Good quarter for banks?; HSBC settles U.S. tax evasion case

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Death and taxes

HSBC’s Switzerland-based private bank has agreed to pay $192 million to settle U.S. Department of Justice claims that it helped American customers hide more than $1 billion in assets from the Internal Revenue Service. “The agreement effectively ends a multiyear investigation of the Geneva-based bank’s activities between 2000 and 2010. The penalty includes the forfeiture of $72 million in proceeds derived from illegal activities, $61 million in restitution to the IRS, and a penalty of $60 million,” which was reduced because the bank self-reported its conduct. “The agreement defers prosecution for three years, giving the bank time to demonstrate good conduct, in which case the case could be closed,” the Financial Times reports. Wall Street Journal, Financial Times

Wall Street Journal

Faster than the speed of light

Goldman Sachs “has teamed up with a quantum-computing startup to explore how the nascent technology could be used to speed up financial calculations and artificial-intelligence-based decision making. By harnessing the properties of quantum physics, quantum computers have the potential to sort through a vast number of possibilities in nearly real time and come up with a probable solution. While traditional computers store information as either zeros or ones, quantum computers use quantum bits, or qubits, which represent and store information as both zeros and ones simultaneously,” the paper reports. “We’re looking at various possibilities for applying quantum computing across the bank,” said Paul Burchard, a managing director in Goldman’s research and development division. The bank is working with QC Ware, a Palo Alto, Calif.-based startup.

Financial Times

Looking up

JPMorgan Chase CFO Jennifer Piepszak put a brighter spin on the bank’s fourth quarter trading and investment banking results than she did only a month ago. “The quarter has played out a bit better than we thought, largely on healthy investment grade (debt) flow,” she told an investor conference in New York on Tuesday. Her comments are the first indication by a big Wall Street bank about what to expect this quarter.

Piepszak “also upgraded JPMorgan’s guidance for net interest income in the fourth quarter, saying it would be a ‘few hundred million dollars’ higher than the bank’s previous expectations and that credit quality was ‘pristine.’”

Left hanging?

Credit Suisse is looking to have thrown out a £68 million lawsuit in London by its former head of European emerging markets, “who claims the Swiss bank failed to protect him after he was given a criminal conviction while working in Romania.” Vadim Benyatov, an American citizen, claims “the bank failed to take steps to protect him from risk and intervene when he was arrested.” He also says “an internal Credit Suisse investigation had cleared him of wrongdoing.” The bank says the suit is without merit and wants it tossed out.

“The case is being closely watched because it raises a wider question about the legal steps employers are required to take to protect staff who are sent to risky locations abroad,” the paper says.

Show me the money

Challenger banks and fintech companies still need to make money if they’re to prove they can compete with traditional banks over the long term, the paper says. “Their focus on providing a different kind of customer experience has led to snazzy digital and mobile interfaces, top-notch design, free giveaways and, in many cases, commission-free services for clients. But it is not yet clear whether this strategy will lead to profitability for the likes of Monzo and Revolut. All the more so now that incumbents from NatWest to Barclays have raised their game when it comes to digital and mobile services, copying or buying start-ups that offer customer-oriented techniques,” according to the paper.

“The risk for challengers is that, having played their part in getting the industry to improve the customer experience and service, they might end up with very little to show for it. That, frankly, feels unfair.”

I spy

Wirecard, the German payments company that is under investigation for alleged accounting improprieties, is now being accused of spying on its own investors. “A former Libyan intelligence chief, who told associates he is a shareholder in Wirecard, funded a surveillance operation in London that targeted a string of investors including hedge fund manager Crispin Odey,” the paper reports. “Rami El Obeidi, head of foreign intelligence in Libya’s National Transition Council, which governed the country temporarily in the wake of Muammer Gaddafi’s death in 2011, was hunting for evidence that market speculators were attempting to manipulate Wirecard shares.”

“Wirecard has denied any involvement in such surveillance,” the paper adds. “The Munich-based technology group, a member of the prestigious Dax 30 index of Germany’s largest companies, has long portrayed critics of its accounts and governance as criminals trying to manipulate its share price, in collusion with the media.”

New York Times

Got it on tape

A black former JPMorgan Chase banker in the Phoenix area and one of his prospective clients, also an African-American, who said he was turned down as a private client, secretly recorded their conversations, which they claim demonstrate racism at the bank. “What makes their cases extraordinary is not that the two men say they faced discrimination,” the paper says. “It is that they recorded their interactions with bank employees, preserving a record of what white executives otherwise might have dismissed as figments of the aggrieved parties’ imaginations.”

“Patricia Wexler, a JPMorgan spokeswoman, denied that the bank discriminated against” either man. “She said that the bank hadn’t been aware of the audio recordings” and it “put one of its executive directors on administrative leave while the bank investigates his conduct.”

Elsewhere

Let’s talk

Malaysian Prime Minister Mahathir Mohamad said he “is hopeful of reaching an out-of-court settlement” with Goldman Sachs over its role in the 1MDB scandal soon, but the bank’s current offer of “one point something billion” dollars is “too small.” The two are still wide apart — Malaysia is asking for $7.5 billion — but negotiations are ongoing. The country has charged Goldman and 17 current and former directors “for allegedly misleading investors over bond sales totaling $6.5 billion that the U.S. bank helped raise for sovereign wealth fund 1Malaysia Development Bhd (1MDB).”

Quotable

“We would like to avoid having to go to the courts, but if they come up with a reasonable sum I think we will agree. But at the moment their offer is too small. We’re continuing to talk with them to explain why they should pay what we demand. Of course it’s not the full amount, that they may be able to bring down, but we think that we can reach some agreement at a later stage.” — Malaysian Prime Minister Mahathir Mohamad, discussing a possible settlement with Goldman Sachs over its role in the 1MDB scandal

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