Lending rebound fades; Wells cuts jobs in mortgage unit

Wall Street Journal

Where’s the boom?: A “promising rebound” in loan growth that was supposed to help local and regional banks “appears to be fading,” which “could become an issue, especially for small and midsize lenders.” Analysts blame “continued uncertainty over trade policy and higher interest rates.”

Muscling in: “A pack of investment banks” led by Goldman Sachs is “elbowing into the crucial exchange business of end-of-day trading.” Previously, the banks would route these orders to the New York Stock Exchange and Nasdaq, but after the two raised their fees, banks including Goldman, Morgan Stanley, Credit Suisse and UBS have handled these trades privately.

“The shift raises questions about transparency,” with some traders worried that closing prices could become less reliable, and “threatens” revenue at the NYSE and Nasdaq. “It also shows that some banks, after lean post-crisis years, are leaning into their trading arms, eager to take on more risk in plain-vanilla businesses like U.S. stocks.”

Everybody wins: Revenue from credit card and loyalty programs is growing faster than overall sales at many U.S. airlines as they “inundate customers with credit card offers, hoping to widen a lucrative and steady revenue stream as they rely more on income beyond fares.” But the banks that issue the cards benefit, too. “It’s a magical formula,” says John Grund, a managing director at Accenture.

Plummeting: While many investors in bitcoin and other cryptocurrencies have gotten hammered by the plunge in prices this year, “losses have been even more brutal” for those who have invested in Bitcoin Cash. The bitcoin offshoot is down 88% from its peak last December, compared to the 67% drop in original bitcoin. “The underperformance of Bitcoin Cash is notable because it touches on a bigger theme: whether virtual currencies can really become a means of payment that would supplant traditional money.”

Financial Times

More cutbacks: Wells Fargo has laid off 638 people in its mortgage banking division, the result of “a downturn in application volume and originations, and a lower number of clients in default.” The moves follow reductions in auto lending, payments and virtual solutions. “After carefully evaluating market conditions and consumer needs, we are reducing to better align with current volumes,” a bank spokesperson said.

Going private: Despite “marginally” lower pay, a “rising number” of junior bankers are jumping to private equity groups in the U.S., U.K., Switzerland and Hong Kong, according to New York-based recruiter Options Group. “The growing popularity of private equity among younger bankers comes at a time when the industry is raising the largest amount of funds ever and seeing the highest level of activity since the start of the financial crisis a decade ago.”

The first of many?: Following a two-year “tug of war between competition authorities and financial regulators,” Japan has approved what the paper says is the “first ever” merger of two big regional banks, “paving the way for a potential wave of mergers.” The decision to allow the deal between Fukuoka Financial Group and Eighteenth Bank “sets a precedent that could lead to widespread consolidation in a Japanese banking sector plagued by ultra-low interest rates and declining regional economies.”

Jumping ship: Three senior executives at TSB, the British bank that suffered a “disastrous IT upgrade” last April that left thousands of customers without access to their money, left the bank recently as it struggles to recover. “The upheaval comes at an awkward time for TSB,” which is dealing with investigations from the Financial Conduct Authority and a private law firm into the causes of the fiasco and has cost the bank more than £176 million so far.

Quotable

“Lumping together two sick men doesn’t create a healthy one.” — A source commenting on the prospect of a merger between German banking giants Deutsche Bank and Commerzbank.