Receiving Wide Coverage ...
Stress Test Wrap: All 31 of the biggest U.S. banks managed to pass the Fed's stress tests this year, but for four of them it was less a "flying colors" sort of victory and more about muddling through. Goldman Sachs, JPMorgan Chase and Morgan Stanley received approval for their capital-payout plans only after adjusting them to ensure their capital ratios stayed above minimum requirements. Bank of America got conditional approval to go ahead with stock buybacks, but will be required to resubmit a plan to the Fed that addresses weaknesses in internal controls and its ability to predict losses and revenue. As an analyst told American Banker Wednesday, "there is no competition to pass this by a huge margin," so the banks may not be too shaken up about their close call. But the Wall Street Journal suggests "the fact some big banks needed to take a so-called mulligan is likely to stoke criticism that the Fed's process is too opaque and designed to find shortfalls at banks rather than ensuring they can build up the necessary capital to absorb losses." The New York Times suggests B of A's latest stumble may "raise new questions about its ability to comply with new regulations that are intended to make the financial system safer." The Financial Times focuses on the two foreign banks that failed the Fed's stress tests, Deutsche Bank and Banco Santander. The Fed's rejection of their capital plans amounts to a "stinging rebuke" for the U.S. units of the foreign banks, according to the paper. Meanwhile, Citi executives are probably awash with relief. John Carney of "Heard on the Street" writes that many members of Citi's management team, including CEO Michael Corbat, jobs were on the line if the stress tests ended poorly.
Curb Those Caviar Dreams: The average Wall Street bonus in 2014 was larger than it's been in any year since the financial crisis, but nonetheless "bonuses just aren't what they used to be," the Times declares, pointing out the growth in the amount of bonuses has slowed dramatically from the previous two years. The Journal shares this glass-half-empty perspective on the average $172,860 bonus, up 2% from the previous year, noting, "many financial firms wrestled with lower profits" last year. The FT takes a somewhat sunnier view of life on the Street, leading with the fact that the securities industry added jobs for the first time since 2011. These numbers come from a report from the New York state comptroller's office.
Wall Street Journal
General Electric may be looking to cut back on commercial lending and other riskier parts of the banking business, according to anonymice. The company has found that "returns from lending aren't worth the discontent the business causes among GE's investors," the paper reports, and that it has "come to consider major business lines, such as commercial lending, disposable if it can secure permission from regulators and the right price." The company remains committed to GE Capital's aviation, energy and health-care financing, however.
The hits keep coming for HSBC. The bank is among the four big financial institutions that had correspondent banking relationships with an Andorran lender accused of laundering money for organized crime groups, according to the Treasury Department's Financial Crimes Enforcement Network. Bank of America, Citigroup and Deutsche Bank also provided the lender, Banca Privada d'Andorra, with access to the U.S. financial system.
Online marketplace lender SoFi is gunning for the mortgage business of young, high-earning homebuyers who don't want to fill out a lot of paperwork or deal with "products designed for their parents," company chief executive Mike Cagney tells the paper. The lender offers downpayments as low as 10%, "much less than the minimum 20-30% demanded by most traditional banks."
New York Times
The American Enterprise Institute's Peter J. Wallison thinks government housing policies bear far more responsibility for the 2008 financial crisis than the actions of big banks, and he wants the world to know it. A Times profile of Wallison, who recently published a book on the crisis, portrays him as a "crusader" who's resolved to go against the tide of public perception, much like economist Milton Friedman.
The CEOs of JPMorgan, Goldman Sachs and Wells Fargo are the last big-bank leaders standing from the pre-crisis era. Reuters Breakingviews' editor Jeffrey Goldfarb thinks shareholders may want to get some fresh blood soon. He's got nothing against those leaders in particular, but the crisis revealed a connection "between extended tenure, groupthink and complacency."