THURSDAY JULY 15, 2021 VOL. 186 No. 134 AMERICANBANKER.COM Follow us on Twitter @AmerBanker GreenSky facilitated 5 loans without borrowers’ consent: CFPB Carrying less debt The fintech, which arranges point-of-sale loans in partnership with merchants, was JPMorgan Chase customers are spending more on cards, fined $2.5 million by the Consumer Financial but the company says unusually high payment rates are Protection Bureau and ordered to refund suppressing loan growth up to $9 million to consumers who received loans they never applied for. Page 5 See story on page 2 Freelancing craze Credit card loans 6 offers challenger $150B an opportunity This has been dubbed the “summer of $144.2B $141.7B $140.4B $141.8B quitting,” and three neobanks are aiming to $132.5B capitalize on the trend by developing apps that provide budgeting, invoicing and tax $100B calculation to meet the specific needs of contract workers. Page 6

In naming co-CEO, 7 First Republic signals $50B succession plan 2Q2020 3Q2020 4Q2020 1Q2021 2Q2021 Hafize Gaye Erkan, the San Francisco ’s president, will share the chief executive role Source: The company with longtime leader James Herbert, whose contract was extended through 2022. Page 7

FNB buying Howard Bancorp dailybriefing ’s underdogs 8 to bulk up in Baltimore 3 save quarter as bond, Acquiring the city’s largest bank would give card engines sputter Pittsburgh-based FNB the No. 6 market Flat credit card growth Income from stock trading and investment share in Maryland’s largest city. Page 7 1 at JPMorgan Chase banking trounced analyst estimates in the bodes ill for other issuers second quarter and made up for weaknesses Apple, Goldman plan buy now/ While customers of the nation’s largest bank in the company’s much bigger fixed-income 9 pay later service to rival Affirm are spending more, an unusually small and credit card divisions. Page 3 Apple is working on a new service that percentage of their purchases are becoming will let consumers pay for any Apple Pay debt. Executives warn that the bank’s With Fed picks, purchase in installments over time, rivaling predicament could persist for the rest of the 4 Biden will have to the buy now/pay later offerings popularized year. (See chart above.) Page 2 walk political tightrope by services from Affirm and PayPal.Page 8 The president has a chance to make his BofA struggles with mark on the central bank as the terms of Citi debuts no-fee stock 2 tepid loan income as Federal Reserve Chair Jerome Powell and 10 trading to compete with consumers shun new debt Vice Chair of Supervision Randal Quarles JPMorgan, Robinhood fell short of net interest near their end. He will face pressure from Citigroup will let retail customers bet on income projections as loans and leases in progressives to pick reform-minded leaders, stocks without paying fees as the bank tries the consumer banking unit dropped 12% while moderate Democrats and Republicans to expand its wealth business in the face from a year earlier. However, loan balances in the narrowly divided Senate might favor of fierce competition from Silicon Valley grew from the first quarter — the first reappointing Powell. Page 4 ventures, discount brokerages and big- sequential increase in a year. Page 3 banking peers. Page 8 THURSDAY JULY 15, 2021 AMERICANBANKER.COM PAGE 2

stimulus checks, muted consumer May, said that exceptionally low net charge- CREDIT CARDS spending and forbearance on mortgages offs across the bank are offsetting some and other loans have given U.S. households of the headwinds to higher net interest more cash to pay down credit card bills. income. Flat credit Even as vaccination rates rose and In the second quarter, JPMorgan’s net consumer spending ticked upward during charge-offs totaled $734 million, which card growth the first quarter of 2021, card balances was half of the total reported in the second declined by $49 billion, the second-largest quarter of 2020. decrease on record, according to a report Sales volumes on debit and credit cards at JPMorgan from the Federal Reserve Bank of New York. totaled $444.3 billion in the second quarter, Just how long the trend will continue which was up 19% from the first quarter Chase bodes remains to be seen — and depends in and 45% from a year earlier, when much large part on ongoing stimulus efforts. On of the country was locked down during the Thursday, the federal government is set pandemic’s early months. ill for other to begin making child credit tax payments Credit card loans at the bank grew by 7% of $300 a month per child to eligible between March 31 and June 30, but were issuers families, a move that will theoretically give basically flat in comparison with the second an additional boost to many households’ quarter of 2020, the company said. Overall, By Allissa Kline finances. loans grew just 1% in comparison with the July 13, 2021 Like most banks, JPMorgan remains first quarter and were flat compared to the Amid the bright spots in JPMorgan flush with deposits. In the second quarter, second quarter of last year. Chase’s second-quarter earnings report its average deposits surged by 23% from a During Tuesday’s conference call, — including higher consumer spending year earlier and rose by 4% from the first analyst Steven Chubak at Wolfe Research and record revenue in asset and wealth quarter. asked if JPMorgan might see a tailwind to management— there lingers a pesky JPMorgan reported net income of $11.9 net interest income if card payments rates headwind that could persist for several billion, down 16% from the prior quarter return to more normal levels. months. but up 155% from the year-ago period, That’s unlikely to happen anytime soon, Payment rates on credit cards, which when the company stashed away $8.9 Barnum warned, though he said there have been higher than normal during the billion in credit reserves to prepare for could be a tiny increase between the third pandemic, could stay elevated through potential bad loans. and fourth quarters. “I think you want to the end of the year, executives at the $3.7 JPMorgan’s net interest income was be thinking about that as a 2022 effect,” he trillion-asset bank warned Tuesday. If down 1% from March 31 on relatively flat said. cash-flush consumers keep paying off loan demand and lower interest