Wall Street Journal
Buyback potential
“Assuming this year’s stress test isn’t dramatically more stringent than those of recent years, a significant chunk of cash stands to be unlocked” by America’s biggest banks in stock repurchases, the Journal says. According to Goldman Sachs, “the biggest banks have capacity under current rules to buy back up to about $22 billion worth of stock in the second quarter. Once the rules are relaxed, they estimate buybacks could nearly triple in the second half of the year, to $63 billion, or about 3% of the market value of those banks.”
“The degree to which banks tap into that capacity is the next question. But the bottom line is that investors can mostly start to think about bank payouts like they did pre-pandemic. That alone should be good for banks’ shares.”
Bubble trouble
The U.S. isn’t the only place where the housing market is booming, and causing worries. “A parallel rise in residential real-estate prices across the world is raising fears of possible bubbles and prompting some governments to intervene to prevent their markets from overheating.”
“That is putting policy makers in a bind. Many want to keep interest rates low to sustain the post-pandemic recovery, but they worry about people taking on too much debt to buy houses whose prices could stagnate or fall later. Other tools they have to cool demand, like tighter mortgage restrictions, aren’t always working, or are being postponed as authorities try to ensure broader economic growth stays on track.”
Libor laggards
The Federal Reserve and other regulators “are dialing up pressure on banks to stop tying loans to the London interbank offered rate. After falling into disrepute a decade ago in the wake of a manipulation scandal, the world’s largest banks and regulators world-wide are scheduled to abandon the short-term borrowing benchmark by year-end. But lenders have been slow to switch.”
“Consensus is building among banks and regulators that federal legislation will be required to avoid uncertainty and liability issues related to the yearslong transition away from the scandal-plagued London interbank offered rate,” American Banker reports.
Club buster
“Brazil’s central bank is revving up its years long effort to bust up the country’s clubby banking industry, using a pandemic-driven shift toward touchless payments to launch its own digital platform. Since its launch in November, Pix is already handling a larger share of digital payments than its private-sector alternatives, advancing the regulator’s goal of spurring competition and getting more Brazilians to use financial services.”
“Additionally, Brazil’s central bank introduced last month so-called open banking, mandating that institutions share key pricing and credit history data with rivals. That added to recent efforts to encourage the growth of fintechs to give consumers more options and to pull unbanked Brazilians into the formal financial system.”
Financial Times
One job is enough
Deutsche Bank plans to name Fabrizio Campelli as head of its investment bank to replace CEO Christian Sewing after “bowing to pressure from regulators to drop the [dual] role. Germany's largest lender will announce the change before its annual shareholder meeting in late May as part of a wider reshuffle of its management board. The shake-up comes after Sewing decided to relinquish the role because of concerns over excessive workload and potential conflicts of interest.”
Welcome to the machine
“Robots are being let loose to write investment reports for Morningstar, the research house that helps investors choose among thousands of mutual and exchange traded funds for saving and retirement. The machine-generated reports that began rolling out this week set out the rationale behind Morningstar’s so-called analyst rating on a fund. The ratings, similar to Wall Street buy or sell recommendations, are separate from Morningstar’s more famous star ratings system, which measures funds’ past performance.”
School of hard knocks
All-nighters and working weekends “was the baptism of fire I needed,” a former junior investment banker at Goldman Sachs says in an op-ed.
“Young aspirant bankers should be under no illusion that the culture will change fundamentally any time soon. (Although they might well question why this extreme and punishing mode of working became the norm in the first place),” he writes. “My all-nighter took place in September 2018, during my third month at Goldman. To this day, the effort my team and I put into that transaction is my proudest professional accomplishment. Despite the stress and sleeplessness, I was able to complete tasks with a competency that I had spent years training for. More than that, I proved to myself that I could function and even excel in this fast paced, high stress environment. Call it a boot camp, but the experience would later open doors for me, and I was paid handsomely for my efforts.”
New York Times
Fintech frenzy
“Thousands of financial technology start-ups are riding an investor frenzy driven by a growing realization that Big Finance is ripe for a tech makeover. Even tiny financial start-ups that have not formally introduced their products — such as Zeller, which will offer banking services to businesses; and Sivo, which is building lending software — have raised millions of dollars and been valued at nine-digit sums.”
“Many investors are now making bold predictions that these start-ups will upend big banks, established credit card providers — and in some cases, the entire financial system.”
Elsewhere
Citi's new diversity chief
Citigroup has hired Erika Irish Brown away from Goldman Sachs as “its chief diversity, equity and inclusion officer,” Reuters reported. “Under Brown, Goldman set a goal that 11% of all new analysts and entry-level associates hired in the United States and 9% hired in the U.K. be Black professionals, for 14% to be Latino professionals and half to be women.” Goldman named Megan Hogan to replace Brown.
