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Fed Sees Fewer Hikes: Federal Reserve Chair Janet Yellen and fellow central bank policymakers announced they expect to raise the benchmark interest rate just twice this year, down from the four hikes expected in their December projections, and, as always, failed to commit to a timetable for the increases. In making the decision, the Fed weighed a strengthening job market and a resilient but moderate U.S. expansion against weak wage growth and global weakness. “Caution is appropriate,” Yellen said during a press conference Wednesday. Some Fed officials have expressed concern that raising rates too quickly could strangle the continued plodding recovery in a still-sluggish economy. In its policy announcement, the Fed stated the global outlook “continues to pose risks,” an assessment the Wall Street Journal said “is important because it indicates whether the central bank is leaning toward raising rates, holding them steady or reducing them.” Buoyed by the Fed’s announcement of only two expected rate hikes this year, the Dow Jones Industrial Average rose 74.23 points, or 0.43%, to 7325.76, its highest close of the year. Wall Street Journal, Financial Times, New York Times
Wall Street Journal
Banks are starting to introduce charity programs, faster promotions and other measures designed to appeal to millennial workers. Citigroup has introduced a program to allow junior bankers to travel to Kenya for four weeks to help microfinance businesses there and develop growth plans. JPMorgan Chase & Co. will allow young workers to spend about 15% of their time helping nonprofits with technology problems. Bank of America Corp. provides junior employees with a path to climb the corporate ladder sooner than in the past. The programs are part of a shift on Wall Street to recruit and keep millennials, who have a tendency to switch jobs frequently and who are said to be “increasingly skeptical of Wall Street.” It remains to be seen whether these strategies will change the way they view Wall Street. “It will engage millennials,” said Stacy Stevens, president of recruiting firm Park Avenue Group. “But I still think it’s the nature of millennials to get bored and to move every two or three years.”
As may have been predicted, Deutsche Bank watched its shares slide as much as 6.7% Wednesday. The likely reason? Certain comments made by co-chief of Germany’s largest bank, John Cryan, to investors at Morgan Stanley’s annual financial services conference in London earlier in the day. Cryan said the bank “may make a small profit” this year, or it may “make a small loss.” Then he added something that revealed his prediction: “There’s a lot of stuff we have to get done this year, so this year we’re not going to be profitable.” But the bank had already forewarned investors that 2016 would be a “tough” year amid the early stages of a five-year restructuring plan that includes fewer available resources for investment banking and a loss of 9,000 jobs. During the first two months of 2016, the bank’s shares fell 24%, although they have stabilized in recent weeks.
New York Times
He’s at it again. Bartlett Naylor, financial policy advocate at the activist organization Public Citizen, has asked shareholders of JPMorgan Chase and Citigroup to consider breaking up the banks, similar to past proposals which investors have either shot down or defeated. Naylor, who calls for stricter Wall Street regulations, asks investors with shares in the banks to form a committee to study the benefits of splitting each bank in two. “Divestiture would also give investors more choice and control about investment risks,” Naylor said in his recommendation. In response to Naylor’s proposal, Citigroup said its executives have regularly evaluated and taken actions to streamline the company, and JPMorgan stated it “continues to successfully adapt its strategy and financial architecture in the constantly evolving banking landscape.”
Reuters: U.S. banks are increasingly exploring newer corners of the digital world, not just in upgrading their aging hardware and software, but also in developing and selling technology to other companies. Among the largest, Goldman Sachs Group, Morgan Stanley and JPMorgan Chase & Co. are producing or selling tools that pertain to everything from cyber security to mobile applications to systems integration, as they explore new avenues to generate growth in a regulatory environment that has restricted traditional means for profits. Goldman is arguably the biggest developer of its own technology that it sells to outside companies and now seeks to capitalize on the popularity of employees using their own mobile phones, tablets and the like instead of company-issued devices. Morgan Stanley has also decided to start selling its own tech, looking to shop Treadmill, a container management platform that enables businesses to operate their software at scale across their systems, according to Reuters, and JPMorgan has been selling its software that ease the process of selling syndicated loan trades. Banks are spending enormous sums on tech upgrades and developments, a collective $62.2 billion last year alone. The jury is still out, though, on the potential to earn money on selling tech -- some banks are optimistic, others skeptical about the financial upside of the idea. Bank executives involved in these ventures said it is still too early to tell whether they will generate profits.