Citigroup layoffs, Truist expansion: Top banking news for November 2023

November 30, 2023 1:37 PM

In November's roundup of top banking news: Citigroup approaches newest wave of job cuts and managerial shifts, Truist Financial nearly doubles most-senior executive leadership team, JPMorgan Chase faces regulatory inquiries and more.

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

Bill Demchak, chairman, president and CEO of PNC Financial Services Group.

Gettyimages/Drew Angerer

Banker of the Year: PNC's Bill Demchak

Article by Polo Rocha

PNC Financial Services Group is far from the flashiest bank around. The Pittsburgh-based bank isn't a megabank like JPMorgan Chase or Bank of America, nor is it engaged in the massive deals that those two arrange on Wall Street. It's no laggard in technology, but it's not the first bank that comes to mind in that regard either.

In fact, one could even say PNC is boring. But in a year of turmoil for the banking industry — which claimed the tech-obsessed Silicon Valley Bank and wealth-obsessed First Republic Bank — perhaps boring is a solid strategy.

PNC, which at $557 billion in assets is the eighth largest U.S. bank, calls itself a national Main Street bank. It focuses on middle-market businesses, ones that aren't household names but still play a critical role in the U.S. economy. Its roots are in Pittsburgh, but it's steadily expanded and now has a national, coast-to-coast footprint.

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Citizens Bank in Sac City, Iowa, was the fifth bank to fail in 2023.

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Iowa bank is fifth failure this year

Article by John Reosti

A small community bank in Sac City, Iowa, has failed after examiners identified "significant loan losses that had not been previously identified," according to a statement by the Iowa Division of Banking.

Citizens Bank, which was taken over by regulators on Nov. 3, had $66 million in assets and $59 million in deposits. It operated one full-service branch and a drive-up facility in Sac City. As of June 30, Citizens controlled about 10% of the $530 million deposit market in Sac County — the county seat of which is Sac City — according to data from the Federal Deposit Insurance Corp.

Citizens is the fifth bank to fail in 2023. It had been the target of regulatory scrutiny prior to the Nov. 3 announcement. In August, Citizens entered into a consent order with the Iowa Division of Banking and the FDIC that focused on Citizens' commercial trucking portfolio. The consent order required Citizens to retain a consultant with problem loan workout experience and to cease using overdrafts as a means of funding borrower operations.

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Truist Financial said that it has reworked its 11-member executive management team into a 21-person "operating council" that's designed, in part, to help break down silos.

Scott McIntyre/Bloomberg

In latest shake-up, Truist expands its executive leadership team

Article by Allissa Kline

Truist Financial is reorganizing its leadership structure, the latest in a series of steps aimed at improving the regional bank's worse-than-promised efficiency and its lagging financial performance.

Two months after Truist launched a $750 million cost-cutting program and six weeks after it unveiled plans to drastically reduce the size of its board of directors, the Charlotte, North Carolina-based bank said on Nov 14 that it is nearly doubling the size of its most-senior executive leadership team.

The $543 billion-asset company said that it has reworked its 11-member executive management team into a 21-person "operating council" that's designed, in part, to help break down silos.

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JPMorgan Chase Locations Ahead Of Earnings Figures

JPMorgan Chase said that it is cooperating with regulators in connection with inquiries into its securities arm and its trading operations.

Michael Nagle/Bloomberg

JPMorgan Chase discloses multiple investigations by U.S. regulators

Article by Orla McCaffrey

Regulators are asking JPMorgan Chase for information about certain practices in the bank's securities arm and its trading operations, the bank disclosed in a regulatory filing.

The Securities and Exchange Commission is investigating specific practices at JPMorgan Securities, including the discounting of advisory fees, the selecting of portfolio managers and the aggregating of customer accounts for billing. A separate SEC inquiry is looking for answers about the timing of the bank's liquidation of certain shares distributed to investment vehicles, JPMorgan said in the filing.

JPMorgan said that it is cooperating with the SEC in connection to both of those inquiries.

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Citigroup's Wave Of Job Cuts Poised To Start As Soon As Monday

Citigroup, which employed 240,000 people at the end of last year, reduced its headcount by 7,000 between January and September.

Nathan Howard/Bloomberg

Citigroup notifies its employees about job cuts

Article by Allissa Kline

Citigroup informed its employees on Nov. 20 of an upcoming round of job cuts and managerial changes — the next big step in CEO Jane Fraser's push to create a simpler, flatter company.

