MGM cyber attacks, VR onboarding: Top banking news for September 2023

September 29, 2023 1:05 PM

In September's roundup of top banking news: Truist Financial promises to cut costs by roughly $750 million; former Wells Fargo exec Carrie Tolstedt is sentenced to three years probation; Bank of America and TD Bank double down on SBA loan growth; and more.

Click here to read last month's roundup of banking industry news.

Truist Bank Branches Ahead Of Earnings Figures

Scott McIntyre/Bloomberg

Truist vows to cut costs by $750 million. Critics wonder: Is it enough?

Article by Allissa Kline

Truist Financial, which has been facing criticism from Wall Street over its rising expenses, rolled out a plan on Sept. 11 to cut costs by an estimated $750 million over the next 12 to 18 months.

The spending reduction will involve "significant" job cuts between now and the first quarter of 2024, CEO Bill Rogers said at an industry conference. He also promised a reduction in the number of management layers, the consolidation of certain business lines and cuts in technology spending.

The cost-cutting initiative, which equates to an annual spending reduction of about 5%, is aimed at helping Truist keep expense growth to no more than 1% next year. That would be a steep drop-off from the estimated 7% increase in expenses that the company has forecast for all of 2023.

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Federal Reserve Board Chairman Jerome Powell

Despites structural constraints in the housing market, Federal Reserve Chair Jerome Powell says the central bank anticipates "measured housing services inflation" to decline in the months ahead.

Rate 'lock-in' effect is hurting housing and mortgage markets, Powell says

Article by Kyle Campbell

WASHINGTON — Federal Reserve Chair Jerome Powell acknowledged that the so-called "lock-in" effect has contributed to stagnation in the mortgage lending market and the nation's broader housing woes, but he said he doesn't regret the central bank's monetary policy moves that played a major role in the problem.

By some estimates, more than 90% of homeowners have locked in mortgage rates below 6%, with many paying less than 4% on loans made while the Fed held interest rates near zero. The disparity between those rates and current market rates, currently north of 7%, is discouraging some homeowners from selling their properties out of a fear of taking on a more expensive mortgage to purchase their next home.

Powell said that dynamic is "one of the explanations for what's happening broadly in the [housing] market," but it likely would not make the Federal Open Market Committee think twice about bringing interest rates to their lower bound again, should economic conditions warrant such a move.

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First Republic Bank failed in April and was placed into the receivership with the Federal Deposit Insurance Corp. The FDIC then sold all of the bank's deposits and virtually all of its assets to JPMorgan Chase.

Lauren Justice/Bloomberg

JPMorgan shutters 14 First Republic branches, more closures expected

Article by Allissa Kline

JPMorgan Chase has closed 14 former First Republic Bank branches in California, completing its initial plans to trim the failed bank's branch network after taking over in May.

The offices were closed earlier this month, according to the Office of the Comptroller of the Currency's weekly bulletin of bank branch closings and openings. Half of the locations were in San Francisco County. The remaining ones were spread across six other counties in California.

Earlier this year, JPMorgan said that it planned to close 21 First Republic branches by the end of the year. All of those closures have now been completed, according to a source familiar with the matter.

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Bank of America has made 1,000 loans totaling $394.2 million through the Small Business Administration 7(a) program so far in fiscal 2023. It is aiming to increase that to $1 billion of 7(a) loan volume for the next fiscal year, which starts Oct. 1.

Stephanie Keith/Bloomberg

Big banks like Bank of America and TD capitalize on SBA loan growth

Article by John Reosti

With a week remaining in the Small Business Administration's 2023 fiscal year, Bank of America has notched sizable increases in 7(a) loans and loan volume. Steve Turner, the Charlotte, North Carolina-based money center's national SBA executive, is determined to see the momentum carry over into fiscal 2024.

Bank of America has produced 1,000 7(a) loans totaling $394.2 million so far in fiscal 2023, up from 505 loans for $201.1 million in fiscal 2022. For fiscal 2024, which starts Oct. 1, Turner is setting his sights on $1 billion of SBA loan volume, including 7(a) and the agency's smaller 504 loan program.

It's a lofty goal. Though about 1,500 lenders made 7(a) loans in fiscal 2023, only three — Huntington Bancshares, Live Oak Bank and NewtekOne — have reached $1 billion in originations.

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Georgia-based Mountain Express Oil, which is in liquidation as part of a Chapter 7 bankruptcy, owned dozens of gas stations and sold fuel to hundreds of others.

