FINANCIALS
This week, 3M. Not the Minnesota Mining and Manufacturing Co, famous for Post-It Notes, but management, mergers and margins. For the full rundown, see our credit weekly, published this afternoon.
- Management; always watch the narrative. Perhaps it’s the season, but our colleague, Piri, noted yesterday that four high profile CEOs in his coverage had been let go in the past quarter (Campari, Starbucks, Burberry and Nestle). We look at SEB, Scor and HSBC. In summary, mgmt change can have a meaningful impact on a business, even if it appears a smooth succession and these changes can have a spread impact, even if the direction takes time to become clear.
- Mergers (and acquisitions); beware the politics. Commerzbank is the key political football this week. Since Unicredit swooped in to build a 9% stake, only a little over a week ago, a range of actors have sprung into action. The net effect means we see a >50% chance of Commerzbank remaining independent, due to politics. This appears a key barrier to European banking consolidation and likely longer term spread negative for CMZB. We also examine ECB VP De Guindos' role in BBVA-Sabadell, new US bank competition rules and the range of European potential acquisition targets.
- Margins; look out below. JPM's profit warning is likely not the last, especially with the Fed's 50bp move and the ECB and BoE both now in cutting mode.
- Movers on the week - a risk-on week for banks and insurers, including some high quality tighteners.
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