Heartland in its sights Goldman Sachs is closing in on a deal to acquire United Capital Financial Partners, a California-based wealth management firm that manages $24 billion in assets. If the deal is consummated, United Capital “would tuck into Goldman’s existing wealth-management business and would further its goals of broadening that roster of clients to the less affluent. Goldman has been making a push to diversify its businesses and manage more money for clients, a steadier business than trading or underwriting securities. The deal is the most tangible signal that [CEO David] Solomon, a former deal banker himself, is looking to reshape the firm he inherited in October.”
"I'm encouraged by capital markets activity," Goldman Sachs CEO David Solomon said Tuesday. "I'm not going to say it's running back to 10-year averages right away, but it has materially improved."
Wall Street Journal
Cashing in Citigroup’s “unintentional bet on the future of banking is starting to pay off.” While the bank’s biggest competitors “were gobbling up cheap deposits at their thousands of branches around the U.S.” after the financial crisis, Citigroup “was shrinking its footprint, focusing on a handful of big cities to right itself after its near-collapse. Now the bank’s executives are convinced that many U.S. consumers are finally ready to leave the branch behind and fully embrace digital banking.” The bank took in about $1 billion in digital deposits in the first quarter, more than it did in all of 2018, with about two-thirds of it from new customers, most of whom don’t live near a Citi branch.
Easy as pie Despite “a love-hate relationship with online lenders,” more small businesses are seeking financing from them. “Nearly a third of small businesses applying for credit last year did so with online lenders, up from 24% the prior year, according to the Federal Reserve’s small-business credit survey.” Borrowers “say interest rates from the corner bank would be more favorable than those extended by web-based financiers. But they also expect online lenders to be more likely to provide funding, to make their decisions more quickly and to be less likely to require collateral.”
Increasing risk Fannie Mae and Freddie Mac are buying more mortgages with high debt-to-income ratios. Nearly 30% of the loans they bought last year that were packaged into mortgage-backed securities were to homebuyers with a DTI ratio of more than 43%, nearly double the rate from 2015. The change “highlights questions about mortgage risk as policy makers debate ways to change the system.”
Financial Times
About-face Metro Bank, the beleaguered U.K. bank, “has drawn up plans to sell more than a billion pounds worth of loans at the center of a misreporting scandal that caused its share price to plunge and forced it” to try to raise more capital. “The move would be a significant reversal of strategy for the former darling of Britain’s challenger banks, which won admiration from investors for its rapid growth but changed its approach after the discovery of an embarrassing accounting error.”
On Monday the bank’s shares sank 7% after it said its plan to raise £350 million of new equity capital was “well advanced.”
“The statement came as Metro Bank reassured customers on Twitter this weekend that it remains a ‘safe and secure haven’ for their money after concerns spread on social media about the bank’s financial strength.”
Raising the heat The former head of Denmark’s financial regulatory agency, who had previously been Danske Bank’s finance director, has been charged by Danish economic prosecutors in the bank’s money laundering scandal and had his house raided. Henrik Ramlau-Hansen was charged with failure to prevent certain transactions while he was the bank’s finance director from 2011 until 2015. Those are the same charges leveled against Danske’s former CEO Thomas Borgen, whose house was also raided. “The prosecutors’ moves mark a significant escalation in the €200 billion scandal, which has cost Danske half its market capitalization, triggered the ousting of its chief executive and chairman, and sparked criminal investigations in Denmark, the U.S., France and Estonia.”
Quotable
“For the 21st century, we are glad we never got the ballast of an extra 4,000 branches. I’m certain it’s going to turn out to be a very fortuitous thing.” — Stephen Bird, Citigroup’s global consumer banking chief, on the bank’s strategy to eschew new branches in favor of digital banking.
The Jackson, Mississippi, company will use proceeds from the sale of its Fisher Brown Bottrell Insurance unit to restructure its investment portfolio, moving $1.6 billion of low-yield securities off the balance sheet.
The store-branded card issuer is raising annual percentage rates and adding fees for paper statements to compensate for lost revenue. The Consumer Financial Protection Bureau's new regulation is scheduled to take effect on May 14.
At the banks' annual meetings, shareholders at both companies struck down proposals that would have split the board chair and CEO roles. Two other proposals also failed to win shareholder support, one concerning energy financing and another on pay gap analysis.
Congressional Review Act resolutions are ramping up ahead of the 2024 election cycle. Experts say that, although none are likely to become law, the resolutions are still powerful messaging and political tools.
The ABA is testing an information-exchange network to allow banks to share their fraud data with each other. Companies including Baselayer are also building solutions.
Republicans on the House and Senate Small Business committees are accusing the SBA of being irresponsible in granting Funding Circle permission to participate in its flagship loan-guarantee program.
