UK banks fear the fintech revolution

One scoop to start: Anthropic has tapped law firm Wilson Sonsini to begin work on one of the largest initial public offerings ever, which could come as soon as 2026, as the artificial intelligence start-up races OpenAI to the public market.

In today’s newsletter:

• UK banks are off the “naughty step”

• The German lab coming for AI giants

• The divorce (lawyer) capital of the world

A new threat for UK banks

The banking industry remains under siege, but no longer from the scrutiny and litigation that hung over the sector for much of the past two decades in the wake of the 2008 crisis.

The threats are now coming from a crop of increasingly muscular non-bank and fintech players that are going after many profitable parts of banks’ businesses.

That was one of the main themes at the FT’s Global Banking Summit in London on Tuesday, where executives from around the world gathered to debate the future of the industry and how to make money in the new era of banking.

Conference attendees’ fears were crystallised in a fixation on Revolut, the fintech leader whose customer base rivals many European banking giants.

Barclays boss CS Venkatakrishnan told the audience that fintechs had “really laid down the gauntlet to the banks in terms of the quality of services they provide”.

Revolut has more than 65mn customers worldwide and secured a $75bn valuation in a fundraising round that concluded last week. For a brief moment, it was worth more than Barclays.

The lender is awaiting a full banking licence from UK regulators. Without the requirements that come with the licences, Venkatakrishnan said groups such as Revolut have an advantage over traditional banks.

“They are free from some of the very important consumer obligations that we have to fulfil to society,” he said.

But it’s not just flashy fintechs courting banks’ customers that have the European traditional players on their toes.

As DD wrote about yesterday, more competition also comes from the private capital industry, which has taken over broad swaths of lending markets since 2008 and now holds many lucrative financial assets.

Still, the overall mood at the summit was relatively sanguine.

Boston Consulting Group reported the majority of banks (outside of China) are finally trading above their book value. Lenders are upbeat that the UK is pursuing deregulation and were keen on the possibility, however far off, that it could close the gap with the US.

Groups such as HSBC were clear on their path to restructuring around their most profitable business lines.

Its chief executive Georges Elhedery said at the conference he would be “ruthless” about the overhaul of Europe’s largest lender, and planned to “double down” on its mergers and acquisitions and equity capital markets businesses in the Middle East and Asia.

And bankers were pleased to hear from City minister Lucy Rigby that they’re no longer on the “naughty step”, 18 years after the financial crisis jeopardised the world economy.

The German AI start-up with giant dreams

From the medieval German town of Freiburg, one of Europe’s artificial intelligence start-ups is hoping to become a formidable competitor to the likes of Google and ByteDance.

Black Forest Labs is barely more than a year old, but this week the start-up announced it had raised $300mn at a $3.25bn valuation.

The deal, which confirms an earlier DD scoop, bolsters the company’s standing as one of Europe’s most promising start-ups and a top developer of artificial intelligence image generation.

It’s also one of the few European start-ups developing its own AI models alongside Paris-based Mistral.

Led by CEO Robin Rombach, Black Forest Labs has been a pioneer in the industry.

The company’s team previously worked at Stability AI, developing a breakthrough technology for image generation known as Stable Diffusion. But after that group ran into trouble, Rombach and several of his colleague left to found Black Forest.

Many AI researchers believe Black Forest’s Flux models rival Google’s Nano Banana and ByteDance’s Seedream image systems.

That’s despite Google and ByteDance having far vaster computing resources, thousands of engineers and extensive video libraries from YouTube and TikTok to provide training data.

Black Forest Labs, while a fraction of the size of the largest US groups, has struck a lucrative deal with Meta as well as partnerships with creative toolmakers Adobe and Canva.

The German company is targeting a market that could upend industries such as advertising and entertainment.

One of its early investors, Michael Ovitz, co-founder of Creative Artists Agency, has helped Rombach make connections in Hollywood, even though many studios are wary of AI tools following the 2023 writers’ strike.

And while the company’s headquarters may be off the beaten track, it also has benefits.

Rombach said being headquartered outside the “super hype” of San Francisco — where AI groups are raiding each other’s talent with huge pay offers — is “the best thing that we have done so far”, as it helps the team stay “super focused”.

The women litigating London’s biggest splits

While DD is normally about tales of tie-ups, today we bring you a story about the ultimate demerger: divorce.

The FT’s Josh Spero and Suzi Ring interviewed the legendary female family lawyers — among them Fiona Shackleton, Sandra Davis, Frances Hughes, Diana Parker and Helen Ward — who have made London the divorce capital of the world.

The women, who have advised and challenged some of the world’s wealthiest people, have won settlements in the English courts fighting over billions of pounds.

They’ve worked on the contentious splits of prominent figures from Diana, Princess of Wales and Sheikh Mohammed bin Rashid al-Maktoum of Dubai to Chris Hohn and Paloma Picasso.

Their rise is inseparable from London’s emergence as a global financial capital from the mid-1980s onwards, drawing the wealthy and powerful to live and love in the City. And sometimes split.

The fact that Shackleton can charge about £1,200 an hour (almost $1,600) shows that these women operate only for the world’s richest clientele.

As they head into the final years of their careers, the question that bedevils all companies is coming up here too: who will succeed them?

Job moves

• Strategic Value Partners has hired Andrew Shore as a managing director focused on North American real estate. He joins from Davidson Kempner, where he was a managing director.

• Evercore has hired Ben Carpenter as a senior managing director, Bloomberg reports. He joins from JPMorgan Chase, where he was global co-head of healthcare investment.

• Paul Weiss has hired Nicholas Schwartz, Julie Ann Lamm and Mark Adler as partners in the firm’s finance group in New York. The trio joins from Sidley Austin.

• Apple has named Amar Subramanya vice-president of artificial intelligence. He joins from Microsoft, where he was a corporate vice-president.

Smart reads

Warp speed China’s biopharma sector is producing formidable competitors to western companies, the FT reports, a stunning rise from just five years ago when the country failed to develop an effective Covid-19 vaccine.

Holding on The New York-based quant firm Hudson River Trading has grown quickly by slowing down, Bloomberg reports. But can the strategy withstand the test of time?

Political price US data centre construction has become a political liability for Republicans, The New York Times reports. Recent election results in the battleground state of Georgia may spell trouble for the party — and the technology.

News round-up

ECB refuses to provide backstop for €140bn Ukraine loan (FT)

Qatar to cut Sainsbury’s stake as long stint as top shareholder ends (FT)

Ruffer cuts a fifth of jobs as profits fall (FT)

BDO partners’ profits fall as reorganisation looms (FT)

Just Eat Takeaway chief to step down weeks after Prosus deal (FT)

Apollo’s Rowan calls Mamdani ‘enemy’ of Jews at UJA fundraiser (BBG)