Receiving Wide Coverage ...
The Oracle of D.C.: The papers offer varying interpretations of Federal Reserve chair Janet Yellen's testimony before the Senate Banking Committee. The New York Times says Yellen sought to give the central bank leeway in the timeline of its interest-rate increase. Fed officials could firm up plans to raise rates as soon as June at a March policy meeting, but "Yellen emphasized that patience remained the Fed's watchword, and that the persistence of sluggish inflation might still push back the timing of the liftoff," the paper reports. By contrast, the Financial Times and Wall Street Journal suggest Yellen's testimony points more firmly to a forthcoming change in interest rates. The FT says Yellen "gave the strongest signal to date that the end of that era is approaching" while the Journal says Yellen seemed "upbeat about the economy" and "laid the groundwork for interest-rate increases later this year."
Slimming Down While Staying Big: JPMorgan Chase executives pushed back against calls to break up the bank at the company's annual investor day Tuesday, defending the benefits of scale even as they acknowledged the need to maintain a leaner operation. The bank announced plans to cut $3 billion in costs from its investment bank and cast off $100 billion in deposits from large institutional clients in response to new capital and liquidity requirements. The bank will also close roughly 300 branches (about 5% of its network) by the end of 2016 and continue cutting bank teller positions. Nonetheless, "scale has always defined the winner in banking," according to JPMorgan chief financial officer Marianne Lake. New York Times, Financial Times, Wall Street Journal
Earnings in the Big Picture: Total bank profits fell 7.35% in the fourth quarter from a year earlier, which sounds worse than it really is. Most banks actually posted higher revenue thanks to increased lending, according to the Associated Press, but big banks' settlements related to the financial crisis and a weakening mortgage market dragged down industry-wide earnings. The Journal's Victoria McGrane also points out community bank earnings rose 28% from the previous year and surpassed the rest of the industry in loan growth. "The larger institutions recovered from the crisis earlier but the community banks really are catching [up] and their performance over the past year on a number of indicators really surpassed the general industry results as a whole," FDIC chairman Martin Gruenberg said at a news conference.
Wall Street Journal
Security technology firm Gemalto says an alleged hack into the company's network five years ago by government agencies didn't compromise the encryption keys it uses for cellphone SIM cards and EMV chips. The Dutch company announced Friday it believes the U.S. National Security Agency and the U.K.'s Government Communications Headquarters may have been responsible for the hack.
"Capital One Financial said the U.S. Justice and Treasury departments are looking into possible money-laundering violations at the company," the paper reports. The Justice Department is also conducting a probe into the company's subprime auto lending unit. The article doesn't offer further details on the nature of the investigations.
Speaking of government probes, JPMorgan Chase is in talks with the DOJ about "potential 'statistical disparities' in interest rates for auto loans originated by car dealers."
Higher capital requirements are unnecessary for European banks operating in the U.S., according to the European Union's new financial markets chief Jonathan Hill. "I think we continue to think that EU banks actually are properly and sensibly capitalized and that having a double requirement isn't necessary," he tells the paper.
"Why do companies that spend so much time and money promising to be good do bad things?" the paper's Michael Skapinker wonders in the wake of revelations about alleged tax evasion at HSBC's Swiss unit and the foreign exchange and Libor-rigging scandals. He thinks the problem comes down to corrupt subcultures that exist within particular departments, units and business lines even as management tries to emphasize ethical behavior. But that doesn't let the people at the top off the hook, he says. "The only defense against corruption is to be out all the time, digging into the business and repeating the importance of not damaging the company's reputation over and over again."
Lending Club shares were down 11% Tuesday after the company reported a $32.9 million loss in 2014. The company attributed the loss to marketing and product development costs, but noted revenue had "more than doubled" to $213 million.
New York Times
Deutsche Bank's incoming general counsel for the Americas has a lot of practice deflecting federal investigations, the paper reports. Steven F. Reich is a veteran lawyer for the Clinton administration as well as President Obama's Justice Department, where he "responded to investigations of the government's botched gunrunning crackdown, known as Operation Fast and Furious."