Wrong direction?: American International Group said its second quarter net income fell 17% to $937 million, largely due to a $200 million pretax restructuring charge, reduced investment income “and another weak showing for its big business of selling property-casualty policies to corporate clients,” the Wall Street Journal reports. The quarter marked the one-year anniversary of CEO Brian Duperreault’s turnaround effort.
The restructuring charge, which AIG said was “primarily related to efficiency initiatives,” “is likely to intensify investors’ concern about the speed of the turnaround, which comes against a backdrop of pricing pressure in the global insurance industry,” the Financial Times says.
On its way: Royal Bank of Scotland said it will start paying dividends for the first time since the financial crisis, pending the finalization of a fine with the U.S. over toxic mortgage-backed securities.
Not enough humans: Experian is looking to use artificial intelligence “to predict application behavior more quickly and reliably, and to identify and fix problems before they impact customers. Just as manufacturing firms added sensors to monitor the performance of generators and compressors, Experian now is doing the same thing with software. Machine learning helps Experian manage an increasingly complex IT environment as the business world faces a shortage of technical talent and adapts to the fast-paced nature of software development.”
Have your say: Readers sound off on whether or not it was appropriate for President Trump to criticize the Federal Reserve.
Financial Times
Turnabout: HSBC is looking to sell its “know your customer” software to other banks. The compliance system, “which combines robotic process automation and machine learning technologies to carry out automated checks on clients,” will be offered through EXL, a U.S.-based outsourcing company. “The move underlines how much HSBC believes its client-checking systems have improved six years after it was fined almost $2 billion and narrowly escaped criminal charges for breaching money laundering and sanctions rules in the U.S.”
New York Times
Monopoly: Australia’s four biggest banks, which control a 75% market share, “have used their dominant position to exploit customers, deliver inferior products, charge exorbitant fees and block competition,” a government commission said.
Back in business: Prince Alwaleed bin Talal, the big Saudi Arabian investor in Citigroup and other companies, is getting into the music streaming business. The $270 million investment in Deezer is the prince’s first international deal since he was freed from three months’ detention in the Riyadh Ritz-Carlton following his arrest by the Saudi government on corruption charges.
New math: The paper has a neat interactive showing readers combinations of various companies whose values add up to the worth of one: Apple, which crossed the trillion-dollar mark. One slide pits the four largest U.S. banks (JPMorgan Chase, Bank of America, Wells Fargo, Citigroup), against the tech giant. Winner? The banks ($1.168T).
Quotable
“Humans never get much above 95% accuracy when they are filling out forms as it is quite tedious work, but automating it gets you much closer to 100%.” — Kirsty Roth, head of operations at HSBC, about the bank’s new customer identification compliance system.
The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
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.