Bank M&A said ready to reignite; OCC has concerns

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Urge to merge: Banks are starting to hear a buzz “not heard since the 2008 financial crisis,” namely consolidation within the banking industry. It may not happen immediately, “but a combination of factors is clearly bringing M&A back on to the agenda,” the Financial Times reports.

“Big banking mergers and acquisitions are back on the agenda in Europe,” the paper reports in a separate article, “where top executives are stressing the need for consolidation.” Bankers there are worried about the “growing gulf with resurgent U.S. rivals and the competitive threat from big technology groups in America and China. Consolidation would be one solution, giving European banks the scale to keep pace with U.S. competitors and the resources to invest in costly but necessary digital transformation.”

But at least one banker still has bad memories from the last wave of bank M&A. “Given the terrible and very regrettable consequences resulting from many mergers and acquisitions before the credit crunch, I totally understand why some people were angry about the role of some advisers, including myself,” said Matthew Greenburgh, a former bank M&A adviser at Bank of America Merrill Lynch.

Wall Street Journal

Warning: Regulators are “raising red flags” about looser underwriting and lower rates some banks are offering their corporate customers, “even if they operate in industries that are under strain,” in order to boost loan growth and win deals. The Office of the Comptroller of the Currency is worried about banks “extending interest-only periods, allowing borrowers to draw down bigger portions of the value of collateral and relaxing covenants meant to protect from losses,” as well as lowering interest rates.

Going in circles?: The financial deregulation bill signed into law by President Trump last week “may be about as good as it can get for banks,” the paper’s Intelligent Investor column intones. “Every deregulation cycle just plants the seeds for re-regulation.”

Hacked in Canada: Bank of Montreal and Simplii Financial, an online-bank unit of Canadian Imperial Bank of Commerce, said they were hit Monday by what appears to be a coordinated cyberattack from outside Canada. BMO said about 50,000 accounts may have been breached, while CIBC said about 40,000 customer accounts were compromised.

Moving forward: Coinbase, which “did more than any other company to bring U.S. retail investors into digital currencies — and left many feeling burned as bitcoin crashed,” is looking to woo new customers. The company recently announced plans to provide new services for hedge funds and other large investors and is opening a New York office to cater to Wall Street clients.

A potential customer might be Zoe Cruz, “one of the most powerful women on Wall Street” who lost her job at Morgan Stanley during the subprime mortgage meltdown and is “attempting a comeback in the virtual currency world.” She’s on the board of Ripple, the cryptocurrency startup.

Financial Times

Trailing: Pay on Wall Street went up 17% last year, bringing it back up to where it was before the financial crisis. But the situation in Europe “presents a less exuberant picture.” While pay across the pond has also been going up, “it is far from clear that those banks have the earning power to match their generosity.” Banker pay as a percentage of profits, now running at more than 70%, suggests European banks “cannot really afford these elevated payouts.”

It’s off: SoftBank and Swiss Re said they have “agreed to end discussions” about the Japanese company buying a minority stake in the reinsurance company, although the two companies said they still may explore potential business partnerships.

New York Times

Change in policy: Some of the largest American banks appear to have gone back on a vow they made three years ago to cut back on lending to the coal industry in order to mitigate climate change. “With coal companies enjoying a small resurgence under the Trump administration, banks are again embracing the industry,” where some of the largest companies are now out of bankruptcy.

Quotable

“The worst loans are often made in the best of times.” — Comptroller of the Currency Joseph Otting.

Andrew Harrer/Bloomberg