Wall Street Is Hiring … in Florida (The nearshoring strategy is aligned with President Trump’s push to keep jobs in the U.S.)

(courtesy of Bloomberg)

When Deutsche Bank sent senior Wall Street executive Leslie Slover to run its expanding outpost in Jacksonville, Fla., she wasn’t entirely ready for the lifestyle. Gone were the skyscrapers and subways. In their place was a corporate campus with a pond and vast parking lots, flanked by rows of new town houses, some inhabited by employees. The on-site culinary options? A cafeteria and some food trucks. Suddenly, Slover had to relearn to drive.

“It’s hard—it’s not Manhattan,” says Slover, 52, who spent her career in the Northeast before becoming the regional head of the bank’s operations in Jacksonville and Cary, N.C. “Indian food at 11:30 at night does not exist.”

Deutsche Bank

Transplants from the city that never sleeps may feel at first like aliens in this northern Florida city 35 miles south of the Georgia border, but their numbers are growing. Global financial companies including Frankfurt-based Deutsche Bank and Sydney-based Macquarie Group have been moving executives here and hiring locally, even while paring staff elsewhere.

It’s part of a Wall Street trend known as nearshoring, in which banks are moving operations away from expensive financial centers like New York to places such as Jacksonville and North Carolina’s Research Triangle. Also in Jacksonville are more than 19,000 employees of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. Meanwhile, Goldman Sachs has established operations in Salt Lake City, and UBS has a site in Nashville. It’s a way to improve profitability without going overseas. Conveniently, it also happens to comport with President Trump’s demands that employers keep good jobs on U.S. soil.

In the early days, investment banks mainly transplanted back-office workers such as accountants, technology staff, and lawyers. But in Deutsche Bank’s case, the Jacksonville campus has grown into the company’s second-largest U.S. location. The bank has about 2,000 employees there—up from 1,400 in 2013—and plans to add more in 2017.

Increasingly, the site is a microcosm of its U.S. business, even the trading functions. On campus, in a building alongside the man-made pond, a young team recruited from universities such as Emory and Vanderbilt sells securities in tandem with their counterparts in New York. When a client calls in an order, a Jacksonville salesman glances at a live video feed of desks at 60 Wall St., finds a trader standing by, and relays the order. Slover says the technology allows the two locations to function like one seamless floor. She’s come to enjoy living in Florida, noting it has more elbow room than Manhattan and the people are unusually nice.

According to Jones Lang LaSalle, high-end corporate office space in Jacksonville can be leased for about $22 a square foot, cheaper than all but four major U.S. cities tracked by the company. That’s about a quarter the rate in New York. Banks pay Jacksonville employees about 30 percent less on average than those in New York, according to Cathy Chambers, a senior vice president with the JaxUSA Partnership, a division of the local chamber of commerce. A financial analyst, for example, might earn $67,000 in Jacksonville, compared with $99,700 in New York. The local and state governments also offer tax incentives to lure companies.

For Anthony Glenn, who runs an office Macquarie opened in Jacksonville last year, advantages include escaping for late-afternoon surf sessions at a local beach. Another perk is his 15-minute drive to work. He says his office includes people from 21 countries, plus big U.S. cities such as Houston, New York, and Philadelphia. Many of them came to escape punishing commutes from far-flung suburbs.

“In most cases, it’s been a lifestyle decision,” Glenn says. “They’re weighing a compensation change vs. a huge increase in quality of life.” Macquarie’s Jacksonville office employs people whose jobs might otherwise have been filled in India. It provides a support staff that’s more convenient for its U.S.-based employees, while its Indian operation continues to focus on the Asia business.

Jerry Mallot, president of JaxUSA, brushes aside criticism that Jacksonville can’t cater to big-city tastes. “We’re not New York, but we wouldn’t want to be New York,” he says. He points out that the city has its own NFL team, craft breweries, and “more golf courses than you could play in 10 years.” There’s a Tesla Motors store, too. Companies are eager to establish operations in a place with year-round sunshine and no state income tax, Mallot says. They typically start by transferring managers to the region, then build staffs by hiring from the area. The salaries are attractive by Jacksonville standards.

