Bank earnings season begins; more payments companies quit Facebook’s Libra

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JPM, Citi beat

JPMorgan Chase’s third quarter earnings rose 8% and beat expectations. The bank earned $9.08 billion as revenue also rose 8% to $29.34 billion.

Citigroup's third-quarter profit rose 6% to also beat expectations. The bank posted a net income of $4.91 billion compared with $4.62 billion last year.

Wells, Goldman profit falls

"Falling Rates, $1.6 Billion Charge Weigh on Wells Fargo Profit" (WSJ) and "Goldman Profit Drops 26% as Market Wobbles" (WSJ)

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And then there were …

Three more payments companies – Visa, Mastercard and Stripe – plus eBay have joined PayPal in abandoning Facebook’s Libra digital currency project. The desertions, which “came after lawmakers, central bankers and regulators expressed deep concerns” about the project, “threaten to derail an ambitious initiative to remake global finance before it ever gets off the ground.”

“The loss of four of the largest payments companies in the world leaves Facebook without much of the muscle it assembled for Libra. The project now mostly hinges on smaller payments companies, telecommunications providers, venture-capital firms, e-commerce merchants and nonprofits.” Wall Street Journal, New York Times, American Banker

“The loss of financial-services institutions in particular could very well signal the beginning of the end for Libra.”

Wall Street Journal

Showing their cards

Bank earnings season begins on Tuesday as JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo report third quarter results. Bank of America follows on Wednesday and Morgan Stanley on Thursday.

Don’t expect much from the banks’ Wall Street units, where “expectations will be low.” Global investment banking revenue is expected to drop 2% from a year ago.

The banks’ consumer divisions may pick up the slack, however. They are “charging record-high margins on credit cards even as borrowers take on more debt” and the Federal Reserve cuts interest rates. “The increase in [credit card] rates might seem counterintuitive, but banks’ generous card rewards programs, offering free travel and other perks, have been eating into lenders’ profitability. To offset that pain, banks are charging cardholders more to borrow. Charging higher rates also is a way for lenders to protect themselves against future loan losses.”

No apps for you

Google has barred high-interest payday lenders from its app store. The move, which “inserted the tech giant into a fight over payday loans, prompted an outcry from payday-lending companies” but praise from consumer advocates.

Financial Times

Challenger reboot

HSBC is planning to “overhaul” its 20-year-old First Direct brand, which it calls the “original challenger bank … to attract younger customers and compete with fast-growing new digital rivals such as Monzo. Some of the new products it is working on include an in-app marketplace and a ‘financial autopilot’ that would use artificial intelligence to make personalized recommendations and automate activities such as topping up savings accounts. Successful features may eventually be introduced to customers of HSBC’s main brand.”

New York Times

Taking shortcuts

When Deutsche Bank “set its sights on China nearly two decades ago, it was late to the game and faced fierce competition.” To catch up, it cut corners and bent rules, the Times said. “It paid millions of dollars to Chinese consultants with access to politicians, hired dozens of relatives of China’s ruling Communist Party and showered some members of the political elite with lavish gifts,” according to an investigation by the Times and the German newspaper Süddeutsche Zeitung.

“It was a brazen campaign to win business in China by charming and enriching the country’s political elite. And it worked. By 2011, the German company would be ranked by Bloomberg as the top bank for managing initial public offerings in China and elsewhere in Asia, outside Japan.”

Quotable

“I would caution against reading the fate of Libra into this update. Of course, it’s not great news in the short term, but in a way it’s liberating. Stay tuned for more very soon. Change of this magnitude is hard. You know you’re on to something when so much pressure builds up.” — David Marcus, the Facebook executive overseeing Libra, after four more prospective partners abandoned the project.

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Earnings Cryptocurrencies Digital payments Apps International banking Deutsche Bank HSBC Facebook JPMorgan Chase
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