Earnings: Morgan Stanley, the last of the big five U.S. banks to report second-quarter earnings, reported higher profits and revenue that beat analysts’ forecasts. Wall Street Journal, Financial Times
Receiving Wide Coverage ...
Not all gold: A 40% decline in its fixed-income trading business drowned out Goldman Sachs’ otherwise solid second-quarter earnings report on Tuesday. It was the second poor quarter in a row for the “once-vaunted bond-trading unit,” the Wall Street Journal states, “deepening questions about the bank’s strategy.”
“The results will likely amplify criticism that Goldman hasn’t responded quickly enough to dramatic changes in trading trends and market conditions,” the paper says. “A rejiggering of the division’s leadership last fall failed to jolt the desk from its malaise.” The Wall Street firm also suffered its worst-ever quarter in commodities, the Financial Times notes. Wall Street Journal here and here, Financial Times, New York Times
Yet Martin Chavez, the bank’s chief financial officer, “gave few details about how it would repair its track record during a 75-minute call with analysts and no hint that the bank was considering the cuts that some analysts say it needs to make.” Nevertheless, the bank’s nascent consumer lending business is off to a good start.
Wall Street Journal
Too late: Consumer Financial Protection Bureau Director Richard Cordray told acting Comptroller of the Currency Keith Noreika it's too late to stop implementation of the CFPB’s rule that bars banks from requiring mandatory arbitration. In a fourth letter between the two regulators, Cordray said he had already signed the rule and sent it to the Federal Register for publication. He also called “plainly frivolous” Noreika’s claim the rule could affect the safety and soundness of the banking system.
Ch-ch-ch-changes: Wells Fargo plans to alter how its branches operate in order to improve customer service. Scheduled to go into effect in the middle of next year, the bank plan to reduce wait times and educate customers about digital capabilities. The aim is to help customers while they’re inside the branch rather than refer them to call centers. “Our customers expect to have a good experience when they come into our branches. They expect us to take care of their problems and address their questions,” Wells retail banking chief Mary Mack said.
Oh Deere: With low crop prices making it difficult to obtain bank loans, farmers are turning to Deere & Co. to finance their operations. Deere, which already lends billions to finance purchases of its farming equipment, is now providing more short-term credit for crop supplies, such as seeds and fertilizer. The company is now the fifth largest agricultural lender, ranking behind four banks, according to the American Bankers Association. The company’s portfolio of loans and leases totaled nearly $35 billion at the end of the company’s 2016 fiscal year.
Ready to buy?: Despite rising prices and concerns about affordability, first-time buyers are showing more interest in making the plunge, according to a study of Google search data by Chase Home Lending. The bank’s mortgage unit found searches related to buying a first home have jumped 11 percentage points, to 44% of all home buying-related search activity, so far this year, compared with a year earlier.
Managing risk: Heidi Toribio, global head of banks and broker dealers at Standard Chartered Bank, discusses maintaining correspondent relationships even as regulators are pushing against them in order to mitigate money laundering and terrorism finance risk.
Retailer blues: Delinquency rates on bonds backed by retail store commercial mortgages have risen to their highest level in four years, according to Fitch Ratings, “as struggling stores and mall owners find investors more reluctant to refinance their debts.” The percentage of delinquent retail loans rose to 6.23% in June, the highest level since August 2013.
“Interest rates are going up, and we’re starting to see some benefits, but in some cases it’s not quite turning out to be the case. We’re still trying to understand what the full impact is.” — Atlantic Equities U.S. bank analyst Chris Wheeler discussing why banks aren't thriving as interest rates rise.