Banks face growing P2P lending threat…

Santander reports strong retail results

BBVA records 30% rise in annual profit

MUFG provides finance lessons for

Banks face growing P2P lending threat

Online peer-to-peer (P2P) social lending networks
such as Zopa and Prosper will grow to account for as much as 10
percent of the global market for retail lending by 2010, according
to a study by consultancy Gartner.

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The report says non-bank social platforms are “pushing
aggressively into banking and investment services” and the threat
is particularly pronounced in terms of lending and payments.

A number of P2P lending platforms have raised significant funds
from venture capitalists in the past two years, with US-based
Prosper raising $40 million while UK-based rival Zopa has secured
approximately $34 million.

Despite the growing popularity of P2P networks, Gartner’s report
warns banks not to attempt to copy social banking practices, unless
they can clearly establish a strategic intent centred on social
welfare, as opposed to traditional commercial returns. Instead,
Gartner suggests banks should look to partner financial social
networks, offering capabilities like transaction processing and
risk management.

A separate report in December 2007 by Javelin Research &
Strategy predicted that more US consumers will turn to P2P social
lending networks in order to pay off credit card debt, with the
amount borrowed for this purpose expected to surge from $38 billion
in 2008 to $159 billion over the next five years (see RBI

Deutsche Bank avoids Q4 write-downs

Deutsche Bank, Germany’s largest bank by assets, has reported a 7
percent increase in profits for 2007 to €6.5 billion ($9.4
billion), boosted by no subprime-related losses in the fourth
quarter of 2007 (it made a €2.2 billion write-down in the third
quarter). Deutsche also strengthened its capital position with €5
billion net new deposits in the fourth quarter and €19 billion for
the full year.

The bank benefited from getting out of investments in US subprime
earlier than a number of its rivals. “In July, when the first
signals started, we said out, exit, whereas some others hoped for
better times,’’ Deutsche Bank chief executive Josef Ackermann told

While he expects “conditions to remain challenging in 2008,” he
confirmed a bullish pre-tax profit target of €8.4 billion.
Ackermann also confirmed Deutsche Bank would be interested in
future acquisitions, in particular Germany’s largest retail bank,
Deutsche Postbank.

Chinese earnings growth to moderate

Although 2007 was an excellent year in general for Chinese banks,
earnings growth is expected to moderate in 2008 due to the central
bank’s tightened monetary stance and the correction currently under
way in the equity market, which will stunt the growth of fee
incomes, according to a report by ratings agency Fitch.

“Accelerated loan growth, expanded fee income from the sale of
wealth management products, and low non-performing loans
contributed to record-level earnings in 2007,” said Charlene Chu, a
senior director of Fitch based in China, in a report entitled
Chinese Banks – Annual Review and Outlook.

“The strong upturn in profitability in 2007 was one of the most
positive developments in the Chinese banking sector in recent years
as it put banks on the path to long-term self- sufficiency.”

However, the report highlights that a number of challenges lie
ahead. “Looking into 2008, the changing global economic
environment, tightened monetary policy and increased window
guidance at home, as well as the gradual diversification of the
financial sector away from bank-dominated intermediation, are
expected to prove increasingly challenging,” Chu added.

Santander reports strong retail results

Santander, Europe’s second-largest bank by market value after HSBC,
has reported a 19 percent rise in net profits, to €9 billion for
2007, boosted by retail banking, limited use of structured products
and minimal exposure to asset-backed securities. Loans rose 8
percent to €574 billion with net interest income up 22 percent to
€15.3 billion and net income from fees and commission up 14.5
percent to €8 billion.

Despite the results, Santander has not been unaffected by market
problems in the US and reported a €737 million write-down in the
value of its investment in US-based Sovereign Bancorp.

In the fourth quarter, the bank’s Spanish retail division reported
a small fall in profit to €448 million from €455 million for the
same period last year, while its UK subsidiary Abbey reported an
increase to €295 million from €260 million a year ago. In Latin
America, profit shot up by 27.7 percent from €487 million to €622

BNP Paribas reports record results for

BNP Paribas (BNPP), France’s second-largest banking group after
Crédit Agricole, has reported record annual profits, up 7 percent
in 2007 to €7.8 billion on revenues ahead by 11 percent, despite
what it termed “a backdrop of very difficult economic and market
conditions over the second half of the year”.

BNPP continued to expand both organically and through acquisitions
during 2007; in particular, in retail banking in Europe, and in
emerging markets, with over 400 branches opened or acquired and 1.7
million new customers added during the year.

