Banks plan big buybacks in first quarter; JPMorgan, Citi pause political giving

Receiving Wide Coverage …

Deutsche does it again

Deutsche Bank “agreed to pay $130 million largely to settle allegations that it violated laws against bribery by using middlemen and hiding its payments to them as part of a global effort to win business,” the Wall Street Journal reported. “The bribery settlement exposed a wide-ranging effort by the bank to use consultants or middlemen to help it get deals in Saudi Arabia, Abu Dhabi, China and Italy.”

“The bank agreed to pay about $87 million to settle the criminal allegations. Deutsche Bank will pay $43 million to resolve a parallel investigation by the U.S. Securities and Exchange Commission.”

The bank also “entered into a deferred prosecution agreement” in which “Deutsche will not face criminal prosecution, but could in the future if it does not comply with provisions including improving its compliance procedures,” the Financial Times said. “The agreement is also void if Deutsche commits a felony in the next three years.”

Wall Street Journal

Political pause

JPMorgan Chase and Citigroup “said they are pausing all PAC donations to Republicans and Democrats in the coming months.” JPMorgan “made the decision to pause political giving because of the growing political crisis following the violence at the Capitol alongside health and economic crises, said Peter Scher, JPMorgan’s head of corporate responsibility.”


Stripe said it “will no longer process payments for President Trump’s campaign website following last week’s riot at the Capitol,” claiming that the organization “violated its policies against encouraging violence.”

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Condo lending rules tightened

Fannie Mae and Freddie Mac have “moved to tighten rules on buildings with many short-term rentals and hotel-like amenities,” meaning “getting a mortgage for a resort-area condo might become more difficult. The moves by the two government-controlled mortgage giants come as the Trump administration seeks to shrink their footprint in housing, especially in areas such as vacation properties that may not serve the core mission of encouraging homeownership by making it more affordable.”

“The updated rules are starting to generate pushback from Realtors and bankers who say entire buildings could be ineligible for financing even if only some units are rented out on a short-term basis. They also fault the process Fannie uses to determine the eligibility of a building, saying it is opaque and can’t be disputed by a building’s owners or its homeowners association.”

Joining Biden?

Nellie Liang, “the founding director of the Federal Reserve’s division of financial stability, is being considered as the U.S. Treasury’s undersecretary for domestic finance.” Liang, “currently a senior fellow at the Brookings Institution, the same Washington think tank where Treasury Secretary-designate Janet Yellen worked after leaving the Fed in 2018, was nominated by President Trump to a seat on the Fed’s seven-member board of governors in 2018, but her nomination ran into opposition from Senate Republicans.”

“The Treasury undersecretary job requires Senate confirmation and plays an important role in management of U.S. debt, tax and fiscal policy, financial regulation, housing finance and other economic matters.”

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Financial Times

Ready to buy (back)

“America’s top banks [plan] to buy back more than $10 billion of their shares in the first quarter, as the loan losses of the pandemic year recede and capital markets fire on all cylinders. JPMorgan Chase is expected to lead the way with buybacks, spending around $3.2 billion on its own shares by the end of March. The remaining $7.4 billion or so is spread across Bank of America, Citigroup, Goldman Sachs, Morgan Stanley and Wells Fargo.”

“Analysts expect the buybacks to come in close to the maximum permitted under a Federal Reserve decree in late December, which surprised investors by allowing banks to resume buybacks and return billions to shareholders while also flattering banks’ earnings per share. The first quarter’s repurchases will be capped so that the sum of dividends and buybacks cannot exceed average quarterly earnings over the previous year.”

Under fire

HSBC “is under fire for financing the fossil fuel industry after a group of investors filed a climate resolution ahead of the bank’s annual meeting in April.” The resolution, which claims the bank is “failing to take climate change seriously, having made no specific commitments to reduce funding for fossil fuels, called on HSBC to publish a strategy and targets to reduce its exposure to fossil fuel assets.”

“Investors are increasingly targeting banks over their role in financing carbon-intensive projects and industries. Last year, shareholders filed a landmark climate resolution at Barclays’ annual meeting, which received the support of a quarter of shareholders and forced the lender to strengthen its policies.”

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Out of the doghouse

In addition to the buybacks, bank stocks, “stuck in the investment doghouse for years, are gaining further support after Senate run-off races last week that flipped control to the Democratic party. Investors are now hunting for stocks likely to feel the benefit of the vaccines-led rebound, while the prospect of the Democratic party controlling the White House and both chambers of Congress has also fueled inflation expectations, triggering a rise in long-term interest rates that bodes well for banks’ profits.”

“The banks are going from the land of misfit toys, where they were in the summer, to being an area of interest for investors,” said Charles Peabody of Portales Partners.”

The future is now

Goldman Sachs is marketing its “treasury of the future” cash management services to third parties. The services include “digital liquidity management products, self-service account opening and analytics tools including highly automated reports, which [the bank] says are cheaper and more accurate than those offered by legacy providers.”


“The big question (for banks) is going to be how aggressive are you going to be on buybacks, over what timeframe?” — Mike Mayo, bank analyst at Wells Fargo, on banks’ plans to repurchase their own shares now that the Fed has given them the greenlight to do so.

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