Tough times for Wells' Sloan; Mega mortgages to the stars
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Changes in attitude
Wells Fargo CEO Timothy Sloan said the bank plans to cut its work force 5% to 10% — as many as 26,500 people — over the next three years as it “adjusts to changing consumer behavior and works to recover from a series of scandals that have gripped the bank for the past two years. The bank’s profit and revenue have been falling over recent quarters as it restructures some of its major businesses, in part due to regulatory scrutiny.”
“We are addressing past issues, enhancing our focus on customers, strengthening risk management and controls, simplifying our organization, and improving the team member experience — all in the spirit of building a better Wells Fargo for our customers,” Sloan said.
The bank’s board of directors denied reports that it has considered replacing Sloan.
The Danish Financial Supervisory Authority is reopening its investigation into Danske Bank after the bank admitted that more than $230 billion — most of it Russian money — was laundered through its tiny Estonian branch, much more than previously believed. The regulator, which closed down its probe in May, “can’t directly impose fines, but it can report its findings to the police and deem executives unfit.” Danish prosecutors are also investigating the bank for alleged money laundering crimes. Wall Street Journal, Financial Times
The U.K.’s National Crime Agency is also now investigating Danske.
Pay for performance
Peter Kraus, the former CEO of AllianceBernstein, is starting a firm with an interesting compensation concept: not only will the firm be paid by clients based on their investment performance, but so will the firm’s money managers. The company, Aperture Investors LLC, is backed by Italian insurer Assicurazioni Generali.
“Broad performance fees aren’t new in asset management,” the Wall Street Journal notes. “Mr. Kraus said his new outfit will go a step further by basing a big chunk of employees’ pay on whether they’ve outperformed — and clawing back some portion of their bonuses if they don’t. The wrinkle is more radical than it might seem, potential clients said. By staking compensation on the same performance goals, it is doubling down on a bet that its managers will perform well from the start.” Wall Street Journal, Financial Times
Wall Street Journal
Off the team
Paul Russo, who has run Goldman Sachs’ equities trading business since 2012, is leaving the firm, “the first senior departure as incoming Chief Executive David Solomon sets priorities and puts his own team in place. The change comes at a tough time for the equities business across Wall Street and, in particular, at Goldman, which has ceded ground to rivals in recent years.”
Really jumbo mortgages
Wall Street banks are increasingly making multimillion-dollar mortgages to the super-wealthy to keep them from taking their money out of the bank. Among the recent borrowers are entertainers Beyoncé and Jay-Z, who borrowed $52.8 million from Goldman Sachs to finance their purchase of an $88 million mansion in Bel-Air last year. “While the total number of these mega-loan borrowers remains small in comparison with the overall market — senior banking executives said the big banks only do a handful each year — the number is inching up.”
“If you have a client who has $50 million with your bank, you would do everything you can to keep them from taking that money out,” said Jon Maddux, CEO of FundLoans, a San Diego-based lender that makes more than 20 such loans each year.
Deutsche Bank has hired data specialist David Gleason away from JPMorgan Chase to be its chief data officer for global transaction banking. The hiring of Gleason, who will be based in New York, is “an attempt to better monetize the lender’s vast store of client and transaction data.”
CEO John Flint’s “intentionally vague” plans to “reinvigorate” HSBC are raising eyebrows at Europe’s largest bank and have left some veteran investment bankers unimpressed and grumbling. While Flint “wants managers to interpret the system themselves,” many bankers “wanted more detail on how their boss planned to cut costs while increasing revenue.”
Beef with the boss
Christian Meissner’s departure as Bank of America’s investment banking chief followed “months of disagreement over what Mr. Meissner perceived as the bank’s increasing conservatism and diminished risk appetite” which resulted in a “fundamental clash with CEO Brian Moynihan about the investment bank’s ambition and resourcing.”
No experience necessary
The Department of Housing and Urban Development has given promotions and pay increases to “five political operatives with no housing policy experience within their first months on the job, demonstrating what government watchdogs and career staff describe as a premium put on loyalty over expertise.” The paper says all five had previously worked on President Trump’s or HUD Secretary Ben Carson’s presidential campaigns. “The political hires were among at least 24 people without evident housing policy experience who were appointed to the best-paying political positions at HUD.”
“It’s an obscene amount of money. It’s easy to understand that there’s a lot of public uproar. It’s a continuation of the financial crisis. There’s this sense of unmet consequences for the financial sector.” — Jesper Berg, head of the Danish Financial Supervisory Authority, commenting on his country’s Danske Bank money laundering scandal.