Second round of PPP runs into familiar problems

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Another rocky start

The Small Business Administration’s second round of Paycheck Protection Program loans opened on Monday, “triggering a fresh chorus of complaints from lenders and borrowers about delays and glitches plaguing the approval process,” the Wall Street Journal reported. The agency’s “electronic loan portal was overwhelmed by demand shortly after it opened Monday morning, according to banking industry groups, that say the process was also stymied by last-minute changes in guidance on how to submit applications. The SBA said it had processed more than 100,000 PPP loans through more than 4,000 lenders by late Monday afternoon.”

“Many bankers complained about new technology glitches and fresh questions were raised about the mostly anonymous list of beneficiaries,” the Washington Post said. The program “has been overwhelmed, both because of a surge in applications and the uneven process by which some companies receive loans and others do not. Within an hour after the SBA reopened its online portal, known as E-Tran, for submissions Monday, banking officials began to complain that the system was either not working or was painfully slow.”

“Some said they had been unable to load the web page at all, while others said they could load the portal but were unable to log in,” the Financial Times reported.

The portal “kept crashing all day,” the New York Times said, “much to the frustration of bankers around the country who were trying — and failing — to apply on behalf of desperate clients.”

Meanwhile, another high-profile entity — the NBA’s Los Angeles Lakers, “one of the league’s richest teams” valued at more than $4 billion — disclosed that it “received and then returned” a $4.6 million PPP loan “amid the public uproar over the messy rollout as major brands were given millions of dollars while local mom-and-pop shops were shut out,” the Journal said.

“Once we found out the funds from the program had been depleted, we repaid the loan so that financial support would be directed to those most in need,” the team said.

“A handful of publicly traded companies say they aren’t planning to return loans despite pressure from the Trump administration to repay the funds,” the Post reports. “Companies in the hotel, cruise ship and medical-device sectors said they are qualified to receive the money and need the funds to stay in business.”

“Banks are being scrutinized for where they direct loans after criticism that they prioritized high-profile firms,” American Banker’s Neil Haggerty reports. “But many observers argue that banks' lending decisions in the early days of the program were understandable. Financial institutions, mindful of underwriting and fraud risk and lacking SBA guidance, were likely looking to disburse aid quickly. Fast-tracking loans to reliable clients therefore made sense, they argue.”

Mixed results

HSBC, Europe’s largest bank, said its first quarter net profit fell 57% to $1.79 billion as it set aside $3 billion to cover potential loan losses, a sharp increase from $585 million in the year earlier period. Wall Street Journal, Financial Times

But UBS said its first quarter earnings jumped 40% to $1.6 billion, boosted by sharp gains in its core wealth management business and investment banking. Still, credit losses surged 10-fold to $268 million, up from $20 million in last year’s first quarter. Wall Street Journal, Financial Times

Wall Street Journal

Good omen?

Deutsche Bank’s preannouncement late Sunday “that it expects to miss its capital buffer targets this year” but also “better-than-expected revenue and on-track cost reductions … was a classic bad news sandwich, and the management communication technique appears to have worked,” as the stock rose 10% on Monday. “But investors will have to wait until Wednesday, when Deutsche Bank unveils full first-quarter numbers, to find out if the increase in revenue came from more than just investment banking. Any devil that emerges in the detail could be taken badly, given the glass-half-full share-price reaction Monday.”

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