WASHINGTON/BALTIMORE (BBN) (Update on April 1, 2020 to add interviews with Congressman Gregory Meeks (D-NY) and US Rep. after passage of the USD 2.2trln CARES Act stimulus package on March 27, 2020) –Major European banks such as France’s Societe Generale; Italy’s Unicredit and Spain’s Banco Santander are looking at US black-owned banks as a means to enter and gain market share in the world’s largest economy.

[US Congressman Gregory W. Meeks (D-NY) and US Rep. Joyce Beatty (D-Ohio) speaks to Capitol Intelligence/BBN using CI Glass on USD 2tln stimulus CARESAct package and minority-owned banks at the US Capitol on March 27, 2020]

Speaking to Capitol Intelligence following the passage of the USD 2.2 trln CaresAct stimulus package, House Financial Services Subcommittee Chairman for Consumer Protection and Financial Institutions US. Rep. Gregory Meeks (D-NY) and US Financial Services Subcommittee Chair for Diversity and Inclusion, US. Rep. Joyce Beatty (D-Ohio) said they are petitioning President Donald J. Trump and US Treasury Secretary Steven Mnuchin so that minority- and black-owned banks will be the first group of financial institutions to receive emergency relief from the USD 2.2 trln stimulus package.

Putting minority- and black-owned banks first would be the most efficient and effective way to get aid and financial relief to the most vulnerable members of American society, who suffered the greatest during the 2008 financial crisis.

The first likely beneficiary of a minority-owned first policy is Washington, DC-based and family owned Industrial Bank headed by B. Doyle Mitchell, Jr, who is the third generation to own and run the bank founded in the 1880s.
[Industrial Bank President B. Doyle Mitchell speaks with Capitol Intelligence/BBN using CI Glass following testimony to the US House Financial Services Committee]

Industrial Bank is also strategic, and it recently took over another minority-owned bank, City National Bank of New Jersey/New York, from the Federal Deposit and Insurance Corporation (FDIC) after it was shut down by its regulator, the Office of the Comptroller of the Currency (OCC) in November 2019.

After decades of unsuccessfully competing with US majors Goldman Sachs, JP Morgan and Citigroup in their home turf of the New York City, European banks have decided to bypass NYC altogether and tie-up with minority-owned banks in America’s booming cities, the heads of major EU banks and insurance companies told Capitol Intelligence/BBN.

The strong growth of major US cities, on top of more than USD 100bn in US Treasury Department’s Opportunity Zone tax free credit program for investing in economically depressed areas in the United States has created a “once in a lifetime” opportunity for US investment by European banks and large institutional investors.

While US banks ably compete on the European market, European banks historically have been cut out of the domestic market due to the fragmented nature of the US market and the ability of US banks to crowd out foreigners from lucrative banking deals.

In a statement following the passage of the CARES Act, House Financial Services Committee Chair Rep. Maxine Waters (D-CA) stated:

The small businesses in this country form the backbone of our nation’s economy. This bill provides major funding to ensure small businesses are able to continue to serve their local communities during these difficult times. The final bill includes loan forgiveness to small businesses for expenses related to utilities, rent, interest on mortgages, and payroll, which should help struggling small businesses have access to funds to cover their immediate costs. There are also funds available that Treasury and the Federal Reserve can and should immediately deploy to support small businesses, and we will be examining closely how these provisions are implemented.

[US Treasury Secretary Steven speaks to Capitol Intelligence/BBN using CI Glass on Opportunity Zones and President Donald Trump proposed USD 1.5 trln Infrastructure Fund during US Conference of Mayors Winter Meeting in Washington, DC. January 24, 2019]

“The banks in New York always look at the European banks as dumb money and a place to offload bad deals and paper,” a New York banker said.

The inability of European banks to compete with US major bans, and the frustration of black-owned banks frustration in accessing US capital markets, have created a perfect fit for European banks wanting to expand in the US without reinventing the wheel with brick-and-mortar branches; and minority- and black-owned banks’ desire to have sophisticated investment and commercial banking operations without losing ownership control, have made these relationships successful.

Among minority bank being targeted by the Europeans are: Harbor Bank of Baltimore, Md.; Industrial Bank of Washington, DC; Citizen Trust Bank of Atlanta, GA.; OneUnited Bank of Boston, MA.; First Independence Bank of Detroit, MI; and Liberty Bank of New Orleans, LA.

The Harbor Bank of Baltimore Chairman and CEO Joe Haskins, Jr and Industrial Bank chairman Doyle Mitchell, Jr told Capitol Intelligence/BBN they’d welcome holding talks to discuss cooperating on how a European bank can bring in their best-in-class investment banking know-how to the banks’ existing client base of small to medium size business clients.

[The Harbor Bankshares Corporation (Harbor Bank) Chairman, President. & CEO Joseph Haskins, Jr speaks to Capitol Intelligence/BBN using CI Glass about financing the Inner Harbor East, Baltimore, where President Donald Trump spoke on September 12, 2019. Prior to this speech the president had spoken at FSC Chair Maxine Waters’ the Financial Braintrust panel during the Congressional Black Caucus Annual Legislative Conference in Washington, DC. September 13, 2019]

Harbor Bank was the principal bank involved in developing the Inner Harbor East Marina where America’s largest asset manager, Legg Mason, is based. Baltimore is also the home of T. Rowe Price and TransAmerica, the US asset management of Dutch financial conglomerate Aegon.

