Receiving Wide Coverage ...
Low Energy: The fizzling energy market will get a lot of attention this earnings season as nervous shareholders question banks about their exposure, according to the New York Times. The paper suggests banks gird themselves for defaults in the wake of falling oil prices. On the upside, Wells Fargo chief John Stumpf says lower oil prices are a boon for consumer lending: people who spend less at the gas pump will have more money for other purchases. Few such bright spots are on the horizon for investors who participated in leveraged loans to the oil and gas industry during the recent boom, according to John Gizard of the Financial Times. He suggests they have themselves to blame for ignoring the lessons of history (the subprime mortgage crisis, for example).
Bonus Round: Wall Street bankers who were counting on a bigger bonus this year will have to curb their expectations. Many employees will be receiving diminished payouts after an unexpectedly rough December, the papers report. Citigroup scaled back the size of its bonus pool for traders, while Bank of America did the same for investment banking and securities staff, according to the Wall Street Journal. JPMorgan Chase traders are also expected to get smaller checks. While bankers may be miffed at the reduced size of their payouts, the FT notes bonuses in the U.K. are still much too big for the European public's liking. "[T]he public's trust in banks has never really been rebuilt so, for some, any level of bonus will be too much," a British commenter tells the paper.
Wall Street Journal
Banks are bracing themselves for the possibility that Greece could split from the euro after national elections later this month, the paper reports. While a Grexit isn't too likely, according to analysts, it's better to be safe than sorry. Banks including Citigroup and Goldman Sachs are performing "detailed checks on counterparties that could be significantly affected by a Greek exit, looking at credit exposures and testing how they would provide cross-border funding to local operations," according to the paper. A separate article warns that Greece might wind up leaving the single-currency system unwillingly if it defaults on its debt, thereby violating the terms of its bailout agreement and losing support from the European Central Bank.
Citigroup is ripe for restructuring in the eyes of the market, according to John Carney of "Heard on the Street." He suggests the drawbacks of Citi's current size outweigh the benefits, and that splitting the bank into four parts could help it boost dividends and liberate it from extra-high capital requirements.
Alibaba plans to break into India's promising payments market with the purchase of a 30% stake in One97 Communications, the company behind mobile wallet Paytm.
"The biggest eurozone banks have come under renewed pressure to raise extra capital after the European Central Bank set new individual targets and Spain's Santander responded by selling 7.5bn of shares last week," the paper reports. Banks have until the end of this week to make the case for keeping their capital ratios below the level recommended by the ECB.
Let's maybe take a minute and think about the consequences of building machines that are smarter and faster than we are, say a group of scientists, businesspeople and investors including Stephen Hawking. They're not saying we shouldn't create robots that will take our jobs, move into our homes and eventually enslave the human race, just that we should be deliberate about it. More seriously, the letter from the Future of Life Institute acknowledges the benefits of advancing artificial intelligence, including the possibility of stamping out poverty and disease. The key is to "maximize the economic benefits" of AI while "mitigating adverse effects."
New York Times
Lawmakers are using sneaky tactics to undermine Dodd-Frank, according to columnist Gretchen Morgenson. Their plot: "First, seize on complex and esoteric financial activities that few understand. Then, make supposedly minor tweaks to their governing regulations that actually wind up gutting them." This approach is on full display in a bill slated for a House vote this week, she says. The grandly titled Promoting Job Creation and Reducing Small Business Burdens Act would give banks an extra two years to sell off their stakes in collateralized debt obligations as required under the Volcker Rule. It would also permit some Wall Street banks to avoid trading derivatives on clearinghouses and free certain private equity firms from supervision by the Securities and Exchange Commission.
More churches are offering small-dollar loans in order to help cash-strapped borrowers avoid pricier alternatives. "Unlike commercial lenders or even other nonprofit alternatives, these church-backed programs offer near-zero interest rates," the paper reports.