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Commerzbank defies activist Cerberus; the SBA’s other disaster loan program

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Going their own way

Commerzbank appointed Hans-Jörg Vetter as its new chairman on Monday, “ignoring opposition from its second largest shareholder, Cerberus Capital Management,” but “receiving the blessing” of its biggest investor, the German government, the Wall Street Journal reports. The move signals that Cerberus “will face an uphill battle as it pushes for changes at the embattled German lender.”

“Commerzbank has struggled to make money in a negative interest-rate environment and amid stiff competition in its crowded home market. The bank is going through an overhaul centered around job cuts and branch closures to improve its profitability. Cerberus, which holds more than 5% of Commerzbank, has called for even deeper cuts.”

“Vetter’s first task will be to find a successor for chief executive Martin Zielke, who announced his resignation last month and will leave the bank by the end of this year,” the Financial Times reports.

Wall Street Journal

The pandemic was easy by comparison

HSBC “announced disappointing second-quarter results as a result of Covid-19-related provisions. Yet the fallout from the health crisis seems manageable compared with the political uncertainties HSBC faces in each of its main markets: China’s creeping control over Hong Kong, escalating tensions between Washington and Beijing, and the economic impact of Britain’s exit from the European Union.”

“Financially, there are more tough times ahead, particularly as Covid-19 reemerges around the world. The geopolitical questions are harder for HSBC to answer. The bank has traditionally been extremely discrete in its political dealings, but was recently forced to side publicly with China when the tensions over Hong Kong flared up. As Beijing becomes more assertive, and Washington finds unity in a hawkish stance on China, this seems likely to happen more.”

Financial Times

Defense minister

JPMorgan Chase “has appointed veteran dealmaker David Freedman to lead its newly created global shareholder engagement and M&A capital markets group as part of a broader effort to help clients fend off activist investors. The new group advises corporate clients on how to engage with shareholders to defend the company from an activist campaign.”

“One of the big differences of managing activism now is that institutional long-only shareholders are even more supportive of activist investors,” Freedman said. “It’s our view that you need to address all of your shareholders whether they’re on the activist side or not.”

Going digital

The People’s Bank of China “is hoping its new digital currency will reduce the dominance of Alibaba and Tencent in digital payments. The experimental digital currency is on trial in a number of Chinese cities and the PBoC intends to use it to simplify digital payments and interbank settlements. Regulators and executives at Ant, Alibaba’s financial affiliate, said PBoC officials have Alipay and WeChat Pay, the dominant digital payments platforms, firmly in their crosshairs.”

“It is about the role of a digital currency for domestic retail use,” a senior executive at the Hong Kong Monetary Authority told the FT. “They want a more level playing field for the banks. Retail payments are so dominated by Alibaba and Tencent while banks are less active in electronic payments.”

New York Times

Disaster program

The Small Business Administration’s Economic Injury Disaster Loan program has been “besieged by more than eight million applicants — and operating in the shadow of the hastily assembled Paycheck Protection Program — given out more money in the past few months than it had in its entire history. But the demand has created a problem that is hobbling hundreds of thousands of applicants: The agency, afraid of running out of cash, capped its coronavirus loans at a fraction of what companies can normally borrow — even though the program has handed out less than half of the $360 billion it can lend.”

“Nearly 400,000 businesses have run into the $150,000 limit, according to the agency’s data. The cap has been just one problem with the disaster program. Applicants faced long delays, confusing procedures and communication lapses. And last Tuesday, the agency’s internal watchdog said hundreds of millions of dollars handed out through the program may have been fraudulently obtained.”

Elsewhere

Auditing the auditor

Germany’s Auditors’ Regulator (Apas) has “upgraded a preliminary investigation into a full formal regulatory inquiry” into EY, Wirecard’s auditor for the past decade, Reuters reported. Apas has been running the preliminary probe since last October and is “examining all audits that EY had conducted of Wirecard’s accounts since 2015.”

EY said it was assisting with the investigations. “We too are interested in this matter being cleared up comprehensively, completely and quickly,” the firm said.

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