Receiving Wide Coverage ...
Booming: Shares in Dutch payments company Adyen nearly doubled Wednesday in their first day of trading in Europe. The stock closed at €455 a share, up 90% from its initial offering price of €240. That gives the company a valuation of €13.4 billion ($15.8 billion). Wall Street Journal, Financial Times here and here
Too big to ignore?: A year after the Treasury Department first described its plan to deregulate the financial services business, “large banks have reason to be disappointed. One year on, the biggest winners are small and mid-sized lenders, plus non-bank financial institutions that effectively compete with the largest lenders but under far less scrutiny.” While some actions, such as a proposal to loosen the Volcker Rule, should help big Wall Street banks, “other actions actually have cut against the biggest banks.”
The recent drop in the stock prices of many global systemically important financial institutions into bear market territory indicates that “financial risk has grown much higher.”
Wall Street Journal
Fined: The Consumer Financial Protection Bureau fined Security Group, a South Carolina-based debt collector, $5 million for making “improper in-person and telephonic collection attempts” and “physically preventing consumers from leaving their homes and visiting and calling consumers’ places of work.” Wall Street Journal, American Banker
No problems here: In his first Congressional testimony as Comptroller of the Currency, Joseph Otting told the House Financial Services Committee that his agency’s probe into banks’ retail sales practices “did not find pervasive or systemic issues” and found only about 10,000 unauthorized accounts, not enough to warrant public enforcement actions. Wall Street Journal, American Banker
Big talk, no action: Despite lots of speculation, the prospect of a merger between large European banks is no more than “bank-merger fantasy football.” “European officials want big lenders to merge, arguing for a muscular pan-continental bank to take on U.S. rivals like JPMorgan Chaseand Citigroup.” But that’s not likely to happen any time soon. “European bank valuations remain low and have dipped further amid political turmoil in Italy. Rules to measure the riskiness of banks have been finalized, but the sector’s cleanup of bad loans has yet to be completed. So the cross-border trophy deal remains a way off.”
Head’s up: The Treasury Department is warning banks to be on their guard against human-rights abusers using the financial system. The Treasury’s Financial Crimes Enforcement Network, or FinCEN, issued an advisory “highlighting the connection between corrupt foreign political figures and their enabling of human-rights abusers, in part through the use of financial facilitators.”
Staying relevant: The head of Canada’s biggest bank said banks “need to rethink their strategies, or risk being sidelined by companies such as Facebook, Amazon, Alibaba and Tencent.” Royal Bank of Canada CEO David McKay said the bank must diversify beyond financial services, including helping people rent an apartment on Airbnb, to “remain relevant to customers and survive in a world where big technology groups are encroaching into its markets.”
Be prepared: The Bank of England will require U.K. banks to adhere to a set of minimum standards of service following a cyberattack or IT failure in the wake of several major glitches in Europe in recent weeks. “We have seen an increase in the number of operational incidents – be they caused by internal failures or from external attack,” said Lyndon Nelson, the deputy chief of the BoE’s Prudential Regulation Authority, which regulates the largest banks and insurance companies.
Buyer beware: “More regulatory scrutiny, a string of fines and a souring political mood has darkened the outlook” for Australia’s big four banks, all of which have seen their stock prices fall by about 10% this year. “And in spite of healthy dividend payouts, high return on equity, solid capital reserves and a lack of competition over the past decade, investors say there are good reasons for further caution towards the sector.”
New York Times
Unreal: A new research report is blaming the share rise in bitcoin and other popular cybercurrencies last year on a “concentrated campaign of price manipulation.” The paper by John Griffin, a finance professor at the University of Texas, “is likely to stoke a debate about how much of bitcoin’s skyrocketing gain last year was caused by the covert actions of a few big players, rather than real demand from investors.”
Fading dream: The dream of homeownership is “under siege on three fronts” for many prospective American homebuyers. “The housing supply is low. Interest rates are rising. And even Canada plays a foil: Tariffs on lumber have sent the price of construction sharply higher. Those hit the hardest? People who are trying to buy their first homes, just as they are amassing the savings to make the leap to homeownership.”
“I do not think that European cross-border mergers can happen in the current environment. There are a series of barriers to be cleared before considering such deals.” — Frédéric Oudéa, CEO of Société Générale.