Jane Fraser to become first woman CEO of a US megabank

The good news spread fast yesterday. Veteran financial executive Jane Fraser has finally broken the men-only glass ceiling, becoming the first woman CEO of a US megabank. Fraser will take the helm from Citigroup’s CEO Michael Corbat who announced his early retirement

After 37 years at Citi, including the last eight years as CEO, the company announced in a statement, Corbat plans to retire from Citi and step down from its board in February of 2021.

The board selected Jane Fraser, currently Citi’s president and the CEO of Global Consumer Banking, to succeed Corbat as CEO in February, “and she has been elected to the board, with service beginning immediately.”

“Her global responsibilities include all Consumer businesses in 19 countries, including Retail Banking and Wealth Management, Credit Cards, Mortgages and the associated Operations and Technology,” according to the statement. 

Fraser has been at Citi, the third-largest U.S. bank by assets, for 16 years. 

She was a McKinsey & Company partner for 10 years before she joined Citigroup’s Wall Street division in 2004. Then she quickly rose through the ranks to became head of strategy and acquisitions, CEO of the firm’s private bank, and later led its Latin American operations, and “rising to head of global consumer banking.” 

The CEO position at top U.S. banks rarely opens up, and often goes to insiders who are men. According to CNBC, she was promoted to president in October 2019, “reportedly to keep her from being poached to lead other banks.”

Furthermore, Corbat’s unexpected retirement at 60 years old “finalizes a management overhaul that had been underway,” which started when Citi’s former president Jamie Forese stepped down after a 30-year career at the bank, triggering the departure of several other high ranking Citi executives.

Citigroup’s board however stands out for having the most women members compared to the six biggest banks, according to CNBC, approaching 50% representation. 

“I have worked with Jane for many years and am proud to have her succeed me,” Corbat said in a statement. “With her leadership, experience and values, I know she will make an outstanding CEO.”

Historically men have dominated the top U.S. banking leadership roles. Fraser’s promotion has now broken that tradition giving us all a reason to celebrate this milestone. 

Lenders’ profit margin outlook improves

Strong consumer demand is keeping lenders optimistic. The Fannie Mae third quarter 2020 Mortgage Lender Sentiment Survey of senior executives at Fannie approved lenders found 48% of lenders believe quarter-over-quarter profit margins will increase, slightly down from 52% the previous quarter.  

At the same time, only 15% of the executives believe profits will decrease, down from 23% in Fannie’s Q2 2020 Mortgage Lender Sentiment Survey, marking an eight percentage point improvement.

The improvement in outlook reflects continued, significant growth in refinance and purchase demand across all loan types, Government Sponsored Enterprise (GSE) eligible, non-GSE eligible, and government, Fannie said. Especially refinance mortgage demand “remained extremely strong” in Q3 2020, according to lenders, and is expected to remain the same going forward. 

Fannie’s Q3 2020 survey, conducted between August 4, 2020 and August 16, 2020, also shows another 37% believe profits will remain the same.

This quarter’s results align with the strong housing recovery despite the economic downturn due to COVID-19, as “pent-up consumer demand, continued low mortgage rates, and favorable mortgage spreads helped drive lender profitability,” said Doug Duncan, Fannie Mae senior vice president and chief economist.

“Lenders’ reported purchase mortgage demand for the prior three months, across all loan types, have returned from sharp drops to the levels seen last year for the same quarter. Purchase demand growth expectations for the next three months reached the highest third-quarter readings since survey inception.”

Lenders also reported they do not expect further tightening of credit standards over the next three months, Duncan continued. “Lenders attributed credit tightening to the uncertainty on the economic recovery… and potential longer-term downside risks including labor market weakness, low inventory, and home price uncertainty.”

Verus introduces new CRE division

Verus Mortgage Capital, founded in 2015 to invest solely on the non-agency mortgage market, or non-QM, has launched a commercial real estate (CRE) division.

The new division is “designated to pursue origination opportunities” in CRE credit, the company said. Named Verus Commercial Real Estate Finance, the new division is “a balance sheet, CRE direct lender that will provide capital for a wide range of real estate asset classes nationwide,” the company said.

The senior management team consists of co-presidents Kenneth Witkin and Ricardo Koenigsberger, and Anthony R. Iervolino as managing director, all CRE professionals with extensive market experience who will lead Verus CREF in providing effective lending solutions. 

The team’s market tested expertise includes “structuring transactions to achieve the diverse goals of its clients,” according to a company statement. 

The new division plans to specialize in offering bridge loans for acquisitions, refinancing, restructurings, discounted payoffs, lease-up stabilizations, and other special situations, the company said. Asset types include a broad range of options including condo inventory, luxury residential, investment properties, mixed use, mobile home parks multifamily and offices.

Verus CREF financial products currently include senior loans, B-pieces, mezzanine loans, and preferred equity. Target loan limits will range in size from $1mm to $25mm.

Other lending parameters include loan terms of one to two years plus extensions; interest rates starting at 7.5%; loan-to-value of up to 80% on multifamily property loans, and 70% LTVs on all other asset types, up to a maximum loan cost of up to 80%; origination fees of 0%-2%. 

Verus CREF also offers funding time of as little as 2 weeks, an amortization interest only option and no penalty prepayments at anytime.

Verus Mortgage Capital is a non-QM correspondent investor backed by investment firm Invictus Capital Partners, according to the company website. It purchases loans in all 50 states and the District of Columbia, and offers correspondent lenders a wide range of non-QM loan products for their borrowers.

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