SoFi's California bank buy; gridlock plagues PPP’s final weeks

Wall Street Journal

Accelerant

Social Finance plans to buy “a tiny California community lender to accelerate its push into the banking business. ” The fintech “will spend about $22 million to acquire Golden Pacific Bancorp Inc., which has three branches in and around Sacramento and about $150 million in assets. SoFi plans to contribute an additional $750 million to capitalize the bank for a national, digital expansion should regulators approve the transaction.”

SoFi “expects to keep operating Golden Pacific’s branches and hopes the community bank will provide it with insights into how to sell [its software and technology] services to other small lenders and credit unions.”

Last October, the Office of the Comptroller of the Currency “gave conditional approval to SoFi’s plans to build a bank from scratch, but CEO Anthony Noto said the company decided it would be more efficient to acquire a small bank. Golden Pacific, he said, checked all the boxes.”

The move “is designed to hasten the online lender’s quest to obtain a bank charter,” American Banker said.

Running out of options

“Going private could be a solution” for some of Europe’s smaller banks, the Journal says. And regulators “may be warming to the idea that private equity has a part to play in the sector’s next consolidation wave.”

“The absence of industry buyers leaves European banking regulators in need of other options for strengthening shaky lenders. This could open the door for private equity’s special blend of roll-ups and cost cutting, which has historically been frowned upon by banking officials. Deals will still be tricky, as many regulatory concerns remain. Still, Europe’s regulators want a more robust banking system, and have few options. Unconventional thinking will be necessary.”

Financial Times

Mistake insurance

Wall Street banks “including Citigroup” have begun “inserting legally binding clauses in the form of accidental payment covenants in debt documents” to protect themselves in the event they send money to lenders by mistake. The clauses would “allow banks to demand the repayment of any money sent to lenders” in error.

“The new terms come after Citi last year wired $900 million of its own money to creditors of the cosmetics group Revlon and later lost a legal battle to recoup the funds. The error resulted in the bank slashing its fourth-quarter profits by $323 million.”

New York Times

Last minute rush

“Some lenders say there just isn’t enough time to adapt” to the latest changes in the Paycheck Protection Program, which is set to expire at the end of the month. “The result has been gridlock and uncertainty that have left tens of thousands of self-employed people frantic to find lenders willing to issue the more generous loans before the program ends on March 31.”

“JPMorgan Chase, the program’s largest lender this year in terms of dollars disbursed, doesn’t plan to act on the new loan formula before it stops accepting applications on March 19. Bank of America, the second-biggest lender, opted against updating its loan application and said it would contact self-employed applicants to manually sort out their applications — but stopped accepting new ones on Tuesday. Even lenders that will be offering the loans up to the congressionally imposed deadline were unable to reprogram their systems until the Small Business Administration officially updated the rules and began accepting applications with the revised loan formula.”

“Bankers can expect to spend long hours in coming weeks as they expedite loan applications” before the deadline, American Banker reports.

Elsewhere

Innovative choice

JPMorgan Chase “has hired former HSBC executive Jeremy Balkin as head of fintech and innovation for wholesale payments,” Reuters reported. “At HSBC Balkin served as head of innovation and strategic digital partnerships, leading a team whose responsibilities included improving digital customer experience and identifying new products and services. Among the team’s projects was the deployment of humanoid robot Pepper in HSBC’s Fifth Avenue flagship New York branch.”

“Balkin’s appointment comes as large banks continue to invest in innovation and financial technology to improve their digital offerings for both business and retail clients.”