Category Archives: Banks

(CNBC) SocGen chairman calls on regulators to help strengthen Europe’s banks 


  • The French lender announced the acquisition of the equity markets and commodities arm of the German firm Commerzbank last week.
  • Consolidation may not always the best strategy for these banks, Elisabeth Rudman, managing director at DBRS said.

Chesnot | Getty Images News | Getty Images

The chairman of Societe Generale said Europe‘s banking space should follow in the footsteps of the U.S.’s, calling on regulators to facilitate more consolidation in the region.

Speaking to CNBC over the weekend, Lorenzo Bini Smaghi said that European banks need to become more concentrated, so they can compete with American lenders.

“In general if we look at Europe, obviously there are too many banks and it’s too fragmented so I think Europe needs to move in a direction of more concentration to help better the real economy. If we compare (it) to the U.S., we’ve seen this process of concentration 30 years ago,” Smaghi told CNBC’s Charlotte Reed.

The French lender announced the acquisition of the equity markets and commodities arm of the German firm Commerzbank last week. The deal, which still needs to be cleared by regulators, is an attempt to have a larger presence in the German market at a time when Deutsche Bank is re-defining its strategy, after recent turmoil and management changes.

According to Smaghi, the transformation of European banks “has to come.”

“And of course as chairman of SocGen I can say that we will be a protagonist in this process. But this requires for things to happen on the regulatory side.”

“I’m not suggesting anything at this stage, just that we need more concentrated and larger banks able to compete with the American banks,” he said on potential new mergers.

SocGen chairman: You don't get to a fairer system by raising barriers

SocGen chairman: You don’t get to a fairer system by raising barriers  

On Friday, reports suggested that J.P. Morgan and the Industrial and Commercial Bank of China were looking to buy Deutsche Bank, which was promptly denied. In June, another French bank, BNP Paribasbought the asset manager DWS, which was owned by Deutsche Bank. The move was also seen as an attempt to increase its presence in the German market.

However, according to Elisabeth Rudman, managing director at DBRS, consolidation is not always the best strategy for these banks.

“We’ve seen big cross-border mergers and acquisitions in the banking sector in the past and a lot of them did not turn out very well at all … (It’s) difficult to see that as a solution to everything,” she told CNBC’s “Squawk Box Europe” Monday.

“Europe is, in many ways, overbanked and there are still a lot of banks, some big banks and some small banks that are still struggling. But there’s not going to be an overnight solution,” Rudman added.

(Reuters) British Supreme Court rejects Goldman Sachs appeal vs Novo Banco

(Reuters) Britain’s Supreme Court dismissed on Wednesday an appeal by Goldman Sachs for compensation from Portugal’s Novo Banco over a $835 million loan to Novo Banco’s bankrupt predecessor, Banco Espirito Santo (BES), which was carved up by the state in 2014.

The decision, announced by the court on its website, sets a precedent that could help Portugal fend off other lawsuits involving major bondholders in BES, such as Pimco and Blackrock, which have challenged similar decisions by the Portuguese central bank in 2015 not to transfer liabilities to Novo Banco.

The loan arranged by Goldman Sachs (GS.N) was extended to BES by Luxembourg-based vehicle Oak Finance in 2014, shortly before the bank went bankrupt under the weight of the debts of its founding family, and Goldman has sought compensation from Novo Banco, which took over the healthy operations of BES.

Britain’s Supreme Court said it unanimously rejected the appeal, even though the original loan agreement was governed by English law. Novo Banco declined to comment.

After the collapse of BES in August 2014, Portugal’s central bank transferred some assets and liabilities to Novo Banco, which took over BES operations after an injection of about 5 billion euros ($5.8 billion) of public funds. It was acquired last year by U.S. private equity firm Lone Star.

In December 2014, the central bank specified the Goldman Sachs loan was not eligible for the transfer and had never been transferred, to which Goldman objected.

The court said it understood “that an English court must treat the Oak liability as never having been transferred to Novo Banco. It was therefore never party to the jurisdiction clause.”

It added there were ongoing administrative law proceedings in Portugal challenging the December 2014 decision, which have not yet been resolved.

  • GS.N

A range of other lawsuits by bondholders in BES and Novo Banco also challenge a central bank decision at the end of 2015 to transfer more than 2 billion euros of bonds from the rescued Novo Bank back to BES, which is being liquidated.

London-based hedge fund Winterbrook Capital said last week it considered several notes issued by Novo Banco to be in default as a results of the resolution measures taken by Portugal’s central bank in 2014 and 2015.

Despite the warning, Novo Banco placed 400 million euros worth of subordinated debt notes just two days later on June 29, its first issue since the rescue, to strong investor demand.

(BBC) Deutsche Bank’s US unit fails Fed’s stress test


This file photo taken on May 2, 2018 shows a view of the Federal Reserve in Washington, DCImage copyrightAFP/GETTY
Image captionThe Federal Reserve administers annual “stress tests” on the largest banks operating in the US

Deutsche Bank’s US division has failed the second round of the Federal Reserve’s annual two-stage stress tests, designed to assess how well the sector could withstand another financial crisis.

The German lender suffered from “widespread and critical deficiencies” in parts of its business, the Fed said.

Goldman Sachs and Morgan Stanley were only granted “conditional” passes.

But 31 of the 35 banks tested were given the all-clear.

Stress tests were introduced in the wake of the 2008 financial crisis and every year America’s central bank, the Federal Reserve, puts the country’s banks, including foreign subsidiaries operating in the country, through their paces.

The Fed measures whether banks are holding sufficient capital to cope with a recession and in the second part of the process it focuses on banks’ “capital plans” such as how much cash they intend to return to shareholders. However this is the first year that the results of the US units of foreign banks have been publicly released.

All of the 35 largest banks subject to the tests passed the first part of the testslast week.

But the Fed found Deutsche Bank’s US arm had “material weaknesses in the firm’s data capabilities and controls supporting its capital planning process, as well as weaknesses in its approaches and assumptions used to forecast revenues and losses under stress”.

The verdict is another blow for the troubled German lender whose financial health has been under the spotlight recently. And it will require the bank to make changes to the way it operates in the US.

Goldman Sachs and Morgan Stanley were given passes, but will not be permitted to increase the amount they return to shareholders beyond levels in line with the last couple of years, in order to bolster their capital cushions.

