BofA's lofty market aspirations; Amazon working on palm payments

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UBS hits and misses

UBS said its fourth quarter earnings more than doubled to $722 million, beating expectations, but for the full year profit fell to $4.3 billion from $4.5 billion as revenue fell to $28.9 billion from $30.2 billion. The bank also became “the latest European bank to trim its financial targets because of the effects of ultralow interest rates and a turbulent trading environment,” the Wall Street Journal says.

“The bank has been hit hard by the Swiss National Bank’s monetary policy,” the Financial Times notes. “Interest rates in the alpine country have just entered their fifth year in negative territory, with many anticipating room for further cuts in 2020 should the central bank deem it necessary.”

French flyers

Two French banks “have produced shareholder returns to rival those of JPMorgan Chase and Citigroup, and there is no reason why the trend can’t continue,” the Journal says. While “U.S. bank stocks have generated average total returns of 17.1% over the past year, more than three times the 5.5% delivered by European peers,” Crédit Agricole has produced a total return of 32% and BNP Paribas has gained 27.8%, “in the range of the largest U.S. banks.”

“The French economy has performed better than most of its European peers, putting the country’s lenders in a stronger position, while a competitive domestic market has kept bank executives on their toes. This has allowed BNP Paribas and Crédit Agricole to maintain stable, investor-friendly business models: growing revenue, trimming costs, building capital and paying dividends. The past doesn’t predict the future, yet both banks do have a record of delivering strong returns through trying times.”

Perhaps trying to duplicate their success, “JPMorgan Chase has bought a second building in Paris that can house up to 450 employees, as it steps up the shift of its euro-related trading operations out of London due to Brexit,” the Financial Times reports. The purchase “could eventually see the French capital becoming its second-largest European base behind London.”

Wall Street Journal

Taking things in hand

Online retail giant Amazon.com “is creating checkout terminals that could be placed in bricks-and-mortar stores and allow shoppers to link their card information to their hands,” the paper reports. “They could then pay for purchases with their palms, without having to pull out a card or phone. The company plans to pitch the terminals to coffee shops, fast-food restaurants and other merchants that do lots of repeat business with their customers,” the paper says.

“Amazon envisions that customers would first use the terminals to link their debit or credit card information to their hands. Data that would pass through the terminals, including where consumers shopped and when, would be stored on Amazon’s cloud. Amazon recently filed a patent application for what it described as a ‘non-contact biometric identification system’ that includes ‘a hand scanner that generates images of a user’s palm.’”

Follow the money

“Banks in the U.S., U.K. and Canada have become among the biggest lenders into short-term financing markets, while banks in France and Japan are now the biggest borrowers after rapid growth in all these markets in 2017 and 2018,” according to the Financial Stability Board’s latest annual report, which covers 2018. “Repo lending by banks jumped 21% to $5.9 trillion globally in 2018, while borrowing by banks from this market also jumped by 15% to $6 trillion,” the report said. “Banks are net providers of cash in the U.K., U.S. and Canada, along with money-market funds and other asset managers. Borrowers are mostly hedge funds, finance companies and broker dealers. In France and Japan, meanwhile, banks are net borrowers of cash.”

Financial Times

Lots of potential

Bank of America CEO Brian Moynihan says the bank can “double its consumer market share despite growing fears about the power of the country’s largest institutions,” the paper reports. “Our market share in consumer is probably 12, 13, 14 per cent, depending on who counts,” Moynihan told the paper. “The reality is, you could double that. Other companies that you think might have big consumer markets share — the auto companies, the soft drink companies, the beer companies — they have massively more consumer share” than BofA.

While that’s a worthy goal, Moynihan “has a new challenge as he heads into the next decade: making sure the crisis-time lessons of the past aren’t forgotten by him, by his leadership team, or by the many employees among his 200,000 workforce who have known nothing but good times as they built careers during the U.S.’s decade (and counting) of straight economic growth,” the paper opines.

The objective is “to remind ourselves that the mistakes that were made were made by very smart people that thought they were doing the right thing,” he said.

Quotable

“One of the big questions for our industry is we now have a substantial amount of our employee base that weren’t here [for the financial crisis]. And so you have to think about how do you get those teammates to understand all of what happened without appearing to be lecturing them.” — Bank of America CEO Brian Moynihan on one of the challenges U.S. banks face in growing

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