Editor's note: Morning Scan will not publish on Friday, April 19, in observance of Good Friday. We’ll be back on Monday, April 22.
Breaking News This Morning …
Off target BB&T and SunTrust Banks, which are planning to merge later this year, announced mixed first-quarter results Thursday morning. BB&T missed earnings estimates despite higher profits while SunTrust also came in below expectations, as profits fell. Both banks recorded merger-related charges.
Receiving Wide Coverage ...
On deck JPMorgan Chase’s Chief Financial Officer Marianne Lake was named head of the bank’s consumer lending unit while Jennifer Piepszak, head of the bank’s credit card division, was named to replace Lake. The moves put “two women with decades of experience at the bank at the top of the list to one day succeed James Dimon as chief executive,” the Wall Street Journal says. “The ascension of either Ms. Lake or Ms. Piepszak to the top job at the largest U.S. bank would be a major development for women, who occupy few senior roles in the banking business and on Wall Street. Both 49, Ms. Lake and Ms. Piepszak are seen as having the right combination of youth and experience to potentially succeed Mr. Dimon if he sticks around for another five years.”
The job change gives Lake “operating units to run for the first time and increasing her chances of succeeding” Dimon, the Financial Times says. “The move fills in what some cited as a crucial gap in her CV.”
“The executive changes came a week after Mr. Dimon and the chief executives of six other big banks were asked during a congressional hearing to raise their hands if it was likely that a woman or person of color would succeed them,” the New York Times notes. “None of the seven white men raised their hands.”
Rate shock Bank of New York Mellon’s shares dropped by nearly 10% Wednesday after it “delivered a grim reminder that shifting Federal Reserve policies and softening long-term interest rates are taking their toll on part of the finance industry.” The bank’s “disappointing results,” which included a 20% decline in net income and an 8% drop in net interest revenue, “underline how sensitive financial firms can be to the ebb and flow of interest rates, particularly when increases in short-term rates aren’t matched with rising longer-term rates.”
Signage is displayed on the exterior of a Bank of New York Mellon Corp. office building in New York, U.S., on Thursday, July 12, 2018. The Bank of New York Mellon Corp. is scheduled to release earnings figures on July 19. Photographer: Bess Adler/Bloomberg
Bess Adler/Bloomberg News
The stock price decline was the “biggest one-day drop in almost eight years” at the company. “Current expectations for the yield curve will likely negatively impact our revenue growth for the next several quarters,” CEO Charles Scharf warned.
More trouble Deutsche Bank said it processed “at least €175 million of dirty money for Russian criminals between 2011 and 2014 and has braced itself for potential fines, litigation and prosecution of individual managers in response. The internal assessment exposes another area of money-laundering failings at Germany’s largest lender.”
Separately, House Democrats have subpoenaed nine large banks — including three foreign banks — as part of their probe into President Trump’s finances. “The total number of lenders targeted by the lawmakers hasn’t been previously reported, nor have most of their identities.”
“The increasing interest in Deutsche Bank’s connections to the Trump Organization is primarily about Russia’s election meddling,” American Banker reports. “But a focus on money-laundering violations might also bring more attention to policy reforms sought by banks.”
Wall Street Journal
Slimming down U.S. Bancorp said it plans to close as many as 450 branches over the next three years (about 10-15% of its locations) as it “looks to trim its expenses and push more digital tools.” The bank said it now has “more flexibility” following the lifting of a 2015 consent order with the Office of the Comptroller of the Currency related to the Bank Secrecy Act and anti-money-laundering.
Collectors beware The Consumer Financial Protection Bureau is planning to propose tougher rules on debt collection practices “and enhance the power of consumers in dealing with collectors,” CFPB Director Kathy Kraninger said Wednesday. “The proposed rule would protect consumers with ‘clear, bright-line limits’ on the number of calls collectors can make in a week and spell out how they can communicate with consumers using newer technologies such as email and text messages,” Kraninger said. “Collectors would also be required to provide consumers with more and better information at the outset of collection.”
Additionally, she vowed "less focus on enforcement actions and more emphasis on consumer education."
I won't back down Herman Cain said he is “very committed” to pursuing a seat on the Federal Reserve Board “despite apparently lacking enough Senate support to be confirmed if President Trump nominates him.”
“I don’t quit because of negative criticism,” Cain told the paper. “I don’t quit because of negative attacks. And I don’t quit because several senators have expressed reservations about my qualifications. I happen to believe that you need some new voices on the Federal Reserve.”
“I have a different perspective,” Cain writes in an op-ed. “The professor standard” — the notion that only academics should serve on the Fed — “doesn’t work, and the Fed needs new voices to argue for an approach that does.”
Plan B Despite the “brutal bitcoin selloff,” supporters of cryptocurrencies “are plugging away with plans to use its underlying blockchain technology to reshape Wall Street’s machinery. These blockchain-based networks have been in development for several years without much to show for the effort. But now states, regulators and lawmakers are laying the legal groundwork for the creation of ‘digital securities’ — assets resembling bitcoin and other cryptocurrencies — that could represent stocks, debt or other financial instruments,” facilitating trading and settlement.
Quotable
“There have been advances in communications technology since 1977 but the Fair Debt Collection Practices Act has not been updated to reflect our use of these technologies.” — Consumer Financial Protection Bureau Director Kathy Kraninger, announcing proposed new rules for debt collectors
The Cleveland-based bank is projecting steady growth in net interest income even as credit losses remain manageable. But Chairman and CEO Chris Gorman also said that he thinks a recession is likely.
The first-quarter increase involved commercial real estate loans, including some problematic multifamily loans and an office credit, but none of the criticized loans were to consumers, officials at the Dallas company say. Further CRE deterioration is anticipated.
The Detroit-based company is exploring ways to make more consumer auto loans without running afoul of stricter capital standards that are expected from the Federal Reserve. Possible approaches include more securitizations and the use of credit risk transfers.
The House Financial Services Committee also sent to the full House two bipartisan bills, including one that would prevent large banks from opting out of having to recognize Accumulated Other Comprehensive Income in regulatory capital.
Charge-offs and nonperforming loans rose at the Georgia bank in the first quarter. But it blamed the problem on one large client and said the matter has been resolved.
Amid healthy first-quarter loan growth and improving credit quality, Discover Financial Services slashed its profits by $800 million to offset remediation costs from a 16-year period when it overcharged certain merchants.
