Uncle Sean's Update - 6/16/23

​Happy Friday!!!
 
WHEW – it is getting HOT down here in Texas 🔥which can mean only one thing…..  It’s Father’s Day Weekend!!!  Happy Father’s Day to all the Dad’s out there getting it done 24/7!  Here is the Uncle Sean Update for 6/16/23:
 

• It’s Fed Week!!!  As widely expected (although I admit that I thought they would go ahead and raise 25bps), the FOMC decided to hold and maintain the existing target range for the fed funds rate at 5.00% - 5.25% based on “how far and fast we have moved.”  Chairman Powell went on to state that “holding the target range steady at this meeting allows the committee to assess additional information.”  If you want to get your “inner Fed freak on” like me 😊, you can check out the details below:
  • Here is the Transcript of Chair Powell’s Press Conference (25 pages); and here is the press conference video (40 minutes).
  • Also – check out the Summary of Economic Projections (i.e. “Dot Plot”) showing a consensus estimate of about 50 bps more rate increases to 5.6% through YE; but a growing sentiment for the potential of a “soft landing” as Change in real GDP increased from 0.4% in March to 1.0% for 2023 YE.
    • As always, Uncle Sean feels the need to remind folks that the Summary of Economic Projections is not policy.  It is simply a median of current assumptions based on current economic data as it stands today.
  • Meanwhile, the BLS May CPI Report came in at 4.0% YoY (expectation was 4.1% and April was 4.9%) – Core CPI remains a little more stubbornly sticky at 5.3% (expectation was 5.2% and April was 5.5%).
    • Marks 11 straight months of annual CPI declines with the high water mark being June 2022 at a whopping 9.1%.
      • Also for reference – this is the first time since Mar 2022 that the Fed did not raise rates at their FOMC policy meeting….

 

• This makes me happy!!!  The NFL announced it is borrowing $78M from 16 Minority Depository Institutions (MDIs), Community Development Financial Institutions (CDFIs) and minority- and women-focused banks (a complete list of these FI’s is at the bottom of the article) to support and expand business opportunities with diverse enterprises across the country. The League worked with Bank of America to identify these financial institutions that provide vital investments to diverse individuals, businesses, and communities.  GOOD JOB to everyone involved!!!! 👍👏

 

• The OCC released their Semiannual Risk Perspective - Spring 2023 Edition – Uncle Sean found this to be a good read at 36 pages with some really informative graphics showing changes over time as well as some Blue Chip (Walters Kluwer) economic estimates going forward. Some Key Summary Items:
  • Liquidity levels have rebounded
  • Credit Risk remains benign, but signs of stress are increasing with particular emphasis of office space (three years of declining occupancy) in CRE – with class B and C buildings having the highest vacancy rates (CoStar Group)
  • Operational Risk and Compliance Risk remain elevated as banks continue to utilize third parties for digitization efforts and alternate product, services, and delivery channel offerings
    • Uncle Sean wrote about this last week related to the joint Interagency Guidance on Third-Party Relationships: Risk Management, but it certainly bears repeating that while Banking-as-a-Service is awesome and still growing at a rapid pace, it sure feels like the regulators are looking very closely at the BaaS platform provider / Connector model (we are all aware of the higher profile enforcement actions / written agreements over the past year).
      • And this part too…. As Uncle Sean likes to say, “you can delegate responsibility, but you cannot delegate accountability.”

 

• Speaking of BaaS Connector/Middleware model…..  So I had purposedly delayed writing about FIS to acquire Bond as neither entity had prepared an official press release.  However, it appears that this is a done deal and has already closed.  Payments Dive has a good summary.
  • Uncle Sean’s thought…..  What happens when a major Core Processor acquires a BaaS Connector…???  What happens to other BaaS Connectors that were already partnered with FIS???  Could this be the beginning of an industry wide shift???  I guess we shall wait and see.  😲

 

