(AOF) – Euronext has reached a definitive agreement for the sale of its 11.1% stake in LCH SA to LCH Group, for an amount of 111 million euros. Closing of the transaction is expected in early July 2023. The competent authorities have been notified. As a result, Euronext will record a capital gain of approximately €40 million in the third quarter of 2023, which will be exempt from tax. As of December 31, 2022, Euronext recognized a carrying amount of €70.6 million for this investment.
This transaction results from the exercise by LCH Group of its option to buy back Euronext’s 11.1% stake in LCH SA, following the early termination of the existing derivatives netting agreement between Euronext and LCH SA, announced on January 16, 2023.
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Key points
– First European financial center created in 2000, present in 23 states, bringing together the regulated markets of Amsterdam, Brussels, Dublin, Lisbon, Milan, Oslo and Paris, as well as several platforms;
– Revenues of €1.5 billion, split between transactions for 35%, custody & settlement-delivery for 17%, listing for 15%, advanced data services for 14% and clearing for 8%;
– Growth model based on: strengthening the value chain, expanding the platform offering, broadening the listing offering, innovative products and services, strengthening positions in sustainable finance and pursuing external growth;
– Open capital of which 23.81% held by reference shareholders -ABN Amro, Caisse des dépôts, Cassa Depositi e Prestiti, Euroclear, Federale participatie and Intesa San Paolo;
– Company incorporated under Dutch law, Piero Novelli chairing the 10-member board of directors, Stéphane Boujnah being managing director;
– Maintenance of financial solidity after the purchase of Borsa Italia, with a leverage effect reduced to 2.4, shareholders’ equity of €4 billion and liquidities of €1.5 billion.
Challenges
– “Growth for impact 2024” strategy:
– annual growth of 3-4% in turnover and 5-6% in operating income,
– maintaining the dividend policy (50% rate) and investments (3-5% of turnover),
– synergies with the Milan Stock Exchange raised to €115 million by 2024;
– 4 priorities for the innovation strategy -digitalization, deployment of information sharing and co-design, reinforcement of the efficiency of central technologies and integration of innovations such as tokenization, tailor-made trading models, etc.;
– Environmental strategy on 2 pillars – reduction of the carbon footprint, validated by the SBTi and with the objectives identified then transition to sustainable finance:
– reduction of the direct carbon footprint by 75% in 2030 (vs 2020) and by 72% in 2027 for suppliers,
– expansion of the offer of ESG indices,
– strengthening of Europe’s No. 1 position in the range of ESG investment vehicles – ETFs, investment funds, “green” bonds, derivatives, etc.,
– support for issuers in their ESG transition;
– Maintaining competitive advantages – unique platform for transactions on European regulated markets and service offering covering all the needs of financial market participants;
– High capacity for innovation, operating margin higher than that of its European competitors and speed of execution of integrations.
Challenges
– Weight and volatility of European regulation;
– After the migration of data centers in Bergamo and then that of cash & derivatives to the Optiq trading platform, expansion of the clearing solutions offer to all Euronext European markets by the end of 2024 and deployment of the offers around crypto-assets;
– Integration of Spafid’s corporate services activities and Nexi’s technological assets;
– After record revenues, 2023 objectives
– €630m in operating costs, fully offsetting, with synergies, the cost of inflation,
– maintenance of at least 63% of the European market share of stock market transactions;
– 2022 dividend of €2.22
The negative effects of rising interest rates
The rise in interest rates normally causes an increase in bank income through the loans granted. In Europe, according to a survey conducted by S&P among 85 banking establishments, the sector expects an average increase of 18% in its net interest income. However, this new inflationary context also has undesirable effects, in particular an increase in refinancing costs. It is also accompanied by the fear of a new recession, which would then affect all the bank’s businesses, ranging from loans to asset management, whose income is correlated to market valuations. Reassuring element: the banks of the euro zone are sufficiently solid to face a deterioration of their environment.