Fed examines Deutsche’s Danske role; Wells loses another executive

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Tragedy at Florida bank
At least five people were killed after a gunman opened fire Wednesday afternoon at a SunTrust Bank in Sebring, Fla. The suspect surrendered after a standoff with police. “We are working with officials and dedicating ourselves to fully addressing the needs of all the individuals and families involved,” SunTrust CEO Bill Rogers said in a statement. “Our entire team mourns this terrible loss.”

Deutsche under the microscope
The Federal Reserve is looking into Deutsche Bank’s possible role in the Danske Bank scandal, “further intensifying what could be one of the biggest money-laundering scandals ever,” Bloomberg reported Wednesday. “The Fed’s probe is in an early stage as it scrutinizes whether Deutsche Bank’s U.S. operations adequately monitored funds” from Danske’s Estonian branch, where Deutsche served as a correspondent bank.

“There are no probes,” Deutsche said, but it “received several requests for information from regulators and law enforcement agencies around the world. Deutsche Bank continues to provide information to and cooperate with the investigating agencies.”

“The scandal could provide a prominent test of whether banks are held accountable for the actions of the customers at rival banks when they clear U.S. dollar transactions for other lenders,” according to the Financial Times.

Nevertheless, the German government expressed support for the country’s biggest bank. "Deutsche Bank ... suffered some setbacks in the past, but it is basically sound and it can recover and so the question is what are the details of such strategy,” Peter Altmaier, German minister for economic affairs and energy, told CNBC at the World Economic Forum in Davos, Switzerland. “And as we discussed with the CEO and the board and all the people concerned, I trust in Deutsche Bank and I will lend my political support to Deutsche Bank.”

Bank error
Metro Bank’s stock dropped nearly 40% in London Wednesday after the British “challenger” bank disclosed that its balance sheet was 11% larger on a risk-weighted basis than it previously thought, due to an accounting error, meaning some of the bank’s loans were riskier than it initially believed. The bank, which was founded by American Vernon W. Hill in 2010 and has since grown to 66 branches, also issued a profit warning.

“Metro Bank’s woes shine a spotlight on a group of British challenger lenders that have attracted significant international investment over the past decade,” the Wall Street Journal says “The new players prioritize customer service and digitization, and aren’t burdened by huge post-crisis fines and legacy technology like more established rivals.”
Wall Street Journal, Financial Times

Wall Street Journal

Moving forward
Synchrony Financial said Walmart has agreed to drop its lawsuit against the credit card issuer. Late last year Walmart sued Synchrony, its former retail card issuer, alleging that its underwriting standards harmed the retailer. It sought at least $800 million in damages. Walmart has since switched its card business to Capital One, which also agreed to buy the $9 billion in existing Walmart card balances. The announcement was part of Synchrony’s fourth quarter earnings report, in which it said it earned $783 million versus $385 million in the year earlier period, driving the stock up more than 10%.

Financial Times

More woes for Wells
Kristi Mitchem left Wells Fargo Asset Management to become CEO BMO Global Asset Management's C$320 billion ($240 billion) investment arm, delivering another blow to the American bank. “Her departure after less than three years as WFAM head comes at a challenging time for the scandal-hit U.S. bank,” the paper says, noting that Wells “has faced difficulty in attracting business” following fines and sanctions stemming from its 2016 retail banking scandal. Chief investment officer Kirk Hartman and Nico Marais, president and head of multi-asset solutions, were named interim co-CEOs of the Wells unit.

Changes in attitude
Santander, the fifth largest bank in the U.K., said it plans to close almost a fifth of its branches in the country as branch transactions have dropped 23% and digital transactions have doubled over the past three years. “The way our customers are choosing to bank with us has changed dramatically in recent years,” said Susan Allen, Santander’s head of U.K. retail and business banking.

Quotable

“How does somebody emerge? The same way we emerged. The emergence will come out of the consolidation of another round of people which still has to happen in the United States. There are now 6,000 odd banks, and you’ll find them continuing to consolidate.” — Bank of America CEO Brian Moynihan, predicting another round of bank consolidation in the U.S. that could lead to a new giant competitor.

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