Daniel Acker/Bloomberg

Southeastern banks face losses after oil distributor's bankruptcy

Article by Polo Rocha

A handful of banks concentrated in the Southeast are facing loan losses following the liquidation of a Georgia-based wholesale oil distributor that had borrowed more than $200 million from them.

The bankruptcy of Mountain Express Oil, which owned dozens of gas stations and sold fuel to hundreds of others, is set to erode the loan loss reserves at several banks.

First Horizon Corp. led a $218.5 million syndicated loan to the oil distribution company. The bank's CEO referred to the upcoming charge-off at a conference on Sept. 12, and United Community Banks in Blairsville, Georgia, disclosed its own involvement in a filing on Sept. 13, though neither bank referred to Mountain Express Oil by name.

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MGM Resorts Locations Ahead Of Earnings Figures

MGM Resorts, which operates Bellagio, Mandalay Bay, MGM Grand and Park MGM, continued to experience disruptions to its online booking system on Sept. 18. The casino group had recovered many of its other systems on Sept. 15 after days-long outages caused by ransomware.

Bridget Bennett/Bloomberg

MGM, Caesars cyberattacks send warning signal to banks

Article by Carter Pape

A cybercriminal group specializing in social engineering campaigns compromised both MGM Resorts and Caesars Entertainment this month, and the disruption continues for MGM.

The attacks highlight the complexity of the cybercriminal ecosystem, composed of multiple threat actors with various methods and specializations, and the perverse outcomes of paying ransomware demands.

The methods used by the group behind the MGM and Caesars attacks may serve as a preview of what banks may face as it expands from targeting business process outsourcers, as the threat actor did against Caesars, to banks and other types of companies. (In an SEC filing, Caesars said it was affected by a social engineering attack on an outsourced IT support vendor.)

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"Once we put them in headsets, the smiles on their faces were unbelievable," said Mike Wynn, innovation and design executive for The Academy at Bank of America, of new hires' reactions to learning about life at Bank of America through virtual reality.

Why Bank of America, TD Bank use virtual reality for onboarding

Article by Miriam Cross

Onboarding at a new job typically doesn't involve riding a unicorn or peering down over lush scenery and rice fields from an island floating in the sky.

All that is possible when new hires onboard while wearing virtual reality headsets. Moreover, two banks that have deployed or tested this method in the past two years — Bank of America and the Toronto, Canada-based TD Bank Group — say that it's practical as well as fun for new employees. Interns at TD, for example, reported that it was easier to come out of their shells in these whimsical spaces. Bank of America saw connections form in its virtual space that transitioned to the real world. New employees could meet senior-level executives in one place. Both banks found that VR generated significant enthusiasm.

For now, the promise of virtual reality in banking mostly lies in employee training or onboarding. The devices are not widely adopted among consumers, meaning customer applications don't make sense yet. But in hybrid work environments, virtual reality could be a fit.

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Getty Images

Credit unions handing reins to next generation of leaders

Article by Frank Gargano

The credit union industry is facing a mass exodus of C-suite talent and other senior leaders over the next few years as baby boomers retire.

That has only been exacerbated by COVID-19. Executives who delayed retirement to help guide their institutions through the uncertainty are resuming their scheduled departures. That means there could be a significant portion of the credit union industry looking to fill critical leadership roles over the next few years.

The issue is so important that the National Credit Union Administration has issued a proposed rule that would mandate federally chartered credit unions develop and follow processes for appointing their next generation of leaders. The agency approved the rule for public comment in January 2022, but has yet to readdress it during a board meeting since.

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Five Star Credit Union and Michigan State University Federal Credit Union each announced two M&A deals this week.

Two credit unions are on a bank shopping spree

Article by Jim Dobbs and Ken McCarthy

Five Star Credit Union in Dothan, Alabama, announced its second bank acquisition in a week. So did Michigan State University Federal Credit Union in East Lansing.

The $775 million-asset Five Star said on Aug. 31 that it agreed to buy Abbeville, Georgia-based Wilcox County State Bank. It said the cash deal would be structured as a purchase and assumption transaction; it did not disclose other financial terms of the deal for the $178 million-asset Wilcox, which it expects to close by the second quarter of 2024.

On Aug. 28, Five Star said it plans to acquire the $215 million-asset OneSouth Bank in Georgia. That deal also is expected to be completed in the second quarter. Together, the acquisitions would boost Five Star to about $1 billion of assets.

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