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  • Will Deutsche Bank Come to Wirecard’s Rescue? If Only

    Will Deutsche Bank Come to Wirecard's Rescue? If Only(Bloomberg Opinion) — Deutsche Bank AG is lining up to buy a piece of history — a remnant of scandal-ridden Wirecard AG. It’s not the only one sniffing around. But however many expressions of interest there may be, and however credible the buyers, the proceeds from selling off even the best assets of the German payments company will be tiny relative to the losses incurred.When Wirecard was a stock market darling, investors weren’t piling into the shares because of its Wirecard Bank subsidiary, the piece that potentially interests Deutsche Bank. The lending arm was a sideshow as the rest of the operation appeared to expand. Of course, the growth reported by the group is now heavily in doubt following the admission that the accounts overstated cash balances by 1.9 billion euros ($2.1 billion).Deutsche Bank says it is considering providing financial support for Wirecard Bank should it be required. Precisely what that means is unclear. Wirecard’s bank is not subject to insolvency proceedings. If it needs assistance, there should be other avenues. It’s not Deutsche Bank’s job to be lender of last resort. But there could be some logic to a straight takeover at the right price.Extreme due diligence will be critical. Wirecard Bank has looked like a simple deposit-taking institution that’s been growing nicely. Question one is whether its 1.7 billion euros of deposits have stayed put as the parent company has unraveled. Then any buyer would need to kick the tires on the credit quality of the assets.And however much comfort Deutsche Bank got, this would be a tiny transaction. Even prior to Wirecard’s spectacular implosion, the unit’s book value was around 160 million euros. Credit quality will need to be robust to justify paying that.At least Wirecard’s creditors’ expectations are low. The group’s loans and bonds are trading at around 17% of face value, suggesting their owners expect to collectively get back around 400 million euros of the 2.3 billion euros they are owed (assuming Wirecard drew down all its revolving credit line in full). A jumbo convertible bond is being quoted even lower. That’s backed by Wirecard but issued out of a separate entity, creating doubt as to whether its holders’ claims would rank as highly as those of other creditors.It will take several years to adjudicate claims, so the expectation must be that recoveries will be slightly higher — but not much.Aside from the bank, the other asset likely to attract interest is Wirecard’s U.S. business, put up for sale earlier this week. This was acquired from Citigroup Inc. in 2017. The price wasn’t given, but Wirecard did reveal an associated $200 million foreign-exchange transaction for the purposes of the deal. It also said the acquisition would add $20 million to Ebitda. Take that as a base and assume a 10-15 times valuation multiple and an exit might raise $200-$300 million, according to Mirabaud Securities analyst Neil Campling.As for the remaining businesses, investors need to be optimistic to believe they are worth much. One explanation for the missing billions is that most of Wirecard’s operations have been loss-making for some time, and so never generated the free cash flow that was reported. Value them at, say, 100 million euros for the customer relationships and some tangible assets. Tot it all up and you can see why hopes are so faint. The one other source of compensation would be generated from claims against the company and its directors, falling back on insurance.Wirecard’s administrator says there are “numerous interested parties” in the company’s assets. Who wouldn’t want to nose around the books of this infamous fallen technology star? But beware of thinking that Deutsche Bank, or anyone else, will truly come to the rescue.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

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  • Exxon Mobil Suffers Quarterly Loss on Lower Oil and Gas Prices

    Exxon Mobil Suffers Quarterly Loss on Lower Oil and Gas PricesExxon Mobil Corporation said in its regulatory filing on Thursday that it has incurred an unprecedented second straight quarterly loss from the fall in oil and natural gas prices after coronavirus lockdown restrictions dampened energy demand worldwide.

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  • How Many American Airlines Group Inc. (NASDAQ:AAL) Shares Did Insiders Buy, In The Last Year?

