Earnings season begins; MoneyGram to test Ripple’s XRP

Editor's note: Morning Scan will not publish on Monday, Jan. 15, in observance of Martin Luther King Day. We’ll be back on Tuesday, Jan. 16.

Breaking News ...
Earnings: JPMorgan Chase reported fourth quarter net income of $4.23 billion, or $1.07 a share, down nearly 40% from a year earlier due to a $2.4 billion charge related to the new tax law. Excluding that charge, earnings per share rose nearly 3% to $1.76. Revenue fell to $24.2 billion from $25.5 billion as trading revenue plunged 34% to $3.37 billion from $4.52 billion. Wall Street Journal, Financial Times

PNC Financial Services said its fourth-quarter earnings doubled compared with a year ago, thanks to a one-time gain from tax reform.

Wells Fargo said its fourth quarter profit rose to $6.15 billion, including a $3.35 billion benefit from the tax reform law.

Wall Street Journal
Ripple effect: MoneyGram International has agreed to test XRP, a digital currency created by fintech startup Ripple, to see if it can help reduce money-transfer costs and settlement times. Shares of both companies’ stock rose sharply on the news. Ripple’s software aims to create networks for banks and financial institutions to enable for faster and cheaper interbank trading and settlement. Ripple CEO Brad Garlinghouse tweeted earlier this month that three of the five largest money-transfer companies would begin using XRP this year.

Lessons learned: Non-financial companies now face greater scrutiny — and are getting hit with more penalties — by the Treasury Department’s Office of Foreign Assets Control. “Over the past decade financial institutions faced the lion’s share of OFAC penalties, but companies operating outside of the financial-services sector are coming under greater scrutiny for violations,” the paper reports. “Banks weren’t hit as often last year, observers said, in part because their compliance programs have matured in the years since large global financial institutions began agreeing to multi-billion dollar settlements with multiple regulators.”

Financial Times
Ready or not: Consumer banking in the U.K. will “change forever” starting Saturday as Open Banking takes effect. The rules “aim to bring more competition into the marketplace. The idea is that by sharing our data with financial providers, they will have a better understanding of our spending habits and will be able to provide a more personalized service,” the paper explains. But, it says, “very few customers are even aware of the radical shake-up our personal finances are about to undergo,” while not all banks are ready for the change, including the five largest.

Sweet music: U.K. Prime Minister Theresa May told London-based bankers “she will put financial services at the heart of a new trade deal” with the European Union, the paper reports. In her first formal meeting on Brexit with financial services heads, the bankers told May “what they thought she should do to protect the size and influence of the City of London.”

“It’s clear the language has changed,” said one participant. “The mood music towards financial services companies is far more upbeat.”

New York Times
Where did it go?: “A combination of tough regulations, new technologies, calm markets and changing customer behavior has left [bond trading] a shadow of its former self — and much of Wall Street trying to redefine itself,” the paper reports. Between 2012 and 2016, income generated by fixed-income trading at the 12 biggest investment banks dropped by $27 billion, to $76 billion.

“The accelerating losses are likely to be on display over the next week as the biggest United States banks report their annual results,” the paper says, with some analysts predicting that revenue could fall another 20% this year.

Elsewhere
Not everyone is happy: The leading bid for the Weinstein Co., being fronted by Maria Contreras-Sweet, has been criticized by some because of billionaire Ron Burkle's role as a backer. Burkle reportedly remains in touch with Harvey Weinstein. Contreras-Sweet was head of the Small Business Association under President Obama and founder of ProAmérica Bank, a commercial bank that caters to small to mid-sized businesses in the Latino community.

Quotable
“If you look at banks now, you have much-more developed compliance programs and much-more careful legal counsel.” — Richard Nephew, a senior research scholar at the center for energy policy at Columbia University’s School of International Public Affairs.