decoupling is happening fast.

☆ Macron is right and wrong on share buybacks
▼ + stars: | 2023-03-23 | by ( ) www.reuters.com time to read: +2 min

LONDON, March 23 (Reuters Breakingviews) - Emmanuel Macron dislikes the “cynicism” of large profitable companies engaging in massive share buyback programmes. The French president has a point that there are better ways for companies to spend their profits than to reduce their share count. Share buybacks in Europe’s largest 11 markets nearly doubled last year to 161 billion euros, according to a report by BNP Paribas (BNPP.PA), which itself is spending some 5 billion euros - or half its net profit - to acquire its own stock. And from an economic viewpoint, money spent cuddling shareholders would be better spent on investment and growth. That said, the scope for one country to regulate share buybacks in isolation – and to stop companies just paying out special dividends instead - is dubious.

☆ Economic asphyxiation puts Russia in China’s orbit
▼ + stars: | 2023-03-20 | by ( Pierre Briancon | ) www.reuters.com time to read: +7 min

Cut off from foreign markets by sanctions, Vladimir Putin’s government is at pains to finance budget deficits that would have been manageable in peacetime. The financial difficulties are pushing Russia further into the sphere of influence of China’s President Xi Jinping, who visits Moscow this week. Dipping into the fund, though, will push Moscow further into China’s financial orbit, Russian economist Alexandra Prokopenko has noted. In the short term, financial hope for Russia can only come from a significant increase in oil and gas prices. Trade between China and Russia increased by 34% last year as Chinese imports of oil and gas jumped 50%.

☆ China’s easing moment may be short lived
▼ + stars: | 2023-03-17 | by ( ) www.reuters.com time to read: +1 min

LONDON, March 17 (Reuters Breakingviews) - Western central banks’ new hesitation on interest rate hikes has given Beijing more breathing room. The decision came as a surprise, as the central bank has been generously pumping up bank liquidity when rolling over maturing medium-term policy loans. Such a subtler easing approach reinforces Governor Yi Gang’s view that China’s interest rates are at “appropriate” levels for now. Worries about the country’s mounting corporate and household debt help explain why Yi may favor keeping rates steady for longer. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ Carlsberg CEO’s big job is to keep glass steady
▼ + stars: | 2023-03-17 | by ( ) www.reuters.com time to read: +2 min

LONDON, March 17 (Reuters Breakingviews) - Carlsberg’s (CARLb.CO) new boss is unlikely to tinker with the company’s corporate recipe. The $21 billion Danish brewer on Thursday named Jacob Aarup-Andersen to replace outgoing Chief Executive Cees ’t Hart. A veteran from a rival brewer might have been better placed to introduce new products, and adapt to new industry trends. However, the new boss’s finance pedigree and track record managing businesses suggests that his main job will be to implement the group’s current strategy. It aims to increase revenue by 3% to 5% annually until 2027 and boost operating profit growth above that level.

☆ File Raiffeisen’s sanctions-bypass idea in the bin
▼ + stars: | 2023-03-16 | by ( ) www.reuters.com time to read: +2 min

LONDON, March 16 (Reuters Breakingviews) - Raiffeisen Bank International thinks it may have found a clever way to repatriate a small part of its Russian assets. Hence the idea to swap its stranded roubles against the frozen euros accumulated by Sberbank, the Kremlin-owned bank forced to unwind its operations by the war in Ukraine. Up to 400 million euros of its assets are now sitting idle in a frozen fund. Promoters of the idea, now being tested with regulators, reckon this might conform with sanctions because the swap would not involve sending hard currency to Russia. In reality, it would allow Russia’s largest bank to recover its frozen money, opening a massive loophole in the sanctions regime.

☆ Bolloré Jr. readies Vivendi for asset purge
▼ + stars: | 2023-03-09 | by ( ) www.reuters.com time to read: +2 min

But the markdown gives Yannick more latitude to end his father’s ill-fated Italian foray while continuing to play hardball to raise the price tag. Here again, the move will give Bolloré junior more freedom to consider offers from potential buyers, which the European Commission will have to approve. At 70, the elder Bolloré, who remains in charge of the family holding that owns a 30% stake in Vivendi, is gradually implementing his succession plan. At 9.8 euros, Vivendi’s stock fails to capture the value of its various investments and trades below an analysts’ target of between 12 to 15 euros. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ There’s hope beyond moaning for European telcos
▼ + stars: | 2023-03-03 | by ( Pierre Briancon | ) www.reuters.com time to read: +6 min

