Thursday, July 26, 2018

Asian Banks....again...

We have been tracking Asian Banks for some time. See: Bullish on Asian Banks Originally posted on the Street Insight section of thestreet.com 2/28/2006 4:35 PM EST and Still Bullish on Asian Banks

Recently, there has been renewed interest in this sector. We commented for an article by S&P analysts Kelsey Bartlett and Carolyn Duren posted Monday, 02 July 2018 11:52 AM ET, some of which is reproduced below:

Deals are heating up among Asian-American designated banks, with two of the nation’s prominent institutions announcing deals since April.

In its second deal since 2013, Hanmi Financial Corp. is acquiring Houston-based SWNB Bancorp Inc. Meanwhile, RBB Bancorp is making a play for Brooklyn, N.Y.-based First American International Corp. — its third deal since 2013. The two Los Angeles-based banks remain interested in diving into new markets with high populations of Asian Americans, management said.

Hanmi expects the combined entity to have $5.7 billion in total assets, while RBB anticipates it will have $2.6 billion in total assets after closing.


On a May 21 call to discuss the deal, Hanmi President and CEO C.G. Kum said the transaction advances the bank's long-term objective of expanding its existing footprint outside of Southern California. The bank will continue to search for "strategic entry points" in attractive markets, he said.
RBB Bancorp President and CEO Alan Thian shared similar sentiments, and said on an April 23 call its First American International acquisition will provide "improved scale, efficiencies and profitability."

(We noted some time ago that Asian-American banks merge with other Asian-American banks).


In 2014, Kum told S&P Global Market Intelligence that Hanmi, a traditionally Korean bank, hoped to diversify its customer base to include more Chinese-Americans, south Asians and customers without any Asian background. Kum will retire in 2019, but Tenner does not expect his departure to vastly change the bank's business model.

William Michael Cunningham, an economist, impact-investing specialist, and an adjunct faculty member at Georgetown University, said Asian-American banks could grow by expanding their footprints in the broader American market, but doing so could "potentially" cause a bank to lose its status with the Federal Deposit Insurance Corp. as a minority depository institution, or MDI, he said.

"You've got to be a big bank these days in order to survive," Cunningham said in an interview. "... But it is something you have to think about, and you have to plan in order to be successful at." 

In an emailed statement, an FDIC spokesman said whether a bank loses its designation "all depends on the ultimate structure" of the resulting merger.

One of the goals of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 is to preserve minority character in cases of merger or acquisition. The FDIC provides technical assistance, training and educational assistance to the banks. The number of banks and thrifts with an MDI designation has dwindled in recent years.


More than 51% of an MDI's voting stock must be owned by one or more "socially and economically disadvantaged individuals," or the majority of the board and the community the institution serves must be predominantly minority, according to FDIC's definition.

Cunningham said there is a "varying degree of value" to being an MDI, noting that regulators have at times tended to "over-help minority banks."

"They're kind of all up in their business," he said. "That reduces management's flexibility. It's a regulatory burden that other banks don't have."

Cunningham also pointed to financial technology and large banks as challenges for MDIs, noting banks like Wells Fargo & Co. are free to conduct business in other languages.

"The big banks have sharpened their skills in the marketplace that MDIs frequent," he added. "That's one of the additional competitive pressures that these institutions face."

Monday, July 16, 2018

Black Wealth Discussion at SCLC Annual Conference, by Papa Owusu, Franklin and Marshall University, Impact Investing Intern,

       
At the SCLC Annual Convention, Washington, DC, July 13, 2018. Left to right - Mr. Kebede, Virginia Tech, Mr. Owusu, Franklin and Marshall College, Dr. Steele, Executive Director, SCLC, Mr. Ye, Johns Hopkins University, and Mr. Brand, University of Maryland.

On Friday, July 13, 2018, the Southern Christian Leadership Conference (SCLC) held a panel discussion on the state of black wealth in America. The panelists were Samantha Sanders, Director of Government Relations at the Economic Policy Institute, David D. Rixter, Principal  of HCR Consulting L.L.C. and William Michael Cunningham, Founder, Creative Investment Research. The panel was moderated by Kevin B. Kimble, Esq., DC Bureau Chief of SCLC.

William Michael Cunningham
speaking at the SCLC Convention
The panelists discussed a myriad of reasons for the pervasive black-white economic gap to mark the 50th anniversary of the Kerner Commission that identified racism as the reason for the black-white economic gap. A key point made by the panelists is that, beginning with slavery, laws and the justice system  have and continue to support structures that undermine the progress of Blacks in the United States. This, along with employment discrimination, has resulted in the lack of progress in reducing the economic disparity between black people and white people in the United States. The panelists noted that this gap worsened irrespective of education and other factors that, in theory, should enable black people to be at parity relative to their white counterparts with similar characteristics.  A recent report by Duke University’s Samuel DuBois Cook Center on Social Equity explores some myths surrounding this racial gap.

The panel ended with a number of policy proposals to improve the economic status of Blacks. The primary solution discussed was greater anti-discrimination compliance and laws that do not damage Blacks. Another solution was reparations. Suggestions on this front included outright wealth transfers or other methods, such as "baby bonds." Another proposed solution was a federal job guarantee for people unable to find employment in the private sector. 

