Wall Street Journal
Making it to payday
An increasing number of companies, including Walmart, are getting into the payday lending business for their workers. “The aim is to help cash-strapped employees, many with damaged credit, cover unexpected expenses without resorting to high-cost debt. The payroll-advance programs generally give employees the option to accelerate a portion of their next paycheck for a fee that often amounts to a few dollars. The loans are typically a couple thousand dollars, and are repaid through automatic payroll deductions over a few months to a year or longer. Because the services deduct repayments from workers’ paychecks before the money goes to their bank accounts, default rates tend to be low.” Interest rates range from 6% to 36%, depending on the borrower’s credit score.
Calling the cops
Denmark’s Financial Supervisory Authority said it reported Danske Bank, the country’s largest bank, to the police for misleading customers about one of its investment products. Danske, which last year was involved in a massive money laundering scandal involving its Estonian branch, said in June that it reported the case to the FSA following an internal investigation. But on Friday the FSA said “that although Danske became aware that a very large proportion of its customers could expect a negative net return from the investment, the bank did not inform the customers.”
“This is a very serious breach of the consumer protection rules that apply in this area,” the FSA said.
Trouble in China
Bank of Jinzhou, a troubled Chinese bank, “said it would skip a year’s worth of interest payments to international bondholders, days after reporting that losses and problem loans had soared.” The bank “is the first Chinese lender to protect its financial health by using this provision on its additional tier-1 dollar bonds, analysts said. A form of ‘contingent convertible,’ or CoCo, these bonds are widely used by lenders in Europe and Asia to shore up their financial positions. If a bank runs low on capital, it can withhold coupon payments or in some cases convert the securities into common stock.”
On Friday the bank reported a 4.59 billion yuan ($640 million) net loss for 2018 following a long delay in filing its annual report.
Crypto ETF
Van Eck Securities and SolidX Management later this week plan to start selling shares in a cryptocurrency exchange-traded fund that will exempt the shares from securities registration. The shares in the VanEck SolidX Bitcoin Trust would be sold under the Securities and Exchange Commissions Rule 144A, meaning they would only be sold privately to “qualified institutional buyers” such as hedge funds, brokers and banks and not to retail investors.
“The move is the latest attempt by players within the cryptocurrency sector to create a bitcoin-based investment asset in hopes of attracting money from mainstream investors. Though bitcoin has become part of pop culture in the nearly 11 years since it was created, the markets for trading it remain immature and largely unregulated, which has kept many potential investors out. The SEC has so far rejected every attempt to sell a bitcoin ETF.”
Financial Times
I’m a believer
Deutsche Bank CEO Christian Sewing said he will spend 15% of his net salary to buy the bank’s ailing stock over the next three years. “It is the first time a Deutsche chief has made a commitment to regularly invest a chunk of their salary into shares of Germany’s biggest bank. The announcement follows a similar move by Paul Achleitner, Deutsche’s chairman, who invested €1 million in the bank’s shares at the start of last month.”
Sewing made a little over €7 million last year, so his total investment will add up to €850,000 by the end of 2022. He spent €44,058 on 6,563 shares the last two months.
Hiring spree
Revolut, the U.K.-based digital-only bank, said it plans to spend £4 million to hire 400 people in its customer service and compliance departments at a new facility in Portugal. The move, which would increase the company’s headcount by a third, “is the latest step in a hiring spree designed to combat criticism that the high-profile banking start-up is struggling to cope with rapid customer growth, in a bid to prove that it can shift from an app focused mainly on travel money into an international bank.”
“The investment follows similar moves from rivals such as N26 and Monzo. The hiring trend points to the popularity of app-based banks, but also highlights the rising costs being generated by their growing size. All three companies are lossmaking and have yet to signal when they expect to make their first profit.”
Quotable
“Employers have woken up to the fact that a majority of workers are having a lot of trouble simply getting by, never mind getting ahead.” Sophie Raseman, head of financial solutions at Brightside, a company co-founded by Comcast, about the growing number of companies offering payroll advance programs for their cash-strapped employees.