Market difficulties contributed to a fourth quarter fall in profits
by 42 percent to €1 billion, with revenue down 2 percent for the
quarter to €6.9 billion. But during 2007, French retail banking
revenue grew by 4.4 percent to €5.9 billion while revenue at its
international retail financial services division was up 7.9 percent
for the year to €8.0 billion.

ANZ introduces m-banking service

ANZ, Australia’s third-largest bank by assets, has become the first
of Australia’s Big Four banks to offer a functional m-banking
service. It is also the first major bank in Australia to offer
text-based banking, allowing customers to check account balances
and receive mini statements for up to three accounts at any time
via SMS.

ANZ Mobile Phone Banking will be available from 11 February, and
free of charge until 31 December 2008 to all ANZ customers who
register. Following this, ANZ says, it will review the cost of the

The introduction in Australia follows what the bank describes as
the successful launch of the service in 2007 in New Zealand. ANZ
says m-banking has proven to be popular with customers aged 25
years or lower and people who want to closely monitor their account
balances. Both the bank’s M-Banking and TXT Banking products were
trialled with ANZ staff throughout January 2008.

Rival bank NAB has said it will roll out an SMS banking service in
April this year. NAB’s executive general manager of retail banking,
Andrew Thorburn, said that with an estimated 20 million mobile
phones in Australia and 85 percent of mobile phone owners saying
they use text messages, SMS Banking “provides the perfect solution”
for the bank’s customers “on the go”.

BBVA records 30% rise in annual profit

Spain’s second-largest private sector bank, BBVA, has announced
very strong full-year results. Including one-off items, profits
were up 29.4 percent to €6.1 billion ($9 billion) in 2007
(excluding non-recurrent items, net attributable profit grew 18
percent). Its cost-income ratio stood at 43.2 percent (including
Compass Bancshares in the US), compared to 44 percent a year

All four business areas reported improvements during the year. Its
Spain and Portugal unit had its best year ever, lifting net
attributable profit 24.9 percent. BBVA reported that higher
business volumes, especially in lending (up 11.5 percent year on
year), along with better spreads, pushed net interest income up
14.6 percent, while other revenues grew 7.8 percent and costs 2.8
percent. BBVA’s Mexico and USA division recorded a sharp rise in
business activity, with increases of more than 28 percent in
operating profit and net attributable profit in local currencies.
And operating profit at BBVA’s South America unit was up 33.3
percent and net attributable profit up 29.3 percent (both in local

The bank said in a statement: “The group faces 2008 in a strong
position, ready to outperform its rivals, thanks to its proven
ability to generate recurrent earnings.”


China Life adds to banking partner

China Life, the largest life insurer in China, has signed a
strategic co-operation agreement with China Merchants Bank, the
country’s sixth-largest bank by assets. According to local newswire
SinoCast, the two will develop a number of business lines
including issuance of co-branded credit cards and the development
of bundled financial products integrating banking, insurance and
wealth management.

One of China Life’s stated goals is to develop distribution and
product partnerships with local and foreign banks. It has signed
deals with China Construction Bank, Guangdong Development Bank (it
owns a stake in GDB) and the Chinese post office. The insurer,
recently voted the fastest- developing brand in China by Interbrand
(see RBI 585), announced in January unaudited annual
results for 2007 – net profit increased by 50 percent to CNY21.6
billion ($3 billion).

New SBI branches for Indian affluent market

State Bank of India (SBI) has said that, in an attempt to cater for
the growing number of mass affluent and high net worth individuals
in India, it will open what it calls “one-man branches” and
financial service centres in urban areas. The bank says it wants to
open 1,000 one-man branches in residential areas and establish
sales outlets, or financial services centres (FSCs), at places such
as shopping malls, commercial complexes and market centres.

These would operate as sales outfits offering personal banking
products, credit cards, remittance facilities and advice on mutual
funds and insurance. The FSCs would also house an ATM, a cheque
drop-box and an internet kiosk. The FSCs would be manned by two SBI

BNP Paribas and Sahara Bank launch strategic

BNP Paribas, which paid €145 million in return for a
19 percent stake in Libya’s Sahara Bank last July, has kicked off
the first stage of a strategic partnership agreement with its
Libyan partner. A new organisation has been put in place to foster
synergies between the two banks, with the aim of accelerating
business development of three business lines: institutional,
corporate and retail banking.

Sahara, which has a network of 48 branches, currently has a market
share of 17 percent for loans and 22 percent of deposits.

