Breaking News This Morning ...
Visa: Visa agrees to buy Visa Europe for about $23 billion.
HSBC: HSBC postpones HQ decision.
Wall Street Journal
The Uber-killed-taxis narrative doesn't apply to banks vis-a-vis Apple Pay, said "Heard on the Street." Take JPMorgan Chase's Chase Pay as an example. JPMorgan has already inked deals with Walmart and Best Buy to accept payments through Chase Pay. Yes, JPMorgan is having to cannibalize its own profits to win market share. (Isn't that what Amazon has done for virtually its entire existence?) But big banks are able to subsidize that kind of behavior through other revenue sources, like lending.
Visa's deal to buy Visa Europe had been in the works for years, the Journal said. Visa and Visa Europe had once operated under the same umbrella company, Visa International Service Association. That changed as a result of the 2007 IPO of Visa's U.S. unit. Visa wants to reintegrate Visa Europe into the U.S. group to cut costs, generate revenue synergies and boost its rate of stock buybacks.
Alaska's decision to end tax breaks and subsidies for oil companies could spell the end of a loan product. Bank of America is among the banks that have made short-term loans to oil companies, using the Alaskan tax break as a guarantee. The loans had produced yields as high as 20% for the banks.
European banks have found a new way to cut costs: Clean up less often, or have employees do the work of janitorial staff. Banco de Sabadell in Spain has cut back on the number of times the windows at its 2,300 branches are cleaned, from 12 to six. Banco Comercial Portugues turns off the lights at 7 p.m. Lloyds Banking Group in the U.K., sent a memo to employees ordering them to wipe their own desks.
Financial Times
Foreign banks are reducing their balances in the U.S. short-term debt markets, in order to appear safer and more profitable, the Treasury Department's Office of Financial Research said. As a result, these banks are actually carrying more risks than investors can see. U.S. banks, on the other hand, are not artificially lowering their balances. The balance-cutting comes in the market for repurchase agreements, also known as repos. While the OFR didn't name the specific banks, a NYU accounting professor said the study indirectly pointed fingers. The banks that had the lowest capital ratios are making the biggest reductions in their balance sheets: Deutsche Bank, Credit Suisse and Barclays.
The FT is the latest to file a report on banks' research developments that center around bitcoin and blockchain technology. UBS, Citigroup and Barclays are just some of the banks that are exploring ways to put blockchain to use. Why the sudden interest? Blockchain could slice $15 billion to $20 billion from banks' costs for international payments, securities trading and regulatory compliance by 2022, a Santander report said.
New York Times
The paper look at corporate attempts to sidestep the legal system, through the use of arbitration and by essentially banning class-action lawsuits. Credit card issuers American Express, Discover Financial Services, Citigroup and KeyCorp's KeyBank are three companies examined. The problem, according to the story, is arbitration is so expensive for the consumer that it's rarely a realistic option. The Consumer Financial Protection Bureau has issued rules to stop financial-services companies from banning class actions. But financial companies are fighting back.
Elsewhere ...
Bloomberg: When the FBI issued a security warning about the new EMV cards, it inadvertently took the side of retailers in its battle with banks over the cost to accept card payments. That's the verdict of an analyst at Javelin Strategy & Research. The story has predictable quotes from both sides, retailers and banks, extolling or lambasting the virtues of PIN versus signature. Otherwise, the story sheds no new light on the issue.
Reuters: Bank of America has agreed to pay $335 million to settle a lawsuit that accused it of misleading shareholders about its exposure to risky mortgage securities and its dependence on the Mortgage Electronic Registration Systems (MERS) registry.
