Breaking News ...
Earnings: UBS reported a fourth quarter loss of 2.22 billion francs ($2.3 billion) after taking a nearly 3 billion franc write-down due to U.S. tax reform. Wall Street Journal, Financial Times here and here
Receiving Wide Coverage
Next in line?: Anthony Noto, Twitter’s chief operating officer and a former top Silicon Valley banker at Goldman Sachs, has been asked to become the next CEO of Social Finance, replacing founder and former CEO Mike Cagney, who was forced out in September. If he accepts, the decision could be announced as early as this week.
“His signing would be a coup for San Francisco-based SoFi, the biggest and the brashest of a new breed of online lender,” the Financial Times comments.
Keeping it quiet: Omeed Malik, a senior executive at Bank of America and “a powerful figure in the hedge fund world,” was quietly let go this month following an internal investigation into allegations of inappropriate sexual conduct with several female bank employees. His firing is an example how “major financial institutions such as banks and hedge funds mostly act privately to handle midlevel allegations of misconduct, in many instances allowing the accused employees to leave quietly,” the Journal says, noting the comparison with recent high-profile firings of male executives at entertainment, media and technology firms.
“This can have the effect of satisfying neither the alleged victims, many of whom complain that departing executives can continue careers elsewhere with their reputations intact, nor the accused, who say the rapid-fire process doesn’t allow for all the facts to come to light,” the paper notes. Wall Street Journal, New York Times, American Banker
Wall Street Journal
Comeback: Broker price opinions, or BPOs, in which real estate agents offer home price valuations “that are more cursory and cost far less than traditional appraisals,” are making a comeback in the residential mortgage business. While Congress outlawed the use of BPOs for traditional mortgages, they are still used to value collateral in mortgage-backed securities, lending to house flippers and making foreclosure decisions.
“Their popularity shows how Wall Street is finding ways to adapt to government efforts to crack down on some of the excesses that contributed to the housing crisis,” the paper says. “Critics say BPOs are ill-suited to gauge value and could leave debtholders with less collateral than they thought.”
Rewarded: Morgan Stanley said it paid its CEO James Gorman $27 million last year, up 20% from the previous year. The increase “sends a strong signal from the firm’s the board that it approves the progress he has made in reviving the once struggling Wall Street firm,” the paper comments. “Mr. Gorman’s decision to de-emphasize trading and embrace wealth management — a stabler, simpler and less risky business — has paid off, producing steady growth.” By comparison, Jamie Dimon, CEO of JPMorgan Chase — which, as the paperr notes, is three times Morgan Stanley’s size — made $29.5 million last year.
Capital concern: Big banks’ plans to reduce their capital bases and return more of their profits to shareholders in the form of fatter dividends and bigger buybacks “is a worrying trend” to some observers, one of whom is Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, who is “banging the drum” for “radically higher levels of capital to absorb shocks across the biggest banks.”
“I feel like our job is to identify risks, to speak out, and that’s what we’re doing,” he told the paper. “Hopefully legislators will listen.”
One reason for worry could be credit losses. The four biggest American retail banks — Citigroup, JPMorgan Chase, Bank of America and Wells Fargo — had a combined $12.5 billion in credit card losses last year, a 20% increase over 2016. Those figures raise “doubts about the ability of consumers to fuel economic expansion,” the paper says. “People are using their cards to get from paycheck to paycheck,” said Charles Peabody, managing director at Compass Point.
“The driving factor behind the [credit card] losses is that banks are putting weaker credits on the books.” — Brian Riley, a director at Mercator and a former credit card executive.