rates. But their balances at unusually fast rates, loan the pace of decline moderated in the second growth will remain muted, even though quarter, analysts at DBRS Morningstar card spending has been rising. noted. As long as an unusually low percentage Barnum, who led his first earnings call of credit card spending gets converted since being promoted to the CFO role in into revolving balances, JPMorgan’s net interest income will suffer, JPMorgan Chief Financial Officer Jeremy Barnum noted Established 1836 One State Street Plaza, 27th floor, New York, NY 10004 during a call with analysts Tuesday. In June, Phone 212-803-8200 AmericanBanker.com the nation’s largest bank by assets reduced its 2021 net interest income guidance from Editor in Chief Alan Kline 571.403.3846 Copy Editor Neil Cassidy 212.803.8440 $55 billion to $52.5 billion. Barnum said that JPMorgan expects U.S. Managing Editor Dean Anason 770.621.9935 Reporters/Producers consumers to start taking on more leverage, but added: “We just don’t think it’s likely to Executive Editor Bonnie McGeer 212.803.8430 Laura Alix 860.836.5431, Kate Berry 562.434.5432 be a meaningful effect this year.” Miriam Cross 571.403.3834 Washington Bureau Chief Joe Adler 571.403.3832 JPMorgan, which kicked off bank Jim Dobbs 605.310.7780 earnings season Tuesday, could be a Executive Editor, Technology bellwether for other big banks that rely Penny Crosman 212.803.8673 John Heltman 571.403.3847, Allissa Kline 716.243.2679 heavily on credit card income, since the Hannah Lang 571.403.3855 higher-than-normal payment rate has been Community Banking Editor Paul Davis 336.852.9496 John Reosti 571.403.3864, Gary Siegel 212.803.1560 a phenomenon across the U.S. credit card Contributing Editor Daniel Wolfe 212.803.8397 industry. Kevin Wack 626.486.2341 During the pandemic, government

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through Tuesday, compared with a 27% gain trading for a second straight period, the first EARNINGS for the KBW Bank Index. time that’s happened since 2009. While loan balances remained down from “The pace of the global recovery is a year earlier, they grew from the first quarter exceeding earlier expectations,” Fraser said BofA — the first sequential increase in a year. Wednesday in a news release announcing “Consumer spending has significantly earnings. “We saw this across our businesses, struggles with surpassed prepandemic levels, deposit as reflected in our performance in investment growth is strong, and loan levels have begun banking and equities.” to grow,” Bank of America Chief Executive Net income jumped nearly sixfold to $6.19 tepid loan Brian Moynihan said in a statement. billion, beating the $4.67 billion average Also in the second-quarter results: analyst estimates compiled by Bloomberg as income as • Noninterest expenses rose 12% to $15 the firm released $2.4 billion in reserves. billion. Citigroup’s results broadly mirrored • Net income more than doubled to $9.2 trends across the industry. Most trading consumers billion, or $1.03 a share. Analysts estimated desks are cooling as last year’s market swings 77 cents, on average. subside, but dealmakers are still busy helping shun new • Total revenue dropped to $21.5 billion. corporations adjust strategies or finances. Consumers are spending more on cards, but the question is whether they will start to debt EARNINGS borrow more too. At Citigroup, the 37% jump in revenue By from stock trading was an outlier. It was July 14, 2021 Citigroup’s better than the 33% and 13% increase at Bank Bank of America is struggling to build back of America and JPMorgan Chase respectively, its lending income as consumers, flush with underdogs and contrasted the 12% slump at Goldman cash from government stimulus programs, Sachs. avoid taking on new borrowings. Citigroup, though, is known for its massive Loans and leases in the consumer banking save quarter fixed-income trading division, where unit fell 12% from a year earlier. Net interest revenue slumped 43% to $3.21 billion from a income, on a fully taxable equivalent basis, as bond, year earlier, when pandemic-induced swings was $10.3 billion last quarter, the bank in volatility boosted results. While that was said Wednesday. That metric was less than worse than analysts anticipated, it was in line analysts’ estimated $10.5 billion. card engines with declines at JPMorgan and Goldman. While government aid programs during Fees from investment banking edged up the pandemic have helped big lenders like sputter to $1.77 billion, more than the $1.64 billion Bank of America dodge widespread defaults, average of analyst estimates compiled by they’ve also meant many consumers and By Bloomberg News Bloomberg, with the firm citing jumps in fees businesses haven’t needed to take on new July 14, 2021 from equity underwriting and advisory. loans or tap lines of credit. That trend, It was a moment for Citigroup’s overlooked The world’s largest credit card issuer, along with rock-bottom interest rates meant Wall Street divisions to show what they can Citigroup saw revenue from that business to stimulate the economy, have weighed do. drop 11% to $4.02 billion as consumers paid on the profitability of banks’ core lending The firm’s stock traders and investment off balances. While spending on Citigroup businesses. bankers, usually overshadowed by rivals’ cards increased 40% as the U.S. economy Banks’ Wall Street operations have helped larger franchises, trounced analyst estimates rebounded from year-earlier lockdowns, pick up the slack as turbulent markets in the second quarter and made up for archrival JPMorgan saw a 51% jump. boosted trading volumes. Companies weaknesses in Citigroup’s much bigger Fraser, the first woman to run a U.S. seeking to stockpile cash, meanwhile, fixed-income and credit card divisions. The banking giant, began reshaping its strategy turned to debt and equity financing, and a surprise showing, and a release in reserves as she prepared to take the helm in March. combination of cheap financing for buyers set aside for souring loans, helped the lender Citigroup has already announced this year and attractive valuations for sellers spurred beat revenue and profit estimates in the that it will exit retail banking operations a wave of acquisitions. Bank of America’s period. in 13 markets across Asia and Europe and trading revenue fell 14% last quarter, while The results were the first under new CEO will instead focus on building out its newly investment-banking fees fell 1.7%. Jane Fraser and hinted at progress after the formed wealth division. Bank of America was down roughly 2% bank reorganized its equities unit under Fraser has warned her bank will have to to $39.05 at 7:56 a.m. in early New York Fater Belbachir in a bid to become a top- spend more on its underlying technology trading. The Charlotte, North Carolina- four competitor in that business. The firm as it seeks to satisfy a pair of consent orders based company has advanced 32% this year generated more than $1 billion from equities it received from regulators last year. In the