The Fed said it was also granting a conditional pass to Boston-based State Street, which will be required to take additional steps to manage and analyse its exposure to losses.

Last year was the first time all banks passed the second round of the tests.

The second part of the tests is closely watched because it determines how much firms can return to shareholders in the form of items like share buybacks and dividends.

‘One-off event’

The Fed said it had granted the conditional pass to Goldman and Morgan Stanley because the companies’ results had been skewed by tax changes passed last year.

The tax overhaul lowered the corporate rate from 35% to 21%, but led to larger-than-usual one-off tax bills for many banks, as a result of other changes to how losses and overseas profits are taxed.

“This one-time reduction does not reflect a firm’s performance under stress and firms can expect higher post-tax earnings going forward,” the Fed said.

Despite the restrictions, Goldman will still be permitted to spend up to $6.3bn on share buybacks and dividends this year.

Morgan Stanley said it planned to return $6.8bn to shareholders.

Making progress

The decision is the latest blow for troubled Deutsche Bank. Last month the firm announced more than 7,000 job cuts and its credit rating was cut by Standard & Poor’s. The bank reported an annual loss of €500m (£438m) at the end of February.

Deutsche said its US division had “made significant investments to improve its capital planning capabilities as well as controls and infrastructure.”

“Deutsche Bank USA continues to make progress across a range of programmes and will continue to build on these efforts and to engage constructively with regulators to meet both internal and regulatory expectations,” the bank said.

The bank will be required to improve its operations, risk management and governance as a result of the test-failure. It will not be able to make distributions to its German parent firm without the Fed’s approval.

(ZH) Deutsche Bank Tumbles To New Record Low, Drags European Banks

(ZH) Global systemic fears re-emerged this morning, when in addition to ongoing concerns about trade wars which dragged Chinese stocks deeper into a bear market as the Yuan fell for a 10th consecutive day, now there are European banks to also worry about.

Having been relatively stable for much of the recent slide, on Wednesday morning, Deutsche Bank came under heavy selling pressure, tumbling 5% shortly after the start of trading, and dropping to a new all time low of €8.76, and bringing its market cap to just $21BN. By comparison, JPMorgan’s market cap is $357BN.

The stock has since rebounded modestly, and was down 2.3% last, after breaking below €9 for the first time since 2016, when Germany’s largest bank was seen to be on the verge of collapse…

… however the dead cat bounce appears to be nothing more than a temporary respite: “Falling bellow the €9 level adds more pressure to the stock as that was seen as a technical low bottom,” Ignacio Cantos, investment director at ATL Capital in Madrid, told Bloomberg.

The drop in Deutsche Bank sent the The Stoxx Banks Index down 1.8%, to the lowest level since 2016. European Banks Index is now 14% down YTD, of which Deutsche Bank is the worst performer, down 44% YTD.

And sent the index of the global systemically important banks to a 14-month low.

What caused the slump? As Bloomberg’s Paul Dobson writes, there is plenty to worry about besides the usual worries about trade wars, emerging markets, and Italy, including hedge funds warning of a crisis, talk of higher counter-cyclical buffers, as well as sliding bond yields, the deflationary bogeyman for European banks, which in turn is sending European credit risk higher this morning.

Whatever the reason, it appears that whatever risks were latent and starting to emerge as a result of trade war concerns as starting to spread as contagion now hits Europe’s arguably most sensitive sector.

(ZH) Commerzbank Replacing Human Research Analysts With Artificial Intelligence

(ZH) Commerzbank is hoping that computers will soon be able to do at least as good a job writing its equity research reports as the armies of junior analysts that the big banks are no doubt looking to trim thanks to expensive MifidII regulations and restrictions that have cut funding costs for research departments.

Even as its captured the attention of bank executives, automated and computerized equity analysis has, for the most part, been a disaster over the last couple of years. While some larger firms may use algorithms and some automation to crank out macro economic reports, and while computers may be getting better at scraping and reporting data (without actually analyzing it), performing equity analysis requires a deeper look behind the numbers and its simply not a task optimized for automation.

However, we are apparently at that stage in the cycle where cutting costs becomes far more important then being productive or effective, particularly since MiFid II is forcing a race to bottom as investment banks seek out deep cuts in their research departments, driven by a drop in revenue that has accompanied being forced to charge a separate, optional, rate for research instead of bundling those costs with trading fees.

One of these competitors, Germany’s second largest bank has decided that the time has come to automate some of its equity analysis, and according to the Financial Times “Commerzbank is experimenting with artificial intelligence technology that automatically generates sports reports to see if it can write basic analyst notes, as Mifid II forces banks across the world to trim research costs.”

The German bank is working on the project with Retresco, a content automation company in which it invested two years ago through its fintech incubator unit. The project is still at an early stage and could take years to produce reports that banks would be happy to send to their clients, but the notion of AI replacing human research analysts is already attracting attention from senior bankers.

“There’s definitely work that can be done, parts of the [research] process that can be enhanced by algos and AI tools,” the head of one investment bank told the Financial Times, describing earnings reports as something that “should be robo-written.”

Research into AI and automation solutions that can lessen the burden of data-intensive research will likely soon be a theme across the big banks, as they scramble to reduce one of their biggest cost-centers in a time of declining revenues.

The Europe head of another investment bank said research was an area that was rife for automation over time, while analysts at several other banks said their managers were experimenting with AI and automation applications. 

Banks are under fierce pressure to cut the costs of producing research on stocks and bonds following the implementation in January of European investor protections known as Mifid II. The measures force investors to pay for research explicitly instead of bundling its costs into trading commissions. Some firms say their implied research revenue has fallen by as much as 30 per cent as a result.

Possibly ignoring the fact that almost everybody (in the U.S.) reports in Non-GAAP numbers now and that any and all addbacks to earnings generally need to be looked at and analyzed on their own, a Commerzbank executive is confident that the venture would ultimately be successful.

Michael Spitz, head of Commerzbank’s R&D unit, Mainincubator, said the area showed promise because “equity research reports reviewing quarterly earnings are structured in similar ways” and the source documents are often prepared under common reporting standards. “That makes it easier for a machine learning program to extract and contextualise relevant data, which can be then framed in a report using natural language processing tools.” Retresco’s original business uses similar technology to write soccer reports in Germany, in other words if it works for sports it should work for the market.

