Dimon ‘open-minded’ on deals; CFPB would permit ‘zombie’ debt collection
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Morgan Stanley’s $13 billion takeover of E-Trade means the “door is open” for “more ambitious and aggressive” acquisitions by U.S. banks, JPMorgan Chase CEO Jamie Dimon said, the Financial Times reports. While his own bank “is banned by regulation from buying other U.S. banks,” it would be “open minded” about buying other businesses that would “make us a better and stronger company.”
“The door is open for people to be a little more ambitious and aggressive on how they deploy capital for acquisitions,” Dimon said at the bank’s investor day on Tuesday. “There’s a lot of reasons you’re going to see mergers in the U.S., both bank to bank and people trying new disruption strategies, buying new fintechs.”
Dimon also said his bank “is open to tapping” the Federal Reserve’s discount window “when it makes business sense to do so,” a “move that’s likely to lessen the stigma associated with borrowing directly from the central bank,” the Wall Street Journal says. He said “the bank and its regulators have discussed how and when it might appropriately borrow from the window, and hopes other big banks follow suit.”
“Banks — scarred from the public beating they took during the financial crisis — have all but abandoned the window in recent years to avoid even a whiff of a government bailout. The desire to avoid the window is one reason banks are hoarding cash at levels well above what regulators require. The hoarding has drained liquidity from other parts of the market, contributing to a cash shortfall that roiled overnight-lending markets in September.”
The bank also “largely maintained its key profit goals for the medium term on Tuesday, signaling steady but slower growth, and raised its financial commitment for clean-energy initiatives after years of pressure from environmental activists,” Reuters reports. The bank said it “will target $200 billion in lending and other financial services for green and sustainable companies and projects, up from an earlier target of $175 billion set in 2017. The new target, however, failed to satisfy some climate-change activists who flocked outside JPMorgan’s New York headquarters, partially blocking some entrances and demanding that the bank get rid of fossil-fuel clients.”
Dimon called for a “mature conversation” about energy financing, American Banker reports. "It can't just be banks that solve the problem," he said. “If you stop banks from financing some of [these projects], they will be financed by other people who don’t care about pollution.”
Edward Bramson, the activist investor with a 5.5% stake in Barclays, has “renewed his criticism” of the bank after the U.K. Financial Conduct Authority said it is investigating CEO Jes Staley about his ties to Jeffrey Epstein, the late financier and convicted sex offender, the Journal reports. “Several months ago we raised our concerns with you about the regulatory issues and the consequences for Barclays of the Epstein imbroglio,” Bramson wrote in a letter to investors in his Sherborne Investors fund. “This is another example of governance weakness that has led, inevitably, to the recurrent public disappointments and embarrassments which have plagued Barclays for so long.”
The letter “follows a period of uneasy truce between Barclays and Mr. Bramson, who dialed down his attacks” after he failed to win a seat on the bank’s board last year. “However, Mr. Bramson signaled that he intends to revive his attack on the bank. “It has been roughly a year since we had a meeting with the chairman, [Nigel] Higgins. We have requested another meeting with him, as he has now had several quarters of results from which to devise remedies for the strategic weaknesses,” Bramson said.
Wall Street Journal
More than cards
Michael Miebach, who was tapped by Mastercard Tuesday as its CEO starting next year, “puts more muscle behind the company’s effort to expand beyond its legacy cards business.” Miebach, currently the company’s chief product officer, will succeed Ajay Banga, who will become executive chairman of the board.
“Mr. Banga, the longest-tenured CEO of a major U.S. card network, has focused on transforming Mastercard from largely cards-based payments to a range of payment technologies.” “We aren’t really just a card company,” he said. “We are a payments and technology organization that enables the movement of money [between] account[s]. That’s who we are.”
Bank stocks had their worst day since December 2018 on Tuesday after fears over the coronavirus pushed bond yields sharply lower for the second consecutive day, threatening to worsen a profitability squeeze across the industry. The KBW bank index fell 4.5%, with rate-sensitive lenders such as Bank of America, Capital One and PNC Financial all falling by 5% or more on the day.” The overall market, by contrast, was down about 3%.
“The share price rout came on the same day that the Federal Deposit Insurance Corp. reported that U.S. banks’ underlying profits fell in the fourth quarter of 2019 by the most since the financial crisis.”
“European banks are facing tough questions about succession planning and corporate governance as they scramble to find a new generation of chief executives amid the biggest shake-up of the industry’s top ranks since the financial crisis,” the paper reports. “In the past three months alone, two-thirds of the largest 15 European listed banks have either switched the top job or started preparing to find a new chief executive.”
“The synchronized changeover presents challenges. Bank executives, board directors and external headhunters interviewed by the FT all warned of a shallow pool of candidates to choose from and the difficulty that European banks will have attracting executives from the U.S., where the pay is significantly higher. They also said that the next generation of leaders would need to have different qualities compared with the crisis managers appointed following the financial crash, or the subsequent crop of CEOs, who were hired in anticipation of a period of revenue growth that failed to materialize.”
Winning streak over
Klarna, Europe’s largest unlisted fintech, recorded its first annual loss since it was founded in 2005, dragged down by credit losses, which more than doubled. The Swedish company had a net loss of SKr902m ($93 million) for 2019, down from a 2018 profit of SKr105m. The company, which is valued at $5.5 billion, blamed the credit losses on “entering new markets where first-time customers pay back less reliably.”
The Consumer Financial Protection Bureau has proposed allowing debt collectors to try to collect on so-called “zombie debt” from consumers. “Debt collectors lose the right in many states to sue consumers after their debt reaches its statute of limitations, typically three or more years. But there’s a loophole: If the consumer makes a payment or acknowledges the debt in writing, that can be used to try to revive the life of the debt.”
“In a new proposal, the bureau says debt collectors could continue to try to collect on those old debts but would have to tell consumers upfront they are outside their statutes of limitations and the consumer can no longer be sued to recoup the money. The proposal is part of a broad revision of debt collection rules the CFPB implemented last year. It would also prohibit companies from suing to collect on debt they knew or should have known is past their statutes of limitations.”
It's not over
Last Friday’s $3 billion deal to settle with the U.S. Department of Justice and Securities and Exchange Commission over its phony accounts scandal doesn’t mean Wells Fargo is out of the woods yet, Reuters says. “The deal did not address issues with Wells’ mortgage and auto-lending businesses, where customers were enrolled in unwanted products that charged fees. Nor does it preclude potential charges against individuals who were in charge at the time of sales abuses.”
“We think it’s time. We think it’s a good idea and will help remove the stigma.” — JPMorgan Chase CEO Jamie Dimon, announcing the bank plans to borrow from the Federal Reserve’s discount window from time to time