US consumer inflation (ex food and energy) rose by 2.1% YoY in February. The inflation print is consistent with the Fed’s 2% target and should keep them on a “wait-and-see approach” to raising rates later this year. Retail sales rose by 0.2% MoM in January, stabilizing after an unexpected 1.6% drop in December.

In regulatory news, SIFMA approved the unified mortgage bond structure to be issued by Fannie Mae and Freddie Mac going forward. The new bond will bring together the STACR and CAS securities that are similar but issued separately by these entities. Fannie and Freddie back about half of the US mortgage market and have guaranteed nearly $5 Tn in bonds. The unified bond is a big step towards standardizing issuance in the mortgage market.

Congressman Blaine Luetkemeyer, Ranking Member of the House Financial Services Subcommittee on Consumer Protection and Financial Institutions argued against the CECL rules in an op-ed in American Banker. The Current Expected Credit Loss (CECL) accounting standard that will be effective starting in 2020 is expected to eliminate some lending services and restrict access to credit, particularly for low-income families. Bankers are wary of the standard’s requirement to predict credit losses on loan products. You can read about PeerIQ’s analysis of CECL here and our overview of the Bank Policy Institute’s opposition to CECL here.  

Can Citi and JPM beat FinTech Personal Loans?

The personal loan market has grown rapidly since 2010 and the growth has been driven by FinTechs. But banks like Chase and Citi are now hitting back at FinTechs with their own personal loan offerings.

Source: TransUnion, PeerIQ

Both banks are targeting their credit card customers with personal loan offerings. The goal is to offer broader consumer offerings while also preventing these customers from refinancing their credit card balances with FinTech firms.

Citigroup launched a new consumer loan product and a new high-yielding savings-account as part of its digital bank. The Citi Flex Loan will allow select existing Citi credit card customers to convert part of their credit lines to a loan with a fixed APR. JP Morgan launched “My Chase Plan” and “My Chase Loans” – a point-of-sale financing alternative and a personal loan product respectively – that will be offered to its existing credit card customers.

Currently Morgan Stanley is the only top bank without an unsecured personal loan offering. Banks are offering unsecured personal loans and point-of-sale financing as ways for borrowers to lower their payments on large purchases. Easy loan applications on the banks’ digital platform should make it convenient for credit card borrowers to switch from high-interest rate credit card debt to personal loan products, posing a threat to FinTech’s market dominance.

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