Analyze the purchase of Cabin Crew Members; intrigue thickens in Shelton’s appointment to the Fed

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What PNC wants

PNC’s acquisition of the BBVA franchise in the United States “would render its label of ‘regional bank’ increasingly obsolete. The question is whether this also transforms its profitability“, Reports the Wall Street Journal.

“PNC is betting that the best way to add returns in an era of historically low interest rates is to capitalize on the application of its operational know-how, including cost reduction and an improved technological backbone. He estimates that it can generate a 19% internal rate of return on the deal, which is probably better than what banks typically do than deploy their capital in lending these days. “

“The $ 11.6 billion acquisition would create a coast-to-coast bank with more than $ 560 billion in assets and 2,844 branches in more than two dozen states,” reports American Banker. “BBVA USA has also advances PNC’s goal of becoming a national banking franchise. “

Meanwhile, BBVA, Spain’s second largest bank, is seeks to put that money immediately to work. The bank said on Monday it was “in merger talks with small domestic rival Sabadell as Spanish banking sector consolidation shifts into high gear,” the Financial Times reported.

BBVA said he was in discussions with Sabadell with board approval, adding that due diligence had started and advisers had been appointed. But he stressed that no final decision had been made. taken as to whether a merger would ultimately take place or what its conditions would be. “

The sale by BBVA of its operations in the United States “underlines that for European banks, America is a tough nut to crackThe Journal said. “The problem for BBVA was that while it grew in the United States over a 15-year period, particularly in the Southwest, it didn’t become big enough that it made sense to stay. in the country. Spain’s second-largest lender lacked the capital to further expand its footprint and couldn’t ask shareholders – already struggling with depressed its share price – to invest more money. “

“BBVA’s strategic reshuffle shows how the coronavirus pandemic is forcing European banks to be more calculated about their prospects for growth and survival. Another Spanish lender duo, CaixaBank and Bankia SA, agreed to merge in September, and analysts and regulators are betting more deals will be closed. “

On the wire

Just as Judy Shelton’s appointment to the Federal Reserve approaches a Senate vote, “a third Republican senator said he would oppose confirmation, putting in place a close vote starting this week, ”the Journal reported. “I oppose the appointment of Judy Shelton because I am not convinced that she supports the independence of the Federal Reserve as much as I think the board of governors should,” said Senator Lamar Alexander of the Tennessee.

“Republicans will have little room for further defections. In July, Senators Mitt Romney of Utah and Susan Collins of Maine said they would not support his confirmation. No Democrat has publicly supported it. Republicans have a 53-47 majority in the Senate, and in the event of a tie, Vice President Mike Pence would cast the casting vote, assuring Ms. Shelton’s confirmation. Ms Shelton’s term would end in January 2024.

But there’s more to it, reports the Washington Post. “He is it is not known if Vice President Pence, who is mobilized to sever ties in the Senate, will have to do so; a spokesperson for Alexander has said he will not be in Washington this week for family reasons, so he will not be present to vote on the nomination if that happens this week. But Senator Rick Scott, R-Florida, who is expected to support Shelton, will be in quarantine this week. “

“If Scott and Alexander both miss the vote, it could come down to a tie 49 to 49 if Vice President-elect Kamala D. Harris votes. In this scenario, Pence would be needed to break the tie.

the Wall Street newspaper

Comedy of errors

Revlon’s lenders “were surprised at their unexpected gain” when Citigroup “accidentally used its own funds to pay off nearly $ 900 million” to the cosmetics company’s creditors. And they don’t intend to give it back. “In court documents filed Friday, the lenders said they were justified in keeping what they received because no reasonable lender would believe that one of the world’s largest financial institutions would accidentally transfer the full amount owed to them. was owed by Revlon, to the nearest cent. “

“Citi, the loan officer hired by Revlon to distribute the interest and principal payments on its debt,” says the lenders “knew they had been paid in error. The lenders argued that they had no reason to believe the transactions were in error until Citi claimed so much and demanded repayment.

Financial Time

Wirecard is fading

As BBVA pursues a possible merger with another Spanish bank, Banco Santander said it was “”pay around 100 million euros for Wirecard’s core business in Europe in a transaction that marks an important step towards dismantling the disgraced German payment provider. Spain’s largest bank acquires Wirecard’s European technology platform that processes electronic payments for merchants as well as its remaining credit card issuance business in Europe.

“The acquisition does not include the companies Wirecard and Santander will not assume any legal liability regarding Wirecard AG and Wirecard Bank or its past actions,” the Spanish bank said.

Jump on the banks

Berkshire Hathaway “reduced its stake in several large banks during the third quarter, including Wells Fargo, JPMorgan Chase, and PNC Financial. Instead, Warren Buffett’s company “placed a $ 5.7 billion bet on four US pharmaceutical stocks,” including AbbVie, Bristol-Myers Squibb, Merck and Pfizer, according to a securities filing.

Unintended consequences

European bank dividend ban has failed and should be liftedAn FT editorial argues. unhealthy way the relations between banks and their regulators. “

“At first glance, canceling dividends made sense. In March, nearly 70 European banks were to pay around 60 billion euros in dividends to their shareholders in 2020. Stopping these payments would help preserve their capital, leaving them better equipped to deal with the dreaded economic damage of Covid- 19. “Since the end of March, [however,] the combined market capitalization of the 66 largest banks in Europe fell by 250 billion euros, or almost 25%, ”as investors abandoned their shares.

“While the cancellation of dividends kept € 60 billion of additional capital in these banks, the resulting drop in their stock prices severely hampered the ability of all lenders to raise new capital. This means that banks’ overall access to new capital is worse now than it was before regulators intervened. “

But Carolyn Rogers, the secretary general of the Basel regulators’ committee, said “he isfar too early for banks to do a “victory lap” on their response to the coronavirus, arguing that shareholder payments should remain on hold until the long-term impact of the pandemic is clear. She told the FT that “investors should wait longer for dividends or share buybacks, despite pressure from bankers to be allowed to restart payments.”

Looking up

A recovery in the business cycle, higher interest rates and loan loss reserves that do not materialize and flow back into profit or loss are stand in line to raise the fortunes of the banking sector, says an FT editorial.

Quotable

“How was work today, honey?” It was good, except that I accidentally sent [$900 million] to people who weren’t supposed to have it. ” –A member of the Revlon loan union, joking about what the Citigroup employee who mistakenly wired the money to the group might have said.

About Hannah Schaeffer

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