Last week we reported that the central bank in Beijing was warning Chinese banks to make changes to capital ratios or get rid of bad loans. Now it's the turn of the European Banking Authority to sound warnings as profitability in the region remains in a parlous state, impacting capital generation and loan funding. One remedy being applied is UniCredit's continued restructuring, which will see the closure of 500 branches and job losses for 8,000 employees next year. The Italian bank is not unique in such cost-cutting zeal, as Deutsche Bank also did away with thousands of jobs earlier this year and has reportedly just sold $50 billion in poorly performing securities to Goldman Sachs. The move by UniCredit should save $1.1 billion and fits the EU banking watchdog's prescription for operational streamlining, including branch closure and bank mergers, to improve profitability. "The European Union itself may well have to take the bull by the horns and find the political will to reduce banking market barriers within the EU," commented Lorna Baek of Verisk Financial Research. "This would not only encourage the kind of consolidation needed, it would boost EU economic activity through a robust lending environment."
Credit card activity has been healthy for the Royal Bank of Canada (RBC), according to its latest annual report, published on Wednesday. The bank has the largest retail banking network in its domestic market, with over seven million credit card accounts, giving the firm, by its own count, a share of 23 percent of purchase volume on credit cards. The average credit card balance is 19,100 Canadian dollars ($14,492), a rise of 5.5 percent over the previous year. Overall, the bright numbers on the consumer side were eclipsed by declining revenue from RBC's investment banking. The ongoing trade dispute between the United States and China is giving RBC cause for concern, as an economic downturn in its larger neighbour would inevitably affect the Canadian economy.
"Build it and they'll come", goes a business adage that became popular in the closing decades of the last century. Now it seems more a case of "build it and they'll spend", with the "it" in this case being underlying digital payments infrastructure. A perfect illustration comes from Britain, where payment systems operator Pay.UK has revealed that, in a single day last week, 124 million payments were processed through its Direct Debit and Bacs Direct Credit systems, a new high for automated payments in the country. The processing window was open for 15.5 hours, which means that just over 133,000 transactions were processed every minute, on average, during that day. As we note in Verisk Financial Research's forthcoming update of the United Kingdom Cards and Payments market, "thanks to progressive regulation and consumer adoption of modern technology, the UK has become one of the most advanced and competitive payments markets in the world".
"There's an app for that" is a phrase people most definitely did not use in the last century: in Britain the latest noteworthy one, at least for our purposes, comes tethered to a new instalment credit card. London-based fintech Tymit has launched an app-enabled card, issued by Wirecard, that allows holders to plan spending, calculate the "true total cost" of a transaction and, of course, divide the cost of a particular purchase using terms running up to 24 months. According to the company, "interest is only calculated and applied to instalment transactions rather than the whole balance, saving customers a significant amount of money versus traditional credit cards. Purchases that are not put on an instalment plan default to be due in full the next month, with no interest charges or fees".
Such is the dominance of the Big Four Australian banks in New Zealand's retail banking market that the decisions of the latter's central bank are unusually pertinent. For some time now, new and stricter capital requirements that would go considerably higher than the current level of 10.5 percent have been in the offing. However, when the news came this week that the required ratio would rise to a minimum of 18 percent, there were probably sighs of relief in Sydney and Melbourne, as the combined amount needed to comply, at 13 billion New Zealand dollars ($8.5bn), is seven billion less than had been expected. With Australian banks under pressure following a public review of conduct and their domestic regulator scrutinising transactions for irregularities, concern has been growing across the Tasman Sea, especially as New Zealanders are in fact unprotected by a deposit protection scheme, a situation that is set to change as the authorities are currently crafting a plan to establish one.
To end, links to some other stories of interest this week...
France: SocGen launches instant payment offering for FIs
UK: Challengers increasingly used for primary bank account
UK: Goldman Sachs to cool Marcus retail bank expansion in Britain
US: Black Friday shoppers avoid stores, make $7bn+ splurge online
US: Some credit unions growing fast and taking risks, says WSJ report
The Weekly News Digest from Argus Advisory Research highlights significant developments in payment cards, digital payments, acquiring, processing, retail banking and consumer credit. Our writers and researchers frame these items in contexts such as historical, sectoral and regional trends, adding a layer of value often missing from the rolling news cycle.
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