Not good enough: PayPal reported a 28% increase in second quarter profit as total payment volume rose 29%. Despite beating estimates, the stock fell 3% on the news. That’s because the “stock was priced for stellar, not solid,” earnings, the paper says. "Why would investors be unhappy with such rapid and predictable growth? They were expecting an acceleration."
Charging ahead: Visa said its fiscal third quarter earnings rose 13% despite taking a $600 million charge to cover litigation expenses from its long-running legal dispute with merchants. Payment volume rose 11%.
Baby steps: Deutsche Bank’s better-than-expected second quarter earnings were largely driven by cost cuts, while revenue “continued to shrink across the board.” And the bank is “very far from making acceptable returns.” Still, it was a “good start,” and if the bank “can clock up several quarters of controlled cost-cutting and minimal revenue losses, then investors will begin to believe it can eventually get there.”
Financial Times
First lady: Macquarie Group named Shemara Wikramanayake, the head of its asset management arm, to be its next CEO. She would be the Australian investment bank’s first female leader. She will succeed Nicholas Moore, who is retiring in November.
“The appointment is a significant landmark for women in the global investment banking industry, where the most senior executive roles at the biggest banks continue to be dominated by men.” Macquarie shares fell.
Weak quarter: Banco Santander, the eurozone’s largest bank by market capitalization, said second quarter earnings fell 3%, largely due to €300 million in integration costs following its takeover of Banco Popular, plus a strong euro. Santander Consumer USA Holdings "on Wednesday reported a surprising improvement in credit quality," according to American Banker.
Loyal to a fault: The introduction of Open Banking in the U.K. was supposed to mean fintech startups like Monzo, Revolut and Starling Bank would be eating traditional banks’ lunches. “But, judging by a new set of data, they haven't even got started on their breakfast. It seems U.K. consumers are still pretty loyal to their good old-fashioned banks.” A survey of more than 1.5 million mobile banking users in the U.K. found the top 10 most popular banking apps were all from traditional high-street banks, none from fintechs.
The Financial Conduct Authority wants to do something to promote more competition in the U.K. retail banking business. It is considering forcing banks to pay a minimum interest rate on savings accounts to all customers after finding that they “take advantage” of consumer unwillingness to switch banks. The FCA said previous efforts to improve competition “did not stimulate sufficient changes in customer behavior.”
Elsewhere
Moving out: U.K. banks must show how they will staff and operate their new offices in the European Union after Brexit. “It is the clearest sign yet that the shift in banking jobs from Britain may rise significantly from the modest 3,500 to 12,000 forecast in the short term by the City of London financial district.”
Quotable
“I have worked with Shemara for more than 30 years and I am reassured in deciding to retire later this year that I leave Macquarie in as strong position and in safe hands.” — CEO Nicholas Moore on his successor, Shemara Wikramanayake.
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.