Softbank in big fintech push; Analyzing BB&T-SunTrust deal

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Who’s next?
Thursday’s announcement by BB&T that it intends to buy SunTrust “was portrayed by some as the starting gun in the consolidation of regional U.S. banks,” the Wall Street Journal comments. But the paper discounts that theory: “Not all of their competitors will be lacing up their shoes, though. The market’s positive reaction for the acquirer … reflects the right mix of size and regional overlap. Relatively few banks are in the exact same weight category, though.”

But the prevailing thinking is mergers will abound. The deal “will heap pressure on America’s mid-sized lenders to find merger partners,” according to the Financial Times.

“Analysts and investors are scurrying to figure out which banks will be next,” CNBC reported.

The deal “will be a meaningful gauge of regulatory comfort with bank mergers,” said Isaac Boltansky, policy research director at Compass Point. “My sense is that there is still a regulatory hesitancy.” New York Times, American Banker

Indeed, “the proposed merger raises many questions and deserves serious scrutiny from banking regulators, Congress and the public to determine its impact and whether it would create a public benefit for consumers,” said Rep. Maxine Waters, D-Calif., the head of the House Financial Services Committe.

BB&T and SunTrust may have decided to get together now because “the banking industry is heading into a difficult environment of slimmer margins and a slower economy.” The deal is “an incremental positive for both companies, and is what the sector needs given tougher growth outlook over the near to intermediate term,” said Baird analyst David George. “We believe the industry needs more low premium deals in order to reduce the overcapacity in the sector in a shareholder friendly way. This deal accomplishes that."

Of course, American Banker covered every angle starting with straight news coverage of the deal, what it means for banks, what was the driving force behind the merger, and a podcast exploring "the practical and political implications of the" deal.

Under the microscope
Danske Bank said it is under formal investigation by a French judge looking into suspected money laundering through its Estonian branch. “The French probe adds another front to the multiple investigations faced by Danske Bank. It is already under investigation in Denmark, Estonia, the U.K. and the U.S. for allegedly facilitating the laundering of about $230 billion through its Estonian branch by non-Estonian customers, primarily by Russians, between 2007 and 2015.”

But that’s not stopping Denmark’s ATP pension fund, “which handles the retirement savings of most Danes,” from increasing its ownership stake in Danske, the country’s biggest bank. “When we are investing in shares, we are investing in the future not in the past,” said ATP’s interim chief executive Bo Foged. “We’ve been in close contact with the company at different levels and felt secured that the ongoing cleanup process will deliver the expected results.”

Fintech finances
SoftBank’s Vision Fund plans to invest $440 million in British banking start-up OakNorth, “in what will be the largest ever European fintech fundraising,” according to the Financial Times. The investment, which would value OakNorth at around $2.8 billion, “comes just a month after German bank N26 set the previous record with a $300 million deal, highlighting how startup banks’ rapid growth has drawn growing investor interest to the sector.” OakNorth, which specializes in small-business lending, “became the first of the U.K.’s digital-focused banks to report a profit in 2017.”

Separately, Swedish fintech start-up Tink raised 56 million euros ($64 million) in a funding round that value the company at 240 million euros ($273 million). The company, which is backed by three big European banks, offers an app that lets customers track their spending across all their bank accounts. It also licenses its technology to banks through partnership deals, “through which it either integrates its platform with their apps or helps them develop new standalone apps.”

Wall Street Journal

Unhappy clients, again
Wells Fargo’s online banking and mobile applications were down part of the day on Thursday following “a shutdown at one of its facilities where smoke was noticed during routine maintenance. Bank branches, ATMs and some other services were resolved late Thursday though not all systems.” The bank said “it will take another day” to get all of its systems “fully up and running.”

American Banker's Will Hernandez reports customers on Twitter said "the outage extended to credit and debit" cards, which "were declined at various merchants."

Financial Times

Turning up the heat
The paper takes a deep dive into the accounting scandal at Wirecard, the German fintech company that has grown into a €20 billion global payments institution and is now more valuable than the country’s two biggest banks. “The revelations call into question the figures reported by one of Europe’s few technological success stories,” said the paper, which reported the existence of the investigation last week, days before Wirecard disclosed it.

Singapore police raided Wirecard’s offices there Friday, “a significant step up in the authorities’ investigation” into the company.

See you, raise you
Visa raised its offer for Earthport, the U.K.-based payments company, topping Mastercard’s counteroffer by 12%. That’s 23% higher than Visa’s original offer. Earthport’s board recommended Visa’s new bid, but Mastercard said it was “considering its options and urges Earthport shareholders to take no action” yet.

Quotable

“Speculation has gone through the roof that there will be more mergers of equals to follow.” — Brian Foran, a bank analyst and partner at Autonomous Research, about the BB&T-SunTrust merger.

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