Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

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China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

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Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

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Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

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China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

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Categorized | Insurance

Generali: splash the cash

Posted on November 23, 2016

Phillipe Donnet was touted as the continuity candidate when he was appointed chief executive at Generali. He has stuck to the plans laid out by his popular predecessor, Mario Greco — yet Generali shares have fallen 12 per cent since he took over. Rival Zurich, now run by Mr Greco, has risen by more than a fifth.

The underperformance is partly down to domicile, which Mr Donnet can do little about. Italy remains the insurer’s largest market, and investors have tired of its volatile politics and slow-motion banking crisis. The imminent referendum on constitutional changes has only added to their aversion.

Like its peers, Generali must deal with low interest rates and uncertain growth prospects. Mr Donnet, however, brings experience of operating in a low interest rate environment from his years spent in Japan.

On Wednesday he reiterated targets announced last year — an annual return on equity of 13 per cent and cumulative free-cash flow of €7bn between 2015-18. Job cuts and other cost savings are expected to harvest an additional €200m per year by 2019. And there will be an extra one-off benefit of €1bn from disposals, mostly from exiting smaller markets.

The cost cuts should contribute to cash flow and underpin dividends rather than paying for pricey acquisitions. Generali has pledged to pay out at least €5bn over four years, equating to €0.83 per share per year.

That sounds a very similar strategy to those adopted by its rivals, yet its promised dividends imply a yield of nearly 8 per cent — well above the 5-6 per cent offered by European rivals.

That difference looks too wide. True, there is the lingering uncertainty surrounding Mediobanca’s intentions. It owns 13 per cent and has appointed several board members but the bank says it plans to trim this stake. For those willing to look past country risk, Generali looks attractive.

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