Charged: Australia’s antitrust regulator has filed criminal cartel charges against the former country heads of Citigroup and Deutsche Bank for their role in a 2015 stock sale for Australia & New Zealand Banking Group. The charges by the Australian Competition and Consumer Commission, which have not been detailed, are considered unusual because they normally involve a civil action, suggesting “they feel their case is strong,” the Wall Street Journal says. Wall Street Journal, Financial Times
Talking the talk: Italy’s UniCredit and France’s Société Générale are talking about merging, “a bold move that would see two of Europe’s big banks join forces, leading the way for an expected round of banking mergers on the continent,” the Financial Times reports. UniCredit’s French CEO Jean-Pierre Mustier considers SocGen, whose investment bank he used to run, “an ideal partner for the Italian lender, buttressing its investment banking and eastern European operations. For SocGen, one of the main benefits would be gaining a leading position in Italy and Germany, both in retail and corporate banking.”
Jean Pierre Mustier, chief executive officer of UniCredit SpA, poses for a photograph during the Ambrosetti Forum in Cernobbio, Italy, on Saturday, Sept. 2, 2017. Policy makers and business leaders meet at the forum to discuss local and global issues. Photographer: Stefan Wermuth/Bloomberg
Stefan Wermuth/Bloomberg
“But any UniCredit-SocGen deal would be fraught with difficulty,” the FT cautions. “Aside from Italy’s political turbulence — and hostility to foreigners owning or running Italian businesses — regulators may be unnerved by the combination of two lenders already deemed systemically important.”
Separately, SocGen said it agreed to pay $860 million to American and French authorities to settle anticorruption charges related to bribes of middlemen in Libya to win business from that country’s sovereign wealth fund under the late dictator Moammar Gadhafi. It also reached a separate agreement with the U.S. Department of Justice and the Commodity Futures Trading Commission to pay $475 million to settle charges that it tried to manipulate the Libor rate.
Bailing out: The British government is planning to start unloading its majority stake in Royal Bank of Scotland, starting with the sale of about 925 million shares valued at £2.6 billion, accounting for about 7.7% of the bank. At current prices, the government would sustain a loss of about £2 billion on the stake, which it acquired when it rescued the bank during the financial crisis. The government expects to sell £3 billion of stock in each of the next five fiscal years. Wall Street Journal, Financial Times here and here
Wall Street Journal
Paying up: Banks and insurance companies account for half of the dozen largest legal settlements involving inadequate worker compensation since 2000. Bank of America paid $73 million to settle claims it didn’t pay overtime and for work performed off the clock to some retail and call-center workers in 2013, JPMorgan Chase paid $42 million to settle a 2011 overtime case, and Wells Fargo paid $27.5 million earlier this year.
Heavy lifting: GM is expecting its finance unit to pick up the slack as other parts of the automaker’s business hit a lull. GM Financial “has contributed around $1 billion in additional profit in recent years from car sales that wouldn’t have happened otherwise, the company estimates,” and expects the unit’s full-year profit to grow to $1.6 billion over the next few years from $1.2 billion in 2017, accounting for about 10% of the company’s profit.
Financial Times
Let the bidding begin: Goldman Sachs Asset Management, BlackRock, JPMorgan Asset Management and Schroders have been selected to compete for a £109 billion investment contract being put up by Lloyds Banking Group. The deal is “one of the largest ever put up for tender in Europe,” the paper says.
Elsewhere
Coming to America: British fintech startup Revolut is planning to apply for a banking license in the U.S. and it plans to launch its mobile payments service. CEO Nikolay Storonsky told Reuters it may apply by the end of this year. The company has already applied for a banking license in Europe, where it offers a prepaid debit card and a mobile app that makes it cheaper for consumers to spend money in different currencies. It plans to launch the service in the U.S. this summer with a bank partner.
Quotable
“It’s a step in the right direction, and another milestone for the bank.” — Joseph Dickerson, an analyst at Jefferies, about the British government’s sale of a piece of its RBS stock.
The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