For up to date and complete coverage go to AmericanBanker.com THURSDAY JULY 15, 2021 AMERICANBANKER.COM PAGE 4 second quarter, expenses climbed 7% to received bipartisan praise for his handling skill in whoever the nominee is to be able to $11.19 billion, less than the $11.3 billion of the financial impact of the coronavirus thread the needle in a way to be able to gain average of analyst estimates compiled by pandemic, some might urge the White House Republican votes, but not lose Democratic Bloomberg. also to name a more daring pick for the head votes,” he said. “We are making progress on our strategy of the central bank. Candidates for the Fed leadership refresh across our consumer and institutional “I think there’s going to be a significant posts will also likely have to answer tough businesses,” Fraser said in the news release. amount of pressure put on the president, questions about inflation. Current senior “Our overarching goal is to increase the vice president and the folks that help them Fed officials have insisted that the rise in returns we generate and close the gap with nominate to choose someone that’s more prices across many sectors is temporary and our peers. We have set out to modernize aligned philosophically with where the should abate without any intervention from our bank and want to achieve nothing less progressive wing of the Democratic Party the central bank. But some Republicans have than excellence in our risk and control is,” said Chris Campbell, former assistant been dubious of those claims. environment, our operations and our service secretary of the Treasury Department for “It’s long overdue for the Fed to begin to clients.” financial institutions and chief strategist the process of normalizing its monetary at Kroll, a corporate consulting firm. “That policy,” Sen. Pat Toomey, R-Pa., the ranking would significantly rearrange the relationship member of the Senate Banking Committee, FEDERAL RESERVE with Washington and Wall Street.” said in a June 10 tweet. “The combination of But it still remains to be seen if Biden the Fed’s average inflation targeting and its will side with progressives or opt for the view that inflation will be transitory virtually With Fed status quo. The appointment process will be guarantees the Fed will be behind the curve if complicated by the razor-thin majority in the inflation is enduring.” picks, Biden Senate. The chamber is split evenly between Depending on where prices stand when the Democratic and Republican caucuses, Fed candidates appear before Congress, but Vice President Kamala Harris can cast a inflation could become a flash point. will have to tiebreaking vote. “The inflation issue is very salient right Republicans and even some moderate now and something that a lot of consumers walk political Democrats such as Joe Manchin of West are obviously unhappy about,” said Salter. Virginia and Kyrsten Sinema of Arizona could “Consumers are also voters, so that’s potentially object to Fed nominees that they something that politicians on both sides tightrope find too liberal. happen to care about.” “I absolutely would expect the picks that Inflation may become “a battle line” By Hannah Lang [Biden] makes to be on board with regulating in Senate hearings, agreed Bart Naylor, a July 14, 2021 banks with an eye towards environmental financial policy advocate at Public Citizen. WASHINGTON — President Biden will policy and climate change [and] regulating “If we really are going into a period of soon have a unique opportunity to leave a banks with an eye towards the social justice some inflation, then yes, I can imagine that mark on the Federal Reserve when he names concerns,” said Alexander Salter, senior Republicans will be pretty feisty,” he said. his picks for key leadership posts at the fellow at the American Institute for Economic “[But] if inflation abates, then I guess the central bank. But his ability to remake the Fed Research and an professor at Republicans don’t have as much to stand on.” will ultimately be determined by Congress. Texas Tech University. “I definitely think that Still, Salter expects regulatory policy to There is already one vacant seat on the that’s a concern.” take center stage in the consideration of Fed’s Board of Governors. In addition, Fed Republican lawmakers have been any potential Fed nominee as opposed to Vice Chair of Supervision Randal Quarles’s increasingly frustrated with the Fed’s work monetary policy. term expires in October (though he can serve on studying the impact of climate change “The appointments are going to hinge on as a Fed governor until 2032), followed by on financial stability, as well as events held the regulatory mandate,” he said, suggesting Fed Chair Jerome Powell’s term expiring in by some regional Fed banks dealing with the that monetary policy is more in the domain February. Fed Vice Chair Richard Clarida’s racial wealth gap. of the Federal Open Market Committee. term expires in January. Since taking office, Biden has not “What do we actually consider within our Biden will likely feel pressure from the specified which issues he would like the purview — our being the Fed — in terms of left to use the upcoming appointments to Fed to prioritize. But while campaigning for what the central bank is doing and what it can push the Fed to be tougher on the industry, president, he called for legislation that would control?” focus on consumer protection, narrow racial require the central bank to report on racial Most Fed watchers expect Biden to replace inequity in the financial system and address wealth gaps and take those gaps into account Quarles as vice chair of supervision, given climate-related risks. when it sets policy. frustration on the Democratic side with The administration will likely seek to Climate change and racial equity will the Fed’s tailored bank supervisory regime replace Quarles, who has been criticized by “be greatly probed by the Republicans” at that Quarles has overseen. Democrats have Democrats for many of his stances on capital nomination hearings, said Campbell. generally expressed concern that Quarles rules and other issues. Though Powell has “I think that it’s going to require a lot of has been too cozy with Wall Street and has

