Receiving Wide Coverage ...
Credit Suisse’s new CEO Thomas Gottstein “said the bank would allocate two-thirds of its capital to wealth management and one-third to investment banking,” the Wall Street Journal reports. “The split between its two main businesses continues the strategy set out by his predecessor, Tidjane Thiam, who was forced to resign in February over a spying scandal.”
The Swiss bank “promised to increase its profits from wealth management by at least a quarter by 2023 and expand its investment bank,” the Financial Times said.
Wall Street Journal
No income, no problem
U.S. households expect to increase their spending by 3.7% in the coming year, up from 3.1% in July and the highest level since July 2016, according to the Federal Reserve Bank of New York’s November Survey of Consumer Expectations. “The spending forecast comes against a backdrop of expected household income gain holding steady at 2.1%, which the New York Fed noted was below the long-run average of an expected 2.8% increase in income.”
Despite the bullish outlook on spending, “respondents were more pessimistic about their households’ financial situations in the year ahead, with more respondents expecting their financial situation to deteriorate, and fewer respondents expecting an improvement in their financial situation,” the report said.
Now it’s your turn
“Joe Biden’s election victory has likely ended the Trump administration’s efforts to return Fannie Mae and Freddie Mac to private hands. Treasury Secretary Steven Mnuchin suggested in an interview with the Journal that he is unlikely to support a legal move—called a consent order—to end the government conservatorships of the mortgage-finance companies before President Trump leaves office. His signoff would be required for any change in their legal status.”
“Advisers close to Mr. Biden said he would be in no hurry to privatize the companies, which the government took over during the 2008 financial crisis. Instead, Mr. Biden would focus on ways to use the companies to boost housing affordability and promote homeownership, the advisers said.”
Financial Times
Gone digital
“For a country with global tech hubs like Silicon Valley and Austin, Texas, U.S. banks had offered bafflingly archaic financial services, even by the start of the year. During the pandemic, though, they have capitalized on their customers’ increased willingness to use digital financial services. By May, more than 45% of Americans had changed the way they dealt with their bank, a survey of 1,000 people by consultancy FIS found.”
Bank executives at American Banker’s Digital Banking Conference had this message for their peers: “You're dreaming if you think customers will go back to the old way of doing business once the pandemic subsides.”
Growing confidence
Apparently the U.K. housing market is even hotter than in the U.S. NatWest has become the latest British bank to “resume offering [home] loans worth up to 90% of a property’s value. Last week Lloyds Banking Group said it would start offering some 90% loans, albeit with additional affordability criteria.” First-time homebuyers are eligible for NatWest’s loans.
“We’ve been thoughtful about returning to 90% LTV for two reasons — one was having capacity in the system with so much demand from customers, and two was the uncertain and volatile outlook for house prices,” Lloyd Cochrane, NatWest head of mortgages, told the FT. “The outlook in particular [now] seems to be a great deal more certain for customers. That together with capacity issues largely being resolved means we’re comfortable going back in.”
Skeptical
Last week a Dutch court reopened a case against former ING Chief Executive — and now UBS Chief Executive — Ralph Hamers that appeared to be settled two years ago. In that case, ING paid a record €775 million in penalties for compliance failures that “allegedly allowed companies to launder hundreds of millions of euros and pay bribes over six years. The settlement ensured ING and its board — [including Hamers] — were free from any criminal charges.” Now Hamers’s role in the ING scandal is under investigation.
“The interesting question now is whether the case of ING and Mr. Hamers will prove to be a watershed, and whether top bankers not just in the Netherlands but around the world will be required to take personal responsibility for bad behavior that takes place on their watch,” an FT columnist asks. “Somehow I doubt it. Going for companies rather than individuals has been hugely lucrative for the U.S. authorities, turning criminal justice into a profit center. It also makes for a more comfortable life for officials than tackling the macho giants of Wall Street.”
Elsewhere
It could get worse
“For many owners of U.S. commercial real estate, the big trouble hasn’t even started” yet, MarketWatch reported. “The resurgence of the novel coronavirus has stoked fears that a V-shaped economic recovery is now out of reach, while also spurring concern that banking regulators, worried about potentially spiraling risks to the financial system, might crack down on banks and others exposed to souring real estate.”
“The overall stakes have never been higher. Federal Reserve data show U.S. commercial property debt climbed to an all-time high of $3.06 trillion in the third quarter from a 10-year low of $2.2 trillion in 2012.”
Quotable
“I think it’s going to be a two-headed monster. Some assets are going to recover and do well. On the flip side, there’s a lot of distress, and it’s coming.” — Pat Jackson, CEO and founder of Sabal Capital Partners, a distressed real estate investor and lender, on the outlook for the commercial property market.
