Citigroup to create 100 roles in digital asset push, BFSI News, ET BFSI

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– Citigroup is looking to create 100 roles focused on digital assets including blockchain and digital currencies at its institutional division, the U.S. bank said on Tuesday.

The intitiative is the latest by traditional banks looking to find ways to tap the growing cryptocurrency sector, which has been gaining mainstream appeal as well as regulatory scrutiny.

Puneet Singhvi, Citi’s head of blockchain and digital assets at its global markets operation, will lead the new team, Citi said in a memo to staff. The note was sent to the media.

The new team will comprise a mix of internal and external hires and be housed in Singapore, New York, London and Tel Aviv, a Citi spokesperson said in an emailed response, adding that the hiring is expected to finish by the end of 2022.

“Prior to offering any products and services, we are studying these markets, as well as the evolving regulatory landscape and associated risks, in order to meet our own regulatory frameworks and supervisory expectations,” the spokesperson said.

This year Bank of America started cryptocurrency research coverage, Goldman Sachs launched a crypto-trading team and JPMorgan Chase & Co allowed wealth management clients access to cryptocurrency funds, even though Jamie Dimon, its head, has been a vocal critic of the sector.

In Asia, DBS Group is expanding its cryptocurrency trading platform.

Citi’s new team will be involved in product development and project management while outlining strategy to pursue digital asset opportunities including new products, new clients and new investments.

(Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Anshuman Daga and David Goodman)



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How green is the green finance promise of global banks?, BFSI News, ET BFSI

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Most global banks have signed Gfanz (the Glasgow Financial Alliance for Net Zero) at COP26 UN Climate Change Conference pledging to report annually on the carbon emissions linked to the projects they lend to.

Major signatories to the initiative, which aims to provide trillions of dollars in green finance, include Citi, Morgan Stanley and Bank of America. However, earlier efforts to promote green financing have not met with a serious response.

Principles of responsible banking

In 2019, the UN General Assembly exuberantly launched its principles of responsible banking (PRBs) where signatory banks agreed to work with their clients to encourage sustainable practices and to align their business strategy to the UN sustainable development goals and the Paris climate agreement.

Also, many of the biggest banks have not signed the PRBs, even though the principles have been the gold standard until now for committing to decarbonising lending.

Of the top ten banks (by market capitalisation), only Citi, Commercial Bank of China (ICBC), Bank of China and Agricultural Bank of China are signatories to PRBs. JPMorgan Chase, Bank of America, China Construction Bank, Wells Fargo, Morgan Stanley and China Merchants Bank are not on the list.

This is despite it being a limited commitment. Signatories have four years to comply with the principles, and signatories are not penalised or even named and shamed for failing to live up to the principles.

How banks fare

Among the major signatories to PRBs, Citi was the third-biggest fossil fuel lender in 2016-19 after the Paris Agreement and reached second place in 2020.

MUFG and ICBC, who are also signatories to the PRBs, both grew their fossil-fuel lending over the period. MUFG is also a Gfanz member, though neither ICBC nor any of the other Chinese banks are part of the new initiative.

Meanwhile, Wells Fargo and JP Morgan, which were not signatories to PRBs, reduced their total fossil fuels lending each year from 2018 to 2020, by 57% and 23% respectively.

Signatories to the PRBs are also supposed to carry out environmental-impact assessments and to measure the greenhouse gas emissions of projects. They are also supposed to ensure that loans go to projects that are carbon neutral. However, very little of this is happening on the ground at present.

While there is a need for a scheme that makes PRBs compulsory and binding, Gfanz does not tick the boxes. Under it, annual reporting requirements on carbon emissions are not mandatory either.

Experts say instead of forbidding lending to non-green projects now, loan books need to be treated as a portfolio of projects in different hues of green, with a defined trajectory towards greener – but it needs to be mandatory for signatories.



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Wall Street banks set to profit again when Fed withdraws pandemic stimulus, BFSI News, ET BFSI

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NEW YORK -Wall Street banks have been among the biggest beneficiaries of the pandemic-era trading boom, fueled by the Federal Reserve‘s massive injection of cash into financial markets.

With the central bank nearing the time when it will start winding down its asset purchases, banks are set to profit again as increased volatility encourages clients to buy and sell more stocks and bonds, analysts, investors and executives say.

The Fed has been buying up government-backed bonds since March 2020, adding $4 trillion to its balance sheet, as part of an emergency response to the COVID-19 pandemic.

