Citigroup beats Citigroup beat analysts’ forecasts as profit rose 2% versus the year-ago quarter and revenue fell by the same percentage.
Goldman beats but profit drops Goldman Sachs beat first-quarter earnings expectations but profit dropped 21% from a year ago “as quiet trading and underwriting took a toll across Wall Street.” Trading revenue fell 18%, in line with the 17% decline at JPMorgan Chase. “But without the big consumer business that bolstered JPMorgan’s earnings last week, Goldman is more beholden to its Wall Street traders and investment bankers to power earnings.”
Receiving Wide Coverage ...
Source of concern “A string of central bankers” attending the International Monetary Fund meetings over the weekend in Washington “expressed concern” that “President Trump’s combative stance toward” the Federal Reserve “could over time weaken the institution and its role in the global economy,” the Wall Street Journal reports. “The central bankers said they are concerned the GOP president’s approach could erode nonpartisanship in the Fed’s boardroom over the long run. They cited that longstanding tradition as part of the reason the Fed is a global role model for apolitical policy-making.”
President Trump’s “relentless attacks” on the Fed, “which he blames for slowing United States economic growth,” are putting Fed Chair Jerome Powell “in a bind as he tries to bolster the economy without feeding fears that he is buckling under political pressure and damaging the integrity of an independent Fed,” the New York Times writes. “Yet while Mr. Powell repeatedly denies that Mr. Trump is changing the Fed’s course, the central bank has largely moved in the direction that the president wants. For now, there is little distinction between Mr. Trump’s view that rates should stay low because the economy is strong and the Fed’s view that rates should remain low because the economy is fragile. How Mr. Powell handles the next few months will be a critical test of his leadership skills.”
So bad it’s good Deutsche Bank’s success in negotiating a merger with German rival Commerzbank “will likely depend on an obscure but valuable accounting quirk.” Deutsche “hopes European Central Bank supervisors will allow wide latitude to use the accounting treatment — known as negative goodwill, or 'badwill' — as part of a takeover. A combined bank could recognize a onetime profit of more than €16 billion, or more than $18 billion, using badwill, according to analyst estimates. That profit would be crucial for maintaining the combined entity’s capital ratios, which regulators are likely to increase as a condition of approving a deal.”
Meanwhile, European regulators are concerned that Deutsche Bank’s U.S. investment bank “remains too large and unprofitable and needs to be cut back. The watchdogs’ stance would not be affected by a potential tie-up with Commerzbank.”
Wall Street Journal
Diverging paths JPMorgan Chase and Wells Fargo both beat first quarter earnings expectations last Friday, but got there from two different directions. JPMorgan, whose net profit rose 5%, benefited from steady loan growth and higher interest rates. At Wells Fargo, however, “the picture is less encouraging” despite its 14% earnings gain. “The rise in profits was largely due to a sharp drop in expenses,” while revenue and loans outstanding were basically flat. “This suggests continued execution problems at Wells Fargo. It surely doesn’t help loan growth that the Fed is not allowing Wells Fargo to grow its total assets. What’s more, the search for a new chief executive could add a new distraction in the coming months. This makes it all the more important for banks to keep growing loans in order to boost profits. For JPMorgan that is doable, but for Wells Fargo it seems to be a tall order.”
Financial Times
Got you covered TSB said it will become “the first British bank to commit to covering customers against all types of online fraud losses. The new guarantee will cover transactional fraud losses, including unauthorized transactions on customer accounts or when consumers are tricked into authorizing payments to fraudsters.”
“We want to provide peace of mind to our customers,” Executive Chairman Richard Meddings said. “If a TSB customer innocently suffers a fraud loss on their account after being targeted by a criminal, we’ll cover it.”
The good, the bad and the ugly The International Monetary Fund and the World Bank “have launched a private blockchain and quasi-cryptocurrency called ‘Learning Coin’ to better understand the emerging technology. This process will allow the Fund/Bank to better understand how crypto assets could potentially be used in real life. The goal of this project is to promote knowledge — not bias. The app is a prototype that aims to show the good, the bad and the ugly of the technology, without hype or uninformed criticism.”
Going long Edward Bramson has extended the term of his “controversial” $1.4 billion loan from Bank of America that he is using to finance his 5.5% stake in Barclays and win a seat on its board of directors in order to change its business strategy away from trading.
Elsewhere
Winners Banks and their investors won last week’s hearing before the House Financial Services Committee, proclaims Richard X. Bove, financial strategist at Odeon Capital Group, “What emerged was a clear understanding that there would be no meaningful banking legislation for the foreseeable future,” he writes in an op-ed on CNBC.com. “Instead the bureaucrats in the banking regulatory sector would be ‘running’ the banks. These are men and women who either had been bankers or who are strong supporters of the industry. The only banking news that is likely to emanate from Washington, for the next few years, is going to be positive for the industry. The stringent regulations that have been restricting banking for a decade are likely to be loosened. From my perspective, this will be good for the nation and its economy.”
Quotable
“I’m certainly worried about central bank independence in other countries, especially … in the most important jurisdiction in the world.” — European Central Bank President Mario Draghi, referring to the U.S. Federal Reserve Board
The Wisconsin banking company forecasted loan growth of 4% to 6% for the full year, driven by an expansion into new commercial and consumer credit lines as well as enduring economic strength in the Midwest.
In the inaugural iteration of American Banker's news quiz, test your knowledge on top articles covering the legal battles of the Consumer Financial Protection Bureau, new technology testing at JPMorgan Chase, earnings season and more.
To build their executive presence in meetings and on video calls, junior employees should embrace flexible schedules — and possibly media training, Michelle Young of Worldpay and Anna Greenwald of MoneyGram International said at American Banker's Payments Forum.
Liberty Bank in Salt Lake City had been "structurally unprofitable" since 2008, according to its regulators. Experts criticized the FDIC for allowing the bank's demise to play out in slow motion.
The New York-based bank says it will push its concentration of commercial real estate loans below 400% of risk-based capital over the next two years and focus more on C&I.
The San Francisco-based firm's Anchorage Digital Trusted Liquidity and Settlement network, better known as Atlas, will allow clients to settle a range of cryptocurrency transactions.