Card debt, delinquencies drop; Wells dumps assets to satisfy Fed

Receiving Wide Coverage ...

HSBC profit plunges

HSBC’s second quarter profit plunged 96% as it set aside $3.83 billion for potential loan losses, “almost seven times more than in the same period last year” and $1 billion more than expected.

Anthony Kwan/Bloomberg

“The move means HSBC so far has set aside $6.9bn for souring loans in 2020 and the bank raised its forecast for provisions for the full year to between $8 billion and $13 billion. The bank also said it planned to ‘accelerate’ its 35,000 job-cuts program announced earlier this year and may consider further restructuring measures to trim costs.”

Sweetheart deal?

“Donald Trump’s longtime private banker at Deutsche Bank, Rosemary Vrablic, is facing an internal investigation into the terms of a previously unknown apartment deal between her and a company co-owned by the president’s son-in-law, Jared Kushner. Ms. Vrablic’s 2013 purchase of an apartment linked to Mr. Kushner came to light after his latest annual financial disclosures.”

“A person familiar with the situation said that Deutsche was not previously aware of the deal and was investigating the terms of the $1.5 million transaction. Bankers are prohibited from taking preferential deals from their clients.”

“Ms. Vrablic bought the apartment, in a brick building at 715 Park Avenue, with Dominic Scalzi and Matthew Pontoriero, who worked for Ms. Vrablic in Deutsche Bank’s private-banking division, which caters to wealthy clients,” the New York Times said.

Wall Street Journal

Life preservers

“Credit-card debt and delinquencies were widely expected to surge … when unemployment soared this spring at the start of coronavirus lockdowns. Instead the opposite happened. Credit-card debt in the U.S. and other advanced economies has fallen. Fewer people are late on their credit-card payments. Consumer demand for new borrowing—through credit cards, personal loans and even pawnshops—is down sharply.”

“The main reason, according to economists and financial executives, is government stimulus programs launched in the U.S. and other advanced economies that have worked unexpectedly well. The flood of money, along with debt-relief measures such as deferred-mortgage and student-loan payments, has stabilized the finances of many households and even left some in better shape than before the pandemic — at least for now.”

Adios

Many small-business owners, unable to get Paycheck Protection Program from their existing banks, were forced to turn to smaller banks for help. Now many of them “are moving their money permanently to smaller banks that were able to deliver their PPP funds.”

“Most of the time, the pain of transferring balances and syncing incoming and outgoing payments to new account numbers dissuades business owners from switching banks. But many were willing to endure the hassle as a thank-you for PPP help.”

Sen. Marco Rubio, R-Florida, who “spearheaded” the legislation creating the $670 billion PPP, “now faces the challenge of steering more resources to millions of already ravaged companies so they can survive the next few months.”

In an interview with the Journal, “Mr. Rubio discussed the small-business relief package that he and Sen. Susan Collins, R-Maine, proposed July 27 that is now being negotiated with Senate Democrats. The proposal includes $190 billion for a revamped PPP and creating a $100 billion program to provide long-term, low-cost loans to certain struggling businesses including those located in low-income areas.”

Fintech first

Varo Money said Friday “it had received a national bank charter, clearing the final hurdle in its quest to become a bank. The national charter from the Office of the Comptroller of the Currency marks one of the first granted to a fintech company. It gives the startup the ability to make loans and safeguard deposits across state lines.”

“Varo, which bills itself as an all-mobile firm that offers checking and savings accounts, said it would maintain its partnership with The Bancorp Bank, a community bank, for a few months to ensure a smooth transition. It plans to offer credit cards, loans and new savings products.”

Strict diet

Wells Fargo “unloaded hundreds of millions of dollars of assets during this spring’s market collapse to stay out of trouble with the Federal Reserve, which put limits on Wells Fargo’s size as punishment for its 2016 fake-account scandal. Loans the bank made to customers drawing on credit lines in the pandemic’s early days increased its size, and the bank scrambled to sell assets to get back in line, according to people familiar with the matter.”

“It is a reminder that Wells Fargo, the fourth-largest U.S. lender, is navigating the worst economic crisis since the Great Depression with a major obstacle in its path. The growth restrictions have rippled across the bank, playing into its recent decisions to pare back in consumer and commercial lending. Wells Fargo has narrowly stayed under the asset cap over the last two quarters, according to regulatory filings.”

Bitcoin’s booming

“The market boom that pushed stocks, bonds and commodities to their best combined four-month spurt in decades has found its way into the most notoriously volatile and speculative asset on the planet: bitcoin. After trading flat for months, bitcoin rose as high as $11,868 on Saturday from around $9,100 in early July, extending its gain for 2020 to 65%.”

“Speculators are betting bitcoin prices will continue rising for many of the same reasons assets such as gold and equities are rising: a weak global economy forcing central-bank intervention, falling interest rates and the drop in the dollar.”

Both sides now

“A German financier who evangelizes for bitcoin investing and psychedelic drugs received €13 million for brokering SoftBank’s controversial $1.1 billion investment in Wirecard,” the FT reports. “Christian Angermayer was paid by both sides in an intricate deal. Wirecard paid Mr. Angermayer a €11.25 million ‘success fee,’ equivalent to 1.25% of the €900 million raised. SoftBank also paid Mr. Angermayer around €2 million for his role as middleman.”

The FT also reported that Wirecard “processed payments for a Maltese online casino that was later revealed to have laundered money for a powerful arm of the ’Ndrangheta, one of Europe’s most dangerous mafia organizations. Italian legal sources and documents confirmed that, up to 2017, Wirecard processed payments for CenturionBet, a Malta-based gaming company that was later judged by Italian courts to have been used by organized criminals to move cash out of the country in a sophisticated money laundering operation.”

New York Times

Mini mortgages

A new program in Louisville called the MicroMortgage Marketplace project is trying to help consumers buy low-priced homes that many lenders won’t touch. “Its goal is to become a demonstration project that can be replicated in other cities where modest homes are plentiful but the mortgages to buy them are in short supply.”

“Small-dollar mortgages open a path to homeownership for those who otherwise would be shut out, particularly Black and Hispanic borrowers. But they are not popular among lenders. Last year, mortgages for $100,000 or less accounted for just 10% of loans used to buy a single-family home or a condominium in the United States, down from 17% in 2014.”

Quotable

“We’re not seeing consumers increase credit-card balances; in fact, they’re continuing to pay down balances. They’re using the injection of government stimulus, quite frankly, to put themselves in a better position.” — Peter Maynard, senior vice president at Equifax, about the drop in credit card debt and delinquencies since the start of the coronavirus, the opposite of what many had expected.