The strategy was designed to stabilize financial markets and ensure companies and other borrowers had sufficient access to capital. It succeeded but also resulted in unprecedented levels of liquidity, helping equity and bond traders enjoy their most profitable period since the 2007-09 financial crisis.

The top five Wall Street investment banks – JP Morgan Chase & Co, Goldman Sachs, Bank of America, Morgan Stanley and Citigroup – made an additional $51 billion in trading revenues last year and in the first three quarters of 2021, compared with the comparative quarters in the year prior to COVID, according to company earnings statements.

The trading bonanza, along with a boom in global deal-making, has helped bank stocks outperform the broader market. The KBW Bank index has risen by 40% in the year-to-date compared with a 19% advance in the S&P 500.

Now, banks with large trading businesses are expected to profit a second time as the Fed starts to withdraw the stimulus, prompting investors to rejig their portfolios again.

“As investors look to position based on that volatility, that creates an opportunity for us to make markets for them. And obviously that would lend itself to improved performance,” Citigroup Chief Financial Officer Mark Mason told reporters this week.

Fed Chair Jerome Powell signaled in late September that tapering was imminent. An official announcement is expected in November and the central bank has signaled it will look to halt asset purchases completely by mid-2022 – a timetable seen by some investors as aggressive.

Banks have already benefited from enhanced volatility since Powell’s comments in late September, which led to a spike in Treasury yields and a decline in equity markets. That led to a pick-up in trading volumes at the end of the third quarter and the start of the fourth quarter, executives say.

“It is possible we will see bouts of volatility associated with the tapering,” Morgan Stanley Chief Financial Officer Sharon Yeshaya said in an interview Thursday, adding that she doesn’t expect a repeat of 2013’s ‘taper tantrum.’

At that time, the Fed’s decision to put the brakes on a quantitative easing program sent markets into a frenzy as investors dumped riskier assets in favor of ‘safe havens,’ leading to a spike in government bond yields and sharp falls in equity markets.

Fed officials are confident of avoiding that scenario this time around by giving markets enough advance warning of their intentions.

“The sweet spot is where you have some volatility but not enough to disrupt the broader capital markets which have been an important contributor to healthy trading results over the past year,” said JMP Securities analyst Devin Ryan.

Third-quarter results from the biggest U.S. banks this week showed strong performances in equities trading, boosted by stocks hitting record highs, but a more subdued showing in bond trading reflecting calm in those markets.

Investors are anticipating activity will ramp up again in the run-up to tapering, when it eventually begins.

“It will certainly be a positive,” said Patrick Kaser at Brandywine Global Investment Management. “Volatility is a friend to trading businesses.”

(Additional reporting by David Henry; Editing by Andrea Ricci)



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US banks report big profit jumps amid improving economy, BFSI News, ET BFSI

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A trio of large US banks reported signficantly higher profits Thursday, boosted by a strengthening US economy that has diminished the need to set aside funds for loan defaults.

Bank of America‘s results were lifted by the release of $1.1 billion in reserves, while Citi’s got a $1.2 billion boost. Wells Fargo‘s quarter was helped by a $1.7 billion reduction in provisions.

“We reported strong results as the economy continued to improve and our businesses regained the organic customer growth momentum we saw before the pandemic,” said Bank of America Chief Executive Bryan Moynihan.

Large banks set aside billions of dollars early in 2020 amid fears that lockdowns to address Covid-19 would lead to a global depression.

But the results are the latest indication that consumers remain in relatively healthy shape, thanks in part to robust fiscal support programs from Washington and accommodative monetary policy that has boosted the housing and equity markets.

Wells Fargo Chief Executive Charlie Scharf pointed to the “low” number of charge-offs, a sum that creditors believe will not be paid.

Many economists believe the United States could be well positioned for growth, but warn that worsening inflation could weigh on activity and compel the Federal Reserve to lift interest rates more quickly than expected.

On Wednesday, JPMorgan Chase Chief Executive Jamie Dimon said investors should not put “too much focus” on inflation and supply chain problems, pointing to a strong IMF forecast for continued growth in 2021 and 2022.

“You can have good growth and some inflation,” Dimon said. “That’s okay.”

Citi Chief Financial Officer Mark Mason took a similar position Thursday, calling solid growth “the good news” in the economy.

“There are a number of those moving pieces that are out there,” Mason said in response to a question about supply chain problems. “Over time they start to normalize… and we’re optimistic that they will.”

Citi reported profits of $4.6 billion, up 48 percent from the year-ago level on a one percent drop in revenues to $17.2 billion.

Bank of America scored a 58 percent jump in profits to $7.7 billion on a 12 percent rise in revenues to $22.8 billion.