Mr Spitz said the technology was already advanced enough to provide around 75 per cent of what a human equity analyst would when writing an immediate report on quarterly earnings. “If it is related to much more abstract cases, we feel that we are not there yet — that we can or maybe will ever replace the quality of a researcher,” he added. Bankers say regulatory demands for oversight on research publication could also protect humans in research jobs.

Recall, it was less than a year ago that we wrote about the first AI-controlled ETF. At the time, its creators said it “has the ability to mimic an army of equity research analysts working around the clock, 365 days a year, while removing human error and bias from the process.

Last year, EquBot LLC, in partnership with ETF Managers Group (ETFMG) launched the world’s first ETF powered by artificial intelligence, the AI Powered Equity ETF (NYSE Arca: AIEQ). According to Business Wire, the new ETF uses “cognitive and big data processing abilities of IBM Watson™ to analyze U.S.-listed investment opportunities.”

Business Wire explained how EquBot makes investment decisions “EquBot’s approach ranks investment opportunities based on their probability of benefiting from current economic conditions, trends, and world- and company-specific events, and identifies those equities with the greatest potential for appreciation. EquBot and ETFMG expect the fund’s portfolio to typically consist of 30 to 70 of U.S. equities only and volatility comparable to the broader U.S. equity market…the fund’s underlying technology is constantly analyzing information for approximately 6,000 U.S.-listed equities, including company management and market sentiment, and processes more than one million regulatory filings, quarterly results releases, news articles, and social media posts every day.”

The moving of all financial services – including equity analysis – into AI, feels like it could become a major error not only as real human analysts will possibly be needed to reverse work that computers will likely do poorly, at least at first. 

A bigger problem is that this “revolution” will come just as the paradigm that has defined markets for the past decade: central bank largesse pushing risk assets higher, fades, and neither AI nor unmanned algos will be able to trade in the “newer normal.” Ironically this is precisely the time when humans will be most needed.

But that bridge has yet to be crossed, and until then the main prerogative is to keep costs low.

With that said, it seems unlikely that any bank has the artificial intelligence or automation on the level necessary to effectively dissect the story and the narrative that are behind the numbers yet. Consider every time trading algorithms have misinterpreted a headline, only to be kneejerked back and forth until human traders intervene to “discover” the price.

For banks looking for a quick revenue saver, this option will almost certainly prove to be more trouble than it’s worth.

(BBG) Bank of America Sued for Allowing $102 Million Ponzi Scheme

(BBG) Bank of America Corp. was accused in a lawsuit of providing more than 100 accounts used to perpetrate what the U.S. regulators called a $102 million Ponzi scheme.

The class-action suit filed on behalf of people who lost money follows a complaint last week by the Securities and Exchange Commission alleging that five men and three companies defrauded more than 600 investors.

One of the alleged ringleaders once commissioned a song about himself for a party in Las Vegas with lyrics celebrating his $10,000 suits and his partner’s affinity for champagne, according to Monday’s complaint in federal court in Ocala, Florida.

The brother and sister who sued to recover losses from their late father’s investment claim the fraudsters “could not have perpetuated their scheme without the knowing assistance of their primary banking institution, Bank of America, which lent the scheme an air of legitimacy and provided critical support, including at times when the scheme would have otherwise collapsed,” according to the complaint.

Bank of America spokesman Bill Halldin had no immediate comment on the suit.

The lender is accused of failing to spot suspicious activity, including deposits of hundreds of thousands of dollars into accounts with relatively small, negative or nonexistent balances, followed by transfers within the same week to other accounts or investors seeking to cash out.

The architects of the scheme promised they would put investor funds into profitable and perhaps dividend-paying companies, according to the SEC. But they spent $20 million from the investment pool to enrich themselves, made $38.5 million in “Ponzi-like payments” and transferred much of the rest away from the companies that were supposed to receive the money, the regulator said.

The case is Heinert v. Bank of America, N.A., 5:18-cv-00324, U.S. District Court, Middle District of Florida (Ocala).

(OBS) Acionistas do BPI decidem saída de bolsa e limite aos dividendos do banco

(OBS) Acionistas do BPI deliberam sobre saída de bolsa do banco, a limitação da distribuição de dividendos entre 30% a 50% do lucro e a redução do número de administradores na próxima sexta-feira, no Porto.


Os acionistas do BPI deliberam esta sexta-feira em assembleia-geral no Porto a saída de bolsa do banco, a limitação da distribuição de dividendos entre 30% a 50% do lucro e a redução do número de administradores.

Marcada para as 09:30 no auditório da Fundação de Serralves, a reunião magna de acionistas tem como pontos da ordem de trabalhos “deliberar sobre a perda, pelo banco BPI, da qualidade de sociedade aberta”; “deliberar, na sequência da renúncia dos administradores Vicente Tardio e Carla Bambulo, sobre a redução do número de membros do Conselho de Administração dos atuais 20 para 18”; e votar “uma proposta de nova política de dividendos”.

Nos termos de um comunicado enviado à Comissão do Mercado de Valores Mobiliários (CMVM), a primeira proposta visa “aprovar a perda de sociedade aberta do BPI […], com a consequente atribuição de poderes a qualquer dos membros do Conselho de Administração para praticar todos e quaisquer atos necessários ou convenientes à plena execução desta deliberação, em particular quanto às respetivas formalidades de execução”.

O ponto dois da agenda da assembleia geral prende-se com a diminuição do número de administradores, de

(MW) Deutsche Bank to sell $1 bln shipping-loan book

(MW) Deutsche Bank AG (DBK.XE) said Tuesday that it has agreed to sell a $1 billion shipping-loan portfolio to an entity owned by funds Oak Hill Advisors and Varde Partners.

The transaction is expected to close early in the third quarter, the bank said. It didn’t disclose the name of the entity.

“Following this disposal and other derisking strategies we have implemented, the bank will be left with a performing and a run-off shipping book,” Deutsche said.

(BBG) Bitcoin Could Break the Internet, Central Bank Overseer Says

(BBG) Bitcoin Could Break the Internet, Bank for International Settlements Says.

The Bank for International Settlements just told the cryptocurrency world it’s not ready for prime time — and as far as mainstream financial services go, may never be.

In a withering 24-page article released Sunday as part of its annual economic report, the BIS said Bitcoin and its ilk suffered from “a range of shortcomings” that would prevent cryptocurrencies from ever fulfilling the lofty expectations that prompted an explosion of interest — and investment — in the would-be asset class.