For up to date and complete coverage go to AmericanBanker.com THURSDAY JULY 15, 2021 AMERICANBANKER.COM PAGE 5 undermined the key tenets of post-crisis term in 2009. never heard of GreenSky until bills for their regulation. “Given that level of uncertainty in that loan payments arrived in the mail. In some “He’s a nice man. I know him, I’ve talked to capacity and challenges that may lie ahead, I cases, GreenSky did work with borrowers him many times, but he should not be there think there’s a great need for someone with a to resolve the issues, but there were at least after October,” Senate Banking Committee lot of experience at the helm at the Fed,” said 2,800 instances in which the consumer who Chairman Sherrod Brown, D-Ohio, said in a Campbell, “because one wrong move can be complained about an unauthorized loan July 8 interview with Bloomberg. “I’d be very really devastating to the U.S. economy and received neither a refund nor a write-off, surprised if the president reappointed him.” thereby the worldwide economy.” according to the CFPB consent order. But it’s less clear where Biden might “For consumers to wind up in debt to stand on reappointing Powell, whom GreenSky for loans they never knew about is former President originally POINT OF SALE simply wrong,” Uejio said. nominated to lead the Fed in 2018. GreenSky did not immediately respond to “Powell is sort of Quarles with an even a request for comment. more gentle demeanor. It’s difficult to be GreenSky GreenSky gives merchants the ability to angry with Powell,” said Naylor. “He says collect financial information and submit many of the right things about poverty, facilitated loans on behalf of customers through its income inequality, racial justice — even software. Written confirmation from the climate change.” borrower is required before submitting Powell has received high marks from loans without loan applications, but the CFPB alleged members of Congress on both sides of the that GreenSky did not review whether these aisle, and is known on Capitol Hill for his borrowers’ documents were in order until a consumer efforts to engage with lawmakers. filed a complaint, according to the consent “Everybody’s replaceable and there’s good order. people out there,” Sen. Jon Tester, D-Mont., consent: CFPB GreenSky is now required to obtain told Axios last month. “Biden could certainly evidence of a borrower’s authorization pick somebody as good as Powell. But, you By Jon Prior before activating the loan, according to the know, Powell is a proven guy.” July 12, 2021 agreement with the CFPB. While many on the left have taken issue GreenSky has been fined $2.5 million and Bureau investigators also found that with Powell’s involvement in rules that have forced to refund up to $9 million in loans before October 2019, GreenSky was rolled back elements of Dodd-Frank, many the fintech allegedly allowed its merchant allegedly allowing merchants to submit loan have acknowledged that there’s much to like partners to take out on behalf of customers applications for up to two months before about Powell’s shift to a focus on maximum who hadn’t authorized the financing, the going through a mandatory training program. employment, which they say prioritizes Consumer Financial Protection Bureau said The company is required to make changes to workers over Wall Street. Monday. its training rules under the order from the “I think that Powell has, in my opinion, The Atlanta-based company offersCFPB. proven to be very adept to adapt[ing] to the technology merchants can use to offer point- GreenSky’s own merchant risk unit also changing political environment in D.C.,” said of-sale installment loans to consumers that was found to be more lenient in reviewing Campbell, who is urging Biden to consider its partner banks essentially fund. GreenSky loan applications submitted by its biggest reappointing Powell. initially facilitated home improvement loans merchant partners, according to the CFPB. Ultimately, while the changes the Fed through such retailers as Home Depot but has In some cases, employees within the made to rules around stress tests and bank since expanded into other areas, including merchant risk division were allegedly capital requirements under Trump were elective surgery. instructed “to change their recommendations “upsetting,” said Naylor, “they haven’t been From 2014 to 2019, GreenSky received regarding merchant suspensions and so outrageous as to cause us to fall out of our more than 6,000 complaints from customers terminations based on the volume of chairs.” who claimed they had not authorized business a merchant generates,” the CFPB “The Biden administration, which is well submitting a loan application, according to said in the consent order. stocked with leadership that I think sees the the CFPB. In about 100 cases reviewed by the CFPB, world similar to the way we do, ideally will CFPB investigators confirmed that in a resolution was not reached for more than put forward some good candidates to replace about 1,600 of these cases the merchant was six months, the bureau found. GreenSky is the likes of Quarles,” who has been the “No. 1 to blame for submitting a loan application required under the agreement to devote staff problem” at the Fed for progressives, Naylor without the borrower’s consent. CFPB acting to its complaint department and follow clear said. Director Dave Uejio said in a press release timelines for resolving disputes, including Moreover, reappointing Powell could Monday announcing the consent order providing a “provisional account credit” bring a level of consistency to the economic that GreenSky was “careless” to enable its within five days of receiving a complaint until recovery — a similar move former President merchant partners to take advantage of the issue is resolved. made when he nominated consumers. then-Fed Chair Ben Bernanke for a second Some consumers claimed they had

