Ugo Lagrotta

The SNB's latest working paper dives into the impact of low and negative interest rates on Swiss banks. This prolonged period is exceptional by historical standards and has notably affected bank profitability. However, low rates also tend to boost stock markets, driving increased income from commission and fee-based businesses. As CFO at Swissquote, I'm closely monitoring how these trends shape our strategy and the wider financial landscape. An interesting read for anyone in banking and finance.

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Unicredit's move on Commerzbank...will ECB aprove this ?....: It's uncertain whether the European Central Bank (ECB) will approve UniCredit's request to increase its stake in Commerzbank to as much as 30%. Several factors will influence the ECB's decision, and they typically assess such requests carefully. Key considerations include: Financial Stability: The ECB will review whether such a move would impact the financial stability of both banks and the broader eurozone banking system. They may examine UniCredit’s ability to manage a larger stake in Commerzbank without overextending its resources. Competitive Concerns: The ECB may evaluate the effect on competition in the European banking market, particularly in Germany. A significant stake by a major foreign bank like UniCredit could raise concerns about market dominance or reduced competition. Capital Adequacy: The ECB will also assess UniCredit’s financial health, including its capital adequacy and ability to absorb potential risks from a larger investment in Commerzbank. Geopolitical and Regulatory Environment: Given that UniCredit is an Italian bank and Commerzbank is German, the ECB could consider the broader implications for cross-border banking within the EU. Regulators in Germany may also have a say, and political or economic sensitivities could come into play. UniCredit's Intentions: Since UniCredit has stated that a full takeover is only a possibility and not guaranteed, the ECB may require more clarity on the long-term strategy behind this move before making a decision. Overall, while the ECB has not commented, the approval process will likely involve a detailed review of these factors before any decision is made. #fixedincome #bonds #markets #ecb #fed #crypto #bitcoin

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Interesting reading on effectiveness of the Basel liquidity metrics during severe banking turmoil (March-May 2023). My two cents: - yes, the current LCR outflow rates are far from perfection and yes, 30 calendar days may be very generous, especially considering the speed at which clients can pull their money nowadays.. - yes, accounting treatment of HQLA actually matters. Banks can repo out HTC (or amortised cost) securities for cash but at what costs.. - yes, generally banks can access emergency liquidity facilities (ELA) made available by central banks, but that would likely exacerbate liquidity outflows (..what kind of signal would that send to current accounts' holders?).. So, yes the Basel liquidity framework isn't perfect - reason why along with the LCR requirement, there are stress testing requirements, mandating banks to run periodic liquidity stress tests with scenarios tailored to their business model. A perfect liquidity regulatory framework that fits all and prevents all kinds of liquidity runs on banks will never exist.. The current one however - if paired with good risk management practices - should be good enough!

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Cboe Clear Europe participates in ECB experiment on DLT. These experiments aim to explore the potential of distributed ledger technology and how it could improve efficiency for clearing and settlement https://lnkd.in/eX6V4wtC #fundadmin #Custody

