Eurozone banks to clean house ahead of ECB review

(Full story)

By Lionel Laurent and Helene Durand

PARIS/LONDON, Oct 24 (Reuters/IFR) - Euro zone banks are expected to issue more debt, increase loan provisions and speed up asset sales in the next couple of months as they knock their balance sheets into shape ahead of the European Central Bank's (ECB) sector health-check next year.

The ECB will take a snapshot of loans and other assets, including holdings of government debt, from the balance sheets of 128 banks at the end of this year and scrutinise their riskiness before it takes over as the bloc's banking supervisor late next year.

The starting point for the ECB's Asset Quality Review (AQR) gives the euro zone's banks less than 10 weeks to burnish their books, and small to mid-sized lenders in Italy, Spain and Portugal are considered most likely to take pre-emptive action.

"Banks will want to take corrective measures before the end of the year. It's far better not to be singled out by the AQR as having had a problem and fixed it in 2014; it's better to avoid that and do it now," said Mike Harrison, a banks analyst at Barclays.

The most straightforward way of reducing the perceived riskiness of their books would be for banks to set aside more money to cover potential future loan losses, which probably implies taking a hit to fourth-quarter earnings.

"The earnings risk element of the AQR means it could take longer for the earnings cycles at many banks to normalise," said Harrison.

Eurozone banks have already shrunk their balance sheets by 2.9 trillion euros ($4 trillion) since May 2012 - by renewing fewer loans, repurchase and derivatives contracts and selling non-core businesses - according to data from the ECB.

Lenders could bring forward asset sales, including loan books, equity stakes and subsidiaries, before year-end.

"Now that we have the wording and that we know the rules of the game, I believe that some banks will feel like they have some room for manoeuvre," said Khalid Krim, Managing Director, Head of European Capital Solutions at Morgan Stanley.

"Concerning deleveraging or asset sales, we can realistically expect to see an acceleration of the timing."
Bankers said they would be careful, however, not to sell at such a pace that they had to accept poor pricing.

It's a dog's high life: French design for pets

Parisian poodles are used to being pampered by their doting owners, groomed to perfection and adorned with luxury leashes and collars.


Now they finally have the furniture to match.

A company co-founded by a former Societe Generale banker has come up with a range of high-end interior items for the furry and the feathered retailing for as much as 4,000 euros ($5,400).

The discerning cat or dog may appreciate a sofa lined with specialty textiles from Denmark. A birdcage on stilts is crafted from aluminium and oak.

The company, Chimere, even offers a lacquered litter box for cats and a minimalist, bell-shaped fish bowl.
The sofa looks like a retro-style television on short wooden legs and comes in different sizes, with customised finishes available on demand, according to the company's website (www.chimere-edition.com).

Co-founder Frederic Stouls started the venture after quitting the crisis-ridden banking sector in 2012, when he spotted a niche in the $60 billion U.S. pet market that he believes can be filled by elegant design.

"Our designs are romantic, they evoke childhood... You can see dogs taking ownership of the kennel straight away," Stouls said.

Big French luxury groups such as Kering and Louis Vuitton already offer some products for animals of privilege, such as $400 dog leashes and $3,000 cat carriers, but little beyond outdoor accessories.

After opening a retail space in Paris furniture store Silvera, Chimere's next target is the United States. Stouls said the company was also working on new ideas for products such as beehives for the design-conscious apiarist.

"This is a really big market: there are hotels for dogs, spas for dogs," he said. "But the product has to look good."

French video games co. dangles bleak Xmas over Sony, Xbox next-gen push

By Lionel Laurent

PARIS, Oct 16 (Reuters) - Shares of French videogames publisher Ubisoft slumped more than 25 percent to an eight-month low on Wednesday after delaying the release of two titles until next year, missing the holiday season in the hotly competitive industry.

Although the home-console market is no stranger to delayed releases, Ubisoft's move is the latest sign of mounting pressure in an industry where increasingly big-budget titles are having to fight harder to attract gamers' time and money in the face of nimbler and cheaper mobile alternatives.

"In a world of mega-blockbusters, we have now come to the conclusion that the team needed additional time," Yves Guillemot, chief executive of the company behind the Assassin's Creed and Far Cry series, told investors on a conference call.

Ubisoft blamed the delay on pressure to meet consumer expectations in the $66 billion hit-driven videogames industry and said the decision would cause it to swing to an operating loss for its 2013 to 2014 fiscal year.

The announcement, in a statement after Tuesday's market close, follows the huge success of Grand Theft Auto V, released last month by a unit of Take-Two Interactive, in which hedge-fund billionaire Carl Icahn owns a stake.