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It lets freelancers build an invoice in a few Lance will automatically calculate, budget FINTECH steps, send it to a customer and get paid. It and pay quarterly taxes. It automatically sets also comes with a savings account. money aside each month in subaccounts to “We’ve gotten a lot of requests in regards meet savings goals. Freelancing to savings because when we started, we Rokyta will not divulge the size of Lance’s were very focused on saving for your taxes,” customer base but says it’s “competitive with craze offers said Lilac Bar David, Lili’s founder and CEO the market.” and former founder and CEO of Pepper, Lance’s banking partner is the $2.8 billion- Bank Leumi’s digital-only bank and virtual asset Blue Ridge Bank in Richmond, Virginia. challenger assistant. But customers asked for the Willa, based in Los Angeles, has more than option to save for different goals including 10,000 freelancer customers and more than banks an an emergency savings fund. Lili Pro pays 1% 150,000 on its waitlist, according to Aron interest on savings. Levin, its chief marketing officer. Bar David’s team also created a credit These customers tend to be creative opportunity product called Balance Up that gives freelancers and social media creators who customers access to as much as $200 credit work with brands and advertising agencies. By Penny Crosman for debit card transactions as a protection “When we started Willa, we decided to July 13, 2021 against overdrafts. zoom in on addressing the largest problem This has been called the summer of “We know that as a freelancer, your income that freelancers face today: getting paid for quitting, and at least three fintechs see is not stable,” Bar David said. “Sometimes their work fast,” Levin said. Willa lets them opportunity in providing bank accounts and clients are late in paying. We wanted to make quickly create and send invoices from their mobile apps for the droves of people who sure that you do have access to available phone. It can buy a freelancer’s receivables are leaving their jobs and taking up freelance funds when you need them.” and pay them as soon as they send out an work. The monthly subscription fee for Lili Pro is invoice. The fintechs Lili, Willa and Lance all $4.99. “By reducing both time to money and provide mobile banking to people who have “We priced it as a cup of coffee per month,” administrative work, our users can spend left the corporate world for freelancing. Bar David said. “So it’s going to be affordable their time doing more valuable things and According to Statista, there were 59 million and available for every professional freelancer zero time waiting for their money,” Levin people doing freelance work in the United who needs access to the services.” said. “There are lots of services, like PayPal, States in 2020, an increase from about 53 Overall, Lili’s founders say they are trying that let freelancers generate invoices. Still, million in 2014. These neobanks view the to automate banking chores for freelancers so they leave their users with the heavy lifting needs of freelancers as a cross between they don’t have to. like chasing down invoicing details, sending small-business and consumer banking. They “When we started Lili, our vision was to payment reminders and waiting for 30, 60 pay special attention to two weak spots these empower freelancers to balance work and and sometimes even 90 days to get their customers have: tax liabilities and invoicing life,” said Bar David. “We wanted to be in a money.” challenges. position to help them grow their business Levin agrees that, at least in the short term, They’re following the classic fintech and make sure that they have everything they this is the summer of quitting. model of zeroing in on a problem or need need within just one app to solve banking “Long-term, it’s a decade that will define that traditional banks aren’t focused on, and issues, payment issues, expenses and so on the future of work,” he said. “We predict that solving it in a technology-driven way. They’re so they would have more time to focus on more than half of the U.S. workforce will testing ideas for this niche market that banks building their business. As our customer engage in the freelance economy by 2027. could borrow for themselves or partner with base grew, we found out that there are more There are massive implications of this, and a fintech to deliver. professional freelancers that are more mature it’ll ultimately be great for the economy. But New York-based Lili, which launched in within their business and we could serve there’s lots of work to be done to support the January 2020 and has 250,000 customers, them in a better way with different products.” future of work. The systems are old, outdated rolled out a subscription-based service Lance, which is also based in New and built around the assumption that you’re Tuesday called Lili Pro. York, focuses on middle- to high-income either a corporation or an employee, so Lili provides a checking account and Visa freelancers and flexible workers. freelancers are stuck in between. That’s the business debit card. These and all of Lili’s “We see that most freelancers don’t work in core problem we’re addressing with Willa.” banking services are offered through the only one job or field, so our banking platform $21.5 billion-asset Choice Financial Group can aggregate and manage across all income in Fargo, North Dakota. Lili’s app tracks streams,” said Oona Rokyta, CEO and co- expenses and calculates taxes owed. founder. “We assume that people don’t have The Pro version includes advanced a financial game plan when they’re opening a expense management, including the business banking account, so we provide one ability to categorize transactions and split that works just as well on day one as it does transactions between work and personal life. five years from now.”

