Finally, good news for Wells; Deutsche faces more problems
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Big payouts: The six largest U.S. banks plan to reward their shareholders with over $125 billion in dividends and stock buybacks following the Federal Reserve’s annual round of stress tests. On average, the six banks “plan to distribute 102% of their profits to shareholders” over the next year.
The most surprising winner was Wells Fargo, which not only passed the test, but was given the green light to pay out 40% more than it is expected to earn in the second half of this year and the first half of 2019. Ironically, Wells may have been helped by the Fed-imposed limit on the bank’s growth, which means it needs less capital to finance new loans and can give it to stockholders.
The biggest individual winner is probably Warren Buffett, who “is poised to net about $1.7 billion in dividends after Wells Fargo and other banks in which he is a shareholder sailed through” the tests, the Financial Times reports. Buffett's Berkshire Hathaway is Wells’ biggest shareholder.
The biggest loser was Deutsche Bank, which was the only bank to fail the test, and its stock price has fallen so low that it is in danger of being dropped from the Euro Stoxx 50, a major European bank index. The bank’s stock is down more than 40% so far this year. “A large bout of buying could save Deutsche Bank’s place in the index when it is rejigged in September, but its presence in the relegation zone is an indicator of the once-European banking champion’s fall from grace.”
Not discouraged: Initial coin offerings raised nearly $12 billion in the first five months of 2018, more than double the $5.5 billion they raised all of last year. “Their surge this year comes despite intense scrutiny from regulators like the Securities and Exchange Commission, well-publicized frauds and scams and a broad selloff in the cryptocurrency market. Those challenges have scared away some retail investors, but big technology-focused investors continue to plow into ICOs in the hopes of hitting it big.”
Ripple is trying to give away its XRP digital currency to “persuade people to use it for something other than speculative trading.”
Family feud settled: Two branches of the legendary Rothschild family have settled a legal dispute over their rights to the family name. Edmond de Rothschild Group, a Switzerland-based private bank for the wealthy, and Rothschild & Co., a Franco-British investment bank, said they agreed to would “work together to protect the family name in the banking sector.” Wall Street Journal, Financial Times
Wall Street Journal
No down payment, no problem: HomeFundMe, Loftium, Unison Agreement and Landed are “among a growing suite of services that help borrowers cobble together the funds to buy homes. These companies — startups and established players in the housing market alike — say they’re offering options for borrowers who have good credit and income but are struggling to save.”
Summer reading: A book about the collapse of Lehman Brothers “makes a persuasive case that a key lesson remains overlooked: that the Lehman failure and the market crash that followed didn’t have to happen and that the political response, the 2010 Dodd-Frank banking law, has made future financial crises more likely, not less.”
Counting it up: Target is planning to add automated cash-counting machines to its nearly 2,000 stores this summer. “The gray machines known as cash recyclers count bills and coins quickly, but they also allow stores to digitally bank their cash and predict how much money is needed for each cashier’s shift.”
Helping hands: Sri Shivananda, PayPal’s chief technology officer, talks about the five most trusted advisers he turns to for guidance.
Going small: Damian Sutcliffe, the former chief information officer for Goldman Sachs’ Europe, Middle East and Africa operations, is now a voluntary advisor to ipushpull, a five-year-old U.K. fintech startup. He aims to “guide the startup team in the area of product strategy, helping them build up and enhance its services by leveraging his years of tech experience at Goldman Sachs, as well as industry connections.”
Eyes on the bad guys: A company financed by Barclays purports to be “the world’s first business integrity rating agency.” Sigma Ratings will look at the conduct of 500 financial institutions in 16 emerging markets in order to help banks “avoid doing business with terrorists, drug dealers and other organized criminals.”
Hot money: China Merchants Group is teaming up with a London-based firm — to create what it hopes will become “China’s answer” to SoftBank’s $100 billion Vision Fund — to invest in Chinese technology companies. The China New Era Technology Fund “will also look at deals globally, a move that may draw scrutiny from Western governments, which have becoming increasingly concerned and outspoken about Chinese dealmaking in their technology sectors.”
Change in attitude?: At least one private equity firm is mass-mailing checks to consumers, offering them high-interest loans that could be accepted on an impulse, the paper says. Highlighted in the story is Mariner Financer, a subprime lender owned and managed by a private equity fund controlled by Warburg Pincus, whose president, Timothy F. Geithner, “as treasury secretary in the Obama administration, condemned predatory lenders.”
“What it does when you exit these indexes is it means Joe Average fund manager no longer has to look at you.” — Dan Davies, a senior research adviser at Frontline Analysts, about the possibility that Deutsche Bank may be dropped from the Euro Stoxx 50 bank index.