FirstFT: European bank merger delayed by two years due to higher interest rates

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Rising interest rates delay mergers and acquisitions of European banks by at least two yearsdealmakers warn as the punitive nature of accounting rules means that long-awaited consolidation in the sector faces even higher hurdles.

Deal promoters bet that higher rates would provide more money for acquisitions as banks benefited from higher margins and higher share prices as profitability improved.

Many also hoped that the state-sponsored rescue of UBS Credit Suisse could spark similar deals between other national champions.

However, banks across the continent have huge stocks of corporate and consumer loans, as well as government debt, which have been sold at much lower interest rates. As part of any acquisition, these assets must be valued in the market and valued significantly lower than new loans issued at more favorable rates.

“Accounting regulations and their impact on equity are currently a big barrier to M&A,” said Dirk Lievens, head of the European financial institutions group at Goldman Sachs.

Here’s what I’m following today:

  • US debt ceiling: The House Rules Committee will determine framework for consideration of the transaction prevent a national default before it is put to a vote tomorrow.

  • Economic data: The Conference Board publishes the results of its US consumer confidence survey for the month.

  • Results: Greencore, Hollywood Bowl and HP report.

Five more main stories

1. The head of Philip Morris International says the company is charting a path to becoming an ESG shareholder. as part of a drive to win back investors, citing a shift away from cigarettes to less harmful vape-based nicotine alternatives. Read the Financial Times interview with Jacek Olczak.

2. Many of the biggest names in the cryptocurrency market still shy away from the basics. about their business, even as investors increase their focus on the industry, according to a survey conducted by the FT. Well-known crypto companies refused to share or provided partial answers to major issues such as the location of their headquarters.

3. Exclusive: German startup Proxima Fusion has received seed funding to develop a revolutionary fusion power machine. which he hopes can provide a future source of abundant, emission-free energy. It is the first fusion company to leave the country’s respected Max Planck Institute for Plasma Physics.

4. Exclusive: Despite more than 300,000 sewage spills, the UK Environment Agency has only fined four water companies. for violating an overflow permit between 2018 and 2022, according to official figures obtained by the FT in a freedom of information request. Read full story.

5. The UK Labor Party plans to force landowners to sell plots at lower prices if he wins the next general election to cut housing costs in England. Shadow raising secretary Lisa Nandy intends to reform the valuation of land purchased by councils through “Mandatory Purchase Orders”.

Big Read

A montage showing Robert Pruzan (left) and Blair Effron;  wall street sign;  and a torn 100 dollar bill

Centerview founding partners Robert Pruzan (left) and Blair Effron © FT Montage/Reuters/Dreamstime

Centerview has an enviable reputation: the company earns staggering consulting fees on some of Wall Street’s biggest deals, despite its modest headcount and largely avoiding the internal drama that paralyzed other banks – until recently. Now a bitter lawsuit with a former partner questioning this harmonious culture and the future of the firm.

We also read. . .

Schedule of the day

Turkish lira weakened to almost a record low Yesterday, after the re-election of Recep Tayyip Erdogan, analysts warned that the next big test for the victorious president would be to tackle the country’s shaky $900 billion economy.

Line chart of the Lira against the US Dollar showing the weakening of the Turkish Lira after Erdogan's re-election

Take a break from the news

Bestselling author Curtis Sittenfeld joins host Lila Raptopoulos on the FT Weekend podcast to talk about the state of romantic comedieshow they have changed and where they can go next.

Additional material by David Hindley and Emily Goldberg

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