Morning Scan

Is the Visa-Plaid deal in jeopardy?; lenders playing hardball with mall owners

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Back in the black

Deutsche Bank reported its first quarterly profit in over a year “as it benefited from a strong performance in investment banking and a faster-than-anticipated recovery in its home market.”

“A surge in bond trading and lower provisions for bad loans buoyed Germany’s largest lender.”

Wall Street Journal

Under scrutiny

The Justice Department is considering blocking Visa’s $5.3 billion deal to buy Plaid over antitrust concerns. “After spending the better part of the year scrutinizing the deal, the department is concerned it could limit nascent competition in the payments sector,” the Journal reported. “The Justice Department is also reviewing Mastercard’s nearly $1 billion deal for fintech firm Finicity, a startup similar to Plaid, as well as Intuit’s roughly $7 billion deal for personal-finance portal Credit Karma.”

“The Justice Department has recently placed new emphasis on antitrust enforcement in the financial sector. The department’s top antitrust official, Makan Delrahim, in August announced a shake-up of internal operations to improve how the department evaluates financial-sector competition, saying the government needed to ‘take a fresh look’ at how new technologies are changing competitive dynamics in the financial-services industry.”

Out of patience

“More lenders are starting to deliver a stern new message to delinquent mall owners: time to pay up. During the early months of the pandemic, lenders were willing to allow rent deferrals and offer other concessions to retail property owners. But the pandemic has accelerated store closures. Now, as many landlords continue to struggle and miss payments, some banks and other lenders think it is time to start cracking down.”

“Some lenders are now worried about fast-falling retail property valuations, which around the country are plunging by as much as 75%. Lenders say they are compelled to conduct foreclosure sales to recoup what is owed them. Meanwhile, a number of mall owners are filing lawsuits against retailers that they say have the financial ability to meet their obligations but haven’t paid rent. Some tenants, in turn, have asked the courts to allow them to break their leases.”

Fallout

A similar story is playing out in the residential real estate market, where the “fallout from missed rent payments is threatening a large swath of the U.S population, as the expiration of eviction bans draws near. Federal and local eviction moratoriums have protected many of them from losing their homes if they missed payments during the pandemic. But the national eviction ban and some state and city protections are set to expire by January or sooner. Renters will then be on the hook for months of missed payments, which even those who have jobs could struggle to pay.”

Long way to go

HSBC’s stock jumped 7% early Tuesday after the bank reported better than expected third quarter earnings, but the shares “are still down more than 40% this year, massively trailing the 12% drop in the Hong Kong market’s Hang Seng Index. Historically, the stock enjoyed a premium over European rivals because of its exposure to Asian growth, but it has faded in recent years.” Its “Asian connections once were a path to growth [but] are now a mixed blessing.”

“Brexit is another minefield: The lender faces as much as $1 billion in additional credit losses if the U.K. fails to reach a trade deal with the European Union.”

“Like all banks, HSBC also must adapt to persistent ultralow interest rates. It plans to cut costs using digital technology and raise fee-based income by extending its insurance, wealth and asset-management businesses beyond Hong Kong into China and South Asia. The company is eight months into a three-year overhaul to pivot even more toward Asia and cull European and U.S. operations. It has promised an update in February.”

HSBC has rolled out cash-flow forecasting tools for U.S. companies of all sizes as part of its effort to develop an array of digital commercial banking products, American Banker’s Penny Crosman reports.

Mixed signals

The coronavirus has had a mixed impact on credit card issuers. “Although retail spending accelerated at the end of the third quarter, consumers still shied away from borrowing to finance everyday expenses and shopping binges. End-of-September credit-card balances at Capital One, Discover, Synchrony and American Express were below their 2019 levels. Late-payment and defaults rates also decreased at those banks from prior quarters.”

Financial Times

Pulling back

“Banks pulled back from lending to European businesses and households as they braced themselves for a rise in bad loans due to the economic impact of the pandemic, a European Central Bank survey has shown. The ECB’s quarterly survey of banks found ‘a tightening of credit standards on loans to firms in the third quarter.’”

“Banks told the ECB they expected ‘credit standards for enterprises to tighten further, reflecting concerns around the recovery as some sectors remain vulnerable as well as uncertainties around the prolongation of fiscal support measures.’ As a consequence, eurozone companies and consumers could find their access to bank credit drying up just as they are hit by tightening government restrictions in response to the recent resurgence in coronavirus infections.”

New York Times

Try to work it out

Wanda Wilson, a former secretary at JPMorgan Chase, sued the bank and its CEO, Jamie Dimon, claiming the bank “failed to stop what she said was racially driven bullying. The bank tried to have the lawsuit, filed in 2018, dismissed. This month, a judge ruled that the two sides should engage in mediation instead.”

“The firm denies that it engaged in any race discrimination or harassment or retaliation with respect to Ms. Wilson’s employment,” said Joe Evangelisti, a JPMorgan spokesman.

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