Receiving Wide Coverage ...
Morgan Stanley Promotes Two: The investment bank has rewarded two of its star employees with big promotions, bringing them into the upper echelon of management, Financial Times reported. Edward Pick, who oversaw the resurgence of the bank’s stock trading operations, is now global head of sales and trading. And Dan Simkowitz became the head of Morgan Stanley’s investment-management division. The two men will also join the bank’s operating committee. The Simkowitz move in particular drew attention because he now runs the run division that former Merrill Lynch No. 2 Gregory Fleming had headed. In the management shake-up, Fleming was knocked down a peg, leaving him to work solely in wealth management, the Wall Street Journal noted. Nonetheless, the Journal said Fleming continues to be a confidant of Morgan Stanley chief James Gorman — the two have had a close relationship since their time at Merrill Lynch.
The management changes come as a result of Gorman’s dedication to succession planning; an area in which he believes Morgan Stanley has historically failed. “They’re grooming the next generation, and the only way to do that is to give them more responsibility,” Glenn Schorr, an analyst with Evercore ISI, told the Journal. While both Pick and Simkowitz have experience running leading divisions at the bank, their new posts will force them to grow underperforming businesses and could deepen their strength for future moves toward the top.
Wall Street Journal
Ahead of the release of third quarter results, the paper predicted that big banks’ earnings could be lower than the market seems to expect. The Fed’s decision to keep interest rates low continues to put a damper on net interest margin. With low loan growth, banks’ revenue streams keep on drying up, according to the paper’s analysis. And cost-cutting measures designed to keep profitability up could have a chilling effect on future earnings when interest rates finally tick up by leaving the banks with less infrastructure to handle renewed demand.
That doesn’t mean it’s all gloom and doom: San Francisco Fed President John Williams believes the central bank will raise short-term interest rates by year’s end. He told reporters the recent dovish decision was a “close-call,” and data continue to support a raising of rates. With two more scheduled meetings before 2016, there’s plenty of time for the Fed to act.
Small businesses have faced an overwhelming wave of interest from marketplace lenders, who are beginning to find there may be more supply of their services than there is demand. Some business owners told the paper once they started searching for loans they were drowned with phone calls and offers from lenders looking for their patronage.
Meanwhile, online lenders have returned to an old friend: the U.S. Postal Service. Companies like LendingClub and Prosper Marketplace have turned to snail mail and traditional mail marketing to convince customers to flock to their online businesses. Personal-loan offers by mail have more than doubled since 2013, the paper reports.
Banks continue to struggle to make sense of the Volcker Rule and determine how it really impacts their business. The paper notes that at 1,000 pages the guidance is so extensive that some bankers still don’t always know how to apply it. The regulation has been successful in trimming down the size of big banks’ prop trading operations, the paper notes. And that has forced companies to become creative in how they make their money — in particular the paper cites Goldman Sachs, which now makes more from advising on mergers and fundraising than trading.
New York Times
Banks have become more hesitant recently to provide money to consumer lenders, particularly those who specialize in high-interest loans to individuals with less-than-stellar credit. The cautiousness stems from increasing regulatory oversight on the consumer lending industry. The paper reports some consumer lenders, including World Acceptance and Regional Management, have seen big banks slap legal conditions on the money they receive. These stipulations include the threat of considering default if a consumer lender faces regulatory scrutiny. But as we’ve seen, some experts believe these lenders could really be in for a shock.