International Financing Review March 21 2020 21People
&Markets
Rothschild backs itself as rivals scrap buyback plans
The Rothschild family is taking advantage of
market turmoil to increase its stake in
ROTHSCHILD & CO ûTHEûlRMûFOUNDEDûBYûTHEû
current generation’s forebears.
The family currently owns just under half
of the shares of Paris-listed Rothschild & Co,
but said it wanted to spend up to €45m
increasing its stake.
The purchases will be made by Rothschild
& Co Concordia, which currently has a 35%
holding. There are other Rothschild-related
vehicles that give the family collectively a
larger stake in the listed entity, as well as just
under two-thirds of the shareholder votes.
Rothschild & Co’s market value dipped to
as low as €1.15bn following the recentmarket crash. At that point the shares had
fallen by more than 40% this year to €14.64,
their lowest level since the eurozone crisis
in 2012. By Friday they had recovered to
€17.84.
The €45m sum pledged would be enough
to buy another 3.5% of the outstanding
shares at current levels. Rothschild & Co
Concordia said its pledge would show “the
Rothschild family’s trust in the
fundamentals of the Rothschild & Co group”.
To carry out the purchases without
launching a full offer for the rest of the
shares, the vehicle has asked the French
market regulator, the AMF, permission to
disapply this usual market requirement.The vehicle stands to receive over €22m
in dividends after the company said in
its fourth-quarter results announcement
last week it was recommending an 8%
rise in the annual dividend to €0.85 a
share.
Effectively, the family-managed company
is recycling that payout to lift shareholder
RETURNSûASûEFlCIENTLYûASûPOSSIBLE
)TSûMOVEûCOMESûASûOTHERûlNANCIALû
institutions are in a less enviable position
and have come under pressure to scrap
share buyback programmes to conserve
capital and increase lending to customers.
(see story in Top News section)
Christopher SpinkNo regulatory relief seen for US banks
"ANKSûHOPINGûFORûSIGNIlCANTûCHANGESûTOû
Dodd-Frank banking requirements – freeing
up capital and liquidity – as a result of the
coronavirus outbreak are likely to be
disappointed.
While European regulators have cancelled the
current cycle of bank stress tests for their banks,
US rivals have been in testing mode since last
month and are expected to complete the test.
The largest US banks are seen as in strong
positions as the health crisis slams the broader
economy, thanks to action taken by regulators
FOLLOWINGûTHEûûlNANCIALûCRISISû"UTûCRITICSû
argue that many of the safeguards enacted
following the crisis are keeping banks from
fully supporting the economy now.
As the coronavirus continued to wreak
havoc on markets, the Federal Reserve has
intervened with a number of extraordinary
moves, including a return to quantitative
easing, cutting the Fed funds rates to near
zero, and creating commercial paper
funding and primary dealer credit facilities.
And while the Fed encouraged banks to
borrow from the discount window to
support their own liquidity needs, it’sunlikely the central bank will remove
liquidity or capital constraints from banks.
European regulators have not changed capital
and liquidity rules either, but they have used
hmEXIBILITYvûWITHINûTHEMûTOûEASEûREQUIREMENTSû
The Bank of England, for example, removed a
countercyclical capital buffer applied on banks.“REACTIONARY” RISK
The challenges facing US banks and their
subsidiaries are a function of capital,
liquidity and risk appetite, and regulators
can impact all three through targeted rule
changes, said KBW analyst Brian Kleinhanzl.
But he said that is unlikely.
“Regulators are less likely to make rule
changes in order to avoid the healthcare
crisis from becoming a banking crisis,”
Kleinhanzl said.
“Obvious changes like eliminating the
gold plating in Basel III rules or eliminating
surcharges altogether become problematic if
investors believe that banks run the risk of
failing if capital ratios fall.”
Any major regulatory changes could also
be seen as “reactionary” in the face ofdeteriorating conditions, so the ultimate
BENElTûMAYûBEûMUTED ûHEûSAID
Regulators could change the liquidity
coverage ratio, which can free up the high-
quality liquid assets that banks hold on their
balance sheets. At the end of the year universal
banks held about US$2.5trn of HQLA,
exceeding regulatory minimums. If regulators
reduce the amount of HQLA required it could
add modest capacity to bank balance sheets,
but they would still be restrained by capital
ratios and leverage ratios.
“The reality is that many rules would need
to be changed to truly free up bank balance
sheets, and we believe the Fed is more
fearful of having another banking crisis
versus suffering through illiquid markets, so
changes will be small and targeted, if any,”
Kleinhanzl said.
Regulators are more likely to make
changes that impact on clients, such as
changing troubled debt restructuring
regulations and accounting rules to allow
BANKSûGREATERûmEXIBILITYûTOûWORKûWITHû
affected borrowers, KBW said.
Philip ScipioGreenhill hires ex-Barclays banker Taylor
"OUTIQUEûADVISORYûlRMûGREENHILL & CO
has hired former senior Barclays banker
Richard Taylor as a managing director
and chairman of its UK arm.
Taylor left Barclays in July, after most
recently being chairman of corporate
and investment banking in London. He
was previously co-head of itsinvestment banking division.
He joined Barclays after a decade at
Bank of America and Merrill Lynch,
including as its head of corporate and
investment banking for the UK and
Ireland. Before that he worked in
HSBC’s investment bank for 10 years,
after starting his career as a charteredaccountant at Arthur Andersen.
Taylor’s roster of clients at Barclays
included ICI, WPP, BT Group, O2,
National Grid and Kelda, who he
advised on M&A deals, divestments,
fundraisings in equity and debt capital
markets and general corporate matters.
Steve Slater5 IFR PM 2325 p 13 - 22 .indd 21 20 / 03 / 2020 20 : 29 : 17