Breaking News This Morning ... HSBC said it would buy back up to an additional $2 billion in stock after reporting better-than-expected earnings in the second quarter. The bank has now pledged to buy back $5.5 billion in the past year. Wall Street Journal, Financial Times, New York Times
Wall Street Journal New FDIC pick?: The White House is considering nominating Jelena McWilliams, Fifth Third Bancorp's chief legal officer, to head the Federal Deposit Insurance Corp. Before joining Fifth Third in January, McWilliams was an attorney at the Federal Reserve and a staffer to Republicans on the Senate Banking Committee. If approved by the Senate, she would succeed Martin Gruenberg, whose term ends in November. President Trump's original pick for the post, James Clinger, withdrew his name from consideration, citing family obligations.
The U.S. Federal Deposit Insurance Corp. headquarters stands in Washington, D.C., U.S., on Tuesday, Sept. 29, 2009. The FDIC, seeking to replenish deposit reserves as banks fail at the fastest pace in 17 years, today voted to unanimously to have lenders prepay fees through 2012, raising about $45 billion. Photographer: Andrew Harrer/Bloomberg
Andrew Harrer/Bloomberg
Trouble in the cards: Bankers at JPMorgan Chase are growing worried that the bank's popular Sapphire Reserve rewards credit card may turn out to be a money loser for the bank, despite its $450 annual fee. Things are so bad, according to the Journal, that the bank is looking to make about $200 million in cost cuts in the unit that manages the card.
"The scrutiny inside the bank reflects changing economics of the competitive premium card market," the Journal said. "Rewards for consumers—paid for by the bank—have gotten sweeter. Spenders, meanwhile, are growing savvier about maximizing benefits and avoiding balances that pad banks' profits."
But Chase isn't the only bank where credit card profits may be under pressure. The Journal reports Monday that the average net charge-off rate at the eight biggest American card issuers rose to 3.29% in the second quarter, the highest level in four years, according to Fitch Ratings. All eight banks reported increases. "The trend, which accelerated in the first half of this year, has started to suppress bank earnings," the Journal said, and "could be a warning sign for markets and the broader economy."
Nevertheless, the two big ride-sharing companies, Uber and Lyft, are moving ahead with introducing their own cobranded credit cards. Uber plans to launch a credit card for its customers this fall, issued by Barclaycard and carrying the Visa brand. Lyft is reportedly working on a card, too.
Situation stable: The "solid if uninspiring results" posted by several of Europe's largest banks last week is a "welcome change that shows the sector's grinding restructuring is starting to bear fruit," the Journal reports. "Not long ago, investors fretted about whether European banks had enough capital to survive downturns, and whether they'd be able to pare back their mountains of bad loans. Many problems remain, but investors now have more mundane worries, such as profitability and margins." Indeed, European banks still "badly lag their U.S. peers in profits and dividends."
One area where they particularly lag their American counterparts is in securities trading. In fact, they're falling even further behind. "The trouble for the Europeans is that the more money U.S. banks make in their domestic market, the more firepower they will have to deploy on winning business elsewhere," the Journal notes.
Quotable "Upon our discovery, we acted swiftly to discontinue the program and immediately develop a plan to make impacted customers whole." — Franklin Codel, head of consumer lending at Wells Fargo, about the bank's recent auto lending scandal.
The Jackson, Mississippi, company will use proceeds from the sale of its Fisher Brown Bottrell Insurance unit to restructure its investment portfolio, moving $1.6 billion of low-yield securities off the balance sheet.
The store-branded card issuer is raising annual percentage rates and adding fees for paper statements to compensate for lost revenue. The Consumer Financial Protection Bureau's new regulation is scheduled to take effect on May 14.
At the banks' annual meetings, shareholders at both companies struck down proposals that would have split the board chair and CEO roles. Two other proposals also failed to win shareholder support, one concerning energy financing and another on pay gap analysis.
Congressional Review Act resolutions are ramping up ahead of the 2024 election cycle. Experts say that, although none are likely to become law, the resolutions are still powerful messaging and political tools.
The ABA is testing an information-exchange network to allow banks to share their fraud data with each other. Companies including Baselayer are also building solutions.
Republicans on the House and Senate Small Business committees are accusing the SBA of being irresponsible in granting Funding Circle permission to participate in its flagship loan-guarantee program.