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Irca announced a new €1.1bn B2/B-/B+ initially in 2 tranche, fixed and frn but the fixed tranche dropped. Also, some changes were made to documents. The IPT was 3m€ +400-425bps, but the final guidance tightened to 3m€ +375-400bps which is in line with current peers levels like Sammontana. I’m neutral on this issuance. On one hand, I kind of like the company, but the 1year callability isn't particularly attractive. Additionally, while the spread is in line with market conditions, I would have preferred a more appealing premium, even though I recognize the market’s current tightening dynamics. Wishful thinking, I suppose. That said, let’s dig into the company IRCA Overview 📊 Irca S.p.A., founded in 1919, is a global leader in semi-finished ingredients for the food industry, specializing in bakery, pastry, ice cream, and chocolate. With revenues of €1.1 billion in 2023, Irca operates in over 100 countries, catering to a diverse B2B client base that includes major industrial manufacturers, hotel chains, and artisanal producers. Advent International acquired Irca in 2022, driving its growth through strategic acquisitions and operational optimizations. ⭕ Business Model and Operation Diversified Portfolio: - Chocolate and Premium Decorations (Domori, Dobla): High-end products catering to pastry shops and chocolatiers. - Processed Fruits (Cesarin): Value-added ingredients for European markets. - Nuts (Anastasi): Specialization in pistachios, supporting growth in North America and Asia. 💰 Financial Performance - Revenue Growth: Irca has maintained steady growth, with revenues increasing from €890M in 2019 to €1.1B in 2023, driven by: Western Europe (60% ): Steady growth (+3.5% CAGR). North America (25%): Robust expansion (+7% CAGR). Asia (10%): The fastest-growing market (+10% CAGR). - Margins and Profitability Gross Margin: Consistent at ~40%, despite raw material price volatility. - EBITDA: Expanded by 39% over five years, reaching €168.3M in 2023. - CAPEX: €60M invested between 2021-2023, primarily in maintenance and expansion. 2024 projected CAPEX: €70M, focusing on automation and new production lines. 🤝 Strategic Acquisitions Cesarin (2022): Strengthened processed fruit offerings, boosting European revenue streams. Anastasi (2022): Enhanced the premium nut segment, with significant growth potential in new markets. Kerry Sweet Portfolio (2023): Acquired for €500M, adding €274.7M in annual revenue. Expected synergies of €25M in EBITDA by 2024. 🏋Debt Profile and Leverage -Debt Evolution Total Debt (2023): €1.212B. Net Debt (Adjusted): €1.062B - Leverage: Declared: 5.5x Net Debt/EBITDA. (I would be a bit more defensive, and I would adjust to integration costs and provisions which would push it slightly above 6x Ebitda) 👁️‍🗨️ Catalysts and Risks - Catalysts Expansion in high-growth markets such as Asia. Rising demand for innovative, healthy products. Operational optimization - Risks Elevated leverage. Integration risks . Trade tariffs

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Do we want more OR less "too big to fail" (= Global Systemically Important Banks (G-SIBs)) that hold their States as hostages? A merger between UniCredit and Commerzbank AG would create such an additional monster :-(. And let's not forget that the biggest European bank merger of ABN-Amro with Royal Bank of Scotland and Fortis led to the systemic failures of the three of them during the Great Financial Crisis of 2007-2008. Now, guess who was the bright investment banker who engineered this disastrous M&A deal? Nobody else than... Mr Andrea Orcel (working then at Merrill Lynch), the current boss of... Unicredit. As we say in French "Elle est pas belle la vie ?" (Isn't life beautiful?) ;-) #banks #systemicrisk #financialstability #finance #future #moralhazard #2b2f European Central Bank - European Banking Authority (EBA) - Financial Stability Board (FSB) - European Systemic Risk Board - Hélène Rey - Jézabel Couppey-Soubeyran - Finance Watch

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We confirmed Italy’s sovereign rating at BBB+/Stable. High debt levels will remain a challenge as we expect the country to face the highest debt-to-GDP ratio in the euro area within the next three years. European institutional support - especially including Next Generation EU and continued eligibility to the ECB’s Transmission Protection Instrument will remain crucial. See the links below for the full analysis. #Italy #sovereigndebt #sovereignrating

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Update on European equities: still worth keeping them despite all the pessimism surrounding them? Yes, the "Trump trade" at work on Wall Street has widened the performance gap by 7% in two months with the Stoxx Europe 600 and much more YTD. Almost everything speaks in favor of the US economy and market, except the valuation of stocks, much more elevated than on this side of the Atlantic. The underperformance since Donald Trump's election is wider than when he was first elected in 2016 and when tariffs were raised in 2018 and 2019. Citigroup estimates that a 10% increase in customs duties applied to half of the American revenues of companies in the Stoxx Europe 600 would reduce their EPS by 1, 2 or 3% in 2025 (excluding any possible positive exchange rate effect due to the appreciation of the greenback). So, investors may have been too gloomy about Europe. True, any sustainable rebound requires positive catalysts, and they are lacking for the moment. The fear of an economic slowdown, the erosion of analysts’ expectations and the political and economic situation in France are not helping matters. However, there are potential glimmers of hope: an easing of the fiscal brake in Germany in the wake of next year’s general elections; a much-anticipated fiscal stimulus in China; a negotiation around US customs duties; a possible end to the conflict in Ukraine; and a further easing of monetary policy by the ECB. Although it may seem paradoxical in the current negative context, European equities are generally behaving in line with their historical average. Admittedly, the growth dynamic is not fantastic, but it is complemented by a comfortable dividend yield. And, given current valuation levels, a surge in M&A activity could also have a positive impact on stock prices. AG Insurance #markets #economy #finance #financenews #investments #investmentnews #investmentinsights Thanks to Trends Canal Z and Gaële Poncelet

