Investors question State Street; regionals worry about trade effect

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Schmoozing: Goldman Sachs CEO-to-be David Solomon, an investment banker by training, is likely to spend a lot of time with the firm’s big clients, “trying to impress on them the breadth and scale of Goldman’s capabilities,” the Financial Times writes. That compares to current CEO Lloyd Blankfein, who came up through its “once world-beating trading division.”

As for Blankfein, “this country could use more people like” him, the Washington Post writes. The son of a New York City a postal worker, the fact that Blankfein “made it to Harvard and to the top of Wall Street should be an inspiration. Policies designed to increase the number of Blankfeins will do more good than policies designed to level income disparities.”

Wall Street Journal

Not winning friends: Investors “already annoyed with State Street’s weak performance” aren’t any happier following Friday’s announcement the bank is “paying $2.6 billion, or nine times revenue, for financial data firm Charles River Systems,” which includes the “cancellation of a $950 million share buyback and the expected issuance of new shares by State Street to pay for the deal.”

Religious debate: J. Christopher Giancarlo, the chairman of the Commodity Futures Trading Commission and a devout Roman Catholic, is engaged in a debate with the Vatican over the morality of credit default swaps, which Rome called a “ticking time bomb ready sooner or later to explode.”

Yesterday … and today: Vikram Pandit, Citigroup’s CEO during the first five years of the financial crisis, says his policies left the bank in good stead after he left. “I remain proud of everything I accomplished,” says Pandit, who’s now head of Orogen Group, which invests in financial services firms. “The bank has been methodically executing on the strategy put in place, and it’s working.”

Gary Gensler was head of the CFTC during the crisis and “helped craft and implement a new oversight regime for the swaps market, which was largely unregulated” at the time. He now lectures about blockchain technology and cryptocurrencies at MIT. While he’s “bullish on blockchain … his years cleaning up the wreckage of the financial crisis have left an imprint, and he says he can’t look at a fast-growing financial technology phenomenon without a sober assessment of its associated risks.”

Financial Times

Shaken and stirred: Regional banks in the U.S. are worried that “world trade jitters are starting to undermine the confidence of their corporate clients, in the latest sign of a business backlash against protectionism. While downplaying the impact on lending volumes so far, regional and community lenders across the country said anxiety about tit-for-tat tariffs threatened investment activity unless the tensions cooled.”

Competition everywhere: Nonbanks are making substantial inroads in lending and investment management in Europe. Alternative asset manager Ares is expected to announced Monday it has raised €6.5 billion for a direct lending fund that will provide credit to European businesses, bypassing traditional bank lenders. Direct lending funds have raised more than €43 billion over the past eight years “on the back of investor demand and the post-crisis weakness of traditional lenders.”

BlackRock, the world’s biggest fund manager, “is fast establishing a very dominant presence in markets across Europe. [Its] expansion in Europe over the past decade has been one of the most disruptive trends for the continent’s asset managers.”

The company has also opened a data and technology hub in Budapest staffed by 400 technology and customer service workers, with plans to hire 100 more. “The intense recruitment has nearly doubled BlackRock’s continental European headcount in just over a year. Technology has become the biggest arms race in the global asset management industry as rivals try to gain an edge in trading.”

Pressure from above: The fierce competition between Chinese mobile payment giants Alipay and WeBank “comes as Beijing steps up measures to slow the growth of leverage, particularly on corporate balance sheets, and to bring more of that debt out of the shadows and on to the balance sheets of the banks. At the same time authorities are trying to reorient the flow of credit to smaller companies and households.”

Quotable

Bank retrenchment in Europe is still a theme that is being played out. This favors firms like us which have lots of capital to deploy.” — Michael Dennis, co-head of Ares’s European direct lending platform, about the firm’s €6.5 billion fund to make loans to businesses.

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