Home Banking Jane Fraser’s first move at Citi; PPP’s second round ready to launch

Jane Fraser’s first move at Citi; PPP’s second round ready to launch

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Receiving Wide Coverage …

Strong Affirmation

Shares of Affirm, the buy-now, pay-later fintech firm, “surged in the company’s trading debut Wednesday. Trading on the Nasdaq under the symbol AFRM, shares jumped as high as $103 shortly after it began trading around midday, far above its initial offering price of $49. The shares closed at $97.24.”

“Affirm lets online shoppers pay for purchases in installments. Merchants ranging from Walmart to Expedia Group offer customers the opportunity to finance through Affirm. It and similar companies including Afterpay and Klarna Bank have benefited during the pandemic, with many consumers reluctant to take on credit card debt.”

“There is mounting concern about whether BNPL encourages people to buy things that they can’t afford,” a Financial Times says, calling for increased regulation of the sector. “While BNPL plans may not be credit in the strictest definition of the word, they often look like credit and smell like credit — and should therefore be regulated like credit.”

Wall Street Journal

Making her mark

Citigroup “is restructuring its businesses that manage money for wealthy customers, one of the first big moves by incoming chief executive Jane Fraser to put her stamp on the bank. The bank is combining into a new unit its high-end private bank for the ultrarich and its wealth-management offerings for the less affluent.

“By creating a unified Citi Global Wealth business, the bank’s executives are trying to serve customers along the entire spectrum. The idea is for the bank to get clients earlier and keep them as they grow richer, earning more fees in the process. The combination bears the fingerprints of Ms. Fraser, who will take over when Michael Corbat retires next month. Finding ways for the two parts of Citigroup, its institutional and consumer businesses, to work more closely together is expected to be near the top of her agenda as CEO.”

What to expect

Bank earnings season begins on Friday when JPMorgan Chase, Citigroup and Wells Fargo report yearend profits, followed by Bank of America, Goldman Sachs and Morgan Stanley next week. “KBW analysts expect per-share bank earnings to fall 8% in the fourth quarter compared with the same time in 2019. They also expect profits to fall compared with the third quarter, when some of the largest banks delivered better-than-expected results.”

“Net charge-offs are expected to rise in the fourth quarter from the third but remain far below historic highs, analysts said. Banks are also expected to announce plans for stock buybacks.”

Financial Times

Job openings

UniCredit, Italy’s largest bank, “has approached some of Europe’s top available bankers including Andrea Orcel, Tidjane Thiam and Martin Blessing as it seeks to appoint a new chief executive after a dispute over the Italian lender’s future. The incumbent, Jean Pierre Mustier, resigned at the end of November in a disagreement over strategy.” Orcel is the former head of UBS’s investment bank. Thiam and Blessing are the former CEOs of Credit Suisse and Commerzbank, respectively.

“Mustier fell out with the board after insisting on prioritizing wider European expansion, whereas non-executives insisted he doubled down on Italy. The Frenchman also initially resisted the government’s demands that UniCredit buy struggling, state-owned peer Monte dei Paschi di Siena.”

Separately, Simon Cooper, Standard Chartered’s head of investment banking, “has emerged as the leading internal contender to replace Bill Winters as chief executive. Winters, a former JPMorgan Chase executive who has run Standard Chartered since 2015, will not be stepping down this year, but is nearing the end of his tenure. The lender makes the vast majority of its profits in Asia and is one of the largest international banks operating in Africa.”

Warning bells

“Storm clouds are beginning to gather” over the digital currency market as “a strong jolt of volatility in cryptocurrencies has dulled hopes that large pension funds and traditional investors will pile into bitcoin anytime soon as a pick-up in institutional interest remains dominated by speculators. Bitcoin, the most actively-traded cryptocurrency, has endured its worst bout of tumult since the global market ructions in March.”

“The ructions come after a banner year in which bitcoin was among the world’s top-performing assets. The digital currency’s dazzling run prompted concerns about a potential bubble brewing, but also piqued the interest of hedge funds and private investors. The steady drip of big names helped amplify the fervor.”

“Regulators are sharpening their focus on bitcoin and its use in the international financial system after the value of the digital currency raced higher in a volatile rally that fed concerns over its lack of robust oversight by financial watchdogs. Both the U.K.’s Financial Conduct Authority and the president of the European Central Bank highlighted the need for more stringent regulatory scrutiny for cryptocurrencies this week, noting the extreme volatility and criminal activity often associated with the market.”

New York Times

Start your engines

The new $284 billion round of the Paycheck Protection Program “will open for all applicants next Tuesday, the Treasury Department said on Wednesday. The new funding will be available both to first-time applicants and to some returning borrowers. Borrowers seeking a second loan will need to demonstrate a 25% drop in gross receipts between comparable quarters in 2019 and 2020. Second loans will also be limited to companies with 300 or fewer workers, and the amounts will be capped at $2 million.”

“Starting Tuesday, loans will be available from thousands of lenders, including national banks, most regional banks, and financial technology companies like PayPal. Some smaller lenders have already gotten started. Community Development Financial Institutions, Minority Depository Institutions and Certified Development Companies were allowed to start taking loan applications this week. And on Friday, lenders with $1 billion or less in assets will be allowed to start submitting applications.”

Small lenders are embracing automation for the latest PPP round, American Banker reports.

Quotable

“In our view, given their high volatility and the size of their past drawdowns, cryptocurrencies might be attractive to speculative investors, but they are neither a suitable alternative to safe-haven assets nor do they necessarily contribute to portfolio diversification.” — UBS Asset Management, discussing the volatility of bitcoin since it hit a record high last week.