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Our new Bundesbank Financial Stability Review 2024 is online! Many thanks to all colleagues for their dedicated work on the Financial Stability Review!   These are the most important messages: 🔶 Financial system and economy: The financial system faces serious challenges due to geopolitical tensions and a weak economy.  🔶 Structural change: Structural change poses additional challenges to the economy. In particular, in the commercial real estate sector the risk of further price declines remains high, while residential real estate prices have stabilized. 🔶 Banks: Resilience of the banking system is adequate thanks to high capital reserves. The package of macroprudential measures is still appropriate. 🔶 Insolvencies: Corporate insolvencies rise significantly, but from a low level. Insolvency claims have increased considerably.   🔷 Banking sector: It is important for macroprudential banking sector supervision and regulation to continually evolve. 🔷 Nonbank-financial intermediaries (NBFI): The macroprudential perspective needs to be strengthened, and available data need to be shared between macroprudential authorities.   ▶️ Link to the Bundesbank Financial Stability Review and press conference: (https://lnkd.in/e9tfcBiK) ▶️ My video explaining financial stability and our main messages: (https://lnkd.in/eYfTYwAa)

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First rate cut in the box. Europe’s economy is growing, unemployment is at record-lows and inflation should normalize. Our Lombard Odier House View is overweight euro area sovereign debt to take advantage of high yields while we have an underweight allocation to European equities

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🚨 The #EBA and #ESMA have released a new discussion paper evaluating the prudential framework for #investmentfirms, three years after #IFR/ #IFD implementation. The paper highlights strengths, addresses weaknesses, and proposes improvements. Key focus areas include categorisation of Investment Firms, liquidity requirements, and new K-factors. This thorough review aims to enhance the framework's effectiveness, risk sensitivity, and adaptability to the evolving financial landscape. 📊📈 Read more: https://lnkd.in/eBmqE27S #EBA #ESMA #RegulatoryCompliance #InvestmentFirms #FinancialRegulation #Financialservices #Compliance #EU 

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Average auction yields declined/improved ahead of the latest Fed rate-setting meeting on September 18, 2024. The market is betting—with a 40-percent chance, recently—on a Fed rate cut higher than 0.50-basis points. Fed Funds Futures priced in recently a larger 1.20 or nearly five -0.25 Fed rate cuts for 2024 or more than the quarter-point estimates by the Fed dot plot. https://lnkd.in/gPGFTkKz

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🏦🇪🇺The ECB meets this week. What can we expect? 🧐Awaiting the ECB's final decision, here is the outlook from the asset management industry 👉🏼 https://lnkd.in/d3Ud9fyE 💬'Any upward impact on inflation can be addressed by a slower pace of rate cuts in the future, while the rate cut offers additional protection against downside risks.' Konstantin Veit, PIMCO. 💬'Markets will carefully assess whether President Lagarde signals further frontloading to the ECB’s policy normalization' Dr. Martin Wolburg, Generali Investments. 💬'Both downside and upside risks remain.' Felix Feather, abrdn. 💬'The deceleration in services price inflation is encouraging, which, combined with falling wage inflationary pressure, suggests that we can expect lower core inflation in 2025.' Erick Muller, Muzinich & Co. 💬'We now expect quarterly cuts in September and December 2025 to a terminal rate of 1.50% (an unchanged level, but six months earlier).' Ruben Segura-Cayuela, Bank of America Merrill Lynch. 💬'Investors will need to adapt to higher levels of uncertainty and cyclicality, and probably nowhere more so than in Europe.' John Butler, Wellington Management. 💬'One-off figures do not make a trend! But Lagarde’s data dependency implies that monetary policy is likely to change.' Kevin Thozet, Carmignac. 💬'Data and business surveys are deteriorating, and price dynamics confirm that inflation is likely to return to its 2% target.' François Rimeu, Crédit Mutuel.

