BNP

BNP announced a simplification of its Cardif structure (insurance business). BNP Cardif is selling its 25% minority stake in AG insurance (75% held by Ageas) to Ageas for €1.9bn. 

It will then buy new Ageas shares for €1.1bn to increase its stake to 23%. 

The operation will also release €800m in capital, hence improving the CET1 ratio by 5 bps.

Of course, the group also announced that the partnership was renewed, and AG Insurance will continue to provide insurance services to BNP’s clients in Belgium.

This is a pure engineering operation and should have little impact on the valuation of BNP, even though it is a clear improvement (simplification of structure, translation into a more liquid asset and release of capital). In our expert's opinion, the impact is more on Ageas. With 23% of the capital, BNP becomes the anchor shareholder of Ageas. We believe a full takeover by BNP is quite unlikely as it would freeze a very significant chunk of BNP's capital. 

The operation isn't negative for Ageas which benefits from a fresh €1.1bn capital injection at a close to all-time high level. We maintain our Add rating on Ageas that still offers a nice 16% upside based on its fundamental fair value. However,  the speculative appeal is now greatly reduced, as the likelihood of a bid by a third party is now reduced. This isn't necessarily good news for minority shareholders.