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US banks ramp up spending on talent and technology

Costs at the top US banks jumped more than $ 6.6bn, or 10 per cent, in the most recent quarter compared with the same period of last year as executives paid up for talent and technology to fortify their businesses against increasing competition from nearly every angle.

The increase in spending at JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, and Citigroup surprised analysts. Many had predicted that banks’ expenses would fall modestly this year as the extra costs associated with doing business during the pandemic faded away.

However, on a series of conference calls this week to discuss quarterly earnings, executives forecast higher annual expenses due to pay increases for bankers and bigger investments in technology and marketing.

“There’s a nervousness among investors that this is the cost of doing business to keep clients from bleeding to fintechs,” said Autonomous Research bank analyst Brian Foran.

Cost increases at most US banks are outpacing revenue growth while banks grapple with historically low interest rates and a dramatic slowdown in lending.

Expenses at the five banks were 21 per cent higher in the second quarter compared with 2019, before the pandemic hit, according to earnings released this week. But second-quarter revenues just rose 10 per cent compared with 2019.

Although technology spending has been on the rise for years, accelerated digitisation during the pandemic has forced executives to stump up even more.

Column chart of Quarterly expenses in US$ bn showing US banks are spending more to fend off competition

“The urgency and importance when you talk to bank executives seems to go up by the day,” Foran said.

The higher spending represents a shift from how banks reacted to the last financial crisis, when many relied on cost cuts to boost profits. But stimulus programmes helped banks avoid the wave of pandemic-related loan losses that executives had expected, meaning they have extra cash to spend.

“We are identifying, particularly given the pace of the recovery, some real strategic opportunities to invest in the franchise,” Citigroup chief financial officer Mark Mason said this week after the bank reported a 7 per cent increase in costs. “We’re not going to miss this window of opportunity.”

Banks are facing heightened competition in virtually every aspect of their business. Private equity firms now have the capital to execute large deals on their own without relying on banks, and fintech companies are eroding margins in the wealth management business and luring some consumers away from traditional banks with lower fees and perks.

Jamie Dimon, JPMorgan chief executive, warned about the banking industry’s shrinking share of the US financial system in his annual letter to shareholders in April. The bank this week raised its annual expense guidance by 1 per cent to $ 71bn.

Column chart of Quarterly compensation costs US$ bn showing Banks are paying their employees more amid a war for talent

“If we can find more good money to spend we’re going to spend it,” Dimon said on the bank’s earnings call.

Compensation, the biggest expense for the industry by far, rose 7 per cent at the five banks in the second quarter compared with last year as they paid up for talent.

Investment banks like Citigroup and JPMorgan have raised salaries for junior investment bankers who complained of burnout during the pandemic, and Bank of America committed to increasing its minimum wage to $ 25 per hour.

Businesses like investment banking with performance-related compensation have also outperformed expectations this year, which is likely to drive up bonuses.

As part of the tech push, banks are increasingly recruiting engineers and data scientists, which increases their median pay, said Jan Bellens, global banking and capital markets sector leader at EY.

Column chart of Marketing expenses in US$ m showing Banks are spending much more on marketing than during the pandemic

Quarterly marketing expenses also soared 46 per cent year-on-year across the group as lenders pushed promotional credit card offers in attempt to jump-start loan growth and bankers got back to wining and dining potential clients after the lockdowns last year.

“The banks are all in the ring and they’re all ready to fight for revenues. Fighting for revenues means spending more on growth,” said Mike Mayo, bank analyst at Wells Fargo.

Other bank-specific factors are also fuelling spending like integration expenses for Morgan Stanley following two large deals and regulatory costs at Citigroup.

Banks will hope this latest round of tech spending will yield better results than previous efforts. Years of prior tech spending have failed to meaningfully reduce the cost of doing business for banks, with banks’ efficiency ratios — a measure of costs as a proportion of income — remaining stubbornly above 50 per cent for years.

