In macro news, former Fed Chair, Ben Bernanke, is concerned that the “neutral rate” is continuing its multi-decade drop and shows no signs of slowing down. A drop in the neutral rate, which balances growth and slowdown risk, reduces the conventional ammo policymakers have to manage growth.
The WSJ reports that Goldman Sachs intends to provide transparency to investors on the performance of lending operations, including Marcus. The move will bring financial reporting in line with competitors like JPMorgan and Bank of America. Also, stay tuned for GS Investor Day on Wednesday, January 29th. We’ll be sure to analyze all things lending related.
For the financial crisis history enthusiasts, we recommend the WSJ’s post-mortem on the JPM acquisition of Bear Stearns. Teaser excerpt: ”Jamie Dimon got a $30 stock for $10. It took 11 years to close the gap.”
The theme of embedded banking continues to gain currency. Penny Crosman pens, “The Rise of the Invisible Bank” in American Banker. Highlights:
- In five years, banking will be behind the scenes, embedded in everyday activities.
- Wearable devices, such as tech-enabled eyewear linked to banking and money, are coming back.
- An increasing number of bank transactions will take place through “in-home” devices such as Alexa, Google, and Siri.
- Payments to move completely away from cards and phones toward wearables and biometrics.
Check out our prior blog post on the topic of “functions as a service” here for more on the theme.
Auto and Credit Card Delinquencies Trending Higher
Our chart of the week is a sample of credit performance in the auto loan and credit market. The latest data shows a continued uptrend in the % of balances due for auto loans. Auto loans have under-performed due to falling resale value for used cars from supply glut and greater extension of auto loans (leaving the UPB below the auto’s equity value).
Credit performance remains below pre-crisis delinquency levels. We note that the attached does not control for vintage, credit risk, and other factors. Customers interested in having a granular breakdown of the performance of these asset classes can reach out to PeerIQ. Stay two steps ahead of the competition with timely market insights.
Source: PeerIQ, Deutsche Bank, Federal Reserve
In financing news, real estate FinTechs continue to make headlines. Orchard, a real estate startup led by CEO Court Cunningham, raised $36 million in equity. Investors include Navitas, FirstMark, Juxtapose, and Accomplice.
Roofstock, led by Gary Beasley, secured a $50 Million Series D. SVB Capital led the round with participation from Citi Ventures, Fort Ross Ventures, and 7 Global Capital.
HighRadius, led by CEO Sashi Narahari, raised $125 million in Series B funding led by ICONIQ Capital. HighRadius provides software for integrated receivables.
- Low Interest Rates Worry the Fed. Ben Bernanke Has Some Ideas. (New York Times, 01/04/2020) Former Federal Reserve Chair, Ben Bernanke, believes that low interest rates could create challenges during the next recession.
- Demand for Fed Liquidity Rises, New York Fed Injects Nearly $100 Billion (Wall Street Journal, 01/07/2020) The New York Federal Reserve Bank added almost $100 billion in short-term liquidity.
- Eleven Years in the Making: Breaking Even on JPMorgan’s Purchase of Bear Stearns (Wall street Journal, 12/25/2019) JPMorgan finally breaks even on the Bear Sterns deal.
- Can Regulators Catch Up To Tech Changes? (American Banker, 01/08/2020) Policymaking is moving at a significantly slow rate in comparison to the exponential growth of technology.
- Goldman Sachs Sheds Some Secrecy to Win Over Skeptical Investors (Wall Street Journal, 01/07/2020) Goldman Sachs to be transparent with investors by sharing more information on lending operations.
- Podcast 228: Andrew Dix of Crowdfund Insider (Lend Academy, 01/03/2020) CEO of Crowdfund Insider, Andrew Dix, on what to expect from FinTech in the coming decade.
- The Rise of the Invisible Bank (American Banker, 01/06/2020) Digital banking to be embedded in everyday life.
- Real Estate Startup Orchard Raises $36M (Built in Austin, 01/07/2020) New York City-based FinTech startup, Orchard, raised $36 million in equity funding to hire more employees, improve its product, and expand to new markets.
- Roofstock Secures $50 Million Through Series D Funding Round Led by SVB Capital (Crowdfund Insider, 01/08/2020) Startup that provides investors with an online marketplace for digital real estate, raised $50 million in Series D funding.
- Houston, We Have a New Unicorn: HighRadius Raises $125M Series B (Crunchbase, 01/06/2020) FinTech company that provides software for integrated receivables, raised $125 million in Series B funding.
- This Insect Has the Only Mechanical Gears Ever Found in Nature (Smithsonian Magazine, 09/12/2013) The Issus coleoptratus is an insect that has the first functional gearing system ever found in nature.