JPM's profits up on revenue gain; Citi's changing of the guard
Breaking News This Morning …
Earnings: JPMorgan Chase reported record first quarter profits of $9.18 billion, up 5% versus the year earlier period, as revenue rose more than 4% to $29.12 billion. Profits per share were $2.65, 30 cents higher than analysts’ expectations. The increase was largely tied to its consumer bank, where net income jumped 19%. Wall Street Journal, Financial Times
PNC reported earnings of $1.26 billion, up 2.6% from a year earlier, or $2.61 a share, in line with expectations. Revenue rose 4.3% to $4.29 billion, slightly ahead of forecasts. On the downside, the bank's provision for credit losses doubled, although it attributed that to loan growth.
Wells Fargo said its first quarter profit rose 14% to $5.86 billion despite a slight drop in revenue, which nevertheless beat expectations. Earnings per share were $1.20, ahead of the $1.09 consensus forecast.
Receiving Wide Coverage ...
More changes at the top
Citigroup President Jamie Forese, a 34-year veteran of the bank and its No. 2 executive after CEO Michael Corbat, announced his retirement “following a changing of the guard atop a bank that has spent the decade since the financial crisis in recovery.” Forese, who also runs the bank’s investment banking and trading unit, will be succeeded in that role by his deputy, Paco Ybarra. Forese’s retirement “is the culmination of a series of changes at the top of Citigroup under Corbat, who has shuffled the bank’s leadership as part of an effort to refocus on growth after spending years mopping up from the crisis,” the Wall Street Journal says. “In recent months, the bank has named a new chairman and chief financial officer, as well as new heads of technology, investment banking and U.S. retail banking.”
The change “highlights the challenges U.S. financial groups face in maintaining a deep bench of senior executives while their industry faces a potential downturn,” the Financial Times says. “The exit also raises questions about whether the smart money is getting out of Wall Street before the economic cycle turns. Senior bankers including Citi’s chief financial officer have warned that trading revenues fell in the first quarter, while economists and investors have debated whether a recession is looming.”
Going, going …
Four Republican senators say they oppose the nomination of Herman Cain to the Federal Reserve board, “effectively dashing President Trump’s hopes of putting a political ally on the powerful body. White House officials also sought to temper expectations that Mr. Cain would be formally nominated for the job.” Larry Kudlow, the director of the National Economic Council who recommended Cain, said the White House still backs Cain “at the moment.” Wall Street Journal, New York Times, American Banker
Wall Street Journal
Lightening the burden
The Trump administration wants to make it easier for Congress to “overturn financial rules issued as guidance rather than in a formal rule-making process, a win for an industry that has complained the practice can be unfair.” Russell Vought, the acting director of the Office of Management and Budget, said “federal agencies, including the Federal Reserve and other independent bank and markets regulators, should coordinate with the White House before publishing guidance that may be considered economically significant. Anything with a projected impact of $100 million or more would get flagged to Congress, giving it time to review such measures after they’re completed and to theoretically vote to overturn unduly burdensome measures.”
Keep him out
Barclays warned shareholders against voting Edward Bramson to the board, arguing he “would be a disruptive and uncollaborative influence on the board” and that he “does not possess the banking experience and skills that we are seeking to add to the board.” The bank conceded that its investment bank is underperforming — the main reason why Bramson wants a seat on the board in order to alter the bank’s strategy — but insisted that his election as a director is “not what Barclays needs right now.”
Still an issue
Nonbank lending, the lightly regulated sector “that played a central role in the financial crisis, has been expanding rapidly and is still posing risks should credit conditions deteriorate.” Since the crisis, “global shadow banks have seen their assets grow to $52 trillion, a 75% jump from the level in 2010, the year after the crisis ended.”
Riebeck-Brauerei, a German investment company that owns a small stake in Deutsche Bank, plans to file a motion to oust bank chairman Paul Achleitner at this year’s annual meeting. Jan Bayer, Riebeck-Brauerei’s lawyer, cited what he called Achleitner’s “dismal performance” and the bank’s pursuit of a “value-destructive” merger with Commerzbank.
Meanwhile, Commerzbank Chairman Stefan Schmittmann dismissed reports that some board members want the bank to end the merger talks with Deutsche Bank and remove CEO Martin Zielke. “Rumors and speculation on personnel changes are made up out of thin air,” Schmittmann said. “Such allegations are irresponsible and unworthy of discussion.”
“While we will miss the experience and counsel of those who have moved on, I believe that change is healthy and creates new opportunities for our firm and our people.” — Citigroup CEO Michael Corbat, announcing the retirement of Citi president Jamie Forese