BNP Paribas says it will help Sahara develop areas including staff
training, credit risk and IT. In retail banking, the French bank
will help Sahara with retail product development, with the launch
of an international debit card scheduled for this year.

After years in the global economic wilderness, Libya is now
attracting significant international banking interest. Italy’s
Intesa Sanpaolo, Jordan’s Arab Bank and Bahrain’s Arab Banking
Corporation are said to be among international banks considering a
bid for Wahda Bank, Libya’s fifth-largest bank by assets.

Nationwide launches handheld card

Nationwide Building Society, the UK’s largest mutual with £160
billion ($320 billion) in assets, has followed Royal Bank of
Scotland and Barclays (see RBI 572) and begun offering its
retail customers a handheld card reader in an effort to stamp out
card fraud. Like Royal Bank of Scotland, Nationwide has awarded the
contract to France’s Xiring; Barclays chose technology from Dutch
rival Gemalto.

The Xi-Sign 4000 APACS is a portable, unconnected smart card reader
that provides another layer of security for customers, says Xiring,
by authenticating both them and the transaction. The company is set
to supply Nationwide with over 1 million card readers across the
first half of 2008.

NAB, Westpac opt for fee-only financial

NAB and Westpac, Australia’s second- and fourth-largest banks by
assets, have near-simultaneously rolled up fee-only investment and
wealth advice services.

NAB Financial Planning, the financial advice arm of NAB, says it is
transitioning its more than 400 financial planners to a fee for
advice approach for all new clients seeking personal investment and
superannuation advice between now and the end of 2008. General
manager of NAB Financial Planning Geoff Rogers said: “For more than
four years we have offered customers a choice between fees and
commissions but we feel the time is right to make a move towards a
fee only approach.”

Westpac Financial Planning has introduced a fee-only service called
Super Health Check for A$199 ($176), aimed at helping consumers
with investable assets of between A$5,000 and A$100,000 to better
understand and organise their pension and investment needs. Sally
Herman, general manager of advice, said: “Many planners shun
investors with less than A$100,000 in assets, and yet, the average
super balance is around A$45,000.”

Excellent year for Portugal’s BES

Banco Espirito Santo (BES), Portugal’s
second-largest private-sector bank, has reported 2007 net income of
€607.1 million, a 44.3 percent year-on-year growth and a return on
equity of 16.6 percent. The bank’s cost-income ratio fell from 52.3
percent in 2006 to 47.5 percent.

Loans to customers increased 16.9 percent while total customer
funds rose by 9.4 percent. BES’s small international business
continued to make a strong contribution: customer loans increased
by 38.4 percent and customer funds by 18.0 percent. The 23 percent
contribution of BES’s international business to the group’s
consolidated net income was €141.5 million, up 51.9 percent.

In terms of domestic retail banking, BES said its ongoing customer
service and customer acquisition strategy enabled the group to
capture more than 155,000 new customers in 2007 (compared to
150,000 in 2006). The number of what the bank calls “loyal clients”
increased substantially, up 9 percent and leading to an increase in
respective financial involvement of 14 percent.


Sports sponsorship
Another sporting role for Russia’s VTB Group

State-owned VTB, Russia’s second-largest bank by
assets, has signed a sponsorship agreement with the country’s
national women’s basketball team following the team’s qualification
for the 2008 Olympic Games in Beijing. VTB will now become the
general sponsor of the team, and will have a presence at the team’s
training events, matches and other events held by the Russian
Basketball Federation.

The deal further strengthens VTB’s presence within the Russian
sporting world. The bank already sponsors football clubs, including
CSKA Moscow, and has established relationships with the Russian
Olympic Committee, the Russian Golf Association, the Russia Boxing
Federation, Fédération Internationale de Volleyball, the Figure
Skating Federation of Russia and the Artistic Gymnastics Federation
of Russia.

Corporate Social

StanChart in Chinese microfinance

Standard Chartered (China), which currently has 13 branches, 17
sub-branches and two representative offices in the country, has
signed an agreement with the China Foundation for Poverty
Alleviation (CFPA) which will see it provide a credit loan facility
of CNY20 million ($2.8 million) to finance CFPA’s microfinance

The agreement, witnessed by Chinese Premier Wen Jiabao and UK Prime
Minister Gordon Brown, is the first of its kind made within China,
with money going to farmers and small business owners in ten
counties of seven provinces in China.

