More coronavirus challenges for banks; RBS delays

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Wall Street Journal

Banker summit

The CEOs of the largest U.S. banks “struck a calming tone Wednesday in a White House meeting with President Trump that was light on policy talk and largely meant to reassure markets,” the paper says. Bank of America CEO Brian Moynihan said banks are in a “great position” on capital and liquidity.

Bank of America CEO Brian Moynihan
Bank of America CEO Brian Moynihan

“The meeting was called against the worrisome backdrop” of a 20% drop in stock prices, where “bank stocks have been especially hard hit.” Trump called the attendees, who included the heads of Citigroup, Goldman Sachs and others, “probably the best bankers in the world.”

“There are signs that [some] executives see more trouble on the horizon,” American Banker reports.

Despite the happy talk with the president, bank “earnings likely will suffer” from the crisis, the Journal notes. “Add together some of the biggest challenges U.S. banks weathered in the dozen years since the financial crisis, and you get an idea of how bad the coronavirus epidemic could be for them. Many of their businesses mirror economic activity, so falling growth and rising unemployment can dent their profits. Sharp drops in asset prices can sap their investment-banking and trading revenues as deal activity and investors pause.”

And, as investors move away from risky assets, it "saddles lenders with securities they are struggling to sell at desired prices."

Cash concerns

The coronavirus outbreak has prompted questions among consumers whether they should keep extra cash on hand. “When it comes to cash, though, the virus fears cut both ways: There are those who also worry that the cash itself could be a source for transmission. Experts say such fears are understandable — but overblown.”

No boost

The recent drop in the average rate on a 30-year mortgage to a record low of 3.29% last week “could give the flagging economy a much-needed boost amid coronavirus fears. Yet housing is juicing the economy less than it used to, some economists say. Housing never fully recovered from the 2008 financial crisis, and low rates won’t cure its ills. Higher land costs, restrictive zoning, scarce labor and tighter lending standards still limit construction.”

SoFi’s big hire

Maria Renz, a 20-year veteran at Amazon, where she was vice president of delivery experience, is joining Social Finance to lead the fintech startup’s credit card, brokerage and bank-account businesses.

Financial Times

New jobs

HSBC has promoted Mark Wang, head of its investment bank in China, to president and CEO for its operations in the country, “the latest top personnel change in the country following a row with Beijing and the departure of its greater China head,” the Financial Times reports. He succeeds David Liao, who is taking another senior position within the bank.

“China is one of HSBC’s most important markets in Asia, where it derives about 80% of its earnings," the paper says. "It is among the largest foreign banks in the country and past chief executives have dedicated the group to expansion there.”

Separately, Citigroup has hired Loretta Ko, a former employee, to head its investment bank and financial institutions group for Hong Kong, Reuters reports. Ko, who most recently held a similar position at Banco Santander, worked for Citigroup between 1989 and 2004.

Not the right time

The U.K. government has pushed back the target date for its “long-delayed reprivatization of Royal Bank of Scotland by an extra year due to the coronavirus market turmoil.” The government now expects to “fully dispose” of its 62% stake in the bank “by the end of March 2025, a year later than planned.”

“The risk appetite is hardly conducive to making large sales of equities right now,” a source told the paper. The government now expects U.K. taxpayers to take a loss of £32.1 billion on the £45 billion 2008 bailout of the bank, up £1.1 billion from its forecast last March.

AML fee

The U.K. government plans to impose a £100 million levy on companies subject to Money Laundering Regulations — “which include banks, accountants, estate agents and solicitors” — to combat money laundering. The fee, which “will be used for new technology for law enforcement and hiring more financial investigators,” will supplement the National Crime Agency’s £478 million budget.

“Given the role that banks and other professions in the City of London play in making the UK such an attractive hub for illicit finance, it’s right that they should all contribute financially to the fight against economic crime,” said Susan Hawley, director of Spotlight on Corruption.

Quotable

“This is not a financial crisis. Banks and the financial system are in sound shape, and we are here to help.” — Citigroup CEO Michael Corbat, at a meeting of the leaders of the largest U.S. banks with President Trump to discuss the coronavirus crisis

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