Ratings expansion Morningstar said it will buy credit rating firm DBRS Inc. for $669 million, "marking the company's largest acquisition and merging two smaller players in a market for U.S. ratings that continues to be dominated by three giants." DBRS is the fourth-largest credit-rating firm in the U.S., but had just a 2.3% market share as of 2017.
"It's traditionally a tough area for smaller players to break into and establish market share," said Lawrence White, a professor at New York University's Stern School of Business. "They are minnows as compared to the two very big fish and the third, slightly smaller, fish," referring to S&P, Moody's and Fitch.
Wall Street Journal
Lagging Bank stocks have been trailing the overall market in May, down 7.6% compared to the 4.9% decline in the S&P 500 following Tuesday’s market close. But “sliding interest rates are just one of the issues plaguing bank stocks. Big banks also face other woes, including intensified worries about the U.S. economy, stock-trading volumes that have fallen this quarter relative to the first three months of the year, and a slide in U.S. debt capital markets volumes.”
Add one more concern. On Wednesday the Federal Deposit Insurance Corp. released its quarterly bank earnings report for the first quarter, which showed “a 22.8% bump in commercial and industrial-loan balances that are 90 days or more past due” and a 5.5% increase in uncollectible credit card loans. “FDIC officials attributed the most recent sour credit card debt increases to a few banks that have lowered their underwriting standards.” Earnings rose 9%, "helped by an $8 billion increase in net interest income, which totaled $139.3 billion," American Banker reports.
Keep the lines open Banks and debt collectors are among several industries that are “pushing back” against a Federal Communications Commission proposal that would allow phone companies to block robocalls. Representatives from the American Bankers Association, the Credit Union National Association and ACA International, a trade group for debt collection companies, met with FCC officials last week “urging them to delay a planned June 6 vote on the matter and instead seek public comment. Banks, collection agencies and merchants say automated calls are crucial, even though some consumers find them annoying.”
Aycatcher - stock.adobe.com
It's a deal The FDIC’s settlement of a 2014 lawsuit by the payday lending industry falls just short of an apology, the paper’s editorial board writes, but does include a much-needed overhaul in policy that previously branded the lenders as “high risk” merchants without proof, lumping them in with “Escort Services” and “Ponzi Schemes.”
“All this should make other law-abiding businesses sleep easier, at least until Elizabeth Warren is president,” the paper says.
Made to order A growing number of banks are developing mortgage loan programs to serve “the sandwich generation, people with dependent children and with elderly parents for whom they need to care.”
Financial Times
History repeats Deutsche Bank CEO Christian Sewing is making the same mistakes the bank has made in the past, the paper says, announcing an "ominous yet vague commitment to pare operations" but with no immediate follow-up. That hurts employee morale and business.
New York Times
Just the beginning The New York State Department of Financial Services is investigating the exposure of 885 million mortgage records at title insurance company First American Financial. The inquiry “is likely to be followed by other investigations from regulators and law-enforcement authorities into a security failure that exposed 16 years of digital documents containing bank account statements, tax records, Social Security numbers, wire transaction receipts and images from drivers’ licenses. First American left the documents on a website that was publicly accessible, without any authentication protections, according to a report published on Friday by KrebsOnSecurity, a security news site.”
Washington Post
Needle in a haystack President Trump is having a difficult time filling the two remaining seats on the Federal Reserve Board “because he’s looking for something that doesn’t exist: loyal Republicans who like low interest rates.”
Elsewhere
Rise of the robot HSBC will introduce Pepper, its robotic banker, to customers at one of its Miami branches on Thursday, following launches at branches on Fifth Avenue in New York City last summer and in Seattle and Beverly Hills recently. “Far from replacing human workers, its presence in the New York branch helped boost business by 60% and prompted the bank to hire more workers, said Jeremy Balkin, head of Innovation at HSBC Bank USA.” The bank plans to eventually introduce Pepper throughout its global network.
Quotable
“There have been some banks that have relatively recently pursued a little bit more of an aggressive [approach].” — Pat Mitchell, a deputy director at the FDIC, commenting on the rise in bad debt figures at banks during the first quarter
The retail giants are kicking the tires on their own currencies. The potential prize is a way to reimagine prepaid cards and gain a key position as new forms of artificial intelligence-powered payments take off.
Primis Bank plans to sell an undisclosed amount of its 19% ownership stake in Panacea Financial, a digital-only lender focusing on medical professionals and veterinarians. The deal should yield $22 million.
The impact of President Trump's tariffs is the top concern for most middle-market American businesses, a new KeyBank survey found. But these firms also view the scrambled landscape as a chance to innovate and restructure.
The Federal Reserve Board banned a former relationship banker in Arkansas after he was caught stealing customer funds; Benchmark Federal Credit Union plans to merge with Franklin Mint Federal Credit Union to form a $2.1 billion-asset institution; Robin Vince, CEO of Bank of New York Mellon since 2022, has been elected chairman of the board; and more in this week's banking news roundup.