The delayed games, dystopian hacking adventure Watch Dogs and racer The Crew, were due to launch alongside next-generation consoles from Sony and Microsoft, making the sacrifice for quality a risky one in some investors' views.

"This is a pretty severe downward revision - these games were supposed to come out in time for Christmas," said Gregoire Laverne, a Paris-based fund manager at Roche Brune.

"They're being delayed for reasons of quality, which is a good thing, but companies like Ubisoft already have a tendency to restrict the amount of titles they produce. If they release fewer games they have to be a blockbuster every time, there is no room for error."

CONSOLE WARS

Shares of Ubisoft ended the day down 26.2 percent at 8.19 euros, giving it a market value of 782 million euros. The stock fell as low as 7.55 euros, its lowest since February.

The company now expects to report an operating loss of between 40 million euros ($54 million) and 70 million, against a previous target for a profit of 110 to 125 million.

Ubisoft also cut its sales forecast for 2013 through 2014 to between 995 million euros and 1.05 billion from a previous target of 1.42 to 1.45 billion.

The console market is trying to shrug off declining sales and the rising quality of mobile games with the launch of new high-powered machines, which themselves need major triple-A titles to generate interest.

"Console game revenues have been falling for a few years now, which has been very difficult for the games companies and one reason why there has been a focus on a smaller number of blockbuster titles," said Ed Daly, managing partner at Tenshi Consulting.

"People are managing to get their fix of games on other devices, especially smartphones."

The rapid growth of mobile gaming, thanks to devices such as the Apple iPhone, contrasts with consoles' woes and is attracting investor interest: Japan's SoftBank Corp is offering Nokia 150 billion yen ($1.52 billion) for a majority stake in Finnish mobile games-maker Supercell.

Publishers like Ubisoft and industry heavyweight Electronic Arts are also pouring resources into mobile: Ubisoft earlier this month announced the acquisition of mobile studio Future Games of London, while mobile and digital accounted for over 76 percent of EA's fiscal first-quarter revenue.

"The big-budget massive console releases, the triple-A releases, those gambles are becoming increasingly important to get right," said Nick Gibson, founder of Games Investor Consulting.

A pack of Gauloises and a savings account, please

By Lionel Laurent and Matthias Blamont

PARIS, Oct 16 (Reuters) - The French will soon be able buy their cigarettes and do their banking at the same time with the launch of a stripped-down, cut price bank account by the country's huge network of tobacconists.

France's 27,000 "tabacs", whose distinctive red, diamond-shaped signs dot the nation's streets, will be out to win business from the likes of BNP Paribas and Societe Generale as established banks cut back their retail networks in a stagnating economy.

The Nickel bank account, which after initial tests is due to be expanded nationwide next year, will offer customers a debit card and a current account for 20 euros ($27.17). That compares with about 28 to 30 euros for the cheapest payment cards at BNP, SocGen and Credit Agricole.

Though Nickel clients will be charged fees for depositing and withdrawing money, the tabac association CBF still estimates the cost of having an account at less than 50 euros a year. The association says this is a third less than the cost of an account with Bank of France.

Nickel, co-founded by ex-SocGen communications chief Hugues Le Bret, also wants to lure people on the fringes of the system who may be unable to open a traditional bank account.

"With this account, we are bringing banking access to those who feel they've been forgotten, notably in rural areas, or simply shut out because of a mistake along the way," Pascal Montredon, head of the CFB network, told a press conference.

Nickel estimates that 1 percent of the French population does not have a bank account, while there are 2.5 million people who are classified as "overindebted" and 6 million who are unhappy with their current bank.
It also said that it wants to help to fight debt problems by not offering loans and is using the slogan "100 percent useful, zero percent toxic".

Nickel is being launched at a time when French retail banking, traditionally a cash cow thanks to lucrative fees and widespread appetite for conservative savings products such as life insurance, is taking a hit from the stagnant economy and competition from cheaper online competitors.

Lenders themselves are trying to come up with alternatives even as they close branches. BNP this year launched the online-only Hello Bank in Germany, Belgium, France and Italy to bring in customer deposits without a bricks-and-mortar branch network.

Consumer association UFC-Que Choisir, which has railed against the rising cost of bank charges, said that Nickel might help hard-pressed consumers to save money on bank fees.

BNP declined to comment. SocGen and the French Banking Federation did not respond to requests for comment.

One of Europe's top bankers says the whole tax-haven thing is over. Others disagree.