The annual Barcelona tech fest this week was in line with tradition, but a different mood music could also be heard beyond the bleatings of European telco executives. The good news for them is that European competition authorities seem to have been mollified by the constant pleading, and could take a softer approach to consolidation in the industry. Höttges compared the 55 billion euros invested by European telcos on infrastructure last year to the 1 billion euros invested in connectivity by those he calls the “hyperscalers”. The hope is now that, considering the European telcos’ low return on investment, European competition authorities will review their strict stance on consolidation in the sector. But European telcos also have means to address some of the problems they are facing without giving the impression that everything depends on forces beyond their control.

☆ BASF picks right time to share pain with investors
▼ + stars: | 2023-02-24 | by ( ) www.reuters.com time to read: +2 min

LONDON, Feb 24 (Reuters Breakingviews) - BASF (BASFn.DE) continues to provide the best metaphor for the German economy. The group will cut 2% of its workforce in a 550 million euros cost-cutting effort that includes plant closures. Investors who might have cheered the news sent the stock tanking by 6% as BASF boss Martin Brudermüller is also suspending a 3 billion euros share buyback. Politically that may have allowed the group to maintain its dividend at a planned 3.40 euros a share. The closure of one of two ammonia plants in the company’s stronghold of Ludwigshafen was expected - a Belgian plant in Antwerp can supply the global market.

☆ IMF’s outlook on Russia is too rosy to be true
▼ + stars: | 2023-02-10 | by ( Pierre Briancon | ) www.reuters.com time to read: +3 min

The international body recently estimated that Russia will avoid a recession in 2023 and expand by 0.3% after shrinking by 2.2% in 2022. The measures will not “significantly” affect Russia’s oil exports, the Fund says. That is a matter of intense debate among economists since oil prices remain below the cap set by the G7. Much will depend on the evolution of oil prices this year. But only a serious oil price rally, improbable in the context of the global economy’s “subpar growth” - to quote the IMF - could justify looking at Russia through rosy glasses.

☆ New Adidas CEO throws Yeezy in kitchen sink
▼ + stars: | 2023-02-10 | by ( ) www.reuters.com time to read: +2 min

But if Adidas decides to write off the Yeezy inventory altogether, it will lose another 500 million euros. In the worst scenario, with one-off costs in 2023 of up to 200 million euros, the $27 billion sportswear maker expects to report a 700 million euro operating loss this year. The company had already announced that ending its partnership with the musician would shrink its net income by 250 million euros in 2022. Shareholders however seem surprised that Adidas might not try to repurpose the trainers, instead of writing off the inventory. Yeezy is not the only problem for Adidas.

☆ Vodafone travails require more than caretaker CEO
▼ + stars: | 2023-02-01 | by ( ) www.reuters.com time to read: +2 min

LONDON, Feb 1 (Reuters Breakingviews) - Vodafone (VOD.L) needs more than an interim chief executive to dig itself out of its current funk. Sales fell 1.8% in Germany in the quarter ending December, which accounts for more than 30% of the group’s overall revenue. Della Valle is accelerating the group’s 1 billion euros cost-cutting plan, and implementing her predecessor’s decisions. But an interim CEO cannot take strategic decisions, such as whether or not to sell the Italian unit eyed by France’s Iliad - whose owner Xavier Niel has taken a 2.5% stake in Vodafone. Vodafone needs a permanent CEO.

LONDON/HONG KONG, Jan 30 (Reuters Breakingviews) - Renault (RENA.PA) and Nissan (7201.T) have helped their 24-year alliance move forward after four years of stalemate. The deal marks the end of the French group’s domination of its Japanese partner, and addresses festering governance issues. The voting rights of the Nissan shares transferred to the trust will be "neutralised" for most decisions, the statement said. Renault shares fell 2.7% to 37.16 euros, as of 0837 GMT. Nissan shares were largely unchanged at 453.9 yen.

☆ Cellnex takeover would disrupt key strategic pivot
▼ + stars: | 2023-01-20 | by ( ) www.reuters.com time to read: +2 min

LONDON, Jan 20 (Reuters Breakingviews) - A week after founder Tobias Martinez resigned from his chief executive role, Cellnex (CLNX.MC) could also lose its shareholders. Meanwhile the departure of Martinez was expected to herald a return to sobriety in a sector where low interest rates and high leverage boosted consolidation. In the age of higher interest rates, it may be time for the former predator to become prey. Okdiario hints that Cellnex’s main shareholders, led by Italy’s Benetton family with an 8% stake, are inclined to sell. Everything has a price, but the high premium needed to convince shareholders to change tack amid a strategic pivot could be hard to justify.

