Commercial lending squeeze play; banks' 'militarized' cyber efforts

Receiving Wide Coverage ...

Squeeze play: Banks are feeling heavy competitive pressure in commercial lending from lightly-regulated, cash-flush competitors like hedge funds and private-equity firms looking for steady long-term returns. “The situation is forcing the banks to rethink a business that is a key part of their revenue but which is now weighing down what many had hoped would finally represent a banner year in commercial lending,” the Wall Street Journal reports.

“That competition has been aggressive. Private equity, REITs, insurance companies—it’s definitely a formidable competitor,” said Greg Carmichael, CEO of Fifth Third Bancorp.

One of those competitors is GS Acquisition Holdings Corp., which is backed by Goldman Sachs and led by David Cote, the former CEO of Honeywell International. The company is looking to raise $600 million to pursue industrial deals.

Business is picking up in investment banking, however. Tyler Dickson, head of debt and equity capital markets at Citigroup, says the 15% drop in investment banking revenue so far this year compared to last year will end up being “closer to zero” by the end of 2018.

We call the tune: Investors who want a piece of Ant Financial Services’ latest $10 billion private fundraising must agree not to invest in or increase their stakes in the Chinese payment company’s competitors, chiefly Tencent and JD.com. “Such severe investment restrictions are rare, investors and lawyers say, because investors are normally the ones who set conditions for companies before ponying up cash,” the Wall Street Journal said. But “Ant’s ability to dictate its investment terms shows how the company and its affiliate, Alibaba Group, wield significant market power. It also reflects high demand for Ant’s shares.” Wall Street Journal, Financial Times

End of an era: Goldman Sachs president David M. Solomon is likely to be named CEO to succeed Lloyd C. Blankfein by the end of this year, and is already putting together his senior management team, the New York Times is reporting. “The time frame for Mr. Solomon’s ascension has evolved since he was named sole president of the firm in March, establishing him as the heir apparent” to Blankfein. “In recent weeks, Mr. Blankfein has quietly laid the groundwork to step down late this year. His exit will likely take place in conjunction with the firm’s annual dinner for retired partners in December.” New York Times, Financial Times

New York Times

This is war: Banks and payment companies are responding to the rise in cybercrime “with an increasingly militarized approach,” the Times reports. “Former government cyberspies, soldiers and counterintelligence officials now dominate the top ranks of banks’ security teams. They’ve brought to their new jobs the tools and techniques used for national defense: combat exercises, intelligence hubs modeled on those used in counterterrorism work and threat analysts who monitor the internet’s shadowy corners.”

Loosening grip: Over at Deutsche Bank, Chairman Paul Achleitner’s “grasp on power appears increasingly tenuous,” the Times reports, as one of the items at the bank’s annual meeting on Thursday will be a motion to fire him. Achleitner, who has led the bank since 2012, is being held “responsible for the sorry state of one of Germany’s most important industries. As the bank stumbles from one crisis to the next, investors blame him for the missteps that have brought the company to one of the most perilous moments in its nearly 150-year history.”

Washington Post

Trust us: Coinbase, which operates the largest U.S. cryptocurrency exchange and met last week with regulators about obtaining a banking license, is building a “cryptocurrency empire,” the Post reports. It currently manages more than 20 million accounts and stores $20 billion worth of virtual currencies.

“Coinbase’s secret sauce isn’t a fancy algorithm or a data-driven advertising business,” the piece says. “It’s a calculated bet that as the rest of the financial system begins to catch on to cryptocurrency, investors and regulators alike will want a fully licensed partner that undergoes routine audits and complies with all the policies that a typical brokerage does. Its brand, carefully cultivated, is one of trust and legitimacy.”

Quotable

“There’s more non-regulated lenders in the market all the time, and I don’t see that trend abating.” — Terry Katon, head of capital markets at Regions Financial.