BofA tries to boost dealmakers; How Walmart was lost

Receiving Wide Coverage ...

Placing blame
Wells Fargo’s chief administrative officer, Hope Hardison, and its chief auditor, David Julian, were placed on leave after the Office of the Comptroller of the Currency cited them in regulatory warnings stemming from the bank’s 2016 retail banking scandal. “The OCC recently sent individual letters to Ms. Hardison and Mr. Julian that expressed concerns about their failure to oversee problems at the bank,” the Wall Street Journal says, noting “it is rare for individuals to receive such letters.” Wells said the two would no longer be part of its operating committee. Wall Street Journal, New York Times, American Banker

A tale of two banks
The “diverging fates” of Barclays, which reported strong third quarter earnings, and Deutsche Bank, which didn’t, “have one simple connection: the amount of cheap funding they can offer investment banking clients. U.K.-based Barclays is enjoying a strong recovery in investment banking revenue this year, boosted significantly by the financing it can give to trading clients. Deutsche Bank, by contrast, is hobbled by its own high cost of funding, which makes it less attractive to clients,” according to the Wall Street Journal.

While “it is increasingly clear that Europe’s last two big investment banks are following sharply divergent paths after their latest results,” the “gulf between the two European investment banks and their rejuvenated U.S. rivals is still as large as ever,” the Financial Times says. “Although Barclays clawed back some market share and stole a march on its German rival, both European groups remain dwarfed by their Wall Street rivals after a painful decade of restructuring that has left them smaller and less profitable in almost every business line.”

Separately, Deutsche Bank dismissed Nicolas Moreau, the head of its publicly traded DWS Group asset management firm, “after it reported billions in outflows in the third quarter.” He will be succeeded by Asoka Wöhrmann, a longtime Deutsche executive.

Wall Street Journal

Stacked deck
Synchrony Financial, which was the exclusive issuer of Walmart credit cards for nearly two decades, lost the business in July to Capital One. “Walmart executives had grown irritated because, among other issues, they wanted Synchrony to share more of the cards’ revenue and approve more applicants. The breakup was the latest reminder of how the once-pervasive business of store credit cards is changing and forcing issuers like Synchrony and Citigroup to rewrite their playbooks,” including offering bigger concessions to their retail partners.

High note
Visa said its fiscal fourth quarter profit jumped 33% to $2.85 billion as net operating revenue rose 12% to $5.43 billion. Payments volume increased 11% both in the fourth quarter and the full year.

Financial Times

Courting Americans
UBS reported a 37% increase in pretax profits for the third quarter while announcing a plan to attract about $70 billion from “super-rich Americans both at home and abroad” over the next three years. “We are well-placed to take advantage of the unprecedented growth in the world’s wealthy. We are acting with determination and intensity,” CEO Sergio Ermotti said.

New York Times

Going away
Rodrigo Rato, the former head of Bankia, the Spanish bank that nearly collapsed in 2012, will start a prison sentence Thursday after his 2017 conviction for credit card fraud was upheld. Rato, a former managing director of the International Monetary Fund and Spanish finance minister, was sentenced to four and a half years in prison for misusing the bank’s funds for his own personal use. He “is the most prominent Spaniard to enter prison since the country was plunged into a European banking bailout by Bankia’s near-collapse.”

Elsewhere

Show of support
Bank of America CEO Brian Moynihan and two other top executives “made a surprise appearance at a gathering of the bank’s senior dealmakers on Tuesday in an effort to boost morale.” Moynihan, who was joined by CFO Paul Donofrio and COO Tom Montag, “assured those attending the gathering … that they had the full support of senior leadership and the broader organization. Their supportive comments come at a time when Bank of America’s investment bank has been plagued by falling market share and revenue, and after a string of departures by senior leaders.”

Andrew Harrer/Bloomberg

Quotable

“There may be material loosening of terms and weaknesses in risk management of the leveraged-loan market. Some institutions could be taking on risk without the appropriate mitigating controls.” — Todd Vermilyea, a senior associate director in the Federal Reserve’s regulatory division, who said the Fed is taking a closer look at the LBO market.