FIS goes big Fidelity National Information Services agreed to buy Worldpay for about $35 billion, "creating a global payments giant," the Wall Street Journal says. “The deal marks one of the biggest transactions in the fast-consolidating payments sector that is under pressure to cut costs, develop new products and add customers. It comes at a time of greater regulatory scrutiny and rising competition from technology startups that are squeezing fees.” Worldpay was acquired by Vantiv in 2017. Wall Street Journal, Financial Times, New York Times, Washington Post, American Banker
The U.K. head offices of Worldpay Inc., right, stand in the City of London, U.K., on Monday, March 18, 2019. Fidelity National Information Services Inc. agreed to acquire Worldpay Inc. for about $34 billion in cash and stock, the biggest deal ever in the booming international payments sector. Photographer: Jason Alden/Bloomberg
Jason Alden/Bloomberg
Receiving Wide Coverage ...
Talks are on Deutsche Bank and Commerzbank confirmed Sunday they are “formally discussing a merger, marking a new phase after years of speculation about the troubled fates of Germany’s two biggest banks and a stark acknowledgment of the pressures both lenders face. Both banks have spent billions of dollars restructuring, overhauling management and cutting staff, and have tried to remain independent. But both have failed to convince the German government that they can succeed alone. Years of low interest rates and the headwinds of Germany’s home market — which lacks the fee-rich spoils that drive U.S. investment-banking profits — have weighed on both lenders.”
It’s also “a last-ditch effort to create a national champion that can compete with the giant American investment banks. The combined bank would have $2 trillion in assets and be the third-largest lender in Europe, behind HSBC Holdings in Britain and BNP Paribas of France. Together, Deutsche Bank and Commerzbank would have about one-fifth of the private customers in Germany, in theory giving them enough critical mass to be profitable in the country’s overcrowded retail banking market.”
Wall Street Journal
Case closed PricewaterhouseCoopers has reached a $335 million settlement with the Federal Deposit Insurance Corp., which sued the accounting firm for more than $1 billion in 2012 for failing to discover fraud at Colonial Bank, which led to its 2009 demise, one of the largest bank failures in U.S. history. In late 2017, a federal court in Alabama awarded $625.3 million in damages to the FDIC, holding PwC liable for negligence in its audit of the bank. PwC said Friday’s agreement settles the negligence claims.
Financial Times
Bubbling up The U.S. housing market is back in bubble mode, and the paper blames the Federal Reserve for it, claiming the central bank’s “loose monetary policy has buoyed assets, but did not create meaningful supply. A decade on from the subprime bubble, housing, which is not only shelter but also the biggest financial asset for most Americans, is the only major component of the CPI with a national inflation rate that is consistently above the overall number. There have not been commensurate salary increases. Very simply, this means that the housing market is once again completely out of sync with the rest of the economy.”
Not enough The U.K.’s Financial Conduct Authority wants a “broader shake-up” of the board at Metro Bank, the “challenger” bank founded by American banker Vernon Hill, following accounting irregularities at the firm.
New York Times
See you in court “Unless something dramatic happens, Sara Tirschwell v. TCW Group, [CEO] David Lippman and Jess Ravich could become the first major Wall Street case of the #MeToo era to go to trial,” the paper reports. Tirschwell claims she was fired from the giant asset management firm nine days after she made a formal complaint of sexual harassment against her former boss, Ravich, whom she says “pressured her into sex several times during her tenure with the firm.” She’s seeking more than $30 million in damages, claiming retaliation, gender discrimination and breach of contract.
Washington Post
Now what do we wear? Goldman Sachs may have relaxed its dress code, “but for women and minorities who have been playing corporate catch-up for decades, a more casual dress code presents its own complications. Women at work who feel pressure to prove they deserve to be in the room might be wary of ditching their blazers and pumps.”
Elsewhere
Small is good With the “number of community banks in our nation at the lowest point in recent history,” Alex Sanchez, the president and CEO of the Florida Bankers Association, argues that now is the right time for “investors to start new community banks.” The number of small banks has shrunk from more than 18,000 in 1985 to just 5,477 as of the third quarter of 2018, which creates opportunities for new ones, he argues in an op-ed. “Our nation needs community and regional banks just as we do national banks. Each plays an important role in the U.S. economy and places U.S. companies in a strong position at home and globally. With almost 50% of all business loans coming from community banks, that sector of the banking industry must remain strong and vital.”
The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