The BIS, an 88-year-old institution in Basel, Switzerland, that serves as a central bank for other central banks, said cryptocurrencies are too unstable, consume too much electricity, and are subject to too much manipulation and fraud to ever serve as bona fide mediums of exchange in the global economy. It cited the decentralized nature of cryptocurrencies — Bitcoin and its imitators are created, transacted, and accounted for on a distributed network of computers — as a fundamental flaw rather than a key strength.

In one of its most poignant findings, the BIS analyzed what it would take for the blockchain software underpinning Bitcoin to process the digital retail transactions currently handled by national payment systems. As the size of so many ledgers swell, the researchers found, it would eventually overwhelm everything from individual smartphones to servers.

“The associated communication volumes could bring the Internet to a halt,” the report said.


Researchers also said that the race by so-called Bitcoin miners to be the first to process transactions eats about the same amount of electricity as Switzerland does. “Put in the simplest terms, the quest for decentralized trust has quickly become an environmental disaster,” they said.

The BIS is weighing in at pivotal moment in the cryptocurrency story. Even as Goldman Sachs Group Inc., the New York Stock Exchange, and other institutions take steps to offer clients access to the new marketplace, the U.S. Securities and Exchange Commission is cracking down on the offerings of new digital tokens, which it has found are rife with ripoffs. At the same time, cyber-attackers are hitting crypto exchanges regularly — just last week, Bitcoin nosedived after a South Korean exchange reported it was hacked. It fell 0.8 percent to $6,449 as of 11:19 a.m. in New York on Monday.

The report may also revive concerns that for all its ingenuity, blockchain transactions will get harder and harder to protect as it scales up. When this decentralized anonymous system was introduced in 2009, it quickly proved it could secure purchases by computer enthusiasts, networks of friends, as well as criminals in the digital black market, says a working paper published by the National Bureau of Economic Research, a non-profit organization in Cambridge, Massachusetts. Yet with supporters pushing to make it a mass market platform utilized by companies and governments, it may become too expensive to secure, concludes Eric Budish, the paper’s author and an economics professor at the University of Chicago Booth School of Business.

The value of the cryptocurrency market has plunged 53 percent this year to $280 billion, according to CoinMarketCap.

Some Benefits

The BIS did say that blockchain and its so-called distributed ledger technology did provide some benefits for the global financial system. The software can make sending cross-border payments more efficient, for example. And trade finance, the business of exports and imports that still relies on faxes and letters of credit, was indeed ripe for the improvements offered by Blockchain-related programs.

Still, the institution concluded that Bitcoin’s great breakthrough, the ability of one person to send something of value to someone else with the ease of an email, is also its Achilles heel. It’s simply too risky on a number of levels to try and run the global economy on a network with no center.

“Trust can evaporate at any time because of the fragility of the decentralized consensus through which transactions are recorded,” the report concluded. “Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value.”

(Reuters) The bigger cryptocurrencies get, the worse they perform: BIS

(Reuters)Cryptocurrencies are not scalable and are more likely to suffer a breakdown in trust and efficiency the greater the number of people using them, the Bank of International Settlements (BIS)said on Sunday in its latest warning about the rise of virtual currencies.

For any form of money to work across large networks it requires trust in the stability of its value and in its ability to scale efficiently, the BIS, an umbrella group for the world’s central banks, said in its annual report.

But trust can disappear instantly because of the fragility of the decentralized networks on which cryptocurrencies depend, the BIS said.

Those networks are also prone to congestion the bigger they become, according to the BIS, which noted the high transaction fees of the best-known digital currency, bitcoin, and the limited number of transactions per second they can handle.

“Trust can evaporate at any time because of the fragility of the decentralised consensus through which transactions are recorded,” the Switzerland-based group said in its report.

BLOCKCHAIN EXPLAINEDReuters breaks down blockchain in an interactive guide.

“Not only does this call into question the finality of individual payments, it also means that a cryptocurrency can simply stop functioning, resulting in a complete loss of value.”

The BIS’ head of research, Hyun Song Shin, said sovereign money had value because it had users, but many people holding cryptocurrencies did so often purely for speculative purposes.

“Without users, it would simply be a worthless token. That’s true whether it’s a piece of paper with a face on it, or a digital token,” he said, comparing virtual coins to baseball cards or Tamagotchi.

The dependency of users on so-called miners to record and verify crypto transactions is also flawed, according to the BIS, requiring vast and costly energy use.

It has issued a series of warnings this year after an explosive rise in cryptocurrency values attracted a wave of followers.

Agustin Carstens, general manager of the BIS, has described bitcoin as “a combination of a bubble, a Ponzi scheme and an environmental disaster”.

The BIS has told central banks to think hard about the potential risks before issuing their own cryptocurrencies.

No central bank has issued a digital currency, though the Riksbank in Sweden, where the use of cash has fallen, is studying a retail e-krona for small payments.

The BIS also said in its annual report that effective regulation of digital coins needed to be global, targeting both regulated financial institutions as well as companies offering crypto-related services.

(Nasdaq) Deutsche Bank’s misleading CDS hide a wider truth

(Nasdaq) Pity poor Christian Sewing. As if the Deutsche Bank boss didn’t have enough on his plate, prices for the German lender’s credit default swap spreads have ballooned. That matters less than it might seem, but underlines a worrying scepticism towards the new CEO’s strategy.

In fact, the rise in CDS spreads has limited immediate consequences. It could theoretically affect up to 176 billion euros of funding that Deutsche raises from wholesale markets. But the bank only needs to renew around 25 billion euros this year, of which it has already issued 11 billion euros. The majority of the balance, around 7 billion euros to 9 billion euros, will rank ahead of unsecured debt and are relatively unaffected by CDS prices. That leaves just 5 billion euros to 7 billion euros of bonds left to issue.

Higher spreads might also spook funds and other banks that trade with Deutsche, making them less willing to do business. But the bank argues that counterparties rank above senior unsecured creditors under German law, meaning they should not be too worried about short-term changes in its CDS spreads.

However, the rise in Deutsche’s CDS does reflect growing concerns about its weak profitability – and whether Sewing will enjoy any more success in his restructuring than predecessor John Cryan. If Sewing struggles, the bank’s funding costs will creep up, and rating firms lower their assessment of its creditworthiness. Over time, that would hurt Deutsche’s profitability, and cause it to lose more market share.

