UBS rebounds; Metro Bank looks to unload problem loans

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That settles it
As expected, Equifax agreed to pay up to $700 million to settle a series of federal and state investigations and lawsuits arising from its 2017 data breach. The credit bureau settled with Consumer Financial Protection Bureau, the Federal Trade Commission, 48 states, the District of Columbia and Puerto Rico.

“If approved by the federal district court in the Northern District of Georgia, the agreement would require Equifax to establish a $425 million consumer fund for monetary relief to consumers and pay the CFPB a $100 million civil money penalty. Affected consumers would be eligible to receive at least 10 years of free credit-monitoring and at least seven years of free identity-restoration services. They will also be able to request up to six free copies of their Equifax credit report during any 12-month period starting December 31.” Wall Street Journal, Financial Times, New York Times, Washington Post here and here, American Banker

“Despite having to cough up over half a billion dollars in a settlement with federal and state authorities, Equifax is likely not done answering to Congress for its 2017 data breach,” American Banker reports.

While the settlement “is large enough to make headlines but small enough that there is no long-term risk to Equifax, the timing of the settlement serves as a warning to other companies of the risks they face in an increasingly data-focused economy,” American Banker adds.

Rebound
UBS Group earned $1.39 billion in the second quarter, its highest net profit for the quarter since 2010, “following a challenging first three months of 2019, which Chief Executive Sergio Ermotti deemed one of the worst first quarters in recent history for wealth-management and investment banking.” Wall Street Journal, Financial Times

Wall Street Journal

Give and take
Lower interest rates were a double-edged sword for banks in the mortgage business. While mortgage originations got a boost in the second quarter, “banks disclosed steep declines in the value” of their mortgage servicing rights. “The banks that have reported earnings so far generally lost between 7% and 10% of fair value in their mortgage-servicing-rights portfolios, … weighing on what was otherwise a strong period for home-lending operations,” the paper says.

“While lower rates can fuel mortgage making, they usually hurt the paper value of servicing rights. That is because lower rates make homeowners more likely to refinance their mortgages or otherwise pay them off early, which means the servicer loses that future income stream. For servicing portfolios, it was the speed of the drop that caught many executives off guard.”

Financial Times

Shedding problems
Cerberus, the U.S. private equity group, is negotiating to buy a large portfolio of mortgages from the U.K.’s Metro Bank which may include some of the loans that the bank had earlier this year misreported, causing a major embarrassment for the bank. The deal may be announced “as early as Wednesday when the bank publishes half-year results,” although the bank “stressed in a statement that there was no guarantee that the deal would happen,” the paper says.

“Metro Bank said in May it was looking to sell more than £1 billion of loans that were at the center of an accounting error. At the start of the year, regulators found it had overreported its capital ratios. Large numbers of commercial property and buy-to-let loans were affected by the error, with the bank finding it was not holding enough capital against the loans because of the mistake.”

Arming the Atom
Atom Bank, “the first of Britain’s mobile-focused challenger lenders,” has raised another £50 million from investors, boosting its valuation to £530 million. BBVA, the Spanish bank, is the biggest shareholder, at 39%, followed by Toscafund at 29.7%.

Atom “was the first of a wave of digital lenders, including Monzo, Revolut and Starling, which have seen an opportunity to break the stranglehold of the country’s largest banks by wooing younger, web-savvy customers.” The company increased its total lending by 76% last year to £2.4 billion while deposits grew from £1.4 billion to £1.8 billion.

Man on the move?
Royal Bank of Scotland has approached Ian Stuart, the head of HSBC’s U.K. unit, about replacing Ross McEwan as its CEO. “The appointment of Mr. Stuart would come as a blow to Alison Rose, the leading internal candidate, who is considered a ‘shoo-in’ by some insiders at the bank.”

Quotable

“Companies that profit from personal information have an extra responsibility to protect and secure that data. Equifax failed to take basic steps that may have prevented the breach.” — Federal Trade Commission Chairman Joe Simons on the Equifax settlement

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Data breaches Earnings Mortgages Succession planning Equifax UBS
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