Week in Review (18 April)

ING joins the fray after no decision from Deutsche on Commerzbank merger

With no decision on a potential linkup with Deutsche Bank this week, despite Commerzbank’s best efforts, ING has joined the list of Commerzbank suitors.

Reports suggest ING CEO Ralph Hamers has asked both the Federal Government in Berlin and Commerzbank CEO Martin Zielke to initiate talks on a merger. Hamers has reportedly offered to minimise job losses and to move ING’s headquarters from Amsterdam to Frankfurt in the event of a deal. Unicredit has similarly offered to conduct a lot more of the bank’s business out of Germany but the headquarters would remain in Italy.

Although German Finance Minister Olaf Scholz is throwing his considerable political weight behind a Deutsche/Commerzbank merger, the obstacles to such a deal are not insignificant. The SSM is particularly keen on cross border consolidation within the Eurozone and an acquisition by either ING or Unicredit is likely to be the regulator’s preferred outcome.

Short selling ban on Wirecard lifted today as saga rumbles on

On 15 February, Bafin imposed a ban on the short selling of Wirecard’s stock – the first time a short selling ban had been implemented in Germany since the financial crisis in 2008. The ban expires at midnight today and IHS Markit data notes that 14% of Wirecard’s traded shares are being shorted – a proportion seven times higher than the DAX average of 2%. However, with markets closed tomorrow and Monday, it will be Tuesday before the effects, if any, of the lifting of the short selling ban are felt.

On Tuesday, Bafin announced that it had filed a complaint with the Munich Public Prosecutor’s Office alleging market manipulation in the shares of Wirecard. $10 billion was wiped off the share price after a series of reports, run by the FT, citing a whistleblower’s claims of fraud and creative accounting at its Singapore office

Bafin is unusually protective of this fintech company. The short selling ban is unprecedented outside of a financial crisis and has led to speculation amongst market participants of an unhealthy relationship between Bafin and one of the companies it is responsible for regulating. A more straightforward explanation may be that Wirecard’s inclusion on the DAX, replacing Commerzbank, brought additional responsibilities for Wirecard, most notably the inclusion of its shares in DAX ETFs. BAFIN’s decision may have been motivated by fears of boomeranging prices causing wider market problems. Nevertheless Bafin’s push to prosecute two Financial Times journalists is highly unusual and will likely serve to heighten speculation around the nature of its relationship with Wirecard.

Hungarian Central Bank provides detail on bond purchase scheme

On 12 April Hungarian Central Bank Deputy Governor Marton Nagy provided more detail on a corporate bond purchase scheme announced in late March.

The Central Bank has identified 110 companies as potential participants in the scheme, which will start in July and run for a minimum of three years and a maximum of ten years. The total investment, of 300 billion forints, amounts to about €1 billion.

Bonds purchased must have a credit rating of at least B+. The Hungarian Central Bank will allow itself a maximum exposure of 70% per bond series and will invest no more than 20 billion forints in any one corporate group. The minimum exposure of the central bank per corporate group will be 1 billion.

EU-US trade dispute intensifies with ketchup the menu

As noted in Monday’s report, the US released a list of $11 billion of EU products that will be subject to tariffs in response to European Airbus subsidies. The action amounts to a reinvigoration of a dispute that has been ongoing since 2004 and which has involved European complaints against Boeing.

This week, the EU drew up a list of countermeasures targeting $20 billion worth of US imports. Ketchup, coffee, chocolate and roasted nuts are among the delicious treats potentially subject to tariffs. Tariffs will not be immediately imposed and the list is not definitive as the measures will need to be approved by a WTO arbitrator.