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Tough times in subprime: U.K. subprime lender Provident Financial Group's stock plunged by two-thirds on Tuesday after announcing its second profit warning in two months, the resignation of its chief executive, and the end of its interim dividend.

"The company's grim news comes as U.K. consumer credit moves close to levels reached on the eve of the financial crisis, a situation that the Bank of England recently warned British banks about," the Wall Street Journal said.

"This is, without doubt, a disaster for a company and management team which, up until recent times, we regarded extremely highly," Gary Greenwood, an analyst with Shore Capital, told the Financial Times.

Wall Street Journal
Big deal: Affirm and Walmart are close to an agreement in which Affirm, run by PayPal co-founder Max Levchin, would offer installment loans to some Wal-Mart shoppers in the U.S. "The development is the latest sign of retailers' desire to reach new customers with limited credit histories, and of the intensifying competition facing credit card providers such as Synchrony Financial," which issues Walmart's credit card, the Wall Street Journal reports.

Walmart shopping carts.
Bloomberg News

A solid quarter: Aggregate earnings at American banks rose 10.7% to $48.3 billion in the second quarter, according to the Federal Deposit Insurance Corp.'s quarterly report, as nearly two-thirds of banks reported higher earnings compared to a year earlier. The average net interest margin rose to 3.22%, its highest level since the fourth quarter of 2013.

However, the agency warned that the rate of loan growth is starting to weaken. Loan balances grew 3.7% in the quarter, down from 4% in the previous quarter and down sharply from the 7% pace of a year earlier.

It seems banks are starting to wonder if interest rates really are headed higher. The FDIC report found that the percentage of bank assets that don't mature or change interest rates in less than five years reached a new high in the second quarter. "That means banks are allowing more borrowers to lock in low rates for long periods, a potential risk should rates move sharply higher," the Journal said.

Meet the ethics officer: The paper's Risk & Compliance Journal interviews Katie Lawler, U.S. Bank's first global chief ethics officer. "You can't teach people to be ethical but you can create an environment where they are more likely to make good decisions," she said. "Research shows people behave in a certain way not because of rules; they decide how to behave by looking at the people around them and seeing how they are behaving. You just can't rely on rules."

New man on the Block: H&R Block named Jeffrey Jones, a former executive at Uber and Target, to be its next CEO, effective October 9. Jones' job "will be to transform a company best-known for its in-person tax-preparation services into a formidable competitor of Intuit's rapidly growing TurboTax products and other low-cost online options," the Journal said.

Financial Times
Striking while the iron's hot: Goldman Sachs hopes to use its newfound influence in Washington to overturn or modify the Volcker rule, which it views as the "main culprit" in its recent bond trading woes. With Goldman alumni Steven Mnuchin at Treasury and Gary Cohn at the National Economic Council, the bank is hoping for a "new opening" under President Trump following a "harsh time" during the Obama years.

New York Times
The NYT has two items of note from its opinion section: one, entitled “Mr. Trump Sides With Wall Street; You Lose,” calls the administration’s delaying tactics on the “fiduciary rule” (which requires financial advisers to put their clients’ interests first) “obstruction, pure and simple.”

Another piece, “Steve Mnuchin’s Wife Has a Talent for Being Tone-Deaf,” talks of the uproar surrounding a social media spat the Treasury Secretary’s wife got into recently.

Quotable
"The interest-rate environment and competitive lending conditions continue to pose challenges for many institutions. Some banks have responded to this environment by 'reaching for yield' through higher-risk and longer-term assets." — FDIC Chairman Martin Gruenberg.

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