☆ EU’s frozen Russian assets plan is best put on ice
▼ + stars: | 2023-01-12 | by ( Pierre Briancon | ) www.reuters.com time to read: +4 min

The European Commission has launched a plan to try using billions of dollars and euros of frozen Russian assets to help finance the reconstruction of Ukraine. Then an estimated 165 billion euros of frozen Russian reserves sitting in euro zone central banks. The pipe dream of confiscating Russian assets can only be a diversion. CONTEXT NEWSEstonia is preparing a legal framework that would allow the government to seize Russian assets frozen after the EU slapped sanctions on Moscow, a foreign ministry spokesman said on Jan. 9. The European Commission put forward on Nov. 30 a plan to seize and manage frozen Russian assets and use the proceeds for the war-torn country.

☆ Sunken oil tanker merger leaves CEO adrift
▼ + stars: | 2023-01-10 | by ( ) www.reuters.com time to read: +2 min

LONDON, Jan 10 (Reuters Breakingviews) - Promising to lock his main shareholder in a “gilded prison” may not have been the best way to win support for a controversial merger. So now Euronav (EUAV.BR) Chief Executive Hugo De Stoop will not head the $6 billion oil tanker empire that would have resulted from a deal with rival Frontline (FRO.OL). The slightly smaller suitor on Monday called off an all-share deal that dated back to last April, when the parties agreed to merge. Investors’ apparent surprise came even though Euronav’s main shareholder, family-controlled Compagnie Maritime Belge, increased its stake to more than 25%, with the apparent goal of crippling the deal. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.

☆ Putin’s Russia will look more like North Korea
▼ + stars: | 2022-12-22 | by ( Pierre Briancon | ) www.reuters.com time to read: +3 min

LONDON, Dec 22 (Reuters Breakingviews) - The Western sanctions that followed the invasion of Ukraine have made it impossible for Russia to import what it needs. Foreign investors are staying away, thousands of the country’s elite have emigrated, and the price of its main export has sunk. The great shut-off of its economy will accelerate in 2023, as Moscow moves closer to the North Korean economic model. The invasion of Ukraine has inflicted damage on Russia, which depends heavily on the export of oil and gas. As a result, the Russian economy will take a hit.

☆ Economic chaos will break Orbán’s strongman spirit
▼ + stars: | 2022-12-20 | by ( Pierre Briancon | ) www.reuters.com time to read: +3 min

GDP growth is seen slowing to 1.8% in 2023 after growing 5.7% in 2022, according to International Monetary Fund forecasts. But thousands of students and teachers took to the streets in October to protest against rocketing prices and stagnating wages. For now Brussels has only approved the release of 5.8 billion euros of the funds, after Orbán made concessions on Ukraine aid and taxation. Without all the EU funds, Orbán will have to row back on his most populist economic measures. The risk of economic chaos will provide him with a strong incentive to step down from his most defiant, illiberal stances.

☆ EU gas price cap will be self-defeating
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +2 min

MILAN, Dec 16 (Reuters Breakingviews) - Setting a ceiling on the price of European gas would do more harm than good. European Union energy ministers will meet on Monday to try and agree on the cap, which backers believe will prevent gas prices from spiralling out of control. Under the latest proposal, the cap may be set at 220 euros per megawatt hour for the most liquid future contracts exchanged at the Dutch Title Transfer Facility, Europe’s gas benchmark. The Intercontinental Exchange, which handles the majority of TTF future contracts, believes the additional cost would be $47 billion. Traders could even opt to buy TTF contracts on the Chicago Mercantile Exchange.

☆ Bond-buying scars will open European can of worms
▼ + stars: | 2022-12-16 | by ( Pierre Briancon | ) www.reuters.com time to read: +3 min

LONDON, Dec 16 (Reuters Breakingviews) - The euro zone will soon have to pay for a decade of European Central Bank largesse. The first is to use provisions accumulated by national central banks over the past decade. But the central banks had wide differences in their approach to provisioning, meaning some may be left weaker than others. A central bank cannot be declared bankrupt, but operating with little or negative equity could hurt its credibility. And even if central banks don’t penalise them, they face the added risk that governments may tax them instead.

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