Tuesday, July 3, 2018

Probability of Fed Rate Hike is 90.53%

Our model of Federal Reserve policy estimates the probability that the Federal Reserve will increase interest rates. Our July 3rd Summary shows that the probability of the US Federal Reserve increasing the federal funds rate is 90.53%.

While our model needs to be adjusted, as noted below, we remain confident in these results.

The first forecast adjustment element are the previous hikes. Recall that in March, 2018, our model predicted a rate increase with a 92.3% probability. The rate increase following the June 12 – 13 FOMC meeting decreases the probability of subsequent rate increases, if only slightly (90.53% vs 92.30%). One precedent for the Fed raising rates in this manner came in 1994, during the Clinton Administration, when the Fed raised rates from February to May at a 25 basis point pace. Interest rates increased from 3.25% to 4.25% in 4 months (FED, 2018).

Each successive rate increase adds less to policy impact. Given that the Fed has  raised interest rates two times so far in 2018, the fact that the probability has fallen is consistent with our thinking.

The second forecast adjustment concerns inflation. Both Core PCE and CPI continued increasing in June and are now thought to represent a trend. Core PCE references living expenditures excluding food and energy. Yes, the impact on inflation of a trade war must be considered, also. The current Administration has initiated several tariff increases against China, Canada, Europe, NAFTA partners and others. A trade war makes it harder for the Federal Reserve to increase rates, since tariffs increase expectations concerning inflation by increasing prices for the purchased goods that are subject to a tariff. The Fed will want to be cautious about stoking runaway inflationary expectations. Indeed, the impact of the previous interest rate hikes and the looming trade war caused the Dow Jones Industrial Index to fall from 25320.73 on June 12th to 24174.82 on July 3rd. Uncertainty concerning trade will definitely have unpleasant impacts on industrial production, even with minor buffer policies, like allowing ZTE is resuming activities temporarily (Jenny Leonard, 2018).

In summary, the Fed will consider the impact on inflation of a trade war and might continue increasing interest rates but at a slower pace if the situation worsens.

Consumers are the third forecast adjustment factor. Our model uses two major indicators of consumer expectations: Consumer Sentiment, which indicates the confidence consumers have in the economy, and inflation expectations -consumer expectations concerning changes in the prices of goods. The Fed may wish to stop increasing rates in order to give consumer confidence time to adjust.

Given these factors, our adjusted probability of a Fed rate hike is lower than the unadjusted 90.53% probability. The next Fed Interest Rate Decision will be made public on Aug 01, 2018 02:00PM ET.

Research by Ryan Brand, Rongbin Ye, Impact Investing Analysts. EDITED BY WILLIAM MICHAEL CUNNINGHAM

References

Bloomberg Database. (2018). Dow Jones Industrial index & Yield Curve & Interest rate expectation. Retrieved from Bloomberg Terminal.  

Federal Reserve Database. (2018). FED Economic Data. Retrieved on July 3rd from: https://fred.stlouisfed.org

Monday, July 2, 2018

Webinar - How to Finance a Black Women-owned Business in 2018

Maggie Lena Walker was the first female bank president of any race to charter a bank in 1902. Black women have continued down this path of entrepreneurship. According to one report, "the number of businesses created by black women in the United States alone is up more than 460% over the last 20 years, making them the fastest growing group of entrepreneurs in the nation."
Of course, we've known this for some time, and have the track record to prove it. We launched MinorityFinance.com in 1998 and noted that 65% of the inquiries from the site came from Black women. While others have come along after our launch, we remain active and at the forefront. See: Small Business Financing, Black People and Venture Capitalhttps://youtu.be/gXGBEUoxHHs
The key issue then, and now, is money: "according to the Diane Project, black female founders are only able to raise an average of $36,000 in venture funding, while start-ups owned mostly by white males have received on average $1.3 million." We provide data-based advice and instruction, based on our years of experience, to help you over this hurdle.
Our webinar provides information on the current state of Black women businesses. We provide actionable information you can use to get financing for your business.
AGENDA
• Business Planning
• Your business credit history: Dun and Bradstreet.
• Data and Resources for Black women businesses
• The best non profit, local/state/federal resources
• Steps in the business financing process
• Protecting your ideas: intellectual property rights
• What type of financing products and sources/investors/lenders are best for your business: banks, credit unions, factors, hard money lenders, crowdfunding, credit cards, venture capital, digital currency, ICOs.
• Why you should seek out venture capital these days. Which ones to go to. How you should approach them.
Gwen HurtSPECIAL GUEST - Gwen Hurt is the founder and CEO of Shoe Crazy Wine. Her goal is to make her company a national brand. On June 15th, the firm was invited to present Shoe Crazy Wine during WalMart’s open call initiative, and, as a result, by 2019, will be sold in Walmart stores. Ms. Hurt will discuss her ongoing entrepreneurial journey.

To attend:

 https://blackwomenbusinessfinance.eventbrite.com

NOTE: ATTENDEE LINK WILL BE SENT ONE WEEK PRIOR TO WEBINAR.