Wells Fargo reported profits of $5.1 billion, up 59 percent on a 2.5 percent drop in revenues to $18.8 billion.

Shares of Citi gained 0.2 percent to $70.37 while Bank of America rose 2.5 percent to $44.24 in morning trading. Wells Fargo dipped 0.2 percent to $45.96.

jmb/cs



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Bank of America offers $200 to vaccinated Merrill staffers going to office, BFSI News, ET BFSI

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Bank of America Corp will pay out $200 awards to its employees at Merrill Lynch Wealth Management who have been fully vaccinated and going to office regularly, according to a memo shared with Reuters on Wednesday.

The awards will be offered to client associates, administrative support and operations staff at BofA-owned Merrill Lynch, a spokesperson for the bank said.

For now, only those staffers who have confirmed they have received their vaccines were asked to return to office, the spokesperson said.

“While there is no vaccine mandate across the company, we strongly recommend employees be vaccinated and to notify us of their status.”

More than 80% of Merrill employees have voluntarily reported their vaccination status and have or are returning to the office, the spokesperson added.

Earlier this year, major Wall Street firms were aggressively planning for most employees to return to office. But the highly contagious Delta variant of the coronavirus forced some of them to postpone the returns.



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Bank of America appoints new CFO, technology, and legal heads, BFSI News, ET BFSI

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Brian Moynihan, chief executive officer of Bank of America, announced fresh names for chief financial officer, technology head, general counsel, and chief administrative officer, in a major management overhaul.

“These changes position the company with highly energized leaders who are committed to driving responsible growth through its second decade,” Moynihan, 61, said in the memo. “As I shared with our board of directors, it will continue to be my privilege to serve with them as CEO.”

The moves have hardened Moynihan’s position to lead Bank of America, the second-greatest US bank by assets. Moynihan took over in 2010, staggering at first due to the immense errand of tidying up his archetype’s acquisition of home loan bank Countrywide Financial during the financial crisis. He has been running the bank since, reducing expenses and developing returns.

The announcement comes weeks after Thomas K Montag, chief operating officer of the bank, announced his departure.

All things equal, a few division heads who once answered to Montag will now report straightforwardly to Moynihan, including Jim DeMare, who proceeds in his job as global trading business, and Matthew Koder, who remains in the global corporate and investment banking division.

Dean Athanasia, Alastair Borthwick and D Steve Boland are viewed as competitors for the CEO position in the future, according to reports.



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Global banks push ESG loans in India as climate change threat worsens, BFSI News, ET BFSI

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As the climate change threat worsens, global banks are pushing ESG (environmental, social and governance) compliant loans and bonds in India.

A huge pool of global funds is waiting to invest in these securities, which is a big opportunity for such projects in India.

Bank of America (BofA) is offering a 5-7.5 basis points incentive or levying a penalty based on the success or failure of companies in achieving their green targets as stated in the loan documents.

Earlier this year, BofA helped agri and industrial chemicals maker UPL raise a $750 million sustainability-linked loan. This will be a part of the global $1.5 trillion sustainable finance commitment that the US’ second-largest bank has made to be achieved by 2030, in which India will play an important role.

Huge opportunity

Investor interest in debt originating from India is also due to the country’s self-imposed stringent targets as detailed in the Paris Agreement on climate change in 2015. India has committed to reducing greenhouse gas emissions intensity of its GDP by 33-35% below 2005 levels by 2030 and 40% of power from non-fossil fuel-based sources by 2030.

To meet its commitments made under the Paris Agreement, India will need an estimated $2.5 trillion between 2015-2030.

Spelling the opportunity, for example, renewable sources make up only 7.9% of loans to the power sector.

Global lenders have themselves set ambitious targets to ensure a lower carbon footprint.

For instance, Barclays wants to achieve 100 billion of green financing by 2030, after facilitating 32.4 billion by the end of 2020. It is looking to raise $8-10 billion via sustainability-linked bonds by the end of this year.

HSBC deposits

Last month UK-based Hong Kong and Shanghai Banking Corp (HSBC) has raised $400 million of green deposits in India and identified financing opportunities to use those funds. Under its strategy, the bank first finds avenues to finance before raising the resources. The loans are extended for renewable projects, biodiversity linked initiatives, clean transportation and pollution control. Once the loans are sanctioned they are matched with deposits.

HSBC was the first bank to offer a green loan in India in January 2020, and it is currently in discussions to offer sustainability linked loans to multiple companies which will have incentives like a discount on rates.

