Breaking News This Morning ...
Earnings: 4th quarter results from Bank of America, Morgan Stanley, M&T Bank, Comerica
Receiving Wide Coverage ...
The Death of Bitcoin?: Bitcoin is dead. Long live bitcoin. Bitcoin developer Mike Hearn proclaims that bitcoin's litany of problems — from the domination of Chinese bitcoin miners, to bitcoin's superslow distributed network, to the open fighting amongst members of the bitcoin community — has now officially doomed the technology. Time to bury bitcoin and start working exclusively on blockchain technology, Vivek Wadhwa writes in the Washington Post, echoing Hearn's position.
"The fundamentals are broken, and whatever happens to the price in the short term, the long-term trend should probably be downwards," developer Mike Hearn wrote on the Medium site. The price of bitcoin crashed in the wake of Hearn's obituary on the technology.
But two other bitcoin developers, Valery Vavilov and Henry Brade, wrote well-reasoned columns disputing Hearn and Wadhwa, saying the bitcoin system isn't broken and the things Hearn and Wadhwa are complaining about are either false or misguided. Hearn, it seems, never really understood the true value of bitcoin, Brade wrote. "Mike has been at odds with a part of the Bitcoin community for a long time. Especially those that highly value the decentralized/anarchistic nature of Bitcoin," Brade wrote. "It seems clear Mike doesn't really value those things at all, he has always thought of Bitcoin as an efficient global payment network. He gives almost no value to decentralization/freedom from censorship."
Wall Street Journal
Call it the Merrill Seven Year Itch. Bank of America may soon see an exodus of brokers from its Merrill Lynch subsidiary. Seven years after B of A bought Merrill, its brokers are mailing out resumes as the retention packages they received from B of A near their expiration. Those retention deals are lucrative and served to prevent Merrill's brokers from bolting to rival firms.
Moreover, Merrill is about to lose its ranking as the top U.S. brokerage to Morgan Stanley. And Merrill's brokers are being pushed to generate more revenue to trigger certain base levels of compensation. It's not all bad news for B of A that the brokers' seven-year retention agreements will soon expire; it'll save the bank about $400 million yearly to be freed from those agreements.
Worldpay is overvalued, according to "Heard on the Street." The U.K., company's selling point to transmit money from any consumer to any business is compelling, but it's trading at too-high multiples.
Financial Times
The Financial Times observed that three banks that reported earnings on Thursday and Friday—JPMorgan, Citi and Wells Fargo—all seemed more dour on energy-sector exposure than in previous 2015 quarterly reports. JPMorgan said it would increase reserves to as much as $750 million this year, from its current level of $550 million, if oil remains at $30 a barrel (although JPMorgan optimistically expects oil to rise to as much as $45 this year). Chairman Jamie Dimon got defensive when queried by analysts about his bank's energy exposure. "Remember, these are asset-backed loans. A corporate bankruptcy doesn't mean your loan is bad," Dimon said.
New York Times
The New York Times uses a 28-year-old tech worker as an example of the shift by younger folks to digital banking. Rather than carry cash or hand-write checks, the paper's example, Ryan Craine, pays for food and utilities with PayPal Holdings' digital wallet Venmo and refinanced his student loans with Earnest. In a proclamation that's far from groundbreaking, the Times states Craine's choices illustrate "the millennial-led shift toward new digital financial services, a change in behavior that threatens to upend the consumer banking industry."
Recent stock performance of the largest U.S. banks bode ill for their 2016 prospects, according to Breakingviews. Shares of JPMorgan Chase, Bank of America and Citigroup all trade below book value. Weak growth prospects plus China's woes equal "global economic problems that could hobble America's plodding recovery."
Elsewhere ...
Forbes: Aggressive regional and community banks are poised to rapidly steal market share and profits from the biggest banks, according to Tom Michaud, chief executive at Keefe, Bruyette & Woods. While the likes of JPMorgan Chase continue to get bigger and less responsive to the market, smaller rivals like Bank of the Ozarks in Little Rock, Ark.; Eagle Bancorp in Bethesda, Md.; Columbia Banking System in Tacoma, Wash.; and Pinnacle Financial Partners in Nashville, Tenn., are ready to transform the industry, he said. These banks will sharply increase lending and grow their footprints through mergers and organic expansion.
