BANKTHINK

How Goldman Sachs Learned to Stop Worrying and Love Bank Regulation

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Receiving Wide Coverage ...

Goldman Sachs: The Journal's lead story says the Wall Street firm is expanding its private bank, with a goal of building up its portfolio of loans to wealthy clients and corporations to $100 billion from $12 billion in March. The subsidiary bank's deposits, also sourced from well-heeled individuals, have grown to nearly $50 billion from a hair over $30 billion in 2009. Chief Executive Lloyd Blankfein tells the Journal that the firm, which converted to a bank holding company to shore up funding during the crisis, is now "looking at the revenue versus the incremental costs, not the sunk costs" of owning a regulated depository and it likes what it sees. Underscoring Goldman's need to find different ways to make money, the firm reported this morning that second-quarter profits slipped 11% as trading volumes and certain assets' values declined. Wall Street Journal, Financial Times, New York Times

Citi's Earnings: "Job cuts and lower bonuses helped Citigroup protect its bottom line in the second quarter from a slowdown in markets activity," says the FT. The Journal's "Heard on the Street" column, while generally arguing that the market underappreciates Citi's progress, notes that the bank's Tier I capital under the Basel III formula is lower than under Basel I. "This means Citi has big assets that do nothing to bolster its capital base. That, in turn, acts as a drag on its ability to increase capital to meet new requirements and ultimately to be in a position to increase its dividend and buy back stock," which the Fed forbade it to do this year. Wall Street Journal, Financial Times

…And Citi's Yearnings: Another Journal article and the FT's "Lex" column look at the bank's growth ambitions for emerging markets overseas. Wall Street Journal, Financial Times Wall Street Journal, Financial Times

Here's Showing Bank Carelessness: The papers preview today's hearing, at which a Senate subcommittee will unveil the findings of an investigation showing HSBC "ignored warnings for years that the bank's far-flung operations were being used by money-launderers and potential terrorist financiers." Wall Street Journal, Financial Times, New York Times, Washington Post

Libor and the Fed: The Journal's editorial page interprets the documents recently released by the New York Fed as showing its then-president Tim Geithner and other regulators did little to address Libor manipulation. An FT story takes readers inside a closed-door meeting between lawmakers and a top lawyer for the Federal Reserve Board, who said the central bank lacked jurisdiction over banks' rigging of the index.

Correction

Monday's Scan, in summarizing the big credit card settlement, mistakenly described merchants having won the right to offer discounts for cash purchases. They already had that — what the settlement allows for is a surcharge on credit payments. The Times reports today that some merchants are considering such surcharges.

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Q1 Earnings Outlook to Put Focus on Lawsuits, Stress Tests, Lending
With JPMorgan Chase (JPM) and Wells Fargo (WFC) set to issue the initial round of first-quarter earnings reports Friday, big bank CEOs are bracing to answer questions about executive departures, capital shortfalls, seemingly unending legal risks and oh, yeah how they are going to make money.

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