ESG bonds

The ESG-focused fund-raising (green bonds) market, which has already scaled an all-time high so far this year, is set to cross the $10-billion-mark by December, according to Wall Street investment banking major JP Morgan, which has advised 12 of the 13 such bond issuances out of the country so far this year totalling $6.24 billion.

According to the bank, the overall bond issuances from the country may touch $25 billion this year, having already raised $17.5 billion so far, of which ESG-compliant bonds constitute USD6.2 billion.

Globally, the ESG has become a key board-room topic since 2013-14 and soon investors have also been asking on the ESG principles of their investee companies.



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Axis Bank raises USD 600 mn via AT1 bonds, BFSI News, ET BFSI

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Axis Bank on Thursday said it has raised USD 600 million (around Rs 4,380 crore) through the sale of sustainability-focused AT1 bonds. The dollar-denominated, Basel III-compliant AT1 notes were finally priced at 4.10 per cent, 0.30 per cent lower than the initial price guidance, the bank said in a statement.

Under the Basel-III capital regulations, banks globally need to improve and strengthen their capital planning processes.

This is the maiden USD AT1 bond by an Indian issuer in a sustainable format and first time that the bank has accessed international bond markets after a 4-year hiatus.

The bank said the issue was oversubscribed 3.8 times ahead of the final pricing announcement and was well diversified across geographies and nearly half of the bonds were allotted to sustainability-focused investors.

The bank has set up a board-level ESG committee and has a sustainable financing framework, the statement said, adding that a second party opinion provider has graded it as ‘Credible & Impactful’.

“This successful transaction, which is also the largest single-tranche USD bond issuance ever for Axis Bank, reflects the faith and confidence that international investors have reposed in the bank’s franchise and robust credit and business model,” its group executive and head of treasury Neeraj Gambhir said.

The issue follows similar AT1 bond issuances by HDFC Bank (USD 1 billion) and SBI (Rs 4,000 crore) done over the last fortnight, which are seen as signs of interest revival in the instrument.

Merchant bankers had on Wednesday said that Bluebay, Blackrock, Fidelity and HSBC Asset Management Company were among the major investors in the issue.

The merchant bankers to the issue include Bank of America, BNP Paribas, HSBC, Citigroup and Standard Chartered Bank.



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Top green energy banker sees $150 billion in India deals by 2030

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For international investors seeking a piece of India’s renewables boom — and the bankers who sit across the table with them — all roads go through the country’s domestic energy players.

That’s the message from Bank of America Corp.’s Gaurav Singhal, who leads the busiest team in India’s green energy M&A sector in the past 12 months, according to data compiled by Bloomberg. The biggest of the deals saw the US bank advising SoftBank Group Corp on selling its renewables business in India to Adani Green Energy at an enterprise value of $3.5 billion earlier this year.

The green energy arm of local tycoon Gautam Adani’s empire announced the deal in May, following reports that negotiations with the Canada Pension Plan Investment Board had fallen apart.

Adani’s group was a late entrant in the SB Energy deal, though they were aware of it, Singhal said. “The group had many advantages, from being a local player to the fact that some of the SB Energy assets were next door to their own plants.”

The deal helped make India the most active market in the world for renewables M&A in the first six months of 2021 according to BloombergNEF, and Adani and his fellow billionaire, Mukesh Ambani, have unveiled ambitious plans in the sector.

Interest by foreign players

Foreign buyers will undoubtedly continue to compete for assets; Singhal expects more than $150 billion in equity investment into the sector by 2030. Yet most strategic investors from overseas are seeking to back local entrepreneurs, he said.

“Some of the issues of dealing with the Federal government can be handled by only the local partners,” he said. “Foreign investors cannot take that call solo.”

Singhal will soon be making that pitch in person. Bank of America is moving its top renewable energy investment banker in India to New York, as it tries to grab a bigger share of what he estimates is the roughly $500 billion needed to meet the country’s green energy targets.

He’ll bring with him a slew of roles on recent cross-border deals. Global Power Synergy Pcl, the listed power unit of Thailand’s PTT Group, purchased a $453 million stake in local company Avaada Energy earlier this month. In September, Japan’s Orix Corp agreed to buy a roughly 20 per cent stake in Greenko Energy Holdings for $980 million.

“The decade I spent on this sector, which wasn’t considered hot, initially gave BofA and me a first-mover advantage,” he said.

Wall Street is a long way from Agra, the northern town where two decades ago, Singhal used to have to line up for about two hours every month to pay the bill for electricity – which was frequently interrupted. Like Singhal, who has been based in Mumbai, India’s energy sector has moved on. Coal’s market share fell in 2020, the second year in a row, as wind and solar projects become more cost-efficient and the technology improves.

