HUGE GRAYBOX for INVESTMENT PRODUCTS By the way, there will be no COMPLIANCE SECTION this week. Wait until this coming Monday and Thursday WASHINGTON Obstacle Evaded On Glass-Steagall
Improving the odds that the Glass-Steagall Act will be repealed, Rep. Thomas J. Bliley announced that he was abandoning efforts to broker a compromise between banks and insurance companies.
The chairman of the House Rules Committee, parting company with a senior member of his panel, is siding with insurance agents against banks in the Glass-Steagall debate. In a letter to House Speaker Newt Gingrich, Rep. Gerald B. Solomon warned that one initiative favored by banks runs counter to the GOP's mandate to return powers to the states.
In the thrift industry, even the good news is bad. The American Banker thrift index is up 28% this year, with investors betting that falling interest rates will fuel robust earnings. But for months, thrift industry executives have pressed the government for financial help to shore up the Savings Association Insurance Fund, and it's a harder sell on Capitol Hill, at the Treasury, and in the regulatory agencies when stock prices are climbing.
Almost all the largest banks have spent money to clean up polluted sites on which they've foreclosed, a survey by the Bankers Roundtable said. The trade group found that 95% of the 78 largest banks had paid for cleanups and that 91% had altered their foreclosure policies to avoid acquiring polluted properties.
18160 REGIONAL BANKING Washington Mutual Buying Niche Bank
Washington Mutual Inc. announced that it would make its first foray into small-business lending by acquiring a bank specializing in that field. The Seattle thrift company agreed to acquire Enterprise Bank, a one-branch commercial bank in suburban Bellevue, Wash. Enterprise has $132 million of assets and $118 million of deposits.
More than a dozen community organizations in five states throughout the Northeast have banded together to demand that the Federal Reserve Board and the Federal Reserve Bank of Boston hold public hearings on the merger pending between Fleet Financial Group and Shawmut National Corp.
Bankers aren't noted for their lightheartedness, but those at the International Monetary Conference in the Pacific Northwest seemed to find remarkably little to cheer about. As one French banker grumbled to no one in particular on his way from a meeting room to the elevator at the Four Seasons Hotel: "I keep wondering what bad news we're going to hear next."
Sumitomo Bank of California has appointed a new top management team. Tsuneo Onda, 54, was promoted to president and chief executive from executive vice president. Shuichi Tobimatsu, a managing director in New York for the parent company, Sumitomo Bank Ltd., has taken the additional title of chairman of the California bank's board.
18319 COMMUNITY BANKING Top-of-Class ROAs Double Industry's
The nation's most profitable community banks have a knack for making big money - even when the business is a bit choppy. Last year, the best large community banks reported a 2.58% return on average assets, more than double the 1.15% return for the industry, according to an American Banker survey. The best small community banks nearly matched their big brothers, returning 2.43% on assets.
At least seven new banks plan to open their doors this year in North Carolina, a sharp jump from recent years that could signal the banking industry's next wave of start-ups. In the face of a 20-year decline in the number of banks nationwide, the Carolina entrepreneurs believe they will be just the first of many who will snap up the crumbs left behind by big-bank mergers.
GRAPHIC: There is one on p.22 on North Carolina, BUT it may be too big.
Bank consultants in the Northeast are jockeying to assemble groups of community banks in Connecticut and Massachusetts to bid jointly on as many as 150 branches expected to be sold by Fleet Financial Group. The efforts are intended to counter the bidding power of such regional rivals as $43.5 billion-asset Bank of Boston or Providence, R.I.-based Citizens Financial Group, the $10.1 billion-asset subsidiary of Royal Bank of Scotland.
Bankers First Corp. of Augusta, Ga., will probably attract a host of suitors now that it has announced it is up for sale. The $1.1 billion-asset institution said it had spoken with several interested parties since management was routed in a bitter proxy fight that lasted several months.
The lower house of the California Legislature voted overwhelmingly to support opting in early to the federal interstate branching law, a crucial blow to opponents of the measure. It's unclear whether the debate is simply a trade association war or an issue that will affect the state's community banks, its economy, and its tax base.
18264 SMALL BUSINESS SBA Chief: Stop Subsidizing Loans
The path of the U.S. Small Business Administration depends on just two words, says Philip Lader, the agency's administrator. "Subsidy rate," previously an obscure term describing the amount of congressional appropriations needed to fund a loan-loss reserve for the SBA's guarantee programs, is now the focal point in a debate over the agency's future.
THIS IS A Q&A with SBA Administrator, Philip Lader (PHOTO)
The IBAA opposed the Clinton administration's plans for the Small Business Administration. The trade group supported efforts to cut the budget but said proposals to do so by eliminating appropriations for the agency's loan guarantee programs would hurt small banks.
18200 CREDIT UNIONS Cyberspace Pioneers Thrive on Internet
A handful of cutting-edge credit unions are reaching their members through the Internet. These institutions' members can jump into cyberspace to send messages, fill out loan applications, or transfer funds among accounts. More credit unions are expected to join as the industry embraces high-tech delivery systems to cut costs and offer a new means of access to members.
Scoring a rare win over credit unions, the banking industry persuaded a judge in Washington to reject liberal readings of the law requiring an institution's members to share a common bond. In a May 31 decision, U.S. District Judge John H. Pratt said the National Credit Union Administration had overstepped its authority in allowing Communicators Federal Credit Union to expand its membership to anyone over 50 living or working within 25 miles of Houston.
