Fannie, Freddie hire advisers to help raise capital; Deutsche leads the pack

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Wall Street Journal

Hired guns

Fannie Mae and Freddie Mac “hired major Wall Street firms to advise them on raising fresh capital as they move to exit government control, ” with Fannie choosing Morgan Stanley and Freddie hiring JPMorgan Chase. “The moves are the latest in the yearslong effort to return the mortgage companies to private ownership after they were bailed out by the government during the financial crisis. The banks’ advisory roles won’t preclude them from potentially lucrative contracts to help underwrite any new public offerings of shares.”

“Officials have talked about public offerings of shares in 2021 or 2022, but have set no hard deadline. FHFA director Mark Calabria told Senate lawmakers last week that the process of allowing the companies to exit government control has been delayed three or four months by the fallout from the coronavirus pandemic. He said there could be further delays if a significant portion of the millions of homeowners who were allowed to pause their mortgage payments due to the pandemic are unable to get current on their loans.”

Leader of the pack

Deutsche Bank, “long branded as one of the most troubled global lenders,” is “the best-performing large bank stock in the world” so far this year, the Journal says. “The German bank’s shares have risen 19% this year, albeit from a low base, compared with a benchmark index of European bank stocks that has fallen 35%. That is good enough to handily outstrip the share performance of big profitable U.S. banks like JPMorgan Chase and Goldman Sachs.”

Deutsche Bank “still has a lower price-to-book ratio than many of its competitors and its litany of problems have included an inability to make money and curb spending and legal troubles in Europe and the U.S. However, its prospects have improved since it launched a sweeping overhaul last year. The plan includes sharp cost cuts, shrinking its U.S. operations and getting rid of risky assets.”

Gate crasher

Goldman Sachs “will soon begin marketing new bank accounts for corporate treasurers and chief financial officers to manage and move their cash, taking on the global commercial banks that dominate the business. Citigroup, JPMorgan Chase and HSBC, among others, move trillions of dollars for giant corporations and small businesses to help them meet payroll, pay vendors and manage global currency risk. Banks earned $32 billion from providing such services last year, according to research firm Coalition.”

“It is Chief Executive David Solomon’s latest move to transform the bank, and it comes during a time of economic uncertainty and market turmoil that has clouded the outlook for companies big and small.”

Washington Post

We want names

“The Trump administration’s intensifying efforts to block oversight of its coronavirus-related rescue programs are raising new alarms with government watchdogs and lawmakers from both parties amid concerns about the anonymity of companies receiving unprecedented levels of taxpayer funds,” the Post reported. “Government watchdogs warned members of Congress last week that previously unknown Trump administration legal decisions could substantially block their ability to oversee more than $1 trillion in spending related to the coronavirus pandemic.”

“On Monday, Treasury Secretary Steven Mnuchin appeared to bow to that pressure, saying he would work with Congress on new oversight measures. But some Democrats have said the White House is not taking disclosure requests seriously enough.”

“House Democrats are seeking details from the Trump administration and several large banks about the allocation of coronavirus relief funds as part of an investigation into whether large, well-funded companies were favored over small businesses and underserved communities,” American Banker’s Neil Haggerty reports. “In letters to the Small Business Administration and the Treasury Department, the lawmakers asked for all communications with certain large banks and industry associations regarding guidelines and procedures for loans issued through the Paycheck Protection Program.”

Elsewhere

Moving back in

JPMorgan Chase is asking for volunteers as it “plans to start returning more traders and sales staff to its Manhattan headquarters starting next week,” Reuters reported. “Roughly 20% of the bank’s sales and trading staff have worked at its New York office throughout the coronavirus pandemic. Starting on June 22, the bank will gradually increase its in-office staff to as much as 50% by mid-July.”

More cuts to come

Commerzbank, which is under fire from its second-largest investor to cut costs, “will announce ‘considerably’ more branch closures and job cuts when it lays out its strategy review in August,” Stefan Wittmann, who represents labor on the bank’s supervisory board, told Reuters on Monday. The German bank, “which last year announced plans to cut thousands of jobs, is currently in the process of identifying more cost cuts and will announce plans when it releases second quarter earnings in August.”

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Minimum capital requirements Bank stocks Fannie Mae Freddie Mac Deutsche Bank Workforce management Small business lending
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