Philadelphia says banks colluded; Goldman’s 1MDB legal woes ‘just beginning’?
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It was a very good year
U.S. banks earned a record $236.7 billion last year, up 44% from 2017, the Federal Deposit Insurance Corp. said Thursday. Fourth quarter profits were $59.1 billion, down slightly from the prior quarter’s record level but up 18.5% from a year earlier. There were no bank failures in 2018, the first time that has happened since 2006, while the number of “problem banks” fell to 60 from 71, the lowest number since the first quarter of 2007. Wall Street Journal, Financial Times, American Banker
Apple and Goldman Sachs plan to launch a credit card later this year that will offer consumers “extra features on Apple’s Wallet app, which will let them set spending goals, track their rewards and manage their balances.” But the two companies “are entering a crowded field with little experience. Both are looking for new revenue sources as their bread-and-butter businesses struggle.”
Separately, Odeon Capital Group’s bank analyst Dick Bove initiated coverage of Goldman Sachs with a sell rating, warning clients the bank’s legal troubles from the 1MDB scandal in Malaysia are “just the beginning.”
“It is unclear to us whether Goldman Sachs participated in any inappropriate activities,” said the long-time analyst, who joined Odeon earlier this month. “I think that the most negative revelations are yet to come. Thus, the broader issue is will Goldman's business operations be impacted?”
Getting to the bottom of it
The Swedish Financial Supervisory Authority said allegations that Swedbank may be mixed up in the Danske Bank money laundering scandal are “very serious.” The bank’s stock fell sharply for the second straight day and is down more than 20% since a Swedish television station reported the connection.
On Thursday Swedbank said it hired EY to conduct an external investigation into its possible role in the scandal. “I have given EY a broad mandate to independently and thoroughly investigate the information that was presented on the TV program,” said Birgitte Bonnesen, the bank’s CEO. “Preventing and averting money laundering is one of the bank’s most important responsibilities.”
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A British judge said Nigeria had “reasonable grounds” for pursuing a lawsuit against JPMorgan Chase in which the African country alleges the bank enabled the misappropriation of $875 million of government funds to a former official convicted of money laundering. “The defendant bank has failed to establish that the claimant has no real prospect of success,” the judge said in ruling the case may proceed to trial. JPMorgan had argued the case should be dismissed, claiming it had approval to transfer the funds from a government account to those controlled by the former official.
Start your engines
Hong Kong is about to issue digital banking licenses to some of China’s biggest online payments companies, including Tencent and Ant Financial, unleashing competition in an area currently controlled by four large traditional banks “that have lived without fear of serious competition for decades.” The territory “is dominated by the top three or four banks and some of them are just complacent,” said Isabel Wendleken, a consultant at Capco Digital. “They own a lion’s share of the market and it’s hard for them to change. That’s why digital banking has the potential of disrupting it if it’s done correctly.”
Philadelphia sued seven banks — including JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs and Wells Fargo — for allegedly colluding to fix the prices on floating-rate bonds the city issued to finance public works projects. RBC and Barclays were also named in the suit, which claims the city was forced to pay inflated interest rates on the bonds.
“Things can only go worse from here. It’s not lost on us that it’s been a while since we had the last bank failure. And while I would like to believe this is the new normal, it’s not.” — FDIC Chair Jelena McWilliams.