Banks ready for big buyouts; rising real estate markets sparking bubble fears

the Wall Street newspaper

Redemption potential

“Assuming that this year’s stress test is not considerably more stringent than those of recent years, a significant part of the money is to be released”By the largest US banks in share buybacks, says the Journal. According to Goldman Sachs, “The largest banks have the capacity, under current rules, to repurchase up to about $ 22 billion in shares in the second quarter. Once the rules are relaxed, they estimate buyouts could almost triple in the second half of the year, to $ 63 billion, or about 3% of the market value of these banks. “

“The next question is to what extent do banks exploit this capacity. But the bottom line is that investors can mostly start thinking about bank payments the way they did before the pandemic. That alone should be good for bank stocks.

Bubble problem

The United States isn’t the only place where the real estate market is booming and causing concern. “A parallel rise in residential property prices across the world is making fear of possible bubbles and encouraging some governments to intervene to prevent overheating of their markets.

“It puts policymakers in a bind. Many want to keep interest rates low to support the post-pandemic recovery, but fear that people are taking on too much debt to buy homes that may stagnate or fall in prices later. Other tools they have to cool demand, like tighter mortgage restrictions, don’t always work or are postponed as authorities try to ensure broader economic growth stays on track. “

The Libor latecomers

The Federal Reserve and other regulators “are step up pressure on banks to stop tying lending to the London Interbank Offered Rate. After falling into disrepute a decade ago following a manipulation scandal, the world’s largest banks and regulators are expected to drop the benchmark of short-term borrowing by the end of the year. But lenders have been slow to change.

“A consensus is building among banks and regulators that federal legislation will be necessary to avoid problems of uncertainty and liability linked to the transition of several years to the interbank offered rate in London, which caused a scandal, ”reports American Banker.

Club hunter

“Brazil’s central bank has been redoubling its efforts for years to dismantle the country’s clubby banking sector, using a pandemic shift to contactless payments to launch its own digital platform. Since launching in November, Pix already handles a greater share of digital payments than its private sector alternatives, advancing the regulator’s goal of boosting competition and getting more Brazilians to use financial services.

“In addition, Brazil’s central bank introduced what is known as open banking last month, forcing institutions to share key data on prices and credit history with their rivals. This has added to recent efforts to encourage the growth of fintechs to give consumers more options and to attract unbanked Brazilians into the formal financial system. “

Financial Time

One job is enough

Deutsche Bank plans to appoints Fabrizio Campelli as head of its investment bank to replace CEO Christian Sewing after “giving in to pressure from regulators to abandon [dual] role. Germany’s largest lender will announce the change ahead of its annual meeting of shareholders at the end of May as part of a larger reshuffle of its board of directors. The reshuffle comes after Sewing decided to step down from the position due to concerns about an excessive workload and potential conflicts of interest. “

Welcome to the machine

“Robots are be let go to write investment reports for Morningstar, the research house that helps investors choose from thousands of mutual funds and exchange-traded funds for savings and retirement. The machine-generated reports that began airing this week lay out the rationale for Morningstar’s so-called analyst rating on a fund. Ratings, similar to Wall Street buy or sell recommendations, are distinct from Morningstar’s more famous star rating system, which measures past performance of funds.

The school of hard knocks

Sleepless nights and working weekends “was the baptism of fire I needed“said a former junior investment banker at Goldman Sachs in an op-ed.

“Young aspiring bankers should have no illusions that the culture will fundamentally change anytime soon. (Although they might well wonder why this extreme and punitive way of working became the norm in the first place), ”he writes. “My sleepless night took place in September 2018, during my third month at Goldman. To date, the efforts that my team and I have put into this transaction are my greatest professional pride. Despite the stress and sleeplessness, I was able to complete tasks with a skill that I had spent years training for. More than that, I have proven to myself that I can function and even excel in this fast-paced and stressful environment. Call it a boot camp, but the experience will open doors for me later and I have been paid generously for my efforts.

New York Times

Fintech Frenzy

“Thousands of fintech startups are riding an investor frenzy driven by a growing awareness that Big Finance is ripe for a technological makeover. Even tiny financial start-ups that haven’t officially introduced their products – like Zeller, which will offer banking services to businesses; and Sivo, which develops lending software, have raised millions of dollars and been valued at nine-figure 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.”

Somewhere else

Citi’s New Chief Diversity Officer

Citigroup has hired Erika Irish Brown away from Goldman Sachs as “its chief head of diversity, equity and inclusion,” Reuters reported. “Under Brown, Goldman set a target that 11% of all new junior analysts and associates hired in the US and 9% hired in the UK are black professionals, 14% are Latino professionals and half of women.” Goldman has appointed Megan Hogan to replace Brown.

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