Not good enough JPMorgan Chase said its fourth-quarter profit jumped 67%, well short of analysts’ estimates. The bank earned $7.07 billion, or $1.98 a share, compared to expectations of $2.20 a share. Trading revenue fell nearly 6%. Wall Street Journal, Financial Times
Better than expected Wells Fargo reported slightly lower fourth quarter earnings but beat analysts’ per-share estimates as revenue fell by $1 billion.
Receiving Wide Coverage ...
Citi disappoints Citigroup bounced back to a $4.3 billion profit in the fourth quarter from an $18.9 billion loss a year earlier, but the bank’s results were still “mediocre,” showing that “its grand plans for the future could fall short," the Wall Street Journal says. Not only did its “vital trading business struggle under tough market conditions in the fourth quarter,” but “the bigger long-term worry is Citigroup’s somewhat weak performance in Latin America and Asia. Global macroeconomic weakness would be bad for major banks, but for Citigroup especially. Some skepticism about its optimistic projections is warranted.” Wall Street Journal, New York Times, American Banker
Citi’s weak trading results “may herald the beginning of a tough season across Wall Street. While volatility earlier in the year had helped banks’ stock traders produce big gains, December’s moves took a bite out of their larger fixed-income units,” the Journal says.
The bank cut employee pay by $300 million and reduced the risk on its balance sheet as it “battens down the hatches for an uncertain year ahead,” the Financial Times reports. Revenue fell to its lowest quarterly level in two years.
American banks “are strong” but face a “testing 2019” as the post-crisis policies meant to save them slowly unwind, according to the FT.
Crime fighters The U.K. government has established a task force, called the Economic Crime Strategic Board, that will work with the financial sector to fight economic crime. The new body will include the CEOs of Barclays, Lloyds Bank and Banco Santander, plus senior regulatory and law enforcement officials. “We need to take action on all fronts to target the corrupt fraudsters who are lining their pockets with dirty money and living luxury lifestyles at the expense of law-abiding citizens,” said Home Secretary Sajid Javid.
Perhaps coincidentally, the trial of four former Barclays executives began in London Monday. Former CEO John Varley “entered a not guilty plea to two charges of conspiracy to commit fraud by false representation linked to two capital raisings in 2008 during the financial crisis. He is the most senior British banker ever to face a British court in a criminal case since the financial crisis erupted almost a decade ago. The Barclays prosecution is one of the most high profile cases ever brought by the Serious Fraud Office,” the FT says.
Wall Street Journal
Filling a void PayPal named Allison Johnson its executive vice president and chief marketing officer, a post that has been vacant since 2013. A former vice president of world-wide marketing communications at Apple from 2005 through 2011 and a former senior marketing executive at HP, Johnson was most recently a founder and managing partner at West, a hybrid marketing and venture-capital firm.
Financial Times
Blockchain works HSBC said it handled three million foreign exchange transactions worth $250 billion using blockchain technology last year. While that “represents a tiny sliver of its overall currencies business, it still offers a rare example of a blockchain-based product that has proven its worth in wholesale finance, suggesting banks are finding solid applications for the technology.”
Washington Post
New sheriff “Wall Street is nervous” as Rep. Maxine Waters, D-Calif., assumes the chairmanship of the House Financial Services Committee. The first African-American and first woman to lead the committee, she will have “broad influence over the financial world — from Wall Street regulations to flood insurance. She could also use her position to turn up pressure on Wells Fargo, which has admitted to various consumer abuses during the past two years, and Equifax, which had a huge data breach that compromised sensitive data of 148 million people,” the paper notes. It also suggests she could slow the Trump administration's efforts to deregulate banks,
Representative Maxine Waters, a Democrat from California and ranking member of the House Financial Services Committee, center, and Representative Jeb Hensarling, a Republican from Texas and House Financial Services Committee Chairman, right, listen as Ben Carson, secretary of Housing and Urban Development (HUD), not pictured, testifies during a hearing on Capitol Hill in Washington, D.C., U.S., on Wednesday, June 27, 2018. Carson is testifying to discuss oversight of his department. Photographer: Al Drago/Bloomberg
Al Drago/Bloomberg
Elsewhere
Fintech news Finastra CEO Simon Paris said European banks lag far behind their American counterparts when it comes to embracing technology. “You see a big difference between the U.S. banks and the European banks, and I think that's part of the reason why U.S. banks are at twice the level of return on equity over the Europeans,” he told CNBC's Squawk Box Europe. “What the Americans are doing is investing very heavily in productivity and in the actual service itself, (and enabling) the customer journey. You really see that they're getting improvements from those technology investments they made a few years ago.”
Still, not every U.S. regulator is keen on giving fintechs access to the country’s payments system. While the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. are looking to grant federal banking licenses to fintech firms, the Federal Reserve isn’t so anxious for that to happen. “Many Fed officials fear these firms lack robust risk-management controls and consumer protections that banks have in place.”
Quotable
“I don’t want to be the next financial institution to mess up. We will have big bank CEOs raising their right hand a lot more.” — Isaac Boltansky, a Washington policy analyst at firm Compass Point Research & Trading, commenting on Rep. Maxine Waters, D-Calif., taking the reins of the House Financial Services Committee.
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.
Consumer spending slowed and charge-offs rose during the first quarter, but Bread Financial said a pending late-fee rule may not be as devastating to its revenue as the Columbus, Ohio-based firm initially feared.
The FDIC board debated and ultimately withdrew two separate proposals to address asset managers' control over banks, but acting Comptroller of the Currency Michael Hsu said he couldn't support either and called for more research and debate about how asset managers' control over banks impacts safety and soundness.
