Fiserv to buy First Data; Good quarter for BofA, Goldman

Breaking News This Morning ...

Tech scale
Fiserv will acquire First Data in an all-stock deal with a value of about $22 billion that will combine two of the financial services industry's largest technology and processing companies. Fiserv shareholders will own almost 58 percent of the combined company, with First Data's shareholders holding the rest. The acquisition is expected to close in the second half of 2019.

The combined company will be called Fiserv; and current Fiserv President and CEO Jeffery Yabuki will be CEO and chairman. Current First Data Chairman and CEO Frank Bisignano will be president and chief operating officer.

Both companies have been adding new technology to adjust to the expansion of digital financial services that have threatened traditional business models for companies that service financial transactions. It's an environment that challenges these companies despite their considerable size, and has put pressure on companies such as Ingenico, which traditionally thrived in a plastic card-centered commerce system.

The growth of e-commerce and digital has helped relatively smaller companies that serve that model, such as Square and Stripe, and is forcing the larger established companies to team up and diversify to create larger umbrellas to add a larger and more automated menu of services to lure banks and merchants that no longer want multiple vendor relationships.

BofA beats estimates
Bank of America reported sharply higher fourth-quarter earnings of $7.28 billion, compared with $2.37 billion a year ago, when it took a large one-time tax-related charge. Revenue jumped to $22.74 billion, up from $20.44 billion and ahead of expectations of $22.40 billion. Per share earnings also beat estimates.

Goldman gains
Goldman Sachs reported a profit of $2.54 billion, or $6.04 a share, well ahead of last year's $5.68 a share and expectations of $4.27 a share. Revenue rose to $8.08 billion from $7.83 billion.

Scott Eells/Bloomberg

Receiving Wide Coverage ...

On second thought ...
Banco Santander withdrew its offer of its CEO position to former UBS executive Andrea Orcel after it realized it would have to pay him as much as €50 million to compensate him for deferred stock awards from his former employer that he would have to forfeit. "Mr. Orcel resigned from UBS without formalizing how much Santander would pay him, people familiar with his departure from the Swiss bank said," according to the Wall Street Journal. The bank found that amount “unacceptable.” As a result, current Santander CEO José Antonio Álvarez will remain in that role. Wall Street Journal, Financial Times

While Tuesday’s news “stunned the banking industry, its capacity to shock was second only to the fact that Mr. Orcel was appointed by Santander in the first place,” the FT writes. “Mr. Orcel’s attempted transition from the top echelons of investment banking to the world of retail lending was a troubled affair from the start.”

The move leaves Orcel, “Europe’s most famous investment banker, a suave, brash and fabulously wealthy dealmaker who counts many of the Continent’s chief executives as his longtime clients without a job and his once-high-flying career in limbo,” according to the New York Times.

Start the clean up
The European Central Bank is warning banks on the continent that they must meet “stringent targets” to clean their balance sheets of bad loans. “Each of the eurozone’s big lenders will be told how long it has to cover loans that have been more than seven years in default.”

Shares of Italian banks fell sharply Tuesday on the news, which was originally reported by an Italian newspaper.

Wall Street Journal

Longer wait
Wells Fargo CEO Timothy Sloan said the bank now expects to remain under the Federal Reserve-imposed asset cap through the end of this year. Sloan, who made the disclosure during Tuesday’s conference call with analysts after the bank released fourth-quarter earnings, said last month he expected the Fed to lift the $1.95 trillion cap sometime in the first half of this year.

Making lemonade
Despite lower revenue from trading due to market volatility in the fourth quarter, banks fattened up on higher interest rates. “Higher rates mean banks can charge more for loans. In theory, they also have to pay more to depositors. But in practice, banks have been quicker to raise rates for borrowers than pay more to customers for their deposits.”

Financial Times

Still digging
Deutsche Bank CEO Christian Sewing said the bank has launched a second internal investigation into its role in the money laundering scandal at Danske Bank’s Estonian branch, where it acted as a correspondent bank between 2007 and 2015. Sewing made the disclosure at the bank’s New Year’s reception in Berlin. “So far, we do not have any evidence for misconduct on our side,” he said.

Barclays on trial
The U.K.’s Serious Fraud Office said three former employees of Barclays’ investment bank conspired to manipulate the Euribor interest rate. The three bankers, who are on trial in London, have pleaded not guilty. Coincidentally, four other former Barclays executives, including its former CEO, went on trial this week charged with conspiracy to commit fraud during the 2008 financial crisis.

Washington Post

Helping out
Some banks and credit units “are treating the partial government shutdown like a natural disaster, providing affected customers with everything from no-interest loans to fee waivers.” Some are even “proactively reaching out” to customers who they know work for the government.

Quotable

“We have had to balance the respect we have for ... the millions of people, customers and shareholders we serve with the very significant cost of hiring one individual, even one as talented as Andrea.” — Santander executive chairman Ana Botin, about the bank’s decision to withdraw its CEO offer to Andrea Orcel.

— John Adams contributed to this report.