Citi defends Kushner loan; two regionals back CommonBond
Receiving Wide Coverage ...
Tougher times: Rising interest rates and regulatory relief won’t necessarily make it easier for banks to earn a profit in the future, mainly due to increased competition, according to a study released by Bain & Co. on Wednesday. On the deposit side, banks will be pressured by low-cost competitors offering better deals to savers. On the lending side, banks face competition in corporate lending from new players, such as pension funds, while being hesitant to make loans on the consumer side.
To fight back, several big brick-and-mortar banks are creating online units to attract consumer deposits.
Wall Street Journal
On the up-and-up: Citigroup defended its approval of a $325 million mortgage loan to Jared Kushner’s real estate company after the bank and its CEO Michael Corbat were criticized for allegedly trying to curry favor with President Trump’s son-in-law and senior adviser. “This transaction was done in the normal course of Citi’s commercial real estate lending business, received the necessary credit and risk approvals without input from Mr. Corbat, and was unrelated to any discussions with Mr. Kushner,” the bank wrote in a letter to lawmakers in Congress. Corbat met with Kushner on March 3, 2017, but the bank said Corbat “was unaware of the transaction” at that time and the loan didn’t require his approval.
Citi also provided a $200 million loan to a New Jersey luxury apartment project partly owned by Kushner’s company.
Top of the heap: Jamie Dimon earned 364 times as much as the median JPMorgan Chase employee last year when he received $29.5 million in total compensation, one of the highest such ratios among the bank’s peer groups.
Separately, Dimon weighed in on data privacy.
Insurance for millennials: Travelers has launched a customizable renters’ insurance aimed at millennials. Dubbed Traverse, the product offers identity-theft and liability insurance and also gives customers the ability to add other types of coverage, including property insurance for cellphones and travel insurance for canceled flights or auto breakdowns. The policies, which carry no deductibles, are so far are available only in New York. “The goal is to offer a product that speaks more to the need of millennials, where a traditional renters policy might not make the most sense for them,” a company spokesperson said.
Charged: The two Canadian brothers who operate the Payza money transfer company were charged by U.S. prosecutors with operating an unlicensed business, money laundering and violating compliance rules.
Partners: Fifth Third Bank and First Republic have agreed to buy equity stakes in CommonBond, a New York-based online student loan lender, in a deal that the paper says “could herald a new, collaborative relationship between brick-and-mortar lenders and the upstarts that once promised to put them out of business.” Online lenders have threatened to disrupt the lending industry by offering faster and better service than banks can, but have stumbled because of their inability to find investors willing to buy the loans they originate, which have often been plagued with high default rates. The deal “suggests that platforms such as CommonBond could eventually serve as the banks’ customer acquisition and retention engines,” the paper adds.
You ain’t seen nothin’ yet: The chancellor of the High Court warned that financial technology could “make the frauds of yesteryear look modest.” “There is considerable scope for fraud in the brave new world of fintech,” Sir Geoffrey Vos said in a speech in London. “In the digital era the manifestations of dishonesty will take a completely different form. We are staring into a firmament of which many people of my generation have very little comprehension.” He called for global coordination to regulate blockchain.
Settled: UBS agreed to pay $230 million to settle New York State charges of improperly selling residential mortgage-backed securities prior to the financial crisis. The settlement includes $41 million in cash and $189 million in consumer relief. The agreement, which follows a $500 million settlement with RBS earlier this month, brings the total amount of such settlements with the state to almost $4 billion.
“The regulatory approach to blockchain simply cannot be different in different countries because the technology is by definition borderless. The risk of fraud will increase [with] use of the public blockchain for financial transactions. Some start-ups will reduce the risk of fraud, but others will create new opportunities for fraud.” — Sir Geoffrey Vos, chancellor of the High Court in London.