Wall Street Journal
Paying for convenience: More than 20% of bank customers would be willing to pay as much as $3 a month to use their bank's mobile app while about 40% would be in at $1 a month, according to a survey by S&P Global Market Intelligence. Banks could generate as much as $500 million in annual revenue by charging customers, S&P says, with Bank of America, Wells Fargo, and JPMorgan Chase the biggest winners.
Mudd settles: Former Fannie Mae CEO Daniel Mudd agreed to pay $100,000 to settle SEC allegations that he misled investors by downplaying the risks on the mortgage agency's subprime loans. The SEC lodged the complaint against Mudd in December 2011.
Canadian banks to report: Canada's Big Five banks this week report earnings results for the quarter ended July 31. Analysts expect most of them to post single-digit percentage earnings growth compared to the year earlier quarter while Bank of Montreal, which reports Tuesday, and Canadian Imperial Bank of Commerce are each expected to post small declines. "The Canadian banks continue to operate in a growth-constrained environment," one research firm says, largely the result of weak oil prices.
Dead money: The Journal's Heard on the Street column takes up the cause of large banks like JPMorgan Chase and UBS, which want the reserves they hold at central banks excluded from their balance sheets for leverage-ratio purposes. Doing so could reduce the expense of holding this "dead money" of inactive deposits on their balance sheets.
"Removing reserves from leverage calculations could release tens of billions in equity capital at the world's biggest banks, which in some cases could be handed back to shareholders or used to back more productive loans to the real economy," the paper argues. "Banks don't get a lot of sympathy for their profitability problems, but where monetary policy is having perverse effects, like increasing the cost of credit, regulators should act."
Too much of a good thing: Santander U.K.'s 123 account — which pays 1% on deposits of more than £1,000, 2% on £2,000 or more and 3% on £3,000 plus — has been hugely popular with customers, attracting more than £60 billion in deposits since it was launched four years ago. But as interest rates have dropped and lending margins squeezed, the account has been "horribly lossmaking," forcing the bank to cut rates on the account to 1.5% across the board.
"Banks are once again villains — only now they are not earning the 20 per cent returns on equity they enjoyed before the financial crisis," the paper says, noting most banks in Europe and the U.S. are struggling to make 5% to 10%.
Eschewing bonuses: Two prominent U.K. asset managers have stopped paying executive bonuses as pressure increases on the industry to reconsider how it rewards top performers. Woodford Investment Management, headed by Neil Woodford, one of Britain's best known investors with £14.3 billion under management, has eliminated bonuses for its 35 employees, although they will receive pay increases to compensate. Craig Newman, the company's chief executive, said bonuses were "largely ineffective in influencing the right behaviors." Separately, Daniel Godfrey, former CEO of the Investment Association, the trade group for fund managers, is setting up an investment trust that will not pay bonuses to executives in order to reduce "short-termism."