Higher spending in the face of revenue pressures could be a tough sell to bank investors who have closely monitored profitability metrics.

“It’s really hard for investors to understand the long-term value of technology investments being made now,” said Vivian Merker, a consultant at Oliver Wyman. “In part because historically there’s been over promises and under delivers and in part because no one knows the future.”

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This post originally posted here International homepage

Foreign currency demand of Azerbaijani banks decreases

BAKU, Azerbaijan, July 15

By Zeyni Jafarov – Trend:

The Central Bank of Azerbaijan (CBA) held a new foreign exchange auction with the participation of the State Oil Fund of Azerbaijan (SOFAZ) on July 15, 2021, Trend reports referring to a source in the CBA.

According to the source, the demand from Azerbaijani banks at the auction decreased by 4.1 percent compared to the previous indicator and was fully met.

During the auction, the CBA sold $ 51.2 million to the local banks.

At the end of the auction, the weighted average rate of the manat to the US dollar amounted to 1.7 AZN/USD.

The first foreign exchange auction for a long time was held with the participation of SOFAZ on March 10, 2020, during which Azerbaijani banks purchased $ 323.2 million.


The CBA began to conduct currency auctions through a one-way sale of currency in a competitive environment from mid-January 2017.

A decision was made in March 2020 to hold extraordinary currency auctions due to the increased demand of the population for foreign currency amid the failure of the OPEC + deal, which led to a sharp drop in oil prices.

Follow the author on Twitter: @jafarov_zeyni

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This post originally posted here Trend – News from Azerbaijan, Georgia, Kazakhstan, Turkmenistan, Uzbekistan, Iran and Turkey.

Marks and Spencer to close 29 in-store banks today – full list

Marks and Spencer has 29 banks, all located in stores across the country. All banks are closing for good today with the retailer aiming to focus instead on its credit cards, insurance, savings, and loan products.

“We’re now firmly focused on supporting both our customers and colleagues through this change, and the delivery of our transformation plans, which will create new and rewarding payment solutions for M&S shoppers, both in-store and online,” Mr Spencer added.

The closures will undoubtedly affect both M&S staff and customers.

The retailer has previously said it would redeploy branch workers where possible, but it has not confirmed since how many redundancies will take place.

As for customers, the bank will shut their existing current accounts on August 31.

If there are still funds in place in the bank account by August, they will remain frozen, and customers will need to contact M&S to transfer the money elsewhere.

Following the bank closures, Marks and Spencer’s banking services will now move to online, mobile, and telephone channels only.

M&S Bank’s credit cards, general insurance, savings, and loan products will remain the same.

Therefore, customers who have one or more of these products will be unaffected by the changes.

M&S Bank is not the only bank to shut its doors for good in 2021.

Lloyds Banking Group confirmed last month that it will shut another 44 branches in November, meaning it will have closed a total of 100 banks by the end of the year.

Full list of M&S Bank closures

Aberdeen – St Nicholas Street

Birmingham – High Street

Bristol – Cribbs Causeway

Bromley – High Street

Cardiff – Culverhouse Cross

Dartford – Bluewater

Edinburgh – The Gyle

Ellesmere Port – Cheshire Oaks

Exeter – High Street

Gateshead – Metro

Glasgow – Argyle Street

Glasgow – Braehead

Leeds – Briggate

Lisburn – Sprucefield

London W12 – Westfield White City

London – Marble Arch

Manchester – Market Street

Milton Keynes – Saxon Gate East

Norwich – Rampant Horse Street

Oxford – Queen Street

Pudsey – Stanningley

Sandhurst – Camberley

Sheffield – Meadowhall

Shoreham – Holmbush Centre

Southampton – Hedge End

St Albans – London Colney

Tipton – Merryhill

Warrington – Gemini

Wilmslow – Handforth

Author: Mared Gruffydd
This post originally appeared on Daily Express :: Life and Style
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India denies asking state banks to withdraw cash held abroad over Cairn dispute

India denies asking state banks to withdraw cash held abroad over Cairn dispute© Reuters. FILE PHOTO: Cairn India employees work at a storage facility for crude oil at Mangala oil field at Barmer in the desert Indian state of Rajasthan August 29, 2009. REUTERS/Parth Sanyal

NEW DELHI (Reuters) – India’s government on Sunday denied asking its state-run banks to withdraw funds from their foreign currency accounts abroad on fears that Cairn Energy (OTC:) may attempt to seize the cash in a tax dispute, adding New Delhi was open to resolve the matter.