(Reuters) - The practice of funnelling money to tax-free or low-tax countries such as Switzerland in order to avoid paying more punitive taxes at home is finished, the head of French bank Societe Generale (SOGN.PA) said on Tuesday.


Governments and regulators across the world have cracked down on tax evasion in the wake of the financial crisis, a drive which has seen the United States and Europe heap pressure on Switzerland, Liechtenstein, Monaco and others to surrender more information.

"With all the reforms today that have been done by various governments, tax havens - that is to say people with secret bank accounts hidden somewhere to avoid the tax authorities - in my view, that is over," SocGen Chief Executive Frederic Oudea told French television channel BFM.

Citing the example of Switzerland, he said: "What is happening right now means that nobody will take that kind of risk anymore."

Swiss banks last month publicly apologised for their role in helping tax cheats, following a landmark settlement with U.S. authorities that would allow lenders to come forward over tax evasion by U.S. customers and avert prosecution by paying a fine.

The crackdown has effectively meant that an incoming U.S. law requiring foreign banks to surrender information on U.S. account holders has become unnecessary, Oudea said.

The Foreign Account Tax Compliance Act, or FATCA, was enacted in 2010 but takes effect in July 2014. It requires foreign financial institutions to tell the U.S. tax authorities about Americans' offshore accounts worth more than $50,000.

"What is happening today, particularly in Switzerland, makes this law unnecessary," Oudea told BFM.
The head of UK advocacy group Tax Justice Network, John Christensen, said the idea that the days of tax havens were over at this stage "remains entirely wishful thinking".

"The use of secret bank accounts is rapidly being superseded by using offshore trusts and secret foundations," he said. "We're also seeing a wider number of jurisdictions, with Hong Kong, Singapore, Mauritius very rapidly gaining market share, and that is partly a reflection of what's happening as wealth concentrates in the Far East."

Interview: AXA Private Equity, now "Ardian", eager for deals

By Lionel Laurent and Matthieu Protard

PARIS, Oct 4 (Reuters) - French private-equity firm Ardian, recently spun off from insurer AXA AXAF.PA, expects to make two more deals before the end of the year after closing its latest buyout fund, one of its executives told Reuters.

Ardian, which has committed almost a quarter of the 2.4 billion-euro ($3.27 billion) fund, is riding a pickup in interest in European assets from foreign investors and is eyeing mid-sized targets in France, Germany and Italy that have international exposure and growth potential.

"We are looking to make two more transactions before the end of the year," Ardian Senior Managing Director Philippe Poletti said in an interview. "(European) companies are broadly in good shape... But not everyone has growth potential."

Formerly known as AXA Private Equity, Ardian manages $36 billion in assets and is headed by Dominique Senequier, one of France's best-known female executives. Recent acquisitions include German pharmaceuticals specialist Riemser, French engineer Fives and a minority stake in London's Luton airport.

As well as mid-sized buys, Ardian Managing Partner Dominique Gaillard said in the same interview that the firm was eyeing infrastructure assets like Vinci's SGEF.PA parking lots and more sizeable investments such as French catering group Elior.

"(Vinci Park) is something that interests us," Gaillard said. "If we look at it, it will be via our infrastructure fund. On Elior, there is no offer ... But we are interested."

Ardian also recently teamed up with China's Fosun 0656.HK to bid for French resort chain Club Med CMIP.PA, worth around 550 million euros. The bid was extended after shareholders issued a legal challenge but Gaillard said the bid would stay the same and that the complaints were "excessive".

Although deal making in Europe has been in the doldrums throughout the eurozone crisis, market conditions in the private-equity market have begun to improve with competition for assets less heated and banks more willing to lend, Poletti said.

There is also plentiful liquidity for the time being, he added, despite the risk of a knock-on effect in bond markets once central banks begin to unwind crisis-era liquidity support.

FRENCH IMAGE
When it comes to selling assets in Europe, the key will be taking advantage of growing cross-border interest from U.S. trade buyers and Chinese investors, Ardian's Gaillard said.

Although France has a reputation for being hostile to foreign takeovers - the French government scuppered a planned takeover of Dailymotion by U.S. web giant Yahoo YHOO.O - Gaillard said there was less uncertainty now on the tax environment and that he was optimistic about the future.

"We will see U.S. trade buyers come back ... And the Chinese have always been ready to seize opportunities," he said. "There is a gap between the (French) rhetoric and the reality, even though it's clear that the rhetoric has done a lot of harm."

As for Ardian's future strategy as an independent entity, with AXA retaining 23 percent in the firm, Gaillard stayed tight-lipped. Asked whether there could be an initial public offering of Ardian one day, he said it was not on the agenda.