Banco Popular de Puerto Rico

Breaking News This Morning ...Earnings: Citigroup, M&T

Breaking News This Morning ...Earnings: U.S. Bancorp, Comerica, Goldman Sachs, Northern Trust, State Street, Webster

Breaking News This Morning ...Earnings: Bank of New York Mellon, PNC, First Republic, New York Community

Breaking News This Morning ...Earnings: Bank of America, BB&T, Fifth Third, First Horizon, KeyCorp, TCF Financial

Receiving Wide Coverage ...(Investment) Bank of America: A common thread in the coverage of Bank of America's first-quarter earnings was the growing contribution from trading revenues, particularly fixed income, in contrast to weakening profits on the retail side. The report "underscores how dependent on Wall Street the bank has become," the Times says. The FT notes prominently that Bank of America lost money in the mortgage business, unlike peers that benefited from the government's refinancing program for underwater borrowers; litigation, loan putbacks and intensive asset servicing remain salient themes for B of A in home loans. (Another FT story also notes that bond trading was also a bright spot for most of the investment banks and diversified financials.) Still, if you strip away a big accounting hit, revenues and earnings were better than expected (even though revenues dropped significantly, another contrast to the rival megabanks). … But should you strip out that accounting adjustment? Peter Eavis of the Times notes that B of A flagged the item prominently in its press release — "asking analysts and investors to effectively ignore that loss" — but didn't go to such lengths in its third-quarter report last year, when the debt valuation adjustment went the other way and added $1.7 billion. Moreover, the DVA loss this time around could theoretically be seen as good news, since it means the value of B of A's debt is rising because investors see the bank as more creditworthy, and its chief financial officer certainly talked up this interpretation in the press release. The rub, according to Eavis, is that the adjustment is based partly on pricing in the credit default swap market, whose reliability as a gauge of broad investor sentiment has been hotly debated for years. In the actual long-term debt markets, the columnist notes, B of A has been paying more to borrow money — a development the company did not go out of its way to highlight. (OK, to be fair to B of A, the CFO's quote specifically mentioned tightening credit spreads, a term which can refer to pricing on CDS or on bonds, and bond spreads can improve, from the borrower's perspective, even when absolute rates on debt worsen — if the benchmark rates rise. Did they? We'd look it up but we've spent too much time on this DVA stuff already.)

Receiving Wide Coverage ...Customer Service: The Times’ “Corner Office” Sunday column on management styles featured a Q&A with Russell Goldsmith, the CEO of City National Bank in Los Angeles. He describes a motivational companywide storytelling competition, in which employees are invited to share examples of how they or their colleagues “helped a client by going the extra mile.” The winning storytellers get iPads and the protagonists who actually went that extra mile get cash bonuses. Another story in the Sunday Times doesn’t mention banks but may be of interest to bankers concerned about customer service. This front-page article profiles Disney’s growing consulting arm, which advises various companies on how to adapt the entertainment conglomerate’s famously chipper customer-service culture for their own businesses. One trick of the trade for bank branch concierges: when employees at Disney parks give visitors directions, they point with two fingers instead of one (“it’s more polite”).

Receiving Wide Coverage ...The Bank Shareholder Revolt: It’s gone global. A group of activist investors is urging fellow shareholders of Deutsche Bank to vote against a resolution at the annual meeting approving the performance of the company’s “supervisory board.” (That’s the board made up exclusively of nonexecutive directors; Deutsche Bank has a separate “management board.” Everything’s a little bit different in Europe.) “The investor group is particularly angry that Europe’s largest bank by assets did not give shareholders the opportunity to vote on its remuneration report for last year,” especially since the year before a full 42% of shareholders had rejected the pay structure, the FT reports. The paper also notes that on Friday, Barclays will face a potential shareholder rebuke for the pay package of CEO Bob Diamond. In the big picture, writes the FT’s banking editor, Patrick Jenkins, “Investors feel empowered like never before.” Which he considers a welcome development, with a caveat: banks should resist shareholder calls for dividend hikes, even when regulators allow them, since the institutions must build thicker capital buffers to steel their balance sheets against future crises. Jenkins suggests that investors in the big diversified global banks broaden their protests to target investment bankers’ bonus pools along with CEO compensation packages, since those bonus pools are “the only feasible place” to claw back money to return to owners. In the Journal, columnist Francesco Guerrera faults Citigroup’s board, led by departing chairman Richard Parsons, for its handling of shareholder concerns about pay — concerns that were voiced loud and clear by last week’s shellacking in the say-on-pay vote at the annual meeting. Also, if you haven’t already, check out American Banker’s handy guide to the ongoing proxy season. Click here, then open the top related graphic on the left side of the page, and you’ll get a bird’s-eye view of shareholder say-on-pay votes so far, and for companies with upcoming meetings the dates, recommendations from proxy advisory firms, last year's ballot results and other data. Finally, Wells Fargo's annual meeting is today, and our colleague Victoria Finkle reports that the