Deutsche is targeting a 10 percent return on tangible equity by 2021. UBS reckons that implies 32 billion euros of revenue, or growth of 4 percent for the next four years. The last time Deutsche enjoyed that level of growth was between 2009 and 2012. Little wonder investors remain sceptical.

– The spread on Deutsche Bank’s five-year credit default swaps has more than doubled from around 70 basis points at the beginning of the year to 167 basis points on June 11, according to Eikon.

– Credit default swaps are contracts used to protect against the risk of a company defaulting, or to speculate on a change in its creditworthiness. A spread of 166 basis points means it would cost 166,000 euros annually to hedge 10 million euros of bonds.

– Deutsche Bank is currently undergoing a restructuring under new Chief Executive Christian Sewing to boost returns and earn a 10 percent return on tangible equity by 2021, up from a negative 1.4 percent return in the latest financial year. Sewing said on April 26 that he wanted to shift the bank away from volatile investment banking “to more stable revenue sources” and strengthen its core business lines.

(BBC) Government loses £2.1bn on RBS stake sale


People using RBS ATMsImage copyrightPA

The government has incurred a loss of £2.1bn after selling another tranche of shares in Royal Bank of Scotland.

The shares were sold at 271p each, almost half the 502p a share paid in the government’s bailout of RBS a decade ago when it rescued the bank at the height of the financial crisis.

The return was “based on the reality of the situation that RBS is now in”, said Treasury Economic Secretary John Glen.

The taxpayers’ holding in RBS will fall to 62.4% from 70.1% due to the sale.

Mr Glen told the BBC’s Today programme that the bank was in a “much healthier position… and the taxpayer needs to receive some of that money back”.

“I would love it if we could sell the shares at a much higher price. Obviously that is what everyone would like to do, but we need to be realistic and look at the market conditions.”

He said RBS was “a completely different institution to where it was 10 years ago”.

“They’ve gone from operating in 38 countries to nine, their total assets have fallen significantly.”

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By Simon Jack, BBC business editor

RBS signImage copyrightPA

The government has proved a lousy investor – but that misses the point. This was not an investment it was a rescue. The government had no choice – without the government buying shares, RBS would have collapsed taking the UK economy with it.

Does it matter that we are selling at a loss? Well, yes, it would be nice to have made a few pounds. Does that mean it’s a mistake to start selling now? Not necessarily.

The government does not want to be the majority shareholder in a High Street bank. Waiting for the RBS share price to rise back to £5 could take another 10 years and, in the meantime, other investors would be put off investing because the know that one day there is going to be a massive seller of the shares – pushing the price down.

The hope is that over time, the gradual reduction in the government stake will make the shares more attractive and subsequent sales will be at higher prices. The other hope is that the government never has to get into the business of buying bank shares again

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Value ‘destroyed’

UK Government Investments, which manages the government’s RBS stake, said the sale had raised £2.5bn.

The sale is the first time that the government has cut its stake in RBS since 2015, when a 5.4% stake was sold at a price of 330p a share.

The government has said it intends to sell £15bn worth of RBS shares by 2023.

After the details of the latest share sale were announced, RBS shares fell by about 3% to 271p.

Investec analyst Ian Gordon said the timing of the share sale was “not unreasonable”, pointing out that the shares had been trading at close to their highest level for two years.

He said a combination of bad debts and restructuring costs had “destroyed the value of the business”.

RBS share price graphic

Labour’s shadow chancellor, John McDonnell, had earlier criticised the government’s sale plans, saying there was “no economic justification” for selling the shares due to the “large loss” to the taxpayer.

But Chancellor Philip Hammond said the sale was “a significant step in returning RBS to full private ownership and putting the financial crisis behind us”.

“The government should not be in the business of owning banks. The proceeds of this sale will go towards reducing our national debt – this is the right thing to do for taxpayers as we build an economy that is fit for the future,” he added.

RBS chief executive Ross McEwan said the sale was “an important moment for RBS”.

“It also reflects the progress we have made in building a much simpler, safer bank that is focused on delivering for its customers and its shareholders,” he added.

In February, the bank reported an annual profit of £752m – its first for a decade and a sharp turnaround from the £6.95bn loss seen the previous year.

(BBG) Who Really Runs Deutsche Bank?

(BBG) Poor leadership has left investors in the dark about the lender’s strategy and direction.

What a gift to mark the European Central Bank’s 20th anniversary. Germany’s largest lender, Deutsche Bank AG, is being battered by financial markets, hounded by U.S. regulators, and downgraded by credit-rating companies.

It’s fitting then that, despite CEO Christian Sewing’s effort at a pep talk on Friday, it is sources from the ECB that have come out to reassure markets.

There are eerie parallels between the bank’s misery and the situation under Sewing’s predecessor, John Cryan, in 2016. Back then, the firm seemed to be veering from one existential crisis to another, from concerns over its ability to pay the interest on some of its debt, through to the cost of a multi-billion-dollar U.S. mortgage settlement.

Cheap bank funding from the ECB and implicit support from the German government eventually calmed markets, while Cryan’s promise of a leaner, less risky Deutsche Bank helped secure $8.5 billion in fresh capital from investors. The survival hurdle was cleared.

What’s concerning today, after two straight annual losses in 2016 and 2017, is that so little seems to have changed. The bank has a new CEO, but still no clear answer about how it will become a structurally and consistently profitable business.

Last week’s promise of more than 7,000 job cuts seemed to herald yet more revenue shrinkage and staff defections. Management’s mixed messages on whether the firm will cut back, stand still or double down on the U.S. market — one where it frankly can’t compete as a full-service institution — have sown confusion. Deutsche is eyeing a 10-percent return on tangible equity, but JPMorgan analysts reckon that it will be only be at half that by the end of 2020. It’s grim.

Sewing’s attempts at reassuring staff and investors won’t work without a clearer picture about what the bank is about to embark on and what Deutsche Bank will look like when it reaches its destination.

“There’s no reason for us to be discouraged,” Sewing told colleagues in his latest missive. “We have reduced risk by billions of euros, we have strengthened capital and we have reorganized our bank.”

This sounds like a farewell from his predecessor, not the opening salvo of a new arrival. It would be better to warn staff that the bank is about to go through hell, but will come out better on the other side. Rival UBS Group AG took steps years ago to exit business lines and slash jobs; Deutsche Bank still needs to do likewise.

