Donald Trump has summoned some of America's most senior bankers to an emergency coronavirus meeting on Wednesday as global lenders scramble to respond to the threat the outbreak poses to business and the economy.
The White House would not confirm who was invited, but people familiar with the situation said that Goldman Sachs chief executive David Solomon, Wells Fargo boss Charlie Scharf and Citigroup chief executive Mike Corbat plan to attend. So does Gordon Smith, co-president of JP Morgan Chase, whose chief executive Jamie Dimon is recovering from emergency heart surgery.
Executives said they have not yet seen an agenda ahead of the meeting in Washington DC. One person involved said banks would “not be asking for anything” and the priority would be exploring “ways they can help”.
US financial stocks on Monday posted their worst day since 2009 in the aftermath of the Lehman Brothers collapse, after a 30 per cent plunge in the oil price exacerbated underlying fears about a global economic slump because of coronavirus.
The four biggest US banks dropped between 12 and 16 per cent, wiping out $120 billion (€106 billion) of stock market value. In Europe, shares in banks with large exposures to energy such as France's Natixis and Crédit Agricole and Norway's DNB fell even more.
Ahead of the meeting with Mr Trump, US banks unveiled a range of measures to try to mitigate the impact on customers.
Citi has pledged to waive fees for individuals and small businesses afflicted by the spread of the virus. Goldman Sachs’ consumer lending platform Marcus is preparing a ‘disaster relief programme’, modelled on hurricane relief, which involved a one month, interest-free deferment, said a person familiar with the situation.
Italian banks
Meanwhile in Italy, the government said it will suspend mortgage payments and other debt repayments across the entire country for the duration of the coronavirus outbreak. Laura Castelli, deputy finance minister, made the announcement after Italy imposed sweeping travel restrictions to contain the spread of the virus.
Large banks including Intesa Sanpaolo and UniCredit have offered moratoriums on mortgage repayments in the northern areas of the country hardest hit by the virus. The lenders are working on plans to extend the measures nationwide, said two people briefed on the discussions.
Ronit Ghose, banks analyst at Citi, said the impact of mortgage holidays on bank profitability would be limited.
“Unless the bank says it is not going to get the money back, and has to book a loan provision, then the impact on profits is not so bad,” he said. “The bigger issue for these lenders is whether there is going to be any growth, and how bad any recession is going to be.”
Oliver Wyman estimated a 3 to 5 per cent decline in European banking revenue – if the worst is over in two to three months – as growth flatlines and central banks cut interest rates.
However, if it takes six months, losses could “reach into double figures and the threat of credit losses will rise considerably,” the consultancy added.
In Germany, politicians and supervisors have rebuffed bankers’ demands for regulatory and capital relief because of the outbreak, arguing that it is too early to decide on any specific measures, said people briefed on discussions.
Germany
In a meeting on Tuesday, the Association of German Banks, a lobby group, proposed to the finance ministry and BaFin that they preemptively relax the so-called “countercyclical buffer”. This forces lenders to stockpile reserves in good times and release them during a crisis.
The lobbyists also asked for a softening of accounting rules for non-performing loans, warning that the liquidity needs of already-struggling German lenders such as Deutsche Bank and Commerzbank will rise "massively" because of the economic fallout of the coronavirus outbreak. – Copyright The Financial Times Limited 2020
