Citi consumer unit in good shape; Wells' layoffs

Receiving Wide Coverage ...

Troubled times

Hong Kong’s status as “one of the world’s most profitable banking markets is now under threat,” the result of a shrinking local economy, “the U.S.-China trade war, slowing Chinese growth and months of antigovernment protests. A weaker economy is likely to mean more loans going sour and less credit demand from households and businesses,” the Wall Street Journal says.

“The city is a money-spinner” for banks, with profit per employee higher “than in any other market tracked by Citigroup analysts — roughly double the U.S. figure. It is lucrative in part because Hong Kong is a major financial center, and handles a lot of business for mainland Chinese clients.” Two of those banks, HSBC on Monday and Standard Chartered on Wednesday, release earnings this week that “will give investors an early indication” of what to expect going forward.

On Monday HSBC reported a 24% drop in third quarter net income and said it “abandoned its main financial target and would speed up plans to revamp its U.K., U.S. and European businesses.”

Interim CEO Noel Quinn said the bank would “remodel” large parts of the bank in response to the decline. While some areas of its business had “held up well in a challenging environment,” performance at others — mainly in Europe and the U.S. — “was not acceptable.”

Wall Street Journal

Progress

Jane Fraser, who last week was named president of Citigroup as well as head of its big global consumer banking unit, is inheriting a business that is “actually heading in the right direction.” She replaces Stephen Bird, who headed the consumer unit and is leaving the bank.

David Paul Morris/Bloomberg

“It may be tempting to consider this a sign of stalled progress in the consumer business at Citigroup. Certainly Mr. Bird won’t leave the bank with his mission to turn around the unit fully accomplished. Still, there has been major progress in consumer, especially recently. The primary drag on returns, the bank’s U.S. branded card business, is finally showing a long-promised uptick in revenue. U.S. branded card revenue, which excludes private-label cards, jumped 11% in the third quarter from a year earlier, defying falling interest rates. The bank is letting promotional zero-interest balances roll off, and borrowers seem to be staying.”

The more the merrier

The Financial Action Task Force, the intergovernmental agency that sets standards for combating money laundering and terrorist financing, said “countries should establish systems that use one or more different methods to identify the beneficial ownership of an entity. Countries that rely on a single approach are less effective in obtaining accurate and timely information about the ownership of an entity.” The agency “requires member countries to take steps to prevent entities,” such as companies, foundations and associations, “from being used for criminal purposes and to ensure the beneficial information can be obtained or accessed quickly by the authorities.”

Financial Times

Parting ways

Goldman Sachs has “joined a wave of investors withdrawing assets managed by Fisher Investments following lewd remarks about women made by its founder Ken Fisher.” The bank said its asset management arm will drop Fisher from its multi-manager global equity fund, which manages $425 million, by the end of the month. Institutional investors have withdrawn more than $2.5 billion since “Mr. Fisher drew crude parallels between winning asset management clients and sex, and made inappropriate comments about women at a private investment conference this month.”

Elsewhere

Cutting back

Wells Fargo has laid off more than 200 bankers in its U.S. lending divisions recently, Reuters reports. “Most of the cuts were in Wells Fargo’s commercial bank and many impacted its team that gives loans to farmers,” where Wells is the biggest lender in the business. But a Wells executive said “the bank intends to retain that position and there has been no strategic move to reduce exposure. The bank has also made cuts to its energy lending group.” Wells is “traditionally strong” in both industries.

Let it go

UBS wants Iqbal Khan, the new co-head of its wealth management business, “to drop his criminal complaint over a spying scandal that emerged after he left cross-town rival Credit Suisse,” a Swiss newspaper reported. “UBS’s board would welcome it if Khan abandoned his complaint against the three private detectives who followed him during his last weeks as a Credit Suisse employee,” the report said. UBS’s board “thinks a trial could pose dangers for Khan and the bank, especially if new details emerged that could incriminate Khan. It could also be embarrassing for Khan if prosecutors dropped the proceedings without a result.”

Quotable

“It’s the start of the end of an era of super profitability in Hong Kong.” — Ronit Ghose, global head of bank research at Citigroup, about the various pressures on banks in the territory