JPM, Citi beat estimates; Wells Fargo targets D.C.

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Earnings
JPMorgan Chase said it had third quarter profits of $8.38 billion, or $2.34 a share, beating analysts’ estimates of $2.25 a share. Revenue rose 5% to $27.8 billion, also ahead of forecasts. Wall Street Journal, Financial Times

Wells Fargo earned $6 billion in the quarter, or $1.13 a share, below analysts’ expectations of $1.17 a share. Net income was up 32% from $4.54 billion in the same period last year.

Citigroup said its third quarter profit rose 12% to $4.62 billion, up from $4.13 billion a year earlier. Earnings per share were $1.73, ahead of the $1.69 forecast. Revenue fell slightly to $18.39 billion from $18.42 billion a year ago; the Street was expecting a slight increase.

PNC's quarterly profit jumped 25% to $1.39 billion as revenue rose 5.6% to $4.36 billion. Earnings per share were $2.82, versus $2.16 in the year earlier period.

Wall Street Journal

Spike
Mortgage rates have jumped to just below 5%, the highest level in seven years and the biggest weekly increase in about two years. While “a 5% mortgage rate isn’t that high by historic standards,” the paper says, it “could deter many home buyers and represents another setback for the slumping housing market. A return to more normal lending rates won’t feel normal to many buyers who have become accustomed to getting a mortgage loan at 4% or lower, and they could experience sticker shock at what they would have to pay now for a home loan.”

Financial Times

Now that hurts
Square shares dropped sharply again Thursday, falling as much as 16% before closing down 11% on the day, “as investors fretted over the departure of its chief financial officer,” Sarah Friar. “Analysts said the strong reaction reflected Ms. Friar’s unusual role at Square, where [CEO Jack] Dorsey splits his time with his other job as chief executive of Twitter. But most also said the company had enough depth in its leadership ranks to weather her loss.”

Rearming
HSBC made another high-profile hire, adding Greg Guyett, a 30-year JPMorgan Chase veteran, as co-head of its investment bank. Guyett’s hiring, which followed several other recent additions, “seeks to address criticism that the division is underperforming. He will join the bank at a time when it is still trying to recover from a damaging memo written by anonymous HSBC executives, which claimed performance at the investment bank was ‘appalling’ and its strategy for the unit had ‘utterly failed.’”

Brexit warning
It would be bad news for British banks if the U.K. leaves the European Union in a disorderly fashion, with “the risk of mass credit rating downgrades,” Standard & Poor’s warned. Although the credit rating agency believes that scenario isn’t the most likely outcome, the possibility of a disruptive Brexit is “significant,” it said. If that happens, “U.K. banks are the most vulnerable” to the results, which could include “a domestic political crisis and the economy contracting, leaving the property market vulnerable.”

Fintech deal contemplation
Investment bank Natixis is considering a €4 billion deal with French payments company Ingenico “as the French bank looks to expand in the rapidly consolidating payments sector. An agreement would be the latest sign of the intense competition in European payments, with a string of takeovers being pushed through in search of scale.”

Fessing up
Two of Australia’s biggest banks outlined to a parliamentary committee how they plan to clean up their acts following a string of scandals in the country’s financial industry. Matt Comyn, the CEO of Commonwealth Bank of Australia, said the bank had fired 41 bankers and nine others resigned following a government investigation. “As the royal commission has shown, there have unfortunately been failures of judgment, failures of process, failures of leadership, and in some cases greed,” Comyn said. “We’ve been too slow to identify problems, too slow to fix underlying issues and too slow to put things right for customers.” Brian Hartzer, Westpac's CEO, said the inquiry has been a “valuable process.”

New York Times

Unequal treatment
Low-wage hotel employees often pay high fees to Marriott Employees’ Federal Credit Union, the paper charges, while “for more affluent Marriott employees credit union membership can be a very good deal. The Marriott workers’ experience is a stark example of trends that are increasingly bearing down on the nearly 100 million people nationwide who have credit union accounts.”

Elsewhere

Playing politics
Wells Fargo is beefing up its presence in Washington trying “to convince lawmakers it has changed and talking up its charitable work in their districts. In the past the bank’s lobbying efforts had been modest, but over the past 18 months, Wells Fargo has added more than 15 people to its Washington team, tripling its size, and is still hiring.” The bank has also hired several big-name lobbying firms to help with the charm offensive. “Our plan is to engage with virtually everyone on Capitol Hill on both sides of the aisle,” said David Moskowitz, Wells’ head of government relations and public policy.

Two for one?
Citigroup must decide in the next few months whether to combine the CEO and chairman’s job — with CEO Michael Corbat getting the chairman — as Michael O’Neill, the current chairman, reaches 72, the bank’s mandatory retirement age for directors. “The change in the chairman is the biggest corporate governance decision at Citigroup in six years,” said Wells Fargo bank analyst Mike Mayo. “That’s important given what we see as worst-in-class returns, efficiency and stock market valuation.”

Quotable

“There’s almost a generation that has been used to seeing 3% or 4% rates that’s now seeing 5% rates.” — Vishal Garg, founder and CEO of Better Mortgage on the spike in mortgage rates this week.

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