Senate moves to kill CFPB auto rule; Amex profit soars 31%

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Getting closer: As expected, the Senate voted Wednesday to kill Consumer Financial Protection Bureau guidance intended to curb alleged racial discrimination in auto financing. The vote was 51-47, with one Democrat, Sen. Joe Manchin of West Virginia, joining the Republican majority. The House is expected to follow suit shortly.

“The CFPB wrongly used its overreaching, indirect auto-lending guidance as an enforcement weapon,” said Sen. Jerry Moran, R-Kan., the bill’s sponsor. Wall Street Journal, New York Times, Washington Post, American Banker here and here

Speaking of the CFPB, Acting Director Mick Mulvaney has ordered the agency’s inspector general to investigate leaks at the agency, which he blames on “ideologues and activists” inside the bureau. The action follows a Reuters report last week that said the CFPB was about to impose a $1 billion penalty on Wells Fargo, which the bank subsequently acknowledged in its first-quarter earnings report. The agency has yet to make an announcement on the matter.

Amex rebounds: American Express said its first quarter net income soared 31% to $1.63 billion, its highest quarterly profit in nearly two years. Revenue rose 12% to $9.72 billion, propelled by a 10% increase in cardholder spending — the biggest gain since 2014 — and a 16% jump in loan balances, which boosted interest income by 25%.

Scott Eells/Bloomberg

The shift toward increased lending to its own customers “revealed the extent of the changes Amex is making to its business model in response to the 'rewards war' with credit cards issued by banks,” the Financial Times notes.

The results at Amex are indicative of the optimism about consumers at many U.S. banks, “which are eager to woo customers with credit cards, car loans and other products.” But, the paper warns, “critics point to the risk of mounting non-performing loans if households rack up ever more debt — a problem that will be exacerbated as interest rates rise.”

One company that may be at risk for such a downturn is Goldman Sachs, whose loan portfolio has jumped tenfold since 2012. Does that set up the bank to “be punished for piling in to credit so late in the cycle?”

Separately, Amex said it supports moves by rivals Visa and Mastercard, which announced Wednesday they are planning to drop plans to get online shoppers to use dedicated payment buttons — Visa Checkout and Mastercard Masterpass, respectively — in favor of a shared single button. The announcements “mark a sharp turnaround for the companies, which had been investing in and marketing their individual pay tabs for years,” the Wall Street Journal says. “The rethink in strategy is a further sign of how difficult the digital-payments realm has become and shows the companies are looking for new ways to compete for online customers’ attention.”

On the way out: Deutsche Bank said its chief operating officer, Kim Hammonds, is leaving next month, “the latest sign of turbulence at the top of Germany’s biggest lender.” Hammonds, who manages the bank’s technology and operations, is one of two women on its 11-member management board and was seen as an ally of John Cryan, who was replaced as CEO by Christian Sewing on April 8. Wall Street Journal, Financial Times

Financial Times

The song remains the same: Vernon Hill, the chairman of Metro Bank, is likely to face “intense pressure” at the U.K. bank’s annual meeting next week about £4.6 million the bank paid to InterArch, a company owned by Hill’s wife, for “architecture, design and branding services” last year and another £3.2 million in 2016. Hill, the former president of Commerce Bancorp in the U.S., left that company in 2007 “after similar concerns,” the paper notes. Glass Lewis, a leading adviser to large shareholders, supports voting against Hill’s re-election as chairman.

Join the club: TransferWise has become the first nonbank fintech company to gain direct access to the Bank of England’s interbank payment systems without having to go through a commercial bank. The move comes as “regulators and the government step up their efforts to encourage competition in the U.K.’s financial sector.”

Quotable

“We still feel really good about the consumer. I mean, really good.” — Marianne Lake, JPMorgan Chase’s chief financial officer.