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EURIBOR futures opportunity ➡ Yesterday, the ECB cut its policy rate by 25 bps, in line with market expectations. We project a less aggressive easing cycle than markets are pricing in, opening up opportunities along the EURIBOR futures curve. To find out why: https://lnkd.in/e4uS3iGj #ecb #euribor #inflation #futures #trading

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👨‍🎓 Last week, through the Risk Dashboard, i was analysing the credit risk deterioration of French and German banks. https://lnkd.in/eZUkrMqi 👨‍⚕️ Today, by looking deeper into the figures provided by the EBA, we have confirmation that we are only seeing the tip of the iceberg. 💥 Risk parameters, especially those related to Corporates and SMEs, show a clear deterioration over the last quarters for those countries (whether looking at the past - DR & LR - or looking to the future - PD & LGD).

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#MiFIR review: ESMA consults on three new technical standards: non-equity trade transparency, reasonable commercial basis (RCB) and reference data under the MiFIR review. ESMA’s proposals aim to enhance the information available to stakeholders by improving, simplifying and further harmonising transparency in capital markets. In the CP, ESMA is seeking input on three topics: - Pre- and post-trade transparency requirements for non-equity instruments, which aim at ensuring trade information is available to stakeholders by improving, simplifying, and harmonizing transparency requirements, and combining the right balance between real-time transparency and the ability to defer publication. - Obligation to make pre- & post-trade data available on an RCB intended to guarantee that market data is available to data users in an accessible, fair, and non-discriminatory manner. CP elaborates on the cost-based nature of fees & the applicable reasonable margin; and  - Obligation to provide instrument reference data that is fit for both transaction reporting and transparency purposes. It also proposes amendments to align this data with other relevant reporting frameworks and international standards. Comments to be received by 28 August 2024 https://lnkd.in/dHzFD2Pa CP has 3 sections each covering one draft technical standard: (1) the amendment of RTS 2 in relation to non-equity transparency; (2) the draft RTS on RCB; and, (3) the amendment to RTS 23 concerning reference data. The RTS 2 amendment section includes an introduction covering the mandate & scope of the proposed amendments to RTS 2. It includes ESMA’s proposals on pre-trade transparency, esp. the definition & characteristics of central limit order books (CLOB) and periodic auctions, and limited amendments to the pre-trade waiver regime. It also covers the mandate under Article 11 of MiFIR concerning the non-equity deferral regime. The final RTS 2 amendment suggests changes to specific transparency fields. The RTS on RCB holds ESMA mandate &provision of market data. The proposed new RTS converts ESMA guidelines on the cost of market data into legal obligations. It provides that market data users are not charged for market data according to the value integral to them. Includes proposals on the RCB & unbiased and fair contractual terms based on which the relevant market data needs to be made available. RTS also contains access provisions & relevant data policies which should be made public & free etc. The RTS concludes by proposing the relevant reporting to NCAs. Section 13 presents the legal mandate and explains how ESMA plans to address the provisions. Section 14 outlines the proposals and includes questions for respondents’ consideration. Finally, Section 15 includes annexes, list of CP questions, legal mandate, a note on cost-benefit analysis & draft regulatory technical standards. European Venues & Intermediaries Association (EVIA)

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The ECB was “not looking at a single indicator”… hopefully We are not looking only at ECB 🧐 ECB president Christine Lagarde said Thursday’s decision to lower the benchmark deposit rate for the second time this year was “unanimously decided” — unlike the previous cut in June, when Austria’s central bank head Robert Holzmann dissented “Labour cost pressures are moderating, and profits are partially buffering the impact of higher wages on inflation,” the ECB said on Thursday. “Financing conditions remain restrictive, and economic activity is still subdued, reflecting weak private consumption and investment.” Lagarde signalled more rate cuts were expected but downplayed the likelihood a one at its next meeting in October. The ECB president said there was a “relatively short period of time” until then and, while inflation was likely to fall in September, the ECB was “not looking at a single indicator”. In new quarterly projections, the ECB estimated growth of 0.8 per cent this year — down marginally on June’s 0.9 per cent forecast. It similarly trimmed its estimate for 2025 from 1.4 per cent to 1.3 per cent, citing “a weaker contribution from domestic demand over the next few quarters”. (FT)

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