19863 CREDIT/DEBIT/ATMs Microsoft Network Employs Nabanco
Nabanco has won a potentially lucrative international contract to process card payments associated with the on-line network service being planned by Microsoft Corp. Nabanco said it would supply authorizations and processing in 19 currencies when credit cards are used to cover subscription fees and to pay for other Microsoft offerings. The software giant expects to launch the network in August.
Visa International, with the help of about two dozen systems vendors, staged an unusually comprehensive demonstration of what it called the "digital revolution" - everything from a "virtual branch" on a computer screen to wireless shopping and banking via hand-held devices.
GRAPHIC: Bar chart on page 20..Where Visa Stands..
Zions First National Bank - working with Deluxe Data Systems - said it has won a government contract to develop a statewide electronic benefits transfer system for Utah. The bank expects the program to be adopted statewide by 1996, serving more than 49,000 households.
"It's always the outsider" who revolutionizes an industry, says Bipin Shah, who has distanced himself from his banking past. He wants his company, Gensar, to do for payment systems what Federal Express did for package delivery or Microsoft did for software.
18330 INVESTMENT PRODUCTS CD Growth Braked By Economy, Rates
After a red-hot 12 months, the growth in certificates of deposit is starting to cool. During the last week of May, consumer deposits grew at an annualized rate of 11.4% - the smallest rate of increase recorded this year, according to Federal Reserve data. These CDs - up to $100,000 - were growing at a blistering 40.9% pace at their peak in early February. Experts say the reversal is a natural consequence of the slackening economy and a stabilization of interest rates.
Executives at some of the largest nonbank mutual fund companies expressed a host of concerns in recent interviews about the bank retail distribution channel, including a belief that many banks had wavered in their commitment to selling funds when the markets headed south last year.
As the new head of BankAmerica Corp.'s retail brokerage division, Robert Flowers has been given his marching orders: Revamp the unit and boost its profits as it strives to break away from the pack of bank brokerage firms. Part of Mr. Flowers' job will be to help build the assets of the proprietary Pacific Horizon funds.
Directors of bank-managed funds make one-third less money than their counterparts at nonbank funds, said C. Meyrick Payne, a partner at Management Practice Inc. His study surveyed the total compensation of all mutual fund directors.
18288 MORTGAGES Brass Beat Drums For Fannie's Stock
The top brass at the Federal National Mortgage Association made a high- profile effort to promote the company's stock to an elite audience of money managers and securities analysts. Despite a recent rebound, to a new high of $100.125 a share, many observers believe the stock continues to be undervalued.
The refinancing market, battered last year by rising interest rates, has come back to life in recent weeks as rates on 30-year mortgages have dipped below 8%. Applications for refinancings jumped 85% during the past month, and loan officers say the pickup in part represents homeowners who took out adjustable-rate loans in the second half of 1994.
It's a boomlet, all right. Some mortgage companies have begun to add to their staffs - albeit just slightly - to help handle rising loan applications. Temporary employment companies have seen requests for people increase 10% to 25% during the last month. And if interest rates remain low, job placement executives say, employment will continue to rise.
Mortgage lenders could gain opportunities but face new peril from a major initiative launched by President Clinton to boost homeownership. The program aims to add 8 million families to the ranks of homeowners by the year 2000. That could mean about $500 billion of additional loans. However, many of the new homeowners are likely to be lower-income families that present greater credit risk.
Despite a slowing economy, mortgage delinquencies fell to a 22-year low of 3.91% of all loans in the first quarter. But economists said they expect delinquencies to rise for the rest of the year. Delinquencies declined 24 basis points from the rate in the fourth quarter of 1994 and 22 points from that of the 1994 first quarter, the Mortgage Bankers Association said.
18238 TECHNOLOGY Intuit CEO: Banks Won't Be Wired Out
In the aftermath of last month's scuttling of Intuit's planned acquisition by Microsoft Corp., Scott D. Cook, Intuit's chairman and CEO, told a conference banks should not fear technology companies will usurp their traditional role as payment processor and financial adviser to consumers.
To offer customers a broader range of services, Wachovia Corp. is working with IBM to upgrade technology in its branches and a 24-hour telephone banking center. The $30 million project will standardize retail systems in the bank's 500 offices in North Carolina, South Carolina, and Georgia.
Bankers and their high-tech consultants are taking notice as AT&T has recently unveiled a series of products and services aimed at broadening relationships with its customers. Banking experts see the telecommunications giant as a formidable potential competitor but also as a boon to the home banking cause.
The ABA put more emphasis on community banking and high-technology issues in this year's National Operations and Automation Conference. The conference, a longtime indicator of bank operations trends, had been criticized as too broad, and many attributed a drop in attendance to the proliferation of niche-oriented conferences.
A Phoenix-based start-up has developed a system to allow for secure check writing over the Internet and is now seeking a bank partner to help get it off the ground. Netchex officials say their system is a secure and inexpensive way to make payments. Few other start-ups, if any, have tackled the risks entailed in securing on-line checks.
18235 FINANCE Prime Rate Pressured As Treasuries Decline
After a weak May employment report, Southwest Bank of St. Louis cut its prime lending rate to 8.5%, from the prevailing 9% level. With the federal funds rate standing at 6%, narrowing the spread between it and the prime rate industrywide could put further pressure on bank profitability, analysts said.
A debate on bank stocks' future is under way on Wall Street. Some analysts see stocks sitting in the catbird seat, trading higher as the nation's economy slows to a comfortable trot. Others sense an unhealthy level of market euphoria right now. They see the recent inversion of the Treasury yield curve as a classic signal to sell.
Finova, a $6 billion-asset finance company, is looking more like a takeover candidate since Norwest Corp. bought its biggest rival, Foothill Group Inc. But Finova's CEO and chairman says he's concentrating on building up the company, not selling it.