Receiving Wide Coverage ... Bad news bears: Bank stocks, among the biggest beneficiaries of Donald Trump's election, are now heading toward bear market territory, "beaten down from their post-election peaks by talk of weak second-quarter trading revenues and fading hopes of a Trump-fueled stimulus," the Financial Times reports. Goldman Sachs, for example, is down 16.5% since its March 3 peak, Wells Fargo is down more than 14%, and Bank of America and JPMorgan Chase are both off about 12%. Financial Times, American Banker
Comments from the two biggest banks on Wednesday helped fuel the downdraft in stock prices. JPMorgan CFO Marianne Lake said the bank's second-quarter trading is down about 15% compared to a year ago, while B of A CEO Brian Moynihan said his bank's Q2 trading revenue will be down slightly compared to 2016.
Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Friday, May 19, 2017. U.S. equities advanced at the end of a turbulent week as corporate results and a rally in commodities fueled optimism in the world's largest economy. Photographer: Michael Nagle/Bloomberg
Michael Nagle/Bloomberg
This less-than-rosy scenario is giving Royal Bank of Canada second thoughts about making any new investments south of the border. President and CEO Dave McKay told the FT that he "was reluctant to make a case for an acquisition to the bank's board, given doubts over the pace of economic and fiscal reforms under the new president."
Still, the Journal's Heard on the Street column says the recent decline in long-term interest rates, which has flattened the yield curve, favors the largest American banks. That situation "augurs poorly for banks with more long-term loans," it notes. But the four largest banks have only about 13% of their assets tied up in long-term loans, it says, compared to about 25% at large regional lenders.
"All this indicates that the three universal megabanks—JPMorgan Chase, Bank of America and Citigroup —will be among the biggest beneficiaries of recent interest-rate trends. If the yield curve keeps flattening, investors should stick with the big boys."
(Almost) out of Africa: Barclays said it will sell most of its share in its African unit, reducing its stake to around 15% from 50.1%. The sale to a group of institutional investors, which was larger than expected, will raise about £2.2 billion, which "should help alleviate capital fears around Barclays," the Wall Street Journal said.
"Offloading the British bank's African business, which is one of the continent's largest lenders in its own right, is one of the most important decisions taken by Jes Staley since he became Barclays chief executive 18 months ago," the Financial Times commented.
Financial Times Banned: New York City has suspended its business dealings with Wells Fargo, the latest city to drop the bank following last year's phony-accounts scandal. "What happened at Wells Fargo was a fraud — and there should be consequences," city comptroller Scott Stringer said. "We need to send a message to this bank and the broader industry that ethics matter." Wells will be prohibited from acting as the lead underwriter on city municipal bond deals for at least a year.
Going to court: Good Technology's suit against JPMorgan Chase is expected to start next week in Delaware. The bank is accused of "fraud on the board" for advising the technology company to accept an allegedly low-ball offer from BlackBerry because it wanted the smartphone company as a client. "The accusations come as banker liability in soured merger and acquisition deals has become a hot litigation area in the Delaware Court of Chancery, and as banks are looking for new ways to limit their exposure to shareholder lawsuits," the FT said.
Pointed questions: The U.K. Financial Conduct Authority has asked several of the country's largest asset managers to provide detailed information about their contingency plans once Britain leaves the European Union. In a letter to the companies, the regulator asks 30 questions about their post-Brexit plans, including whether they plan to relocate staff or operations to the EU and the possible effect on their capital bases.
Quotable "We're competing with cash. In India, we're not competing with cards." — Madhur Deora, chief financial officer of Paytm, India's largest mobile payments company with five million merchant customers, five times the number that accept credit cards.
The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
Federal Reserve Governor Michelle Bowman said she believes there is a feasible path forward for the revised capital reform proposal, emphasizing the importance of making broad changes informed by industry feedback to achieve broad consensus among Federal Reserve board members.
