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Ant Group plans blockbuster IPO; JPMorgan unveils eco-friendly bond deal

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Ant’s giant deal

Chinese fintech giant Ant Group plans to raise “at least $34.4 billion from the world’s biggest-ever initial public offering in a blockbuster deal” that will take place in Shanghai and Hong Kong, half in each city. “The price values the Hangzhou-based group at about $313 billion,” the Wall Street Journal said. “In comparison, Mastercard Inc. was worth about $330 billion as of Friday’s close.”

“In a few years, Ant has helped change how people in China spend, borrow, save and invest. The firm, which has its origins in an escrow service for Alibaba’s e-commerce websites, now processes trillions of dollars in payments annually, runs one of the world’s largest money-market funds, and facilitates small loans to hundreds of millions of consumers and small businesses.”

A toy figurine of the Ant Group mascot sits on a desk at the company's headquarters in Hangzhou, China, on Sept. 28, 2020.

The deal is expected to come to market Nov. 5, the Financial Times said. The estimated $313 billion valuation puts the fintech “roughly on equal footing with JPMorgan Chase.”

“For hundreds of millions of people in China, Alipay may as well be a bank,” the New York Times said. “It is their credit card, debit card, mutual fund and even insurance broker — all on a single mobile platform. It is a lender to small businesses, both online and off, that might otherwise be ignored by China’s big state-run banks. Alipay has more than 730 million monthly users, more than twice the population of the United States. By comparison, PayPal has 346 million active accounts.”

Ant’s valuation “exceeds the market caps of Wells Fargo and other U.S. financial giants, underscoring the immense growth of the Chinese mobile payments and banking platform,” the Washington Post said.

Should banks be worried about skyrocketing fintech valuations? American Banker’s Penny Crosman explores the issue.

When the bad news is good

HSBC reported a 54% drop in its third-quarter net income compared with the year-earlier period, but that was better than expected as it sharply reduced its credit loss provisions to $785 million, down from nearly $7 billion in the first half.

The earnings report encouraged the bank to strike “a bullish stance, saying it was considering restarting paying dividends” later this year.

While those results were good, CEO Noel Quinn still “must show the road to normal profitability in 2022 and beyond,” Bloomberg argues.

Wall Street Journal

Green bond deal

JPMorgan Chase has “arranged a type of currency-derivative for Italian utility Enel that is linked to both companies’ sustainability targets. The bank believes it is the first such structure to incorporate promises both sides have made on the environment. The deal is the latest example of Wall Street’s efforts to tap skyrocketing demand for financial products linked to environmental, social and governance goals, as investors try to do good while also making money.”

“Enel raised £500 million, equivalent to $652 million, from the sale of bonds in the U.K. last week. The Italian company handed the British pounds to JPMorgan, which exchanged it for €553 million in a transaction known as a cross-currency basis swap. The energy company and the bank will pay interest to each other on the borrowed money every six months. That interest cost can rise if either side doesn’t make good on plans they have set to become more environmentally friendly.”

Financial Times

Accused

A former Goldman Sachs employee claims the bank “covered up allegations of sexual misconduct against its most senior litigator and fired a female lawyer for raising concerns about his behavior,” according to a lawsuit filed in New York Monday. “Marla Crawford, who spent 10 years at Goldman’s legal and regulatory proceedings department, alleged she was discriminated against and sacked after complaining about the behavior of Darrell Cafasso, a former Sullivan & Cromwell lawyer who has been Goldman’s head of litigation since November 2018. She is suing Goldman, Mr. Cafasso and the bank’s general counsel Karen Seymour, who she alleges covered up the misconduct.”

“We conducted a review of the allegations in this complaint and found that they were completely without merit,” Goldman said.

A new broom sweeps clean

The chairman of the European Central Bank’s supervisory board is calling for creation of a “European asset management company” to help banks in the European Union rid themselves of nonperforming loans, not just from the current crisis but those still left over from previous ones. “We need to use this opportunity for a deeper restructuring of the banking sector,” Andrea Enria writes in an op-ed.

“Asset management companies can combine support with appropriate conditionality to banks saddled with NPLs, delivering much-needed improvements to their business models,” he wrote. “This is not about helping banks that took excessive risks and managed them poorly. Instead, the aim is to enable EU banks to support viable households, small businesses and companies, and to bolster the EU’s needed transformation to a greener and more technologically advanced economy without banks being weighed down by impaired loans. A European asset management company is an effective solution. Alternatively, a network of national asset management companies could also support economic recovery, if appropriately designed.”

Washington Post

Mind change

Fifteen years ago, Sen. Joe Biden championed a new law that made it harder for American consumers to discharge their debts in bankruptcy. He now says “he supports many of the protections he rejected then. As president, Biden says, he will push for letting people who enter bankruptcy discharge their student debts and protect the equity they have built in cars and homes. He embraced a plan put forth by Sen. Elizabeth Warren that would also make more people eligible to file for bankruptcy and allow them to file without paying exorbitant legal fees.”

“Those commitments may carry greater significance as experts are predicting a wave of bankruptcy filings from individuals and business owners who are burning through their savings and federal stimulus benefits, leaving them unable to pay their bills and make loan payments.”

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