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engineering from Princeton University, deposit market, according to the Federal SUCCESSION PLANNING and she has previously been named one of Deposit Insurance Corp. It would be FNB’s American Banker’s Most Powerful Women in fourth bank acquisition in Maryland, starting Banking. with the $439 million-asset BankAnnapolis in In naming The company also announced its second- 2013. quarter results on Tuesday, saying that strong For FNB, which has been focused on co-CEO, First loan growth, particularly in single-family and expanding its presence in the mid-Atlantic business lending, drove net income of $373.1 and Southeast regions, acquiring Howard million, a 45% increase from a year earlier. would check a key strategic box. Republic Total loans rose by 22.7% to $123.1 billion. “We think the mid-Atlantic region has Loan originations of $16.8 billion represented been a key driver to our success,” Vincent signals the bank’s highest quarterly volume ever. Delie, FNB’s chairman, president and CEO, First Republic’s net interest income rose by said Tuesday in a phone interview. 27.5% to $1 billion, and its net interest margin “To be able to do a transaction with a succession contracted by 2 basis points to 2.68%, the company like Howard made complete sense company said. to us,” Delie added. “When you look at the plan Noninterest income increased by 72% to financial metrics…it improves the efficiency $226.6 million, driven by wealth management ratio by more than 200 basis points. Eighty- By Laura Alix fees, loan servicing fees and income from five percent of the cost take-outs are fully July 13, 2021 investments in life insurance. realized in year one and we’re only paying 1.6 First Republic Bank has signaled a long- Earnings per share of $1.95 came in times tangible book, which I think is a great awaited succession plan by naming its 22 cents higher than the mean estimate price for a franchise Mary Ann has done a president as co-CEO and also extending the of analysts surveyed by FactSet Research terrific job building.” contract of longtime Chief Executive James Systems. Given the transaction’s local nature — FNB Herbert through 2022. operates 20 Baltimore-area branches already Hafize Gaye Erkan, who joined First — the company is projecting cost savings Republic in 2014 and is currently the M&A amounting to 50% of Howard’s noninterest company’s president, becomes co-CEO expense base, which totaled $12.3 million for effective immediately, the firm said. the quarter that ended March 31 and $89.4 Herbert, whose contract was extended for FNB buying million for all of 2020. FNB expects to achieve a fourth time in 2019, will serve as executive about 85% of the cost savings in 2022. chairman after Dec. 31, 2022, according to Howard The $418 million price tag works out the company. His term as chairman of the to $21.96 per share, or 160% of Howard’s board was also extended by one year through tangible book value. The average price-to- Dec. 31, 2029. Bancorp to tangible-book-value for whole bank deals in Herbert, 75, founded First Republic in 1985 2021 is 157%, according to Laurie Hunsicker, and has been its chairman and CEO since. The bulk up in an analyst with Compass Point Research & San Francisco bank has generally been quiet Trading. about its succession plans over the years, but “The current deal is a little richer [than analysts said Tuesday’s announcement likely Baltimore F.N.B.’s previous Baltimore acquisitions]… cements Erkan’s status as Herbert’s eventual but I think scarcity value comes into play, successor. By John Reosti because [Howard is] the largest community “This announcement likely signals the July 13, 2021 bank left in Baltimore ” Delie said. board’s intentions to eventually name Ms. FNB Corp. in Pittsburgh is buying With Howard out of the picture, Baltimore’s Erkan as sole CEO,” Andrew Liesch, an Baltimore’s biggest local bank. largest bank would be the $339 million-asset analyst with Piper Sandler, wrote in a note to The $38 billion-asset FNB said it agreed to Harbor Bank of Maryland. investors. “We have long since thought this pay $418 million in stock for the $2.6 billion- Howard began looking for a merger would be the case and is well deserved. We asset Howard Bancorp. partner earlier this year, according to Scully, think she will make an excellent choice to Howard was founded in 2004 in suburban the company’s chairman and CEO. lead the bank when Mr. Herbert decides to Ellicott City, Maryland, by Mary Ann Scully, “It’s initially a strategic decision. Where retire.” American Banker’s Community Banker of the does a $2.6 billion-asset company go to Erkan joined First Republic seven years ago Year in 2017. It entered Baltimore in March get the kind of valuation our shareholders as its chief investment officer. She was named 2018 by acquiring the $1 billion-asset 1st deserve,” Scully said in a phone interview. chief deposit officer in 2016 and promoted to Mariner Bank. “Then, you begin translating that to what are president of the bank a year later. Buying the $2.6 billion-asset Howard the benefits for our customers. It suddenly Originally from Turkey, Erkan has a would make FNB Baltimore’s sixth-largest becomes a question of not if, but who. Who is Ph.D. in operations research and financial bank, with about 4% of the region’s $94 billion that ideal upstream partner?”

