Receiving Wide Coverage ...
B of A, Wells Offer Hope: After JPMorgan Chase's disappointing third-quarter earnings report, Bank of America and Wells Fargo followed up with some better news. The Charlotte, N.C., and San Francisco banks issued their earnings on Wednesday and each offered some nuggets of promise.
B of A's trading revenue didn't suffer as much as JPMorgan's did. Expenses decreased, thanks in no small part to a decline in legal expenses. The number of charged-off loans also fell. B of A continues to invest in its wealth-management operations, hiring more employees for the division.
Wells Fargo's holdings of residential mortgages saw improved performance in the quarter. And total loans grew 7.7% from a year earlier. However, Wells Fargo's mortgage originations declined. And it reported deterioration in its loans to oil and energy companies. Wells Fargo is among the banks that reduced the amount of available credit to oil producers, including Emerald Oil, which works in the Bakken shale region.
The Journal's “Heard on the Street” team issued the stern reminder that no bank will be a blazing success until the Federal Reserve does something about interest rates. “When the interest-rate currents beat ceaselessly against you, even the strongest banks can be borne off course,” John Carney wrote.
While core loans grew at B of A and it swung to a quarterly profit, its net interest margin compressed and returns on both assets and equity declined. Even Wells Fargo's return on equity, which is higher than its big-bank rivals' ROE, declined.
Wall Street Journal
The great purge of July at Bank of America raised plenty of questions about Chairman and CEO Brian Moynihan's strategy. One of the biggest questions remains unanswered to anyone's satisfaction: Why did Bruce Thompson, then chief financial officer, get the boot? The disputatious analyst Mike Mayo of CLSA got in a few licks during B of A's earnings conference call on Wednesday, probing for better explanations for Thompson's departure. Moynihan's response to Mayo's question wasn't terribly detailed. “Bruce has served as chief risk officer and CFO for a combined six years and wanted to get back and run a business or do something different,” Moynihan said. “There’s nothing new to add.”
Square's IPO filing disclosed numerous hitherto unknown details about the San Francisco payments disruptor. The filing indicates CEO Jack Dorsey has a direct ownership interest in West Studios LLC and Square has paid West Studios $1.2 million for consulting services. Larry Summers, former Treasury secretary, and two others collectively sold about 6.1 million shares of Square recently to an investment fund; the sale generated about $82 million in proceeds for the three sellers.
Square generated a net loss of $154 million in 2014, and a loss of $104 million in 2013. Square plans to sell some of its shares through an online and mobile platform provider, Loyal3 Holdings, which counts former basketball star Shaquille O'Neal among its investors.
Square's contract to process payments for Starbucks generated about 14% of its revenue last year, making Starbucks the single-largest user of Square's product. That contract is set to expire in the third quarter of 2016, but the registration statement indicates it wasn't a good deal for Square.
Capital One Financial has been a pacesetter among banks, when it comes to digital design. So it's not a surprise that Capital One has installed an unusual piece of modern art at the Manhattan office where its commercial banking operations are headquartered. The 20,000-pound titanium and steel piece stands 19 feet tall, 17 feet wide and stretches 55 feet in depth. It's situated in a glass pavilion that's visible to both Capital One employees and passersby.
The Journal said the piece, created by the architectural firm Gensler, is “designed to express fluidity and movement.” Capital One's senior director of workplace solutions said the piece is also intended to be a branding tool, to signify the bank's growing presence on Park Avenue.
Financial Times
If you're going to get wasted, don't advertise your hijinks on Facebook. It may come back to bite you later, when you apply for a loan. FICO is developing a new credit score model that includes data from social-media sites. “If you look at how many times a person says ‘wasted’ in their [Facebook] profile, it has some value in predicting whether they’re going to repay their debt,” said FICO Chief Executive Will Lansing.
Elsewhere ...
Detroit Free Press: Two credit unions in Michigan plan to merge, creating a $6 billion-asset institution that would be the nation's 19th largest credit union. Lake Michigan Credit Union in Grand Rapids and United Federal Credit Union in St. Joseph would operate 78 branches in seven states and employ about 1,400 workers. The merger is expected to close by the end of the year.
