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Investor News: Mastercard Takes Target at Cryptocurrencies, Comerica to Settle Fraud Lawsuit
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Banks have recently faced challenges ranging from lawsuits and settlements to adapting payment technology to include cryptocurrencies, and even widespread skepticism in the wake of bank failures. But a strong federal jobs report in early June boosted confidence in the sector, with the market reflecting the positive news at the time.
After two years of high interest ratesinvestors entered 2024 increasingly concerned about deteriorating credit. But loan charge-offs, while rising across the sector, remain low by historical standards. Employment data suggested this trend could continue, supporting bank earnings later in the year.
According to the report, gross domestic product increased at an annual rate of 1.3% in the first quarter of 2024, after increasing 3.4% in the last quarter of 2023. Office of Economic Analysis. The Federal Reserve Bank of Atlanta forecast June 7 growth in the second quarter of 3.1%.
Investors have shifted their attention away from concerns that a strong job market will lag Fed policymakers‘ decision to cut interest rates to benefit banks from a strong economy, analysts said. They noted that after raising rates several times in 2022 and early last year to fight inflation, Fed officials have kept rates unchanged since July and continue to signal that their next move will be a rate cut. taxi.
Fed officials said as much in statements this spring Weak labor markets could accelerate rate cuts but continuing strong conditions would not automatically trigger alarm bells, given that inflation has fallen from a peak of 9% in 2022 to nearly 3% this year. The Fed is aiming for 2% and at this stage is focusing more on inflation data than on employment. The Fed will “obviously take these numbers into consideration,” but the latest jobs data is “unlikely to shake policymakers off their already charted path,” said Sophie Lund-Yates, principal equity analyst at Hargreaves Lansdown.
To know more: Is the Fed’s tough approach to real estate too tough?
Elsewhere in the industry, payments companies, including PayPal AND MasterCard, are leading efforts to generate greater demand to expand cryptocurrencies beyond the most knowledgeable and tech-savvy users and early adopters. One of the biggest problems with consumer adoption of cryptocurrency and digital assets have been the user experience, according to James Wester, research director for digital assets and cryptocurrencies at Javelin Strategy & Research.
“It is not intuitive to send and receive cryptocurrencies using most Crypto walletsand the consequences of a mistake, such as sending the wrong cryptocurrency to the wrong type of wallet, is the potential loss of assets,” Wester recently told American Banker.
That does it cryptocurrency according to Wester, an unattractive option for most payment types, especially considering how many other familiar payment methods are already available.
To know more: How close is the payments technology industry to a breakthrough?
“With his cryptographic credentials, MasterCard is trying to solve both the challenge of sending and receiving cryptocurrencies and the potential of sending cryptocurrencies to the wrong type of crypto address,” he said. “These are the types of solutions that cryptocurrencies will need to address issues related to the clunky experience user.”
Visa and Mastercard have pursued the cryptocurrency goal by focusing on the acceptance of stablecoins, working with governments on central bank digital currencies, and simplifying credentials to access blockchain-based products.
Find out more about the recent issues facing the banking sector and what they mean for investors.
The 20 best-performing publicly traded banks with less than $2 billion in assets
American Banker publishes an annual list of the best-performing publicly traded banks with less than $2 billion in assets using data compiled by consultancy Capital Performance Group. The ranking is based on 2023 year-end data and uses institutions’ three-year average return on average capital, or ROAE, to determine the ranking.
For 2024, FFB Bancorp tops the list, moving up from position No. 4 last year. The Fresno, California-based institution’s ROAE was 29.7%, about double the top 100’s median of 14.87%. For all publicly traded banks with less than $2 billion in assets, the median ROAE was 10.91%.
To know more: The 20 best-performing publicly traded banks with less than $2 billion in assets
New York City’s new leadership faces tough questions from shareholders
New York Community Bancorp’s new executive leadership team introduced itself to shareholders on June 5, answering questions from those who have lost substantial value on their investments.
One shareholder wanted to know why investors should approve the additional capital, coming from an investment group led by former Trump administration Treasury Secretary Steven Mnuchin. Although the capital infusion was announced on March 6 and closed six days later, the New York community was necessary to obtain shareholder approval to finalize the transaction due to the amount of shares it plans to issue.
“If the capital increase had not been ready that very afternoon, the company’s chances of survival would have been in danger,” CEO Joseph Otting told shareholders at the meeting. “Looking back today, it was the right decision for the company, it was the right decision for investors, and collectively we will work very hard to restore the value of this company going forward.”
To know more: NYCB’s new leaders face skeptical shareholders in wake of turmoil
Settlement Reached in Comerica Bank Direct Express Case
Comerica Bank has accepted a proposed $1.2 million class action settlement that would end a five-year legal battle against A wealth of 79.4 billion dollars Comerica, which he addressed allegations that he mishandled fraud reportsdid not reimburse customers and did not adequately supervise third-party providers of the Treasury Department’s Direct Express program. Most of the 4.5 million Americans who use Direct Express do not have a bank account and receive their Social Security, Veterans and other benefits electronically on prepaid debit cards each month.
Comerica and Conduent, a large conglomerate and call center operator based in Florham Park, NJ, denied any wrongdoing. Nonetheless, the two companies did not track the fraud complaints and were unable to identify and provide the court with the names of beneficiaries who had filed fraud complaints over a four-and-a-half-year period, according to the report. 97-page agreement proposal.
“Defendants expressly reserve their position that Direct Express customers with claims such as those alleged in this case cannot be identified without careful file-by-file analysis and a thorough individual investigation,” the proposed settlement states.
To know more: Comerica to Settle Direct Express Fraud Class Action for $1.2 Million
Bank stocks reflect the optimism that emerged from the recent federal jobs report
A positive June 7 federal jobs report led bank stocks to advance, with the KBW Nasdaq Bank Index up less than 1% on the day the report was released, but up nearly 2% intraday. It increased 6% year to date through the first week of June.
Analysts said the favorable data reflected employers’ confidence in growth and continued economic strength in 2024, following a solid gross domestic product performance last year. A strong economy typically allows borrowers to make payments on loans, and banks, in turn, report low levels of credit losses.
“The U.S. economy continues to be resilient,” Henk Potts, market strategist at Barclays Private Bank, recently told American Banker’s. Jim Dobbs. Potts expects the 4% unemployment rate to peak and remain “low by historical standards” through 2024.
To know more: Banking stocks advance thanks to robust employment gains
Mastercard’s plans to coordinate digital payments and cryptocurrencies
Mastercard says it can create parity between digital and cryptocurrency payment methods, and to that end, it’s adding its scale and name recognition to cryptocurrency credentials, an old concept that attempts to facilitate the way people they identify the binaries involved in cryptocurrency payments.
Mastercard’s crypto credentials use an alias used by crypto exchanges to process cryptocurrency payments, replacing the blockchain addresses normally used. A The blockchain address varies in size and structure, but there are usually between two and three dozen characters that identify the sender and recipient of a cryptocurrency transfer. An alias is a smaller, easier-to-remember identifier that is conceptually similar to an email address.
“There are multiple blockchains out there, all operating on the premise that there is a decentralized infrastructure to provide access,” Raj Dhamodharan, executive vice president of blockchain and digital assets at Mastercard, recently told American Banker’s Giovanni Adami. “This is good and it’s here to stay. But if you want a healthy transaction, what you want is verified identification. We want to put standards behind that verification.”
To know more: Mastercard asks: are cryptocurrencies still too complicated for payments?