Bank stocks rebound; JPMorgan Chase introduces 'fraud hub'

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On the rebound

Bank stocks led the way in a strong stock market rally Monday that saw the Dow Jones Industrial Average gain more than 400 points, or 1.5%, the Wall Street Journal reported. The financial sector was the best-performing sector of the S&P 500, rising 2.3%, with JPMorgan Chase and Bank of America both climbing more than 2.5%.

Bank stocks were also sharply higher in Europe, “reversing a sell-off last week that pushed the Stoxx banking index to its lowest level since at least the late 1990s,” the Financial Times said. “Lenders including Deutsche Bank, Commerzbank and BNP Paribas were up more than 5% on Monday.”

One of the best performing bank stocks Monday was HSBC, which “surged more than 10% after its largest shareholder, China’s Ping An Asset Management, increased its stake, delivering a vote of confidence in the global lender despite rising tensions between Washington and Beijing,” the FT reported.

“The increase is a welcome respite for HSBC’s share price, which has more than halved this year — including a 9% drop last week — to a 25-year low as the lender has become increasingly entangled in ill-feeling between China, the U.K. and U.S. Investors have also been concerned by the prospect of lost revenues as interest rates are slashed to record lows around the world and after British regulators forced it to cancel its dividend for the first time in 74 years because of the coronavirus crisis.”

Separately, Cerberus “and a rival investment firm have told HSBC they would buy its French retail arm for a symbolic one euro provided the British bank ploughs more than 500 million euros ($582.70 million) into the business,” Reuters reported. “HSBC is working with Lazard to sell its 270 retail branches in France as part of Chief Executive Noel Quinn’s strategy to slash costs across the banking group.”

“The bank has been struggling to attract interest in the unit as bidders fret at the heavy restructuring assumed to be necessary and complex talks with local regulators. Cerberus and the other investor are the only bidders left in the process while French banks, which initially studied the dossier, have all walked away. Both bidders want the business to be fully recapitalized with HSBC injecting at least 500 million euros before they can buy it.”

One of the reasons for the renewed interest in bank stocks is that “investment banking is set to continue to be a silver lining for banks with big Wall Street arms in a difficult year,” the Journal said.

“Bankers’ fees as a percentage of deal proceeds are running at the highest since 2000. Underwriters are earning 4.9% of gross proceeds in the U.S. as fees so far this year. That is almost half a percentage point higher than the average over the prior five years. The combination of more money raised and bigger fees implies that banks’ fee pool for U.S. offerings has already grown by some $5 billion over last year.”

Financial Times

Card shuffle

Goldman Sachs is expected to “reshuffle leadership” at its fledgling Marcus consumer division “as it braces itself for the fallout from the coronavirus pandemic. Harit Talwar, the former U.S. cards boss at Discover who was the first employee of Goldman’s consumer bank Marcus, will hand over day-to-day running of the business to his longtime number two, Omer Ismail. Mr. Talwar will become chairman of the consumer division and remain a member of Goldman’s partnership under the reshuffle, which will become effective on January 1.”

Elsewhere

Fraud control

JPMorgan Chase “is stepping up payment fraud protections for its small and mid-sized business customers, which continue to be targeted by scammers — particularly amid the COVID-19 pandemic,” Reuters reported. “The bank’s new self-service ‘fraud hub,’ introduced on Monday, will allow them to set alerts for unusually large payments and control who gets paid. The service supplements the current system in which customers call the bank to set controls.”

“The measures come amid a broader industry campaign to get businesses to be more vigilant against a major source of payment fraud: legitimate-looking emails, often impersonating the chief executive, with bogus instructions for paying suppliers or other third parties. To help small businesses spot vulnerabilities, the bank is offering to add a ‘safety meter’ to customer account dashboards which graphically shows how they score on setting safeguards, including suspicious transaction alerts.”

Do not delete

The Commodity Futures Trading Commission fined Citigroup $4.5 million “for deleting millions of audio files, including recordings it had subpoenaed, after failing to fix a known design flaw in its audio preservation system,” Reuters reported. The agency “said the Nov. 2018 deletion of 2.77 million audio files included recordings of traders subpoenaed in Dec. 2017 for a probe, which Citigroup had promised would be preserved.”

“Citigroup was accused of not following up on an employee’s warning in 2014 that the configuration of its audio preservation system might create a ‘ticking time bomb effect’ that could, and did, cause mass deletions of audio files. The case is the latest to highlight problems with technology systems” at the bank.