Citi did not say how many positions are being eliminated, or provide the total number of jobs it plans to cut between now and the end of March, when the company expects to complete its reorganization. The company declined to comment on a Bloomberg News report saying that more than 300 senior manager roles, or about 10% of the jobs at that level, had been eliminated.

In an internal memo on Nov. 20, Fraser said Citi is "moving at pace" to implement the changes so that employees are clear about their roles and can begin to "feel the benefits" of the reorganization. Those benefits, she wrote, include creating greater accountability and making it easier to get things accomplished, which she predicted will "improve competitiveness and drive better results."

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As of last month, Capital One customers with 360 Performance Savings accounts were receiving a 4.30% rate, while 360 Savings customers were getting 0.30%, according to the latest version of a lawsuit against the bank.

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Capital One faces lawsuit from savers left behind amid rate hikes

Article by Kevin Wack

Capital One Financial is being sued by savers who say they were tricked into thinking that they were earning the highest rate available from the company's online banking arm.

The plaintiffs in a lawsuit that seeks class-action status argue that the McLean, Virginia-based bank acted deceptively, dishonestly and unfairly by creating a new high-yield account rather than raising the rates it was paying on its longstanding "360 Savings" account.

Existing 360 Savings customers who were seeking juicier yields in the current higher-rate environment would have needed to open a "360 Performance Savings" account, according to the lawsuit.

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Citizens Bank Branches Ahead Of Earnings Figures

Michael Nagle/Bloomberg

Citizens Bank to end wholesale originations

Article by Spencer Lee

Citizens Bank will cease wholesale mortgage originations in December, joining a list of lenders that have left the segment over the past two years.

In a message earlier this month notifying mortgage partners, the Providence, Rhode Island-based bank said existing relationships would be terminated and broker submissions no longer accepted after Dec. 6. Loan submissions received prior to close of business that day would be processed under normal protocols.

Citizens also emphasized it would continue servicing existing mortgages originated through the channel and its correspondent lending operations would not be affected by the decision.

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Banks bought many of the underwater bonds after the Federal Reserve slashed interest rates during the pandemic. The rapid increase in rates since 2022 has eroded their value, since newly issued bonds pay much more.

Adobe Stock

Why some banks are realizing their once-unrealized losses

Article by Polo Rocha

The unrealized losses are getting realized at some banks.

More banks sold parts of their underwater bond portfolios at a loss last quarter — or said they were considering doing so. Those that pulled the trigger took a temporary hit from the sales, but they plan on making their money back by reinvesting the cash into higher-paying options.

Until now, the losses from banks' bond portfolios have mostly been "unrealized" because banks have hung onto their bonds rather than selling them. But now more banks are getting rid of low-yielding bonds, which pay them interest of maybe 2%, and replacing them with others that pay double that rate or more.

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5 potential catalysts for community bank earnings in 2024

Cardshow by Jim Dobbs

Deposit costs continue to climb as loan demand eases amid higher interest rates. Net interest margins, by extension, are getting squeezed. Profits are under pressure.

But community banks have reason for hope as 2023 nears an end. The Federal Reserve, after hiking rates 11 times since March 2022 to cool inflation, has paused on that front for several months. Futures markets have begun to price in an end to the Fed's campaign and, with inflation down substantially late in 2023, some bankers now are looking for rate cuts next year.

Such a development could ease pressure on deposits, lower borrowing costs and bolster loan demand — all potential catalysts for earnings growth. Bankers, speaking to investors during third-quarter earnings season in recent weeks, also vowed to contain noninterest expenses. Some also are gearing up for a new wave of mergers and acquisitions, saying consolidation among small banks could create needed scale and geographic diversity to help lenders capitalize on a possibly improved environment in the year ahead.

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Bloomberg News

Heads must roll for the FDIC's sexual harassment culture. But whose?

BankThink by John Heltman

Sen. Elizabeth Warren, D-Mass., said it best: "I shouldn't have to say this in 2023: Sexual harassment is never all right — never. It's important that the FDIC gets to the bottom of this and holds harassers accountable."

Those words were said at a Senate Banking Committee hearing a day after a massive and damning investigation by The Wall Street Journal depicted a pervasive culture of sexual harassment, exclusion and belittlement of female bank examiners, unhinged partying and just pure toxicity at the Federal Deposit Insurance Corp., all of which goes back at least a decade and probably far longer.

If you're reading this then there's a good chance you've already read the Journal story, and if you haven't, just imagine the most toxic workplace you've ever heard of and triple the toxicity — that might get you in the ballpark.

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