Mike Mayo sees big job cuts at banks; central banks wrestle with climate change

Wall Street Journal

Overstepping?

Global central banks are “jumping into the climate-change policy fray, but some say regulators are going beyond their remits with a focus on risks to financial systems and economies. The Federal Reserve is proceeding cautiously, worried about financial risks but wary of expanding its mandate, which would put it in the middle of the partisan debate over climate change.”

“While climate change could affect macro economies, the effort right now is largely focused on regulating financial companies. Potential risks posed to the financial system by climate change include losses on loans or a decline in the value of assets, such as waterfront property and property repeatedly exposed to wildfires. Commercial banks and investors lend billions to companies that produce significant amounts of carbon dioxide, such as operators of coal power plants. on regulating financial companies.”

Financial Times

Staffing 'inflection point'

U.S. banks “stand to shed 200,000 jobs, or 10% of employees, over the next decade as they maneuver to increase profitability in the face of changing customer behavior,” Wells Fargo analyst Mike Mayo told the Financial Times. “This will be the biggest reduction in U.S. bank headcount in history,” he said.

“If his forecast bears out, this year would mark an inflection point for the U.S. banking sector, where the number of jobs has remained roughly flat at two million for the past decade. The jobs most at risk are those in branches and call centers as banks prune their sprawling networks to match the new realities of post-pandemic banking. That is consistent with Department of Labor statistics that predict a 15% decline in bank teller jobs over the next decade.”

More trouble

On the heels of its big losses stemming from the failure of Archegos Capital, Credit Suisse “faces growing pressure from prized clients to compensate them for losses following the collapse of supply-chain finance funds linked to Greensill Capital. The decision whether to do so is one of the first big dilemmas confronting new chair António Horta-Osório in his cleanup of the bank, which faces the threat of several class action lawsuits from angry investors.”

“More than 1,000 Credit Suisse customers invested in the $10 billion suite of funds, having been told by the bank’s advisers and marketing material that they were low-risk products, fully insured against losses. However, the Swiss lender in March suspended the funds, which packaged up invoices owed by Greensill’s customers into investment products. The bank’s clients could lose up to $3 billion after several of the companies whose debt the funds invested in said they were unable or unwilling to repay.”

Going for the investment banking gold

Citigroup “has named Ignacio Gutiérrez-Orrantia head of its investment banking operations in Europe, as the U.S. lender makes a push to displace JPMorgan Chase and Goldman Sachs as the top-earning bank in the region. Gutiérrez-Orrantia will relocate from Madrid to London and report to co-heads of investment banking, Manolo Falcó and Tyler Dickson, as well as Emea chief David Livingstone.”

“Our objective now is, and I’ll say it like this since it’s an Olympic year, is to go for the gold. We’ve had the bronze four times and we finished second once,” Falcó said.

Elsewhere

Overdraft case settled

Bank of America “agreed to pay $75 million to settle a lawsuit accusing the bank of extracting overdraft fees it didn't earn from customers with savings and checking accounts,” Reuters reported. “Customers said Bank of America often charged multiple $35 fees for insufficient funds or overdrafts on a single transaction, sometimes reflecting the bank's repeated attempts to process it at a merchant's request.”

“The preliminary settlement of the proposed class action was filed last week with the federal court in Charlotte, N.C., where the bank is based, and requires a judge's approval.”

Poaching from Marcus

JPMorgan Chase has hired Sherry Ann Mohan, “the managing director and CFO for Goldman's consumer business, which includes Marcus and Apple Card, as the CFO of its business banking unit,” Reuters said. “The move comes on the heels of the departure of Sonali Divilek, the head of product for Marcus, who also joined JPMorgan.”

Quotable

"If I was giving advice to my kids, I’d say you probably don’t want to go into the financial industry. It’s likely to be a shrinking industry.” — Wells Fargo banking analyst Mike Mayo, predicting banks will cut their headcount by 10% over the next decade.