This all requires tough decisions and, ultimately, leadership. Sewing has had an inauspicious start, but still has time to deliver more than what he has promised. Until then, expect investors to look to policymakers, rather than management, for reassurance about Deutsche Bank’s future.

(Reuters) Australia threatens ANZ, Deutsche and Citi with criminal charges over share issue

(Reuters)bAustralia is preparing criminal cartel charges against the country’s third-biggest bank and underwriters Deutsche Bank and Citigroup over a $2.3 billion share issue, in an unprecedented move with potential implications for global capital markets.

The pending charges, which can carry hefty fines and 10-year prison terms, threaten to change the way institutional capital raisings are handled, and do further damage to the reputation of Australian lenders already mired in scandal.

The Australian Competition and Consumer Commission (ACCC) said federal prosecutors would charge Australia and New Zealand Banking Group Ltd (ANZ.AX), its Treasurer Rick Moscati, the two investment banks and several more unnamed individuals over the 2015 stock placement.

All three banks denied wrongdoing and vowed to defend the charges, with Citigroup saying the regulator was effectively criminalizing practices long seen as the norm in the financial industry.

“The charges will involve alleged cartel arrangements relating to trading in ANZ shares following an ANZ institutional share placement in August 2015,” ACCC Chairman Rod Sims said in a statement.

“It will be alleged that ANZ and the individuals were knowingly concerned in some or all of the conduct.”

The third underwriter, JP Morgan, was not named by the regulator as a target and declined to comment.

Australia has some of the toughest anti-cartel laws in the world, however the decision to pursue criminal charges surprised experts given they are harder to prosecute than civil charges.

The move was “almost unique” in Australian corporate history and indicated prosecutors had a high level of confidence in their case, said Andrew Grant, a banking expert at the University of Sydney Business School.

ANZ shares were 2 percent lower on Friday afternoon, while other banks were down less than 1 percent. The broader market was down 0.2 percent.

Rating agency Moody’s said on Friday the charges were “credit negative” for ANZ.


In 2015, Australian banks were under pressure to meet new capital requirements, prompting ANZ and larger rival Commonwealth Bank of Australia (CBA.AX) to raise a combined A$8 billion in a single week.

The lead managers did not disclose they kept about 25.5 million shares of the 80.8 million shares issued, ANZ said on Friday, a fact that is being investigated separately by the corporate regulator.

The Australian Shareholders’ Association said the pending charges should trigger reforms to capital raising procedures to ensure greater transparency and prevent investment banks profiting from share sales while retail investors have their holdings diluted.

As new bank equity flooded the market, ANZ shares closed 7.5 percent lower on Aug. 7, 2015, when the Melbourne-based lender announced it had completed the institutional component of the raising, according to a Reuters analysis.

ANZ shares took over a year to recover to their pre-raising value of A$32.58.

The joint underwriters allegedly reached an understanding on the disposal of shares, prompting the cartel criminal charges, Citigroup (C.N) said on Friday.

“Underwriting syndicates exist to provide the capacity to assume risk and to underwrite large capital raisings, and have operated successfully in Australia in this manner for decades,” the New York-headquartered investment bank said.

Criminal charges for share underwriters had never been considered by an Australian court and had never been addressed in guidance notes published by regulators, it added.

“If the ACCC believes there are matters to address, these should be clarified by law or regulation or consultation,” it said.

Deutsche Bank (DBKGn.DE) said it was cooperating with investigators and took its responsibilities “extremely seriously”.

Caron Beaton-Wells, a professor of competition law at University of Melbourne, said the ACCC and the prosecutor would only bring criminal charges if they were satisfied they would be proven.

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“The ACCC has long said … that the most potent deterrent for cartel conduct is a potential jail term,” Beaton-Wells said.

“I don’t think it’s a sudden decision to ramp up, just that it’s taken a long time to find conduct for proceeding criminally.”

The development compounds a publicity nightmare for Australia’s biggest financial firms as they grapple with almost daily allegations of wrongdoing at a public inquiry which is scheduled to run to the end of the year.

Barristers for the inquiry have raised the prospect of criminal charges against the country’s top wealth manager, AMP Ltd (AMP.AX), over allegations it misled the corporate regulator.

No. 1 lender Commonwealth Bank is also facing a separate civil lawsuit alleging thousands of breaches of anti-money laundering protocols.

The allegations against some of Australia’s biggest companies and most-traded stocks have sparked several class action law suits designed to compensate investors who lost out as a result of poor banking and fund manager practices.

+++ (BBG) China’s $10 Trillion Shadow Bank Crackdown Has a Long Way to Go

(BBG) Chinese regulators are making progress in their attempts to tame the country’s $10 trillion shadow banking sector, but after a one-year squeeze on the riskiest areas of the industry, there’s still a lengthy battle ahead.

“We’ve had a good beginning to a long journey,” said Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd. “Some components of shadow banking are shrinking and interbank leverage has started to drop. But we are far from the stage where we can claim the job is done.”

Here are five charts showing where the campaign is biting hardest, how some financial institutions are pushing back, and where regulators may be relenting as deleveraging leads to higher defaults.

The best measure of success is last year’s reversal of the surge in shadow banking assets as a proportion of gross domestic product. After doubling over the past five years to reach 87 percent of GDP in 2016, the ratio slipped back last year to 79 percent, according to Moody’s Investors Service.

Two key prongs of the shadow banking campaign have been a clampdown on sales of high-yield asset management products, and an attempt to reduce the hidden inter-dependencies between financial institutions. After explosive growth between 2010 and 2016, wealth management products sold by banks barely increased in 2017. And the slight drop in banks’ borrowings from other financial firms this year is another measure of regulators’ success, albeit a modest one so far. Loans to non-banks such as investment funds and securities brokers had generated multiple layers of lending and pushed up leverage.

But China’s ever inventive financial institutions have been seeking new ways around the rules.

A key element of the campaign against asset management products is a ban on providing implicit guarantees for the riskier offerings to Chinese savers. Instead, banks have boosted their issuance of structured deposits with derivative features, many of them with embedded options that are unlikely ever to be exercised, as a way of continuing to offer high yields to depositors.

That helped boost issuance of structured deposits almost 47 percent to a record 8.8 trillion yuan ($1.4 trillion) in the year through March, according to official data. More than 1.8 trillion yuan of the new stockpile was added in 2018.