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The ultimate answer surprised her, Scully while the longer-term payment plans are one of the largest additions to the service said. dubbed “Apple Pay Monthly Installments.” since its launch in 2014, following other “This is a $38 billion company…but it was When making purchases through an Apple features like peer-to-peer payments. Apple where we were feeling the greatest fit. Pay Later plan, users will be able to choose last year acquired a company that developed The deal is expected to close in early 2022. any credit card to make their payments over technology to allow phones to receive time. The service is planned to be available payments by tapping another phone or credit for purchases made at either retail or card on its back, adding another potential LENDING online stores. Apple already offers monthly feature to the Apple payments road map. installments via the Apple Card for purchases of its own products, but this service would Apple, expand that technology to any Apple Pay WEALTH MANAGEMENT transaction. Goldman plan The interest rates that Apple plans to charge for the monthly installments couldn’t Citi debuts be learned. Affirm charges as much as 30% buy now/pay APR, while other rivals charge less. The no-fee stock interest-free four installment plans would later service rival similar systems like ones from Afterpay Ltd, Klarna Bank AB and Sezzle Inc. in trading to addition to PayPal’s popular Pay in 4 service. to rival Affirm Affirm fell as much as 13% on the news, compete with while PayPal declined about 1.4%. By Bloomberg News Users who want to use the Apple Pay July 13, 2021 Later service will need to be approved via an JPMorgan, Apple Inc. is working on a new service application submitted through the iPhone’s that will let consumers pay for any Apple Pay Wallet app, where they will also be able to Robinhood purchase in installments over time, rivaling manage their payments. Users will need the buy now/pay later offerings popularized to submit a copy of their local ID card to By Bloomberg News by services from Affirm Holdings Inc. and apply for the program. Apple will also offer July 13, 2021 PayPal Holdings Inc. customers the ability to exit payment plans Citigroup will let retail customers bet on The upcoming service, known internally to pay off the remainder of their purchase stocks without paying fees as the bank tries to as Apple Pay Later, will use Goldman Sachs balance. expand its wealth business in the face of fierce Group Inc. as the lender for the loans needed At least some of the Apple Pay Later plans competition from Silicon Valley ventures, for the installment offerings, according will also exclude late fees and processing discount brokerages and big-banking peers. to people with knowledge of the matter. fees, only costing users interest for longer- The Wall Street giant will initially make the Goldman Sachs has been Apple’s partner term plans. The service will also not require new offering — for the Apple Card credit card since 2019, running a credit check on the user. Separately, Citi Self Invest — available to checking but the new offering isn’t tied to the Apple the company is also testing a feature that will account holders before later marketing it to Card and doesn’t require the use of one, let users create temporary, digital Apple Pay more people, said David Poole, who heads the said the people, who asked not to be named Later credit cards for individual purchases. U.S. consumer wealth management business. discussing unannounced products. Apple’s new service is still in development The zero-fee deal applies to individual stocks The buy now/pay later system could help and its features could change or be canceled, and exchange-traded funds but will later add drive Apple Pay adoption and convince the people said. Spokespeople for Apple and other types of investments, such as mutual more users to use their iPhone to pay for Goldman Sachs declined to comment. funds or options, he said. items instead of standard credit cards. Apple On an earnings call earlier Tuesday, Chief Executive Jane Fraser, who took receives a percentage of transactions made Goldman Chief Financial Officer Stephen over this year, has been retooling the bank’s with Apple Pay, driving additional revenue to Scherr said he believes there are “more businesses tending wealth for a variety of the company’s more than $50 billion per year opportunities to be had with Apple.” customers — from investing novices to the services business. Goldman’s alliance with consumer darlings ultrarich. In January, the firm merged its The service is currently planned to work like Apple is aimed at helping it find a footing wealth management arm and private bank as follows: When a user makes a purchase in the world of consumer banking — an into a new unit called Citi Global Wealth via Apple Pay on their Apple device, they expansion it has sought in recent years to to be led by Jim O’Donnell. With this latest will have the option to pay for it either across spread its reach beyond the world of high offering, which won’t require a minimum four interest-free payments made every two finance on Wall Street. account size, it’s shoring up operations that weeks, or across several months with interest, Apple’s iPhone-based payment service is cater to cost-conscious speculators, whose one of the people said. The plan with four accepted at 85% of all U.S. retailers, according numbers have been multiplying during the payments is called “Apple Pay in 4” internally, to the company. The new service would mark pandemic.

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“We feel like the Self Invest offering will quarter rose by $6.2 billion, or 10.6%, from a really round us out,” Poole said. “Citi Self MINIMUM WAGE year earlier, according to the Federal Deposit Invest is another key step to delivering Insurance Corp. that robust and intuitive full investment continuum.” Synchrony The move may add to pressure on the likes CRIME AND MISCONDUCT of Robinhood Markets, the wildly popular boosts its trading app that soaked up customers last year and became their venue of choice for meme-driven buying sprees in the months minimum since. Robinhood, which is preparing for a banker who public stock listing of its own, and discount wage to $20 brokerages TD Ameritrade and Charles Schwab have all reported record volumes on sought Trump their platforms as newcomers rushed in. per hour While those firms and self-directed cabinet post investing platforms at larger peers JPMorgan By Polo Rocha Chase and Bank of America are ahead of July 13, 2021 Citigroup in offering no-fee options, the Synchrony Financial is raising its minimum convicted of firm’s operations are already formidable. wage for U.S. hourly workers to $20 per hour, Businesses now bundled into Citi Global resulting in a pay bump for more than 5,000 bribery Wealth would have collectively produced employees. about $6.6 billion in revenue in 2020, with The credit card lender’s new minimum By Bloomberg News roughly half of that coming from retail clients, wage is an increase from its prior floor of July 13, 2021 Citigroup