Goldman goes transparent; Banks up to the challenge

Wall Street Journal

Opening up

Goldman Sachs later this month plans to release “new details about how and where it makes money, a shot of transparency it hopes will win over skeptical investors and boost a stock price stuck in neutral.” The bank hopes by “peeling back the curtain” on its “lending and proprietary bets and reshaping its quarterly reports to investors [it will] look more like those of peers JPMorgan Chase and Bank of America, whose shares are more richly valued by investors,” the paper reports.

“The changes are the latest effort by Goldman to shed some of its signature secrecy. For many investors, the changes are long overdue, though it remains to be seen whether they will generate enthusiasm for a stock that hasn’t grown meaningfully since 2007.”

Another tough year

“About the best investors can hope for” is that Europe’s banks slog through 2020 no worse than they did last year, the paper says. The region’s bank stocks index rose 8% last year, well behind the broader market’s 23% rise. This year, “there is little in 2020 for investors in European banks to get excited about.”

“Revenues aren’t expected to rise by much, if at all, this year. Economic growth in the region will likely remain anemic, though trade tensions have eased slightly. On the bright side, European interest rates aren’t expected to rise but may at least have bottomed out. Some lenders have started charging to hold big cash deposits, reducing the sting of negative interest rates.” At the same time, “banks still need to spend on new technology to streamline existing systems and add digital services to meet customers’ growing expectations.” And “higher capital requirements are a distinct possibility.”

Promoting affordable housing

The Department of Housing and Urban Development is expected to announce rules on Tuesday “that will roll back Obama-era efforts to prod local governments into building more low-income housing in affluent areas, a policy that was intended to help undo decades of housing discrimination but also created a mountain of paperwork for many local officials," the paper reports, following up on an earlier story in the Washington Post. "Under the new rule, [HUD] will instead require minimal documentation from local governments about how they are promoting desegregation and allow them to choose three goals for how they plan to promote affordable housing in their communities. HUD will focus less on whether cities are building enough homes affordable to minorities in wealthier areas and more on whether they are building enough housing overall.”

Financial Times

Good times for all

“Challenger banks have grown pretty impressively in Britain over recent months,” and “if their aggressive rhetoric is anything to go by, these fintechs have only just begun to scratch the surface,” the paper says. That has “the big bad boring banks … quaking in their boomer boots.” But a new set of data on mobile banking usage “suggests the old high-street lenders needn’t be getting too worried just yet.” According to the data, “the traditional banks not only still have a much larger share of the market, but also a far more faithful customer base — at least in the sense that the majority of their customers don’t use other banking apps.”

In the U.S., challenger bank Chime “quadrupled its valuation over the past nine months, and investors still offered it about $1.8 billion when it decided to raise $500 million in December, according to one person with direct knowledge of the process.”

Washington Post

Supply shortage

“A strong job market and low mortgage rates should sustain the housing market in 2020. The problem will be finding enough homes for buyers,” the paper suggests. “With unemployment hovering at a 50-year low and interest rates well below historical norms, the real estate industry is being dragged down by scarcity in housing stock, especially at lower price ranges. Not enough homes are being built, and homeowners are staying put longer, creating a bottleneck. In their forecasts for 2020, most real estate experts anticipate the housing market moving sideways rather than up or down.”

Quotable

“HUD’s commitment to fair housing remains as steadfast as ever before. … Mayors know their communities best, so we are empowering them to make housing decisions that meet their unique needs, not a mandate from the federal government.” — HUD Secretary Ben Carson on the agency’s new rules on affordable housing