• Okay – one more BaaS Connector model comment and I’m done 😊….  This week, Synapse announced they have laid off 18% of their workforce (after finally reaching profitability and cash flow positive last year) citing current macroeconomic conditions that have “begun to impact our clients and platforms.”
  • Alright, here it comes….  Uncle Sean goes “off the rails” here…  If one of the most well known BaaS Connectors (who is partnered with one of the leading, if not THE leading BaaS Sponsor Bank as well as others) is having a tough time after years of operations and significant market share, what does that mean for that specific model as we continue to see growth in the BaaS Sponsor bank space…???
    • I’ll leave you with one terrifying thought to contemplate if you are a Sponsor Bank using or thinking about using a BaaS platform provider / Connector model (reference the Interagency Guidance on Third-Party Relationships – see Section 5. Termination, page 61-62 – know how to unwind your third party relationship)…..  If you have a BaaS Connector platform provider utilizing multiple banks (including yours) for various banking services for a fintech or fintechs – what is your action item if that Connector files for bankruptcy…???  😬😮
      • Okay – I’m done now – WHEW!!!

 

• Some big news for Wisetack (embedded financing for home improvement & repairs) as they announced partnership with Citizens to offer BNPL for home services projects as part of Citizens Pay.

 

• Big news for ZSuite as well as Dime Community Bank (Nasdaq: DCOM; $13.8B total assets) launches ZSuite for Commercial Escrow Management – NICE!!!!

 

• Grasshopper Bank (FDIC 59113) announced a partnership with Numerated to help the bank’s credit team to automate the process of aggregating and analyzing financial data.

 

• Customers Bancorp (NYSE: CUBI, bank subsidiary is Customers Bank – FDIC 34444) acquires $631M venture banking loan portfolio from FDIC at a significant discount of approximately 85% of book value; and has recruited 30 team members from the unnamed group that originated those loans to service the venture-backed growth industry in multiple high-profile markets (including Austin, the Bay Area, Southern California, Chicago, Denver, Raleigh/Durham, and D.C.).

 

• Temenos is in talks with Nordic Capital as one of the last potential acquirers of Temenos as other suitors drop out. Worth noting that Temenos has been evaluating buyer interest for a while now but has stepped up over the last year due to pressure from activist investor, Petrus Advisers.

 

• The FDIC demands three companies cease making false or misleading representations about deposit insurance:
  • Bodega Importadora de Pallets (“Bodega”), Money Avenue, LLC, and OKCoin USA, Inc. (the actual letters can be found in the link above)

 

• Notable FinTech funding for the week:
  • Truework (API enabled income and employment verification platform) raised $24M in equity funding and a strategic partnership with TransUnion – allowing TransUnion customers to access credit and income data through a single API.
  • Majority (neo immigrant banking app) raised $9.75M in Series B extension bringing the total B round to $47M and citing 6x transaction volume growth per year.

 
 
Random Uncle Sean stuff:

• For the sports fans - Congratulations to the Denver Nuggets as NBA Champions with a win over the Miami Heat in Game 5; and congrats to Las Vegas Golden Knights as the NHL Stanley Cup champions in their victory win over the Florida Panthers in Game 5.
• Wondering if / when we will begin to see generative AI as a standard employment vertical open up in corporate G&A such as Treasury, Accounting, IT, Order Management, and now AI…?  Depending on corporate structure / business model, could we see a Chief AI Officer as a common executive role?  Hmmm….
• Ah yes, here they are – Dad Jokes from Uncle Sean!!!!
  • Little known factoid – if your dog is running a fever, go to the store and get some mustard….  Because mustard is great for hot dogs….  (okay, that was pretty lame even by my poor standards) 🙄
  • Aunt Patty asked me “what is E.T. short for?”  Well, it’s because he has little legs…  😝
  • There are a lot of people that don’t like to hold hands in public – especially if they don’t know you!
  • Is condensed milk just a smaller version of regular milk???  And what about evaporated milk – how do they get it in the can???
    • Gotta run now – just in time to mow the yard and start the grill for Father’s Day Weekend in my New Balance and Jorts – oh yeah - LOL!!!!! 🤣😆😂

 
 
Have a GREAT Father’s Day Weekend and please stay safe!!!
 
Uncle Sean
 
 
Sometimes known as Sean Mayo – contact me directly for scope and pricing of custom reports / analysis projects at [email protected] | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | [email protected] #FedFisHasTheData FedFis
 
FedFis, LLC disclaimer – The views and opinions of Uncle Sean are of his own and may not necessarily represent the views, endorsements, and/or opinions of FedFis, LLC – we all know he’s a little bit different; but that’s why we love him.