said in a presentation in April. $15 an hour. Synchrony also plans to fund its A Chicago banker was convicted of federal To help newcomers, the bank is launching 2021 bonus program so that full-time hourly charges that he sought to trade $16 million a learning center in tandem with Self Invest. employees are eligible for a $1,000 bonus. in bank loans to former Trump campaign “You have quite sophisticated and “We offer one of the most competitive chief for the chance at a top experienced self-directed clients,” Poole said. wage and benefits programs to attract and administration post. “But for those clients that are novice and just retain the best talent. These investments Stephen Calk was found guilty on starting out with investing, we want to make allow us to remain an employer of choice Tuesday by a U.S. jury in Manhattan on sure we have that investor learning center.” now and for the future,” Synchrony President financial institution bribery and conspiracy Last year, Citigroup also debuted a robo- and CEO Brian Doubles said Tuesday in a counts. The founder and longtime chief advisory arm, a digital platform that connects press release. executive of Federal Savings Bank wanted customers to professionally managed Stamford, Connecticut-based Synchrony to be former President Donald Trump’s portfolios for an advisory fee of 0.55%. had more than 16,500 full- time employees Treasury secretary, defense secretary or a top Even with the digital push, Citigroup is at the end of 2020, including thousands of ambassador and approved the 2016 and 2017 focused on building out its workforce of call-center workers, according to an annual loans to Manafort with that goal in mind, financial advisors, said Poole, who joined securities filing. Most of the $96 billion- prosecutors said at a trial that began last in 2020 from Bank of America. There’s asset company’s hourly employees work in month. demand for both digital and advisor wealth customer service, digital servicing and fraud Manafort, who led Trump’s 2016 campaign management, he said. specialization, a spokesperson said. until that August and continued on as an “That’s one of the advantages of Citi,” Poole Synchrony’s announcement is the latest advisor, arranged for Calk to be interviewed said. “A client can come to us and have both. example of banks raising minimum wages for undersecretary of the Army, but the It’s not one or the other.” in a competitive labor market — despite banker wasn’t selected for the post. investor pressure to trim expenses. Calk is scheduled to be sentenced on Jan. Bank of America said in May that it would 10. The banker did not respond to questions raise its minimum wage to $25 an hour by leaving the courthouse after the verdict was 2025. That move follows an increase to $20 delivered. per hour last year. According to prosecutors, Calk was JPMorgan Chase CEO Jamie Dimon noted “hungry for power” and conspired with in his shareholder letter this year that the Manafort to try to achieve it. nation’s biggest bank had raised its minimum “Calk was the one with the money,” wage for thousands of employees to between Assistant U.S. Attorney Paul Monteleoni said $16 and $20, depending on their location. in closing arguments on Monday. “What Across the banking industry, spending Manafort offered to Calk was the chance to on salary and employee benefits in the first use some of that money to buy power.”

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Calk’s lawyer, Paul Schoeman, argued that will drive loan growth, but that hasn’t yet the banker believed the loans were “good” materialized. based on the information Manafort provided. Still, the company beat analysts’ Schoeman said the loans weren’t tied to Calk’s expectations for revenue, expenses and net desire to serve in the Trump administration, income, in a sign that CEO Charlie Scharf’s which the lawyer characterized as being turnaround is taking hold. The firm also driven by a sense of public duty. benefited from a $1.6 billion reserve release, “It’s not about greed for power,” Schoeman $1.3 billion of which fell to the bottom line, told jurors. “It’s about, ‘I would like to serve, boosting net income to $6 billion. Analysts as undersecretary of the Army.’ ” had expected $4.4 billion. Among the witnesses the prosecution “We believe we are doing what’s necessary called against Calk was Anthony Scaramucci, to improve the underlying earnings the Skybridge Capital founder who worked power of the company,” Scharf said in the on the Trump transition team and later spent statement.“The headwinds of low interest 11 days as White House communications rates and tepid loan demand remained.” director. Scaramucci told jurors Calk initially Shares of San Francisco-based Wells Fargo, sought to be Army secretary but was willing which surged 43% this year through Tuesday, to interview for undersecretary. Scaramucci advanced 1.7% to $43.96 at 9:31 a.m. in New helped get Calk the interview as a favor to York. Manafort but said he knew nothing about the loans and that he wouldn’t have helped Calk Cost cuts if he had. Scharf, who took over atop the nation’s fourth-largest lender almost two years ago, has embarked on a series of cost- EARNINGS cutting initiatives as part of his effort to boost profitability after years of scandals. Noninterest expenses dropped 8.3% to $13.3 Wells Fargo’s billion in the second quarter, while analysts were expecting a 7.3% decline. lending stalls Headcount fell to 259,196 from 264,513 at the end of March. Wells Fargo began a series of layoffs last year after pressure to as customers dramatically reduce costs came to a head when the firm reported a quarterly loss. avoid The bank is still under a costly Federal Reserve-imposed asset cap limiting its balance sheet to its size at the end of 2017. borrowing Earlier this year, Wells Fargo scored a sign of progress in its efforts to escape the penalty by By Bloomberg News securing the Fed’s acceptance of a proposal July 14, 2021 for overhauling risk management and Wells Fargo’s average loans tumbled in the governance. Period-end assets were $1.95 second quarter as consumers and businesses, trillion, down from $1.97 trillion a year earlier. buoyed by pandemic stimulus programs, Also in the second-quarter results: refrained from more borrowing. • Revenue surged 11% to $20.3 billion, The average balance of the bank’s beating analysts’ estimates of $17.8 billion. lending book dropped 12% to $854.7 billion, • Net interest income, a key source of according to a statement Wednesday. The revenue, sank 11% to $8.8 billion. Analysts result mirrored a similar decline at Bank of were expecting a 10% drop. America, which said earlier that loans and • The bank’s efficiency ratio, a measure of leases in its consumer banking unit also fell profitability, improved to 71% from 72% in 12%. the first quarter. q Unprecedented levels of U.S. government aid have left consumer and corporate balance © 2021 Arizent and American Banker. sheets in healthy shape, meaning more loans All rights reserved. aren’t a top priority. Executives across the industry have predicted a wave of spending

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