More problems for Wells; two more banks expect tax hits
Receiving Wide Coverage ...
The hits keep on coming: In its latest run-in with bank regulators, Wells Fargo last year had a key part of its Camels score downgraded in a "secret assessment" of its health and strength, the Wall Street Journal reported. "The reduction in the management component of Wells Fargo's Camels score, which hasn't been previously reported, reflected concerns about Wells Fargo's management and its ability to manage risk," the paper said.
In addition, Wells Fargo is expected to show that it "missed out" on the banking industry's record profits last year when the big banks start reporting fourth quarter earnings later this week. While "rivals including JPMorgan Chase and Bank of America are due to post their highest post-crisis annual net income during results season," the Financial Times reports, "figures from Wells are expected to show how long it is taking to recover" from the bank's 2016 phony accounts scandal and other subsequent problems.
Taxing: Two more big banks said they expect to take big charges against their fourth-quarter earnings due to the new U.S. tax reform law. Morgan Stanley said it expects to take a charge of $1.25 billion, while Deutsche Bank is expecting a charge of about €1.5 billion ($1.81 billion). The charges are mostly due to a reduction in the value of the banks' deferred-tax assets. Wall Street Journal, Financial Times
Wall Street Journal
He's back: Keith Noreika, the former acting Comptroller of the Currency, is returning to Simpson Thacher & Bartlett, his former law firm, where he will advise banks. "Mr. Noreika's trip through the revolving door between the government and the private sector raised eyebrows during his brief tenure overseeing federally chartered banks," the Journal commented.
Getting there: The congressional plan to reform Fannie Mae and Freddie Mac "is shaping up as a workable compromise between the competing interests of investors, mortgage lenders, taxpayers and homeowners," the Journal's Heard on the Street column says. "The basic objective shared by lawmakers from both parties is to end Federal government support for Fannie and Freddie, whether explicit or implicit, while keeping mortgages cheap and accessible."
Difference of opinion: A review of the first four weeks of trading in bitcoin futures at Cboe Global Markets finds that small investors are bullish on the price of the digital currency while hedge funds and other large traders are betting the opposite way. Bullish bets are 3.6 times more common than bearish ones among traders with less than 25 bitcoin futures contracts, according to Commodity Futures Trading Commission data, while short bets outnumber long ones by 2.6 times among bigger players.
"There is probably more optimism in the retail segment than there is in the institutional segment," said Steven Sanders, an executive vice president at Interactive Brokers.
Meanwhile, "Cash-loving Germany" has become a "development hub" for virtual currencies and the blockchain technology behind them, the Journal reports. Deutsche Bank and Bertelsmann are both looking to integrate blockchain into their operations, the paper says. "In Munich and Bonn, fintech startups and venture capitalists are jumping into the cryptocurrency field. In Berlin, a world-class blockchain coding community has been growing for years."
(Almost) free money: British banks are offering "record-breaking" deals on credit card balance transfers, with 0% interest rates and average transfer fees of just over 2%, "their lowest levels in over a decade." Barclaycard is offering no interest for up to 36 months and a 1.4% transfer fee, while MBNA is offering 0% for up 38 months with a fee of 1.44 %.
New York Times
Bucking the system: The Sunday Times has a long feature story about Stefan Buck of Bank Frey in Switzerland, who created bank accounts to help Americans hide money from tax collectors and was indicted for it in 2013 by a federal grand jury. "But things didn't go as prosecutors had planned — and the chain of events could have big consequences for America's fight to keep people from evading taxes using offshore bank accounts," the Times reports.
"It's a technology driven by anarchists who wanted to get rid of banks, and now the banks are promoting the technology." — Shermin Voshmgir, founder of BlockchainHub, a Berlin-based think tank and blockchain advocate.