London-listed Cairn is involved in a long-drawn out tussle with the Indian government over tax claims and was awarded damages of more than $ 1.2 billion by an international tribunal late last year.

New Delhi has filed an appeal against the decision it calls “highly flawed”.

Citing government officials and a banker, Reuters and other media reported on May 6 that the finance ministry had asked state-run banks to withdraw the foreign funds on concern that courts abroad could order that assets in their jurisdiction – including bank accounts – be remitted to Cairn.

The ministry, which gave no comment at the time, called the reports “false” in a statement on Sunday, saying no such instructions had been issued.

“Government of India is vigorously defending its case in this legal dispute … Constructive discussions have been held and the Government remains open for an amicable solution to the dispute,” the statement said.

Separately this month, Cairn also sued India’s flagship carrier Air India to enforce the arbitration award, according to a U.S. District Court filing reviewed by Reuters.

The international tribunal had ruled unanimously that India had breached its obligations to Cairn under the UK-India Bilateral Investment Treaty and awarded Cairn damages of $ 1.2 billion plus interest and costs.

Indian authorities in 2014 had demanded 102 billion rupees ($ 1.4 billion) from Cairn for taxes it said were owed on capital gains related to the 2007 listing of the company’s local unit.

“The Government has raised several arguments that warrant setting aside of the award,” the finance ministry’s statement on Sunday said.

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Author: Reuters
This post originally appeared on Stock Market News

Banks Fight $4 Billion Debt Relief Plan for Black Farmers

WASHINGTON — The Biden administration’s efforts to provide $ 4 billion in debt relief to minority farmers is encountering stiff resistance from banks, which are complaining that the government initiative to pay off the loans of borrowers who have faced decades of financial discrimination will cut into their profits and hurt investors.

The debt relief was approved as part of the $ 1.9 trillion stimulus package that Congress passed in March and was intended to make amends for the discrimination that Black and other nonwhite farmers have faced from lenders and the United States Department of Agriculture over the years. But no money has yet gone out the door.

Instead, the program has become mired in controversy and lawsuits. In April, white farmers who claim that they are victims of reverse discrimination sued the U.S.D.A. over the initiative.

Now, three of the biggest banking groups — the American Bankers Association, the Independent Community Bankers of America and National Rural Lenders Association — are waging their own fight and complaining about the cost of being repaid early.

Their argument stems from the way banks make money from loans and how they decide where to extend credit. When a bank lends money to a borrower, like a farmer, it considers several factors, including how much interest it will earn over the lifetime of the loan and whether the bank can sell the loan to other investors.

By allowing borrowers to repay their debts early, the lenders are being denied income they have long expected, they argue. The banks want the federal government to pay money beyond the outstanding loan amount so that banks and investors will not miss out on interest income that they were expecting or money that they would have made reselling the loans to other investors.

They also want other investors who bought the loans in the secondary market to get government money that would make up for whatever losses they might incur from the early payoff.

Bank lobbyists, in letters and virtual meetings, have been asking the Agriculture Department to make changes to the repayment program, a U.S.D.A. official said. They are pressing the U.S.D.A. to simply make the loan payments, rather than wipe out the debt all at once. And they are warning of other repercussions, including long-term damage to the U.S.D.A.’s minority lending program.

In a letter sent last month to Tom Vilsack, the agriculture secretary, the banks suggested that they might be more reluctant to extend credit if the loans were quickly repaid, leaving minority farmers worse off in the long run. The intimation was viewed as a threat by some organizations that represent Black farmers.

