Citi consumer unit stumbles; SOFR surge could be a bad sign

Receiving Wide Coverage ...

The search is on
Tim Sloan’s resignation as Wells Fargo CEO “has led to widespread speculation” as to who will replace him, “with a raft of potential contenders among former and current executives at rival institutions,” the Financial Times reports.

But “identifying a qualified candidate — a person with extensive banking and management experience, the credibility to pacify regulators and the skill to shepherd a company with 260,000 restive employees — will be a challenge,” the New York Times notes. “Persuading that person to take the job is likely to be even harder. While Wells Fargo’s finances are fundamentally sound, the bank faces a daunting list of problems.”

Sloan is the second Wells Fargo chief to lose his job shortly after a grilling in Congress. In 2016, following the revelation of the bank’s phony accounts scandal, Sloan’s predecessor, John Stumpf, “quit the bank 13 days after a brutal appearance before Congress.” Sloan lasted just 16 days after his appearance.

While Wells looks for a successor, “a process that seems likely to take months,” the bank will be run by Allen Parker, a corporate attorney who “has never worked in the revenue-generating parts of a bank.”

House Financial Services Committee Chairwoman Maxine Waters, D-Calif., called for "the removal of other culpable executives and directors."

Wall Street Journal

Reading tea leaves
The secured overnight financing rate (SOFR), the leading alternative to replace Libor, surged to a record last month. But that might not necessarily be a good omen. “The rise in trades indicates that market participants may be concerned about big moves in the near future. That is partly because of the quarter-end volatility that led to a spike in SOFR in December. Investors may be using SOFR swaps to hedge against a repeat of the volatility that hit the market at the end of the fourth quarter.”

Going, going …
The initial coin offering market “is dead. Just about, anyway.” Only $118 million in new offerings came to market in the first quarter, down from nearly $7 billion in the same period last year. “The drop in ICOs is the latest sign that the crypto boom of years past got ahead of itself, and that potential investors are changing from enthusiastic to skeptical. Investors have been spooked by regulators’ clash with ICOs and the overall bear market in cryptocurrencies, where prices are plunging and trading volume is shrinking.”

Financial Times

Source of concern
“Citigroup’s consumer division is on course to miss its 2020 financial targets, adding to investor concerns” about the bank’s direction, and a “clear source of concern within” the bank, the paper reports. The head of the unit, Stephen Bird, “received the lowest score among his colleagues for financial performance in the bank’s annual proxy statement,” tallying a grade suggesting underperformance in at least four categories. He still took home a 10% raise.

Daniel Acker/Bloomberg

War of words
Sweden’s chief financial prosecutor accused Swedbank of obstructing last week’s police raid of the bank’s headquarters. Police sought evidence of alleged aggravated fraud and violations of insider information rules. “I have never experienced that a bank or other actor in the financial markets has ever opposed that we would be able to access documents or information needed for our investigations, even if lawyers contributed to the information we need,” Thomas Langrot told a Swedish newspaper. The bank’s lawyers said the information was protected by attorney-client privilege.

Elsewhere

Liquidated
The National Credit Union Administration shut down the CBS Employees Federal Credit Union in California after its longtime manager, Edward Rostohar, was arrested and charged with embezzling more than $40 million from it over the past 20 years. The institution’s business was immediately assumed by the University Credit Union. Rostohar faces a maximum of 32 years in federal prison and a $1 million fine.

Quotable

“It’s been like Whac-a-Mole at the bank. The minute one problem gets nailed down, another pops up. Whoever takes over has a whole lot of challenges they’re going to have to get their hands around very fast.” — Banking industry analyst Nancy Bush, about the challenges Wells Fargo faces in finding a new CEO