Regulators may ban sales of certain structured deposits, people familiar with the matter said earlier this month, as some of the derivative features allowed issuers to advertise higher yields which were later subsidized by banks, bypassing the rules prohibiting guaranteed returns.

That quest for deposits has also been seen in the rush by China’s top five lenders to sell negotiable certificates of deposit, a short-term borrowing instrument, indicating even the nation’s biggest financial institutions are not immune to the widespread impact of the deleveraging campaign.

Banking shares slumped on Tuesday. Industrial & Commercial Bank of China Ltd. lost 2.3 percent as of the 11:30 a.m. break in Shanghai, set for the biggest drop in more than a month, while China Merchants Bank Co. paced declines in Hong Kong with a 1.5 percent drop.

The scramble for deposits could lead to a rise in money-market rates, which would increase the pressure on Chinese borrowers. China’s credit markets are already sending distress signals, with about seven defaulters in the onshore bond markets so far this year, as weaker borrowers struggle to refinance debt.

Similarly at least eight trust products have been forced to delay payments this year. Until the crackdown, they were the fastest-growing shadow banking segment and a popular way for debt-ridden property developers and local governments to raise money. With over 3.3 trillion yuan of trust products maturing in the second half, the problems are likely to spread.

All of this begs the question of whether Chinese regulators will slacken in their campaign against shadow banking at a time when trade tensions are causing worries about the economic outlook. Already, they showed an awareness of the pain they are inflicting by delaying the full implementation of the asset management curbs from mid 2019 to the end of 2020.

“Deleveraging is a long-term goal, but the pace and methodology to achieve the goal is as important as deleveraging itself is to the economy,” said Xia Le, chief Asia economist at Banco Bilbao Vizcaya Argentaria SA in Hong Kong. “If it’s not well planned, it brings systemic risks.”

(NYP) Deutsche Bank reportedly set to lay off 10,000 workers


Heads are rolling at Deutsche Bank again.

The beleaguered German bank is reportedly planning to lay off as many as 10,000 employees, or 10 percent of its workforce, through next year.

The planned cuts, which are coming about two months after the bank elevated its new CEO Christian Sewing, accelerate and deepen layoffs that were planned by the last top exec, John Cryan, the Wall Street Journal reported Wednesday, citing sources.

Cryan had planned to shed 9,000 positions around the world by 2020. It’s unclear how many of those had actually been cut, although the bank reportedly laid off 400 workers in the US last month. Among the deep cuts are a full-on retreat from stock trading in the US and a pullback in other parts of the world.

The planned firings come after nearly a decade of scandals, settlements and management missteps.

The bank was a dominant Wall Street trading house until the 2008 financial crisis. Since then, it has been trying to cut costs and placate unhappy shareholders who are sick of seeing the bank’s stock trail peers like JPMorgan Chase.

In one particularly desperate cost-slashing move, Deutsche Bank recently shortened its paid “gardening” leave periods for departing bankers — a policy designed to protect the bank’s competitive information — to 30 days from as much as 90 days previously, The Post first reported last week.

The bank has also shut down much of its Houston energy trading operations, and is also moving to smaller offices in Midtown Manhattan, from Wall Street.

Kerrie McHugh, a Deutsche Bank spokeswoman, declined to comment.

(BBG) Eisman of ‘The Big Short’ Fame Recommends Shorting Deutsche Bank

(BBG) Eisman of ‘Big Short’ Says ‘Deutsche Bank Is a Problem Bank’

Steve Eisman, the Neuberger Berman Group money manager who famously predicted the collapse of subprime mortgages before the 2008 financial crisis, recommended shorting Deutsche Bank AG shares.

“Deutsche Bank is a problem bank,” Eisman said in a Bloomberg Television interview in Hong Kong. The German lender has “profitability issues,” and will probably have to raise capital next year, he said, without disclosing his position on the shares. A Deutsche Bank representative declined to comment on the remarks.

New Chief Executive Officer Christian Sewing is embarking on a sweeping overhaul of the struggling investment bank to focus more on European clients, walking away from ambitions to be a top global securities firm. Germany’s largest lender will scale back U.S. rates sales and trading, reduce the corporate finance business in the U.S. and Asia and review its global equities business. The measures will lead to a “significant reduction” in the workforce this year.

The firm has to “shrink dramatically,” Eisman said.

Deutsche Bank shares have slumped almost 34 percent in the past 12 months, the second-worst performance on the MSCI Euro index. The decline also dwarfed the 4.9 percent drop in the Bloomberg Europe 500 Banks index in the same period. Deutsche shares gained 0.4 percent in morning trading on Monday.

While Deutsche Bank’s return on equity trails that of its main competitors, the bank’s capital cushion is comparatively strong. It boasts a Tier 1 equity capital ratio of 13.4 percent, above the average among its largest peers, data compiled by Bloomberg show.

Eisman also recommended bearish bets against Canadian financial companies and reiterated that he is still short Wells Fargo & Co.

The investor’s early bets against the housing market before the 2008 crisis were chronicled in Michael Lewis’s 2010 book “The Big Short,” which highlighted money managers who profited from the market turmoil. A character based on him was played by Steve Carell in the movie of the same name.

Eisman worked at hedge fund FrontPoint Partners LLC when he made money betting against the U.S. housing market. Eisman joined New York-based Neuberger Berman after closing his hedge fund Emrys Partners in 2014.

(CNBC) Barclays CEO fined $870,000 for trying to identify whistleblower


Jes Staley, CEO of Barclays, is being investigated for his conduct in a whistle blowing incident in 2016.

Justin Solomon | CNBC
Jes Staley, CEO of Barclays, is being investigated for his conduct in a whistle blowing incident in 2016.

British regulators have fined Barclays Chief Executive Jes Staley 642,430 pounds ($870,428) for breaching conduct rules by attempting to identify who sent letters criticizing an employee of the bank, they said on Friday.

The fine from the Financial Conduct Authority (FCA) and the Prudential Regulation Authority included a 30 percent discount for Staley agreeing at an early stage to settle.

“Mr Staley’s actions fell short of the standard of due skill, care and diligence expected of a CEO in a regulated firm,” the FCA said.

Barclays CEO escapes with fine, keeps job

Barclays CEO escapes with fine, keeps job  

Regulators said the fine was only 10 percent of his overall pay package.

While it draws a line under an episode some insiders had feared might cost him his job, Staley is the first sitting CEO of a major bank to face such a penalty.