“This initiative is part of Standard Chartered’s commitment at the
second Clinton Global Initiative to establish a $500 million
microfinance facility across our markets by 2011, which is
estimated to benefit 4 million people currently excluded from
participation in the financial sector,” said Standard Chartered
group chief executive Peter Sands.

The bank will also establish a wider partnership with the CFPA
which will see it provide its rural finance expertise in return for
CFPA’s knowledge of the local microfinance sector.


GE Money offers green credit card in

GE Money has launched a new environmentally friendly credit card in
Australia at a time when lenders worldwide are rushing to unveil
green card products (see RBI 582). The GE Money eco
MasterCard is, according to the company, the first such product
available to the Australian market and will allow customers to
offset emissions via purchase rewards.

The rewards will be equivalent to 1 percent of net purchases, up to
a maximum of A$50,000 ($45,000), with customers offered the
alternative of receiving half their rewards as credit to their
accounts. Customers will also be able to log on to GE Money’s
Australian website to receive tips on sustainable living and
information on how to reduce their carbon footprint.

“Internationally, GE is committed to reducing 10 million metric
tons of greenhouse gases each year by 2010 – equal to taking nearly
1.8 million cars off the road annually. GE Money eco MasterCard
benefits will make a significant down-payment toward meeting that
goal,” said GE Money CEO Mike Cutter.

Wells Fargo continues State of the Black Union

The US’s fifth-largest banking group, Wells Fargo, is to sponsor
the State of the Black Union symposium for a third successive year
in an effort to help families hit by the twin salvos of Hurricane
Katrina and the US subprime crisis.

The event will centre on New Orleans and is aiming to mobilise
1,000 volunteers to help rebuild houses damaged by the hurricane.
The symposium itself will concentrate on African-Americans’ impact
on the 2008 presidential elections.

Wells Fargo donated over $82 million to non-profit organisations in
2007, including $19 million to community development projects,
according to recent figures from the bank.


BofA sponsors Chicago Marathon after $23bn LaSalle

The Chicago Marathon has been renamed the Bank of America Chicago
Marathon as the bank widens its sports sponsorship interests
following its acquisition of Chicago-based LaSalle bank in

Bank of America (BofA) already sponsors Major League Baseball, the
National Football League, the PGA Tour and the 2008 US Olympic
team. It has overseen a redesign of the Chicago Marathon logo that
incorporates BofA’s own colours.

The marathon features 45,000 runners each year, as well as 1.5
million spectators, and generates an estimated $140 million a year
for Chicago’s economy. BofA says it will develop “additional
community and philanthropic programmes” to accompany the race’s own
charity programme, which the bank will also maintain. In December
2007 BofA announced that it was to provide $5 million in grants to
Chicago citizens as part of its ten-year goal to give $1.5 billion
to non-profit organisations.

Sports sponsorship
Credit Suisse reveals Euro 2008 campaign

Credit Suisse has unveiled details of an extensive marketing
campaign to be held in the run-up to football’s 2008 European
Championship tournament, scheduled to be held in Austria and
Switzerland this June.

A long-standing sponsor of the Swiss national side, the bank will
hand out 200,000 footballs across its 183 branches in Switzerland.
It is also looking to attract people who are not fans of football
via a series of artistic light installations: historic landmarks
and monuments in all 26 Swiss cantons will be lit up between 4
February and 7 March, along with the nearest Credit Suisse

Football fans will get the chance to meet members of the national
side for photo sessions on 18 May, while online participants can
vote for the best Swiss players of the past 15 years on a special
website and stand a chance of winning a trip to the 2010 World Cup
in the process.

Credit Suisse will also debut two humorous TV advertisements in
February. The bank extended its partnership with the Swiss Football
Association by another four years in December 2007, and will now
continue to support and fund the development of young Swiss
footballers until 2012.

Corporate Social

MUFG provides finance lessons for

Children in 1,500 elementary schools across Japan will be able to
participate in finance and economic lessons as part of a new
educational support programme launched by Mitsubishi UFJ Financial
Group (MUFG).

MUFG, Japan’s largest financial services group, has helped create a
website designed to support teachers at the Elementary School of
the University of Tsukuba. The site features animations and
diagrams designed to hold the interest of children aged ten to 11;
the programme itself is divided into four categories of spending,
saving, borrowing and economic activities.

Booklets and instructional DVDs will also be provided to teachers
at the school before being rolled out to 1,500 other elementary
schools at a later date. MUFG says the initiative falls under its
key corporate social responsibility focus area of “nurturing the
leaders of the next-generation society”.