AIG earnings decline; Goldman to open bitcoin trading unit

Receiving Wide Coverage ...

Insurers report: American International Group reported a 21% drop in first quarter net income, its sixth decline in the past 10 quarters, largely due to bigger-than-expected losses from natural disasters.

AIG’s worse-than-expected performance contrasted with those at two of its biggest rivals. MetLife beat expectations with double-digit gains in net income and adjusted income. Prudential Financial also beat estimates despite a slight decline in net earnings.

Victor J. Blue/Bloomberg

“The latest profits decline shows how long it is taking AIG to get back on the front foot, despite a turnaround effort by chief executive Brian Duperreault, who is almost a year into the job,” the Financial Times comments.

Risky business: “In a step that is likely to lend legitimacy to virtual currencies — and create new concerns for Goldman,” the bank is moving ahead with plans to create “what appears to be the first Bitcoin trading operation at a Wall Street bank,” the New York Times reports. Goldman will not be buying and selling actual Bitcoins, which would require regulatory approval, the paper notes, but will trade a variety of contracts linked to the price of the digital currency.

“The suggestion that Goldman Sachs, among the most vaunted banks on Wall Street and a frequent target for criticism, would even consider trading Bitcoin would have been viewed as preposterous a few years ago,” the paper says.

American Banker reported Goldman's cryptocurrency plans in December.

Meanwhile, the former head of electronic trading at Goldman, Greg Tusar, has launched a startup called Tagomi Systems that will act as a broker-dealer in bitcoin. The firm, which will buy and sell cryptocurrencies for wealthy individuals and family offices, is backed by billionaire Peter Thiel’s venture capital firm, Founders Fund.

In a more mundane part of the market, Goldman CEO Lloyd Blankfein “tried to ease concerns” voiced at the bank’s annual shareholder meeting that it “may be ploughing into consumer credit at the wrong point in the cycle.” The bank’s digital bank, called Marcus, has raised about $20 billion of deposits and $2.4 billion in unsecured consumer loans in just the past year and a half and is a key part of its plan to increase annual revenues by $5 billion over the next two years and diversify from its core investment banking and trading businesses. Blankfein said Goldman is “being very careful” in its move into consumer lending, where the bank is targeting people with lower credit scores.

Financial Times

Square down: Square reported a worse-than-expected quarterly loss of $24 million, up from the prior year period’s $15.1 million deficit, despite a 45% jump in revenue. The payments company also raised its full-year earnings guidance, but that wasn’t enough to prevent a sharp drop in the company’s shares after the announcement.

Bye bye bonus: Paul Pester, the CEO of embattled U.K. bank TSB, is forfeiting a £2 million bonus following the bank’s botched account transfer last weekend. The bank was transferring accounts from its former parent, Lloyds Banking Group, but its technology systems were unable to handle the volume. TSB has promised to spend tens of millions of pounds on waived fees and higher interest rates on deposits in order to mollify customers.

Still here?: Bankers will be happy to see Martin Gruenberg leave as chairman of the Federal Deposit Insurance Corp. The Obama-era holdover “is a growing source of frustration to Wall Street, as the last man standing in the way of a deregulatory wave.” But confirmation of his replacement has been bottled up in the Senate. Gruenberg's term ended five months ago.

Washington Post

Can’t please everyone: Fannie Mae and Freddie Mac’s year-old policy of accepting home purchase mortgage loans with no property appraisals is popular with lenders and borrowers but not with – you guessed it – appraisers.

Quotable

“I would not describe myself as a true believer who wakes up thinking Bitcoin will take over the world. For almost every person involved, there has been personal skepticism brought to the table.” — Rana Yared, one of the executives who is overseeing the launch of a bitcoin trading operation at Goldman Sachs.