Receiving Wide Coverage ... The results are in: Third-quarter results at the big five American banks “weren’t as bad as some investors and analysts had feared, but they weren’t great either — especially in the all-important fixed-income trading category,” the Wall Street Journal reports. “In most cases, leading the pack meant having the smallest year-over-year decline in revenue for a particular trading category.”
The Heard on the Street column says the results show the two big investment banks — Goldman Sachs and Morgan Stanley — “can perform reasonably well even when the environment is tough. What happens if things get better?” Morgan Stanley, it says, is “a proven, steady performer.” But “for those who can stomach some risk in exchange for higher potential returns, it may be time to wade back into Goldman Sachs.”
The New York Times chooses steadiness. “Morgan Stanley may not provide as many thrills as Goldman, but it ought to avoid many of the spills,” it says. “Goldman’s $94 billion market capitalization has edged back ahead of its rival’s, after they briefly traded places in the summer. There’s a case to be made that they should swap around again.”
Adapt or suffer: Ireland is opening its arms once again to the banking industry a decade after the country’s economy was crippled by a banking disaster. The reason: Brexit may cost the country, the U.K.’s biggest trading partner, 40,000 jobs if exports to the U.K. decline. It hopes to soften the blow by luring 10,000 financial services jobs.
Patrick Honohan, governor of the Irish Central Bank, arrives for dinner during the Jackson Hole economic symposium, sponsored by the Federal Reserve Bank of Kansas City, at the Jackson Lake Lodge in Moran, Wyoming, U.S., on Friday, Aug. 28, 2015. The symposium gathers central bankers, finance ministers, academics, and market participants to discuss the theme of "Inflation Dynamics and Monetary Policy". Photographer: David Paul Morris/Bloomberg *** Local Caption *** Patrick Honohan
David Paul Morris/Bloomberg
“Faced with Brexit, Ireland has no choice but to adapt,” said Patrick Honohan, a former governor of the Central Bank of Ireland. “Whether we like it or not, financial services is part of that.” Wall Street Journal, Financial Times
Wall Street Journal JPM buys WePay: JPMorgan Chase agreed to buy payments company WePay, which the paper calls “the bank’s first sizable acquisition of a financial-technology startup.” The bank plans to roll out WePay’s technology, which helps online marketplaces and crowdfunding websites process payments, to its four million small-business customers.
No decision yet: President Trump is expected to pick a Federal Reserve chair before he embarks on his first trip to Asia on November 3. The finalists are current Fed Chair Janet Yellen, who will meet with the president Thursday; Fed governor Jerome Powell, former Fed governor Kevin Warsh, National Economic Council Director Gary Cohn and Stanford University economist John Taylor. “Honestly, I like them all, I do. I have a great respect for all of them,” Trump said.
Tougher rules: Canada’s banking regulator announced new mortgage financing rules “that real estate watchers and economists say could dramatically slow house buying and borrowing,” according to the paper. The rules, which take effect on January 1, would require all prospective buyers — including those with a downpayment of 20% or more — to undergo a stress test before they can qualify for a mortgage. The test would show if the borrower can handle payments on a loan with an interest rate two percentage points above the actual rate.
“These revisions reinforce a strong and prudent regulatory regime for residential mortgage underwriting in Canada,” said Jeremy Rudin, head of the Office of the Superintendent of Financial Institutions.
Financial Times Open for business: While other countries, including the U.S. and China, have put restrictions on the use and trading of cryptocurrencies, Japan, has gone the other way, recently issuing operating licenses to 11 bitcoin exchanges. “For Japan, cryptocurrencies sit within the realm of fintech,” the paper explains. “The government and banking leaders hope that this sector’s businesses — ranging from artificial intelligence-led investment advisory groups to cloud data storage — will free up cash sitting in bank deposits and reignite the economy.”
Quotable “This is easily the most groundshaking mortgage rule of all time, and that’s not an understatement.” — Robert McLister, founder of the mortgage-rate comparison site RateSpy.com, about mortgage rules announced by the Canadian government.
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.