    How Many American Airlines Group Inc. (NASDAQ:AAL) Shares Did Insiders Buy, In The Last Year?We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly…

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  • Estimating The Intrinsic Value Of Intel Corporation (NASDAQ:INTC)

    Estimating The Intrinsic Value Of Intel Corporation (NASDAQ:INTC)How far off is Intel Corporation (NASDAQ:INTC) from its intrinsic value? Using the most recent financial data, we'll…

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  • Is Aeterna Zentaris (TSE:AEZS) In A Good Position To Deliver On Growth Plans?

    Is Aeterna Zentaris (TSE:AEZS) In A Good Position To Deliver On Growth Plans?Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the…

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  • Tesla’s Overexcited Fans Should Cool Down a Little

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  • Tesla could hit $2,000 in best-case scenario, says analyst

    Tesla could hit $2,000 in best-case scenario, says analystOn Thursday, Wedbush analyst Dan Ives raised his bull case price target for shares of Tesla to $2,000 from $1,500. While his base case was lifted from $1,000 to $1,250 (a street high), he maintains a neutral rating on the stock. The Final Round panel discusses the bullish call, and the road ahead for the electric automaker.

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  • Were Hedge Funds Right About Souring On Wells Fargo & Company (WFC)?

    Were Hedge Funds Right About Souring On Wells Fargo & Company (WFC)?We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided […]

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  • Frozen foods sales surge since state of pandemic: AFFI

    Frozen foods sales surge since state of pandemic: AFFIAlison Bodor, American Food Institute Pres & CEO, joins The First Trade to discuss the frozen food industry and how its faring amid this pandemic.

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  • The 3 reasons why I’d build a dividend share portfolio right now

    street sign saying yield, asx dividend shares

    Building a dividend share portfolio at the present time could be a means of generating a generous passive income over the coming years. Valuations across the share market are relatively attractive after the March market crash from the coronavirus, with many shares offering wide margins of safety.

    Furthermore, a lack of appeal among other income-producing assets may increase demand for dividend shares in the long run. With stimulus packages rolled out in major economies, the growth prospects for many industries could improve significantly.

    Low valuations in a dividend share portfolio

    Due to the March market crash, it is possible to build a dividend share portfolio that contains companies with low valuations. Although investor sentiment rebounded sharply after the market’s crash, many companies continue to trade on valuations that are below their long-term averages. This may mean that they offer relatively high yields that produce a generous passive income.

    It may also lead to impressive capital returns in the coming years. Buying shares when they trade at attractive prices has previously been a successful means of generating above-average total returns. As the share market gradually recovers, your portfolio’s value could rise. This may make it easier to generate a passive income in the long run.

    Relative appeal

    A dividend share portfolio may offer significantly greater income prospects than other assets over the coming years. Interest rates have been relatively low for a number of years, and may now fail to rise rapidly as policymakers across the world seek to provide support to their economies. This may reduce demand for income-producing assets such as bonds and cash, which could push many income-seeking investors towards dividend shares.

    Therefore, as well as offering a relatively high yield, dividend shares could become increasingly popular among investors. This may help to push their share prices higher, thereby leading to greater total returns for investors who hold them as part of a diversified portfolio.

    Growth potential

    Owning a dividend share portfolio may not produce high returns in the short run. The prospects for positive global economic growth have rapidly declined over the past few months, and risks such as a second wave of coronavirus may continue to weigh on the outlook for world GDP.

    However, the global growth outlook could be positively impacted by fiscal and monetary policy stimulus taking place in major economies. After all, stimulus packages implemented in the global financial crisis had a positive impact on asset prices and economic activity.

    Although this may not lead to instant gains for dividend share prices, over the long run it is likely to produce capital growth. Alongside the relatively high-income returns available on many dividend shares, the end result could be attractive total returns that make now the right time to start building a dividend share portfolio.

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    Motley Fool contributor Peter Stephens has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

    The post The 3 reasons why I’d build a dividend share portfolio right now appeared first on Motley Fool Australia.

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