The influx of financial-services and other white-collar jobs has brought money and diversity to the area and may even be influencing the political landscape, says Michael Binder, an associate professor of political science at the University of North Florida in Jacksonville. In a county that George W. Bush carried by more than 15 percentage points in two presidential elections, Trump beat Hillary Clinton by just over 1 percentage point. “In a lot of ways, Florida is the inverse of America: The more north you get, the more South you are,” Binder says, referring to cultural and political preferences. “But slowly this is changing, like a lot of the urban cities in the New South.”

Will rising interest rates weigh on home sales?

(courtesy of USA Today)

Aside from expensive ask prices, nothing turns off a potential home buyer more than rising interest rates, as the higher the mortgage rate the higher the monthly mortgage payment.

Higher rates also impact affordability, as more expensive borrowing costs often force home buyers to purchase a cheaper home or downside from a single-family home to, say, a condo.home-for-sale

That’s why Tuesday’s report on December existing home sales and Thursday’s on new home sales will be watched closely by Wall Street.

Sales of existing homes in the final month of 2016 are seen coming in at an annualized rate of 5.53 million units, below the 5.61 million homes sold in November 2016, according to Bespoke Investment Group. A small drop in December sales of new homes also is seen. Economists forecast 585,000 new homes were sold last month, down from 592,000 in November 2016.

December saw a sharp rise in mortgage rates as investors began to price in higher rates after the Federal Reserve hiked short-term rates for the only time in 2016 at its December meeting.

The rate on a conforming 30-year fixed-rate mortgage climbed as high as 4.45% in December, according to the Mortgage Bankers Association, its highest level since spring 2014.

The big question now: Can an improving economy, more jobs and higher worker pay offset the downside of higher rates on home purchases going forward?

Wells Fargo to close approximately 400 branches by 2018

wells-fargo-logo

(courtesy of Jacksonville Business Journal)

Wells Fargo officials announced last week that it plans to close more than 400 branches by the end of next year, in an effort to cut costs.

The bank was involved in a massive scandal last year wherein employees opened fake accounts totaling almost $2 million. The scandal resulted in the company eliminating sales goals for retail bankers and prompted federal investigations, but bank officials say the scandal is not the reason for the branch closings. Wells Fargo is planning to close hundreds of branches in the coming years.

In a statement from Wells Fargo CFO John Shrewsberry, the bank is merely following a trend carried out by several large retail banks – closing locations and replacing them with automated systems and online bank products.

The statement also claims that many of the 200 closures it anticipates this year will be in close proximity to other locations it owns, and many of the employees can be transferred to nearby branches, which should limit layoffs.

Even after the bank closes an estimated 200 branches in 2018, Wells Fargo would still have 6,065 total branches, more than any other bank in the country.

“We continuously evaluate our branch network, and our physical distribution strategy is driven by customer behavior, market factors, economic trends and competitor actions,” said Rosanna Fiske, vice president of corporate communications for Wells Fargo’s southeast region. “While branches continue to be important in serving our customers’ needs, our investment in digital capabilities has enabled us to seamlessly serve our customers across channels and provide choice in how they bank with us.”

Fiske said at this time, she could not provide details on specific locations.

Look ahead at 2017: Financial services set for boom year

Jacksonville’s financial services companies were looking at a big year in 2017 anyway, and with the election of Donald Trump and the potential of deregulation, Jacksonville’s financial industry could benefit.

Many of the community banks in Jacksonville have merged with larger banks, including Jacksonville Bank in 2016. There’s just three locally headquartered community banks with more than $100 million in deposits left in Northeast Florida.

They are: FirstAtlantic Bank with $358.74 million in area deposits, Atlantic Coast Bank with $354.72 million in area deposits and CBC National Bank with $218.53 million in area deposits.

If deregulation of the banking industry does occur, expect these banks to receive a much needed shot in the arm, which could free up capital for local projects.

They could benefit even if regulations don’t change rapidly, said Mitch Hunt, the chairman and CEO of FirstAtlantic Bank. While he said he does not expecting a frenzy of banking deregulation in 2017, a Trump presidency will have other side effects that will positively impact his business.

“Regarding deregulation, I think it will be much slower to come about,” he said. “I think the pace of regulation will slow down, which will be good for both the big banks and smaller banks.”

He said the real impact for community banks will be less about policy and more about confidence in the economy.