BB&T and SunTrust merger; Tech in Bank Earnings; Webinar for Whole Loan Investors

By Vy Phan

February 10, 2019

Greetings,

The Fed’s January 2019 Senior Loan Officer Survey showed that banks tightened standards for commercial real estate (CRE) loans. Overall, banks tightened standards for credit card borrowers. However, lending standards for most categories of consumer loans and C&I loans remained unchanged. Banks also reported weaker demand for both business and household loans.

Source: Federal Reserve, PeerIQ

Technology Spurs the First Big-Bank Merger in a Decade

BB&T agreed to buy SunTrust for $28.2 Bn – the first major mega-bank deal in a decade. This deal will create the sixth-largest US retail bank. The M&A is supported by a constructive regulatory environment fostered by the OCC and CFPB, among others. The previous large acquisition was the JP Morgan acquisition of Bank One in 2004.

A major motivation for the deal was the ability of both banks to pool resources to build better digital offerings. SunTrust has a FinTech focused fund and has partnered with FinTech lenders to provide home improvement and small business loans. Banks are investing billions in digital tech spend to maintain relevance with customers that are increasingly eschewing bank branches for a seamless, online, full-service banking and wealth management customer experience.

In this week’s newsletter, we will review comments by bank and credit card executives on their technology initiatives.

PeerIQ’s Webinar on Tools for Whole Loan Investors

Join us for a Webinar on PeerIQ's Tools for Whole Loan Investors, Wednesday February 13 at 2 PM EST!

PeerIQ will demonstrate its latest analytical tools on a loan pool transaction use case.

Modules include:

Valuation of "pass-through" CUSIPs made up of unsecured personal loans
Stress testing to forecast future cash flows and price loans in various scenarios
Curve extraction from TransUnion market data or originator-specific history
Automated Benchmarking to monitor adverse selection and portfolio alpha

Brian Moynihan, CEO	“… but when you think about that kind of penetration of digital practice a 1.5 billion logins a quarter, you have 77% of the checks deposited not at the branch [ digital banking] is a broad-based trend that we've been driving […] this quarter we crossed five million Erica users. Now remember Erica is not even a year old and five million Preferred Rewards customers who brought their relationship to get the benefits. […] Its tremendous client delights, tremendous capability, tremendous efficiency.”
Michael Corbat, CEO	“We continue to utilize technology to improve the client experience and lower our cost to serve, whether it's by automating processes or enhancing our mobile channels and we'll continue to roll out new digital capabilities throughout the year.”
R. Mark Graf, CFO	“And in terms of technology spent, we are continuing to invest in initiatives to drive even better customer experience and competitive advantage. For example, we're making ongoing investments in machine learning to enable faster and better decisions about how to target our collection strategies and marketing campaigns. We've begun to see the benefits of these investments in 2018, with positive impacts on loan growth and credit performance. […] we will continue to invest in technology, supporting the deployment of advanced analytics and automation. This will allow us to make better, faster decisions, drive operational efficiencies in account acquisition, servicing, fraud and collections. And of course, the thread that weaves all this together is our relentless focus on customer experience.”
David Solomon, CEO	“Lastly, as we bring Marcus and the business of Investment Management closer, we will continue to evolve Marcus from a single product to a multi-product platform. We now serve three million customers through our lending and savings products in Clarity Money. We plan to further enhance the platform to include multi-tiered mass affluent digital wealth offering which is currently in development. […] Across these and other investments for growth combined with a significant focus on operating efficiency, we are beginning to deliver on our commitment to enhance the durability of our revenues and our earnings.”
Rich Fairbanks, CEO	“Our digital and technology transformation is accelerating, and it's powering our ability to grow new customer relationships and deepen engagement with new and existing customers. […] been taking our two banks that we have, one direct bank and one local bank, and basically building one integrated bank which is integration across technology, product, the customer experience. There's a lot that goes into that and we sort of spent years doing it. So, what's noteworthy about this year and a milestone for us is that we reached the stage of sort of integration of these businesses that we are able to launch national marketing of our very digitally leaning bank.”
Margaret Kane, CEO	“Overall, it was also a breakout year for technology. Our investments over the past four years are increasingly contributing to our success. Data analytics, AI, the cloud and others are now credit and customer service innovation and new digital and mobile customer experiences.”

Industry Update:

The January 2019 Senior Loan Officer Opinion Survey on Bank Lending Practices (Federal Reserve, 2/4/19) Bank tightened lending standards for commercial loans but kept them unchanged for household loans.
BB&T to Buy SunTrust in Largest Bank Deal Since the Financial Crisis (WSJ, 2/7/19) The first big-bank merger in a decade saw BB&T agreeing to buy SunTrust for $28.2 Bn.
It’s a platform planet. Can banks adapt to it? (American Banker, 1/31/19) Banks have also been diversifying by developing technology-enabled platforms that allow companies to offer white-labeled banking products.
Is the OCC's fintech charter really 'perfect' for mortgage lenders? (American Banker, 1/27/19) The OCC’s FinTech charter may be most appropriate for a non-bank digital lender.
LendingPoint Again Upsizes Its Mezzanine Financing, Bringing It to More Than $67.5 Million (BusinessWire, 2/4/19) LendingPoint, a consumer fintech lender, upsized its latest mezzanine credit facility to $67.5 Mn.
SOFI 2019-1 PreSale Report (KBRA, 2/6/19) KBRA has rated the senior tranches on SOFI’s latest consumer loan deal AAA.
Have a 100%-APR Consumer Loan? This Lender May Securitize It (Bloomberg, 2/7/19) Enova’s first consumer loan securitizations focused on high-interest rate non-prime loans.

Lighter Fare:

Tokyo to San Francisco in 5½ Hours? If All Goes Well, Yes (WSJ, 2/7/19) On the 50^th anniversary of the maiden flight of the Concorde a look at the advances in commercial air travel that promise to crunch travel times.