In general, European banks primary focus is serving their SME client base and few big deal mandates as icing on the cake, while US banks such as Goldman Sachs, JP Morgan and Citi are loathe to touch any deal below a USD 500m threshold.

However, Banco Santander Chairman Ana Botin said the Spanish bank plans to launch a circa USD 800m program aimed at small-to-medium size businesses similar to a program the bank launched in the United Kingdom.

Botin noted that Santander already operates as a regional bank (Puerto Rico) in the United States and has a large consumer finance division once headed by former Digital Asset Holdings CEO and JP Morgan banker, Blythe Masters.

[Banco Santander Executive Chairman Ana Botin speaks to Capitol Intelligence/BBN using CI Glass on investing US minority banks and African American women owned enterprises following the Woman Entrepreneurs Finance Initiative (WE-FI) panel with White House Senior Adviser Ivanka Trump; Goldman Sachs CEO David Solomon; World Bank President David Malpass during the IMF World Bank Annual Meetings in Washington. October 18, 2019.]

During her women empowerment panel with Ivanka Trump and Goldman Sachs CEO David M, Solomon, Botin said the biggest job grower in any economy is scaling small businesses into medium size companies. Botin also has a special commitment in growing women owned businesses in the developing world and in her own company.

She said she is committed to increasing the number of women leaders in Europe’s 4th largest bank to 30% from 20%, a 50% increase in the number of women managers.

The main financial driver for European banks eyeing minority banks is the long-term growth of the African American market with its circa USD 1.5trln annual consumer spend and continued above average GDP growth in the US urban centers.

Black-owned businesses continue to be undervalued in comparison to white-owned businesses as they continue to be overlooked by national banks and New York City investment banks.

The first European bank to completely bypass New York City is Spain’s Banco Bilbao Vizcaya (BBVA) which decided to make Birmingham, Alabama as its US headquarters after acquiring Compass in 2008.

BBVA Compass now controls a considerable market share in the southeast United States and Texas.

An extremely attractive target for European banks, considering BBVA success with Compass, Atlanta-based Citizens Trust Bank headed by Cynthia Day with major operations in Birmingham, Alabama.

[Citizens Trust CEO Cynthia Day and Senate Banking Committee members Senator David Perdue (R-GA) and Sentor Doug Jones (D-Al) speak to Capitol Intelligence/BBN using CI Glass on European banks entering the US market via investment in minority-owned banks such as Citizen Trust of Atlanta. United States Senate. December 11, 2019]

In fact, any European bank investor interested in Citizens Trust, with its lucrative markets Atlanta with the global headquarters of Coca-Cola [NYSE: KO] and emerging Birmingham, will win considerable help and support from numerous members on the US Senate Banking Committee, such as Alabama Senators Richard Shelby and Doug Jones along with former Dollar General CEO, US Senator David Perdue (R-GA).

Any move on Citizen Trust will trigger off the historic rivalry between Atlanta and Birmingham over the status of being the banking capital of the south, a position Birmingham lost after Atlanta became the regional hub with the massive expansion of Atlanta’s Hartfield-Jackson International Airport.

The unprecedented growth in the US cities, combined with Opportunity Zone tax credits that allows for zero capital gains after ten years, has created a once-in-a-lifetime opportunity for European financial services group looking for long-term investments.

Don Peebles, the billionaire Washingtonian real estate entrepreneur, said any company taking care that their Opportunity Zone investment will benefit the residents of the area may repeat his ability to earn multiples of 4x to 5x.

National Urban League President Marc Morial said that market of people of color in the United States “represents the biggest emerging market of the world” and that it is “three time larger than the Russian Federation and is larger than the economy of almost all countries except for leading industrial nations” with an annual consumer spend USD 4.5 trln.

Morial noted that African American households average about 5 cents to every dollar of white wealth in terms of assets versus debt and that median household income or black Americans is 60% that of whites.

[National Urban League President Marc Morial filmed by Capitol Intelligence/BBN using CI Glass discussing Opportunity Zones investment in urban American during a panel at Select USA Investment Summit in Washington, DC. June 11, 2019.]

European banks heads, such as Intesa Sanpaolo CEO Carlo Messina; Unicredit CEO Jean-Pierre Mustier; Societe Generale Chairman Lorenzo Bini-Smaghi; Commerzbank Chairman and CEO Martin Zielke, all had a first-hand look at the unprecedented economic bonanza of Washington, DC during the IMF -World Bank Annual meetings on October 14-20, 2019 in Washington, DC.

Because of legacy discrimination, US minority banks have less balance sheet risk and liabilities than traditional mainstream banks such as suburban Rockville, Maryland-based Capital Bank (NASDAQ: CBNK] or even a giant such as Bank of America [NYSE:BAC].

European banks and financial services can gain an important market share of the US market with the added benefit of significant tax-free return on long-term investments thanks to the Opportunity Zone tax credits of the Trump administration.

By PK Semler in Washington DC and edited by Ellis Whitman in New York City.

For more information, please call +1-202-549-3399 or email pks@capitolintelgroup.com

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