Guest lectures Flashcards
Mintos: Martins Valters
What is fintech? And what is the future of fintech?
Fintech- computer programs and other technology used to support or enable banking and financial industries.
People’s fundamental needs will not change, but how these needs are met will be profoundly different.
Now differences in:
1. Lending (many alternative ways to get loans –> more accessible and user-friendly)
2. Transactions/ payments (many alternative ways to make payments)’
3. Investments (e.g. app RobinHood offers to invest cost free)
Next step?
–> rise of digital only banks
trust= transparency
Mintos: Martins Valters
What does Mintos do?
Market lending –> cuts out many unnecessary intermediaries
Mintos- marketplace online connecting buyers and sellers (investors with borrowers –> all types of loans).
Livonia Partners
What is Livonia Partners? Its strategy?
Livonia Partners is a dedicated private equity investment firm in the Baltics, currently
managing €83 million Fund. Livonia Partners is focused on leveraged buyout transactions
and it has a hands-on approach to management and turnaround of its portfolio companies.
Livonia’s portfolio currently consists of 7 companies operating in 5 countries and with total
revenue of EUR 160 million. Run by founders Rain Lõhmus, Kaido Veske, Kristīne Bērziņa,
and Mindaugas Utkevičius, its investors are domestic and international financial institutions.
Strategy- leveraged buy-outs (growth funding)
Livonia Partners
Based on what criteria they choose companies?
- Experienced management
- Leader with gloabl ambitions
- Livionia value added
- Robust financials and recession resiliant’
- Fragmanted industry (buy and build)
Livonia Partners
Which was the largest/ most expensive private equity acquisition in the Baltics?
Blackstone acquisition of Luminor.
Livonia Partners
What are the valuation methods?
- Transaction- earning multiples (in Baltics normally 7-8x EBITDA, normally 10xEBITDA)
- Trading- earning multiples
- Discounted CFs
- Book value of assets
- Industry specific KPIs
However, valuation always largely subjective
Livonia Partners
What are their debt level strategies?
Optimize D/E to increase IRR (internal rate of return), not tax shields. Boost IRR by using leverage (paying less initially), deferred payments).
Pehr Vissen
In what ways was the funding situation for Bear
different from the rest of the industry?
Bear had more repos and short-term financing (overnight). More mortgage-based financing (long-term more expensive)–> not liquid, not safe–> huge liquidity risk. Bear had prime brokerage (provided many services- mergers, acquisitions, traded equities, bonds, provide accounting, etc) –> very interconnected –> if Bear Stearns went under, other firms would too since they were clients to prime brokerage.
Mismatch of its financing given vs received.
Bank-runs- when people decide to take out their money
Pehr Vissen
In what ways was the funding situation for JPMC
different?
JPMC was more liquid, borrowed long-term and did not have to be out-in-the-market all the time to fund their balance sheet. Had deposits from the general public, hence could borrow from the federal reserve–> interconnected on a smaller level.
Fortress balance sheet- strategy to stay liquid and always gave enough cash (like an insurance if something went wrong).
Pehr Vissen
What is a forthess balance sheet?
Strategy to stay liquid and always gave enough cash (like an insurance if something went wrong) –> more stable balance sheet.
At that time they had lower return on equity, but in the long run, it paid off in the crises.
Pehr Vissen
What were the arguments for saving Bear?
Losses would be larger if Bear was not saved since Bear was very interconnected with many other financial institutions–> domino effect would take place.Many uncertainties. If Bear was saved, then saved costs for the society.
Pehr Vissen
What were the arguments for not saving Bear?
Saving Bear would incentivized other banks to keep taking these actions–> more banks would need saving (perhaps crises would even happen earlier).
Pehr Vissen
What happened to Bear?
JPMC acquired Bear cheaply to minimze the hazzard. Afterwards price adjusted (increased) and had to pay more for the acquisition (did not want to be sued for mispricing).
Why did JPMC acquired Bear since JPMC always wanted to minimize risk, while Bear was very risky? Possibly wanted to be a good citizen (liked by the society–> good business).
Pehr Vissen
Describe the positive loop in case of inflation?
Increasing asset prices —> increased equity (house as a collateral becomes more valuable) —> lower counterparty risks (more collateral, hence less risky debt) —-> increased leverage in banks (lend more money since safer debt) —-> buy more assets (from the money borrowed) —> increasing asset prices —->……
Viktors Bolbats: Insight into banking in Latvia
What are the changes in the Latvian banking market?
- Residents vs non-residents
- Non-resi into international
- New identities and strategies
- Local community and business
- Value for client