“If U.S.D.A. does not compensate lenders for such disruptions or avoid sudden loan payoffs, the likely result will be less access to credit for those seeking U.S.D.A. guaranteed loans in the future, including U.S.D.A. farmers/ranchers,” they wrote to Mr. Vilsack in April.

The U.S.D.A. has shown no inclination to reverse course. An agency official said that obliging the banks would put an undue burden on taxpayers and that the law did not allow the agency to pay interest costs or reimburse secondary market investors. The agency hopes to be able to begin the debt relief process in the coming weeks, according to the official, who requested anonymity because they were not authorized to comment on the program.

The relief legislation that Congress passed in March provided “sums as may be necessary” from the Treasury Department to help minority farmers and ranchers pay off loans granted or guaranteed by the Agriculture Department. Most of the loans are made directly to farmers, but about 12 percent, or 3,078, are made through lenders and guaranteed by the U.S.D.A.

The Congressional Budget Office estimated that the loan forgiveness provision would cost $ 4 billion over a decade.

While America’s banks have flourished in the last century, the number of Black-owned farms has declined sharply since 1920, to less than 40,000 today from about a million. Their demise is the result of industry consolidation as well as onerous loan terms and high foreclosure rates.

Black farmers have been frustrated by the delays and say they are angry that banks are demanding additional money, slowing down the debt relief process.

“Look at the two groups: You have the Black men and women who have gone through racism and discrimination and have lost their land and their livelihood,” said Bill Bridgeforth, a farmer in Alabama who is on the board of the National Black Growers Council. “And then you have the American Bankers Association, which represents the wealthiest folks in the land, and they’re whining about the money they could potentially lose.”

John Boyd Jr., president of the National Black Farmers Association, a nonprofit, said he found it upsetting that the banks said little about years of discriminatory lending practices and instead complained about losing profits.

“They’ve never signed on to a letter or supported us to end discrimination, but they were quick to send a letter to the secretary telling him how troublesome it’s going to be for the banks,” Mr. Boyd said. “They need to think about the trouble they’ve caused not working with Black farmers and the foreclosure process and how troublesome that was for us.”

Mr. Boyd urged Mr. Vilsack not to let the debt relief stall.

“It’s planting season and Black farmers and farmers of color really could use this relief,” Mr. Boyd said.

Cornelius Blanding, executive director of the Federation of Southern Cooperatives/Land Assistance Fund, said that the letter from the banks appeared to be a veiled threat.

“They are prioritizing profits over people,” Mr. Blanding said, expressing concern that the backlash from banks and white farmers could delay the debt relief. “Debt has been a burden on the back of many farmers and especially farmers of color. Them holding this up really prolongs justice.”

Although the government is paying 120 percent of the outstanding loan amounts to cover additional taxes and fees, banks say that unless they get more, they will be on the losing end of the bailout.

The banking industry groups could not offer an estimate of how much additional money they would need to be satisfied. The Agriculture Department said it would cost tens of millions of dollars to meet the banks’ demands.

In the letter to Mr. Vilsack, the bank lobbyists pointed to one large community bank, which they said had a $ 200 million portfolio of loans to socially disadvantaged farmers that would lose millions of dollars of net income per year if the loans were quickly paid off. They warned that such a move would “undoubtedly reduce the bank’s ability to retain employees.”

The American Bankers Association defended the request, arguing that lenders have been a lifeline to minority farmers. It said that the matter primarily affects the group’s smaller members that have large portfolios of loans from socially disadvantaged borrowers. Representatives for Goldman Sachs, JPMorgan Chase and Citigroup said that the debt relief program had not been on their radar and that they had not been lobbying against it.