The Indian green bond market is expanding rapidly this year with a total of seven issues denominated in foreign currency. Sales jumped to an all-time high of $4.1 billion this year to date, data compiled by Bloomberg show. Despite its presence in renewables M&A, Bank of America is a laggard in arranging green bonds from Indian issuers, the data show. The US lender will work on “filling that gap” in the business, Singhal said.

Local regulations in the power sector are still in flux, making it hard for overseas investors to navigate, and several of them have left. Foreign firms will have a hard time achieving scale by taking part in fiercely fought bidding wars on tariffs, Singhal said. He expects overseas institutional players to invest only in larger companies with the prowess to absorb capital and demonstrate growth, which will quicken the consolidation, he said.

Singhal will start at the New York office next month, and will continue to oversee the bank’s renewable deals in India from there.

One area where Singhal wasn’t ahead of the curve? His car, which is still gasoline-powered. When he moves to New York, he will go electric, he said.

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Biggest U.S. banks smash profit estimates as economy revives, BFSI News, ET BFSI

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By Michelle Price

WASHINGTON – The four largest U.S. consumer banks posted blockbuster second-quarter results this week, after pandemic loan losses failed to materialize and the U.S. economy began roaring back to life.

Wells Fargo & Co, Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co posted a combined $33 billion in profits, buoyed by the release of $9 billion in reserves they had put aside last year to absorb feared pandemic losses.

That was beyond analyst estimates of about $24 billion combined, compared with $6 billion in the year-ago quarter.

Consumer spending has climbed, sometimes beyond pre-pandemic levels, while credit quality has improved and savings and investments have risen, the banks said.

Thanks to extraordinary government stimulus and loan repayment holidays, feared pandemic losses have not materialized. A national vaccination roll-out has allowed also Americans get back to work and to start spending again.

Sizzling capital markets activity has also helped the largest U.S. banks, with Goldman Sachs Group Inc reporting a $5.35 billion profit, more than double its adjusted earnings a year ago.

“The pace of the global recovery is exceeding earlier expectations and with it, consumer and corporate confidence is rising,” Citigroup Chief Executive Officer Jane Fraser said.

That was reflected in a pick-up in consumer lending.

For example, JPMorgan said combined spending on its debit and credit cards rose 22% compared with the same quarter in 2019, when spending patterns were more normal.

Spending on Citi-branded credit cards in the United States jumped 40% from a year earlier, but with so many customers paying off balances its card loans fell 4%.

Citigroup Chief Financial Officer Mark Mason said the bank expects more customers to go back to their pre-pandemic pattern of carrying revolving balances as government stimulus programs wind down later this year.

Wells Fargo posted a 14% gain in credit-card revenue compared with the second quarter of 2020, due to higher point-of-sale volume. Revenue was up slightly on the first quarter, the bank said.

“What we’re seeing is people starting to spend and act more in a way that seems more like it was before the pandemic started and, certainly on the consumer side, spending is up quite a bit, even when you compare it to 2018,” Wells Fargo chief financial officer Mike Santomassimo told reporters.

While loan growth is still tepid, which is usually bad for bank profits, there were signs that demand is creeping back.

Excluding loans related to the U.S. government’s pandemic aid program, loan balances at Bank of America, for example, grew $5.1 billion from the first quarter.

“Deposit growth is strong, and loan levels have begun to grow,” Bank of America CEO Brian Moynihan said in a statement.

JPMorgan, the country’s largest lender, on Tuesday reported profits of $11.9 billion compared with $4.7 billion last year.

Citigroup’s second-quarter profit rose to $6.19 billion, up from $1.06 billion last year, while Bank of America’s profit jumped to $8.96 billion from $3.28 billion.

Wells Fargo posted a profit of $6 billion compared with a loss of $3.85 billion last year, which was largely related to special items.

While the results indicate good news for consumers and businesses, low interest rates, weak loan demand and a slowdown in trading will probably weigh on results going forward, analysts said.

The U.S. Federal Reserve is staying the course, with an inflation target of 2% and no plans to tighten monetary policy by, for instance, raising interest rates, Fed Chair Jerome Powell said in prepared remarks for a congressional appearance on Wednesday.

That suggests banks will have to deal with low rates for an extended period of time.

(Reporting by Michelle Price; additional reporting by Noor Zainab Hussain, David Henry and Matt Scuffham; Editing by Lauren Tara LaCapra and Nick Zieminski)



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