HSBC hires Goldman exec; high rates may hurt banks’ bottom lines

Receiving Wide Coverage ...

Hiring spree
HSBC has hired Peter Enns, chairman and CEO of Goldman Sachs’ Canadian division, as global head of its London-based financial institutions group. The hiring may have been in response to criticism from an anonymous group within the bank that claims that HSBC is having trouble attracting top talent, the Wall Street Journal reports. An August 25 memo written by the group “has ignited a frenzy of speculation in the City of London and some deep introspection inside HSBC about the future of its investment bank.” HSBC is treating the memo as a whistleblower complaint.

Anthony Kwan/Bloomberg

A day earlier HSBC said it hired seven others from outside the bank to work on its infrastructure and real estate investment banking team.

Short-term gains
Higher interest rates “could turn into a drag” for banks rather than boosting profits, as they have the past couple of years. While higher rates “enable banks to charge more on loans,” they also keep many prospective homeowners from getting mortgages and force banks to pay more for deposits. “The benefits of rising rates will probably run their course later this year into next year,” said Gerard Cassidy, an analyst at RBC Capital Markets. “Over time, rising rates will work against the banks.” Wall Street Journal, Financial Times

Credit card lenders — including Discover, Capital One and Synchrony Financial — are also in jeopardy. Investors appear to be “anticipating that, when a recession does eventually come, delinquencies and defaults will climb again. While no one can predict the timing of the next recession, a mere moderation would likely be enough to get delinquencies rising again. The unemployment rate can’t stay at near-50 lows for very long and it makes little sense to price credit card lenders as if it will,” the Wall Street Journal reports.

Wall Street Journal

Taking the helm
Fannie Mae has named Hugh R. Frater, a member of its board, as its interim CEO. He will succeed Timothy J. Mayopoulos, who is scheduled to leave at the end of next week. Frater is a founding partner and managing director of BlackRock and is currently non-executive chairman of Vereit, the real-estate investment trust. His appointment is subject to approval by the Federal Housing Finance Agency.

Billion dollar baby
Brex originally intended to be a virtual-reality company before turning its attention to credit cards. It “now issues corporate credit cards to other emerging tech companies, embracing a sliver of finance the banks avoid because they believe it to be too risky.” The bet has paid off handsomely for its two 22-year-old college dropout founders, as the fintech startup is now valued at more than $1 billion, making “it one of the youngest U.S. startups to enter the billion-dollar club.”

“We’re on our way to disrupting American Express,” said Henrique Dubugras, one of the founders. “If the company grows as much as we expect it to grow, it’s a $100 billion business.”

Financial Times

Up to code
JPMorgan Chase is requiring hundreds of new investment bankers and asset managers to learn computer coding, “a sign of Wall Street’s heightened need for technology skills. With technology, from artificial intelligence trading to online lending platforms, shaping the future of banking, financial services groups are developing software to help them boost efficiency, create innovative products and fend off the threat from start-ups and tech giants.”

Time to say no?
Banks may be making the same mistakes they made in 2008, namely continuing to loan money on properties with inflated values. That could “wipe out all the relatively good work of the past decade,” says Patrick Jenkins, the paper's financial editor.

New York Times

Taking action
Some state attorneys general are worried that the Consumer Financial Protection Bureau is “losing interest” in a lawsuit it filed against Navient, the big student loan servicer. “As the bureau has taken a softer approach toward industries, including payday lending, and had its own acting director say it too often exceeds its authority, the possibility that the Trump administration will ease up on Navient has prompted more states to join the legal fray. Five have now sued Navient, two of them within the past four months.”

You've been warned
The Securities and Exchange Commission’s filing of a cease-and-desist order against Voya Financial Advisors “should set off alarm bells for every financial firm and board of directors under the agency’s watch.” The SEC action was the first time it had used a rule it adopted five years ago to censure firms that ignore identity theft. “Most companies are probably not in compliance with the rule and, given the agency’s increased focus on cybersecurity, they should move quickly to address any issues.”

Elsewhere

The tax man cometh
“The era of mystery-cloaked numbered Swiss bank accounts has officially come to a close” as Switzerland has officially begun “automatically sharing client data with tax authorities in dozens of other countries … under global standards that aim to crack down on tax cheats. Gone are the days when well-paid European professionals could stash wealth across the border and beyond the prying eyes of their tax man.”

Quotable

“Coding is not for just tech people, it is for anyone who wants to run a competitive company in the 21st century. These are skill sets of the future ... By better understanding coding, our business teams can speak the same language as our technology teams, which ultimately drives better tools and solutions for our clients.” — Mary Callahan Erdoes, head of JPMorgan Asset Management.