Barclays had no immediate comment, but is expected to follow up on Friday by imposing a further fine of its own on Staley.

The regulatory findings will also be closely read by lawmakers keen to ensure top banking officials are held accountable for their actions at a time when there are growing calls to better protect whistleblowers.

The regulators stopped short of saying Staley was unfit to continue in his role, after he twice attempted to find out who wrote letters raising “concerns of a personal nature” about an unidentified senior employee.

“Mr Staley acted unreasonably in proceeding in this way and, in doing so, risked undermining confidence in Barclays’ whistleblowing policy and the protections it afforded to whistleblowers,” the FCA said.

Experts believe the fact the author of the letters was not a Barclays employee might have helped Staley’s case, as there are strict rules designed to protect internal company whistleblowers.

Barclays had said in April last year it had reprimanded Staley and would cut his bonus as the two financial watchdogs launched a year-long investigation into his actions.

Authorities in the United States are still investigating the case.

+++ (JN) Bancos terão de ceder dados às fintech “a bem ou a mal”, diz BdP

(JNO Banco de Portugal tranquiliza as fintech, depois da Autoridade da Concorrência ter acusado uma “transposição lenta” da nova directiva e as barreiras à entrada ditadas por este atraso.

A nova directiva de pagamentos, a PSD 2, define que os clientes podem autorizar entidades terceiras a efectuar pagamentos, e portanto os bancos têm de ceder os dados dos clientes às fintech. A directora adjunta do Departamento de Sistemas de Pagamentos do Banco de Portugal, Maria Tereza Cavaco avisa: “Os bancos, se não derem a bem, vão ter de dar a mal. Porque se não derem a bem e não cumprirem os requisitos vão ter de simplesmente permitir o acesso ao seu homebanking”.

A SIBS está actualmente a construir uma plataforma (API) para facilitar a troca de informações entre os bancos e as fintech, mediante a autorização do cliente. Os bancos podem optar por esta via ou por criar as próprias soluções, mas a acção é obrigatória e sujeita a condições apertadas, nomeadamente no que toca ao tempo de resposta. “Aquilo que o regulador vai fazer depois é verificar se a API que a SIBS disponibiliza, ou outras soluções individualizadas, cumprem ou não todos os requisitos. Nós vamos monitorizar quando for a altura”, garante Maria Tereza Cavaco.

Estas declarações surgiram no âmbito da APED Retail Summit, uma conferência que juntou representantes do Banco de Portugal, a Autoridade da Concorrência, SIBS e Visa com os de duas fintech, Easypay e Aptoide.

A Autoridade da Concorrência já se tinha pronunciado quanto aos atrasos da transposição da directiva, alertando para as barreiras à entrada das fintech que este atraso impõe. A transposição estava marcada para 13 de Janeiro mas, quatro meses depois, continua por concluir. Para além disto, “a transposição não resolve todos os problemas. Há depois a implementação, e existirão com certeza desafios”, afirmou na mesma conferência Ana Sofia Rodrigues, a directora do Departamento de Estudos e Acompanhamento de Mercados da Autoridade da Concorrência.

O CEO da EasyPay, Sebastião de Lancastre, vocalizou as preocupações relativamente a este atraso. “Causa problemas às empresas que querem inovar”, queixa-se, e reage:”Os bancos vêem isto como ameaça. Vamos ver quem tem mais músculo”. Sebastião de Lancastre deu o exemplo da própria empresa, que, apesar de portuguesa, tem sede na Suíça. “Em Portugal não seria fácil” sedear-se devido às falhas de regulação, justifica. “Na Suíça temos uma relação muito próxima com o regulador”, que aproveita o feedback das empresas para moldar a regulação, assegura o CEO.

+++ P.O. (BBG) Deutsche Bank Is Said to Weigh Cutting U.S. Staff About 20%


…And the question is…

…What is Deutsche Bank’s future as an investment bank taking into account all the mishap’s, all the scandals, all the law suits (most of them not reflected in the balance sheet),and the loss of credibility?

…And taking into account what it seems to be an innate corporate culture of not abiding by any rules.

…I would argue somber at least.

…And that’s being kind.

Please be so kind and revisit my Personal Opinions on Deutsche Bank

Thank you for your time.

Francisco (Abouaf) de Curiel Marques Pereira

(BBG) Deutsche Bank AG is considering a sweeping restructuring in the U.S. that could result in the firm cutting about 20 percent of staff in the region, according to people briefed on the matter.

The bank is nearing a decision and the final reductions may end up lower, one of the people said, asking not to be identified because the details are confidential. Bloomberg reported in April a plan to slash more than 10 percent of jobs in the U.S. — where its workforce was 10,300 at the end of 2017 — as the German lender retreats from businesses it deems less competitive.

“There are no such plans,” said Joerg Eigendorf, a spokesman for the firm in Frankfurt.

Deutsche Bank, led by Chief Executive Officer Christian Sewing, is considering cuts to businesses including prime brokerage, rates and repo, according to a bank statement last month and people familiar with the matter. The firm is already planning to close an office in Houston and shrink its presence in New York City, moving from Wall Street to a midtown Manhattan space that’s 30 percent smaller.

Deutsche Bank shares were little changed at 11.45 euros as of 9:02 a.m. in Frankfurt. They’ve declined about 28 percent this year, making the lender the second-worst performing stock on the Bloomberg Europe 500 Banks and Financial Services Index.

Read more: Deutsche Bank joins exodus from Wall Street

Deutsche Bank isn’t targeting a specific level of cuts at the U.S. unit and the final figure will depend on each business line’s decisions, according to another person briefed on the matter. The U.S. makes up about a tenth of its global workforce.

The U.S. business is already seeing some senior defections. The bank said in memos Tuesday that Barry Bausano, a longtime senior executive overseeing relations with hedge fund clients, and Jonathan Richman, head of trade and financial supply chain for the Americas, are leaving.

Bausano will step down as chairman of the business with hedge funds and as CEO of Deutsche Bank Securities, the company’s U.S. broker-dealer. The 54-year-old has helped lead efforts to retain big trading clients in recent years, after some grew concerned about the bank’s strength as a counterparty.

Richman, who has spent 10 years at the firm, is pursuing another opportunity and will be replaced by Juan Martin and Giovanni Saladino. The trade business is part of the bank’s global transaction banking unit, which produced 15 percent of its revenue last year.