“We recognize the need for U.S.D.A. to carry out this act of Congress, and we support the goal of providing financial relief to socially disadvantaged farmers and ranchers,” said Sarah Grano, a spokeswoman for the American Bankers Association. “We believe it would be helpful if the U.S.D.A. implemented this one-time action without causing undue financial harm to the very lenders who have been supporting farmers with much-needed credit.”

Danny Creel, the executive director of the National Rural Lenders Association, said he had no comment. An official from the Independent Community Bankers of America said that the group was not currently considering litigation and that it anticipated that the federal government would find a way to accommodate its requests.

Lawmakers who helped craft the relief legislation have expressed little sympathy for the banks and are pressing the agriculture department to get the money out the door.

Senator Cory Booker, a New Jersey Democrat, said: “U.S.D.A. should now take this first step toward addressing the agency’s history of discrimination by quickly implementing the law that Congress passed and moving forward without delay to pay off in full all direct and guaranteed loans of Black farmers and other socially disadvantaged farmers.”

The banks are not the only ones who have been fighting the debt relief initiative. A group of white farmers in Wisconsin, Minnesota, South Dakota and Ohio are suing the Agriculture Department, arguing that offering debt relief on the basis of skin color is discriminatory. America First Legal, a group led by the former Trump administration official Stephen Miller, filed a lawsuit making a similar argument in U.S. District Court for the Northern District of Texas this month.

Mr. Vilsack said at a White House press briefing this month that his department would not be deterred by pushback against its plans to help minority farmers.

“I think I have to take you back 20, 30 years, when we know for a fact that socially disadvantaged producers were discriminated against by the United States Department of Agriculture,” Mr. Vilsack said. “So, the American Rescue Plan’s effort is to begin addressing the cumulative effect of that discrimination in terms of socially disadvantaged producers.”

Author: Alan Rappeport
This post originally appeared on NYT > U.S. News

Bitcoin back above $57K as 'hundreds' of US banks prepare to HODL for clients

Bitcoin (BTC) staged a characteristic comeback on May 5 as a day of losses turned around in a flash.

BTC/USD 1-hour candle chart (Bitstamp). Source: Tradingview

BTC price nears $ 58,000

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD passing $ 57,000 again during Wednesday trading, with daily gains knocking on 5%.

The move marks Bitcoin’s second such “comeback” in a week. While the bearish trend reset, analysts were keen to see how much fuel Bitcoin had accumulated after dipping to near $ 53,000 overnight.

For Philip Swift, co-founder of trading suite Decentrader, fundamental indicators still pointed to a continuation of the longer-term bull market.

“I continue to think that Bitcoin will not crash and is more likely to range before breaking out to the upside,” part of a series of tweets read on the day.

“Many other indicators suggest $ BTC has much more upside and the cycle is not over.”

Swift specifically noted that one tool, the Pi Cycle Top indicator, had “nailed” Bitcoin’s most recent all-time high of $ 64,500 in April. As Cointelegraph reported, Pi has become increasingly popular for those tracking BTC price trends over successive years.

At the time of writing, BTC/USD circled $ 57,200, ruminating after reaching local highs of $ 57,400.

No plain sailing for altcoin bagholders

Hodlers thus received a welcome response from the largest cryptocurrency, which had spent much of the week being humiliated at the hands of a surging altcoin market.

Among the astonishing movers were tokens such as Dogecoin (DOGE) and Ethereum Classic (ETC), the latter having laid dormant for much of the past three years since the end of the previous broad “alt season.”

Words of caution, veiled or not, were nonetheless not in short supply, as Bitcoin proponents warned about the fickle nature of such parabolic altcoin moves.

Acting in Bitcoin’s favor meanwhile was news that it would be supported by “hundreds” of banks in the United States in 2021, along with investment giant Grayscale becoming a sponsor of NFL team the New York Giants. 

“What we’re doing is making it simple for everyday Americans and corporations to be able to buy bitcoin through their existing bank relationship,” said Patrick Sells, head of bank solutions at crypto custody firm NYDIG, which is behind the scheme, revealing the scale of the rollout to CNBC.