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Earnings: Morgan Stanley reports higher first-quarter earnings and revenue.
Receiving Wide Coverage ...
Flat tire: Goldman Sachs's disappointing first quarter earnings report "punctured some of the optimism surrounding U.S. bank stocks in the wake of the election of Donald Trump, revealing a poor quarter for bond trading that fell well short of analysts' expectations," the Financial Times reports. "Banks with big trading businesses were expected to do well out of Mr. Trump's victory in November. But first-quarter revenues from Goldman's core debt-trading business were essentially flat, compared with a very choppy period a year earlier."
The New York Times notes Goldman's annualized return on equity of 11.4% in Q1 "places it in the upper echelons of the industry, along with the likes of JPMorgan Chase and Wells Fargo." However, that return was based on a low tax rate; without that benefit, Goldman's return would have been just 8.9%, "below the rule-of-thumb 10% needed to cover the cost of capital."
There was one bright spot in the Goldman report: Its fledgling online consumer-lending unit, Marcus, ended the quarter with more than $115 billion in deposits, making it one of the top 25 banks in the United States.
Wall Street Journal
Open your wallets: It was a big day for digital wallets on Tuesday. Mastercard added its Masterpass wallet to Facebook Messenger, which will allow consumers to place online orders on the Facebook messaging service. The rollout is still in its early stages and is available so far only to a handful of merchants, including FreshDirect and Subway.
At the same time, PayPal said it will make its payments offerings available on Android Pay, which the Wall Street Journal calls "one of the payment company's biggest steps to bringing its digital wallet to physical stores." Beginning in a few weeks, PayPal customers will be able to use their balances to shop at Walgreens, Dunkin Donuts and other traditional retailers that enable in-store payments through Android devices. Going forward, PayPal users who link credit cards to their accounts will also be able to use them on Android Pay.
AI to the rescue: Deutsche Bank is turning to artificial intelligence to reduce the costs of regulatory compliance as well as to improve accuracy. AI will be able to sort "through volumes of voice and video recordings to make sure that the bank's professionals are complying with the rules," the paper said, such as when they're speaking with clients. "In the old days, you'd go through tape and listen to hours of audio," said Elly Hardwick, the bank's head of innovation.
Big shift: Clients of Bank of America's global wealth unit, including Merrill Lynch, moved a record $29.2 billion during the first quarter into accounts that charge a fee based on their total assets and out of accounts that charge commissions for stock and bond trades.
"The developments are the latest sign that advice for a recurring fee is Wall Street's go-to compensation model for the future," the paper notes. "The industry shift is coming even as the Trump administration seeks to eliminate or revise" the fiduciary rule.
Growing pains: A couple of bitcoin exchanges suffered setbacks recently. Customers at Bitfinex, the world's biggest exchange, were unable to withdraw or deposit money except in other virtual currencies, while another exchange said a glitch caused a crash in prices.
Financial Times
Lowballed: JPMorgan Chase was accused of committing "fraud on the board" by Good Technology, which is suing the bank for allegedly directing the security software provider to sell itself to BlackBerry at a lowball price in order to win future investment banking business from the smartphone company.
Right to it: Guo Shuqing, the new head of the China Banking Regulatory Commission, has been a "regulatory windstorm," issuing seven policy documents in the past 12 days. The "flurry of new policy directives" is "in line with the government's focus this year on managing financial risk."
Quotable ...
"Without a doubt, 2017 will be a big year for financial regulation. Regulation of the entire banking industry will become stricter and enforcement will become more rigorous." – A fixed income analyst on China's banking industry
