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Banking, Portfolio News


#295
Stormy Weather In BankVille

Published:

Jul 13, 2019


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Posted In:

Banking, Portfolio News

Published:

Jul 13, 2019


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Despite fresh all time highs in the stock market on Friday, the big banks aren’t emerging from clouds that have lingered over the industry since the financial crisis.

Though the broader market trades at 18x earnings, JP Morgan and HSBC are trading at 12x, Bank of America at 11x, and Goldman at 9x. With an average earnings multiple around 10x, the banks are now valued at the steepest discount to the market recorded in more than four decades.

Investors are clearly worried about the sector’s profitability and growth. And last week, the storm grew stronger as Deutsche Bank cut 18k jobs in an effort to slash their cost structure by 25%.

So, why exactly have the clouds lingered in Bankville despite the longest bull-run in recent history?

One key driver is the narrowing spread, and more recent “inversion,” in short-term versus long-term interest rates. Core to the banking business model is paying out short-term rates on deposits while raking in longer-term rates on loans. With little or negative spread, the banks profit margins get squeezed.

As a result, banks appear to be heightening their focus on fee-based revenue. This includes wealth management (which Deutsche is now refocusing on), as well as home financings. According to Goldman, mortgage rates are now low enough that 45% of homeowners may be eligible to refinance - which could be a boon for leaders such as Wells Fargo.

Despite these reasons for optimism, it's unclear the storm is going to STOP anytime soon.

Portfolio News


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MoneyLion


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Vestwell appoints two fintech leaders to its board - Vestwell announced the appointment of two new members to the company’s Board of Directors, Rana Yared, Partner and Managing Director of Goldman Sachs, and Lori Hardwick, CEO of Wealth Tech at RedRock Strategic Partners and Chairman of Riskalyze. Rana and Lori join following Vestwell's April $30m Series B round, which is being used to fuel innovation and scale the company’s retirement technology platform. Read more

Flutterwave participated in the Africa Blockchain Conference Tech Expo - Portfolio company Flutterwave joined the Africa Blockchain Conference in Kampala, Uganda. The conference featured the "Africa 4.0 Tech Expo," showcasing leading tech and innovations in Africa. Read more

Moneylion given 5-star review by Benzinga - Portfolio company Moneylion was given a 5-star review from Benzinga, describing it as a "catch-all for everything related to your personal finances." Read more

Bank of Khartoum receives “BBB+” rating with positive outlook for its financial crime compliance - Sigma Ratings has awarded BOK a 'BBB+' rating with a Positive Outlook. This marks the first rating Sigma has issued on behalf of a financial institution in Africa. Read more

5 largest ERC-20 tokens surpassed Venmo in trading volume - In Q2 2019 the combined transaction volume of stablecoins Tether, Dai, USD Coin, Paxos, and True USD surpassed the transaction volume of popular payments app Venmo. Portfolio company TradeBlock provided insights used in the report! Read more

Stormy Weather in BankVille


Nervous investors to check for rates squeeze on US bank earnings - While the stock market hits fresh highs, US bank stocks have trailed the S&P 500 by 14% over the past year. Earnings multiples are 40-50% below the broader market. Read more

Deutsche Bank chief rebukes executives over suit-fitting on cuts day - Of course they did! A couple of senior Deutsche Bank managers called high-end tailors to their London office as thousands of traders lost jobs. The CEO then gave them a buzz. “I expect the two colleagues won’t forget my call,” said CEO Christian Sewing. Read more

Industry News


Latin American venture firms angle for slice of global funding boom - Uruguay’s Kaszek Ventures and Brazil’s Monashees seek to raise combined $750 million for new funds. These plans come on the heels of SoftBank saying in March it intends to invest $5 billion in technology companies in the region. Read more

Domino's tests cashless stores in Australia as the world ditches paper money - It is hoped the pizza chain’s cashless stores will help increase safety since both the stores and delivery drivers will no longer have any cash to steal. The Australian government has also banned all cash purchases over $15,000 in a law that took effect this month. Read more

Banks not rushing to Libra – It has been 3 weeks since Facebook announced plans for the new Libra cryptocurrency, and banks have not yet publicly bought in. Reasons that different banks have cited for not yet supporting Libra include banks' own cryptocurrencies/digital coin projects, a complex regulatory environment, and the risk that Libra becomes a competitor to banks' own services. Read more

US Congress rejects European-style ESG reporting standards - House opposition is a blow for investors seeking clearer and more comparable data. Opponents claim that “Mandatory ESG disclosures only name and shame companies as well as waste precious company resources.” Read more

Bitmain co-founder launches new cryptocurrency financial services startup - Wu Jihan, the co-founder of Bitmain Technologies, which produces hardware specialized for use in mining Bitcoins, has launched Matrixport, a one-stop platform for over-the-counter trading, lending and custody for digital assets. Read more

Google Chrome now syncs saved payment options across devices - The tech giant announced this week that it will allow signed-in Chrome users to fill in checkout forms with payment methods previously saved to their Google Account. Read more

Miami Dolphins announce Litecoin as the team's official cryptocurrency - The Miami Dolphins, a popular American professional football team, announced Litecoin (LTC) as the team's official cryptocurrency, and that the team has partnered with Aliant Payments, a crypto merchant services and payment processing firm. Read more

SEC approves 1st consumer Reg A+ token “Props” for cross-app rewards - After cracking down on ICOs, the SEC just “okayed” the first two RegA+ tokens that offer an alternative way for anyone to gain a stake in a network, even unaccredited investors. Blockstack and influencer live-streaming app YouNow’s spin-off “Props” received a formal green light for a consumer utility “Howey” token users can earn to get loyalty perks in multiple apps. Read more

Utah becomes second U.S. state to create fintech regulatory sandbox- Utah announced that they have created a fintech regulatory sandbox, which will permit fintech companies to apply for a special exemption when setting up a business. Read more

Tezos scores billion-dollar STO deal with South American investment bank - BTG Pactual - South America's third-largest investment bank - is jumping onto the Tezos Blockchain to launch its security-token offerings. Read more

S&P rating is landmark for Chinese bond market - S&P became the first foreign credit-rating company to offer an independent assessment of risk in China’s vast domestic debt market, giving a top grade to a unit of the country’s largest bank. Read more

Growing list of fintechs going public on ASX in 2019 – Tyro, Australia's only independent and fastest growing EFTPOS (Electronic Funds Transfer at Point Of Sale) provider, is considering listing on the Australian Securities Exchange (ASX) this year. Other fintechs like Splitit and Prospa have already gone public on ASX this year, while Douugh is also actively preparing a listing on ASX. Read more


New York and Israel regulators announce fintech cooperation – The New York State Department of Financial Services, alongside the Bank of Israel, the Israel Security Authority and the Insurance and Savings Authority, agreed to “encourage and enable” the exchange and sharing of financial services technology. Read more

Revolut to open Berlin tech hub - Revolut, U.K. based provider of banking and transfer services, announced its plans to open a new hub in Berlin. The move will improve Revolut's access to Berlin's budding pool of tech talent in order to bolster the company's growth efforts. Read more

Capital One acquires BlueTarp Financial - Capital One has acquired BlueTarp Financial, Portland, Maine based provider of customized B2B credit management programs. BlueTarp offers suppliers credit management services that essentially offload the need for suppliers to manage receivables, similar to factoring services. Read more

European challenger bank N26 launches in the U.S. - The European mobile banking startup with more than $500m in funding from big-name backers including Peter Thiel’s Valar Ventures and Tencent, is finally launching in the U.S. Read more

IBM and Australian banks announce blockchain pilot - Australian banks ANZ, Commonwealth, and Westpac are teaming up with IBM and Scentre Group (operates shopping centers in Australia under the Westfield brand) to process retail lease bank guarantees on a private blockchain - the program will be named Lygon. Read more

Select Financing


AssetMark Financial - California based provider of wealth management tools and technology announced its plan to raise $250m in its IPO during the week of July 15th. Read more

Bolt - San Francisco based provider of a streamlined online checkout platform for small businesses raised $68m in Series B funding co-led by Activant Capital and Tribe Capital. Read more

Clause - New York based provider of digital contract management solutions raised $5.5m in Series A funding led by Galaxy Digital. Read more

Creditas - Brazil based provider of a digital platform offering secured consumer loans raised $231m in Series D funding led by SoftBank. Read more

Fawry - Egypt based provider of digital payment services announced plans for an upcoming IPO on the Egyptian Exchange, looking to raise $150m. Read more

Jacobi - Australia based provider of a platform that helps institutional investors with asset risk management, modelling, and analytics raised A$7.7m in Series A funding, co-led by Illuminate Venture Partners, 8VC, and Credit Ease Venture Fund. Read more

Kyash - Japan based provider of a payment app offering connected Visa cards, with the goal of becoming Japan's first challenger bank, raised $14m in Series B funding, co-led by Goodwater Capital and Mitsubishi UFJ Capital. Read more

Landbay - London based platform that finances landlords to help them buy properties to rent out raised £1b from an undisclosed financial institution to finance mortgages on its platform. Read more

Lulalend - South Africa based provider of short-term loans to small and medium sized businesses raised $6.5m in Series A financing co-led by IFC and Quona Capital. Read more

NiYo Solutions - Bangalore, India based neo-bank raised $35m in Series B funding led by Horizons Ventures, Tencent, and JS Capital. Read more

OPay - Lagos, Nigeria based provider of mobile payment services, which was founded by the Norwegian browser company Opera, raised $50m in funding led by Sequoia China, IDG Capital, and Source Code Capital. Read more

Open – Bangalore, India based startup that operates a neo-bank to help businesses automate and run their finances, has raised $30m in Series B funding, led by Tiger Global. Read more

Provenance Blockchain - San Francisco based provider of a blockchain platform for the financial industry raised funding (undisclosed amount) from a Singapore-based investment arm of Recruit Holdings. This funding follows Provenance Blockchain's $20m security token offering (STO) in April. Read more

Qover - Belgium based provider of digital insurance raised €8m in funding led by Alven and Portag3 Ventures. Read more

Remitly - Seattle based provider of mobile remittance services raised $220m in Series E funding, comprised of $135m in equity investment led by Generation Investment Management and $85m in debt from Barclays, Bridge Bank, Goldman Sachs, and Silicon Valley Bank. Read more

Sensibill - Toronto based provider of software used to scan and digitize physical receipts raised $31.5m in Series B funding led by Radical Ventures. Read more

Soldo - United Kingdom based provider of multi-user spending accounts for businesses raised $61m in Series B funding co-led by Battery Ventures and Dawn Capital. Read more

WayPay - Royal Bank of Canada (RBC) has acquired WayPay, a Burlington, Ontario cloud-based provider of accounts payable automation and payment optimization. Read more

Zopa - United Kingdom based peer to peer lender announced it is looking to raise $235m to propel the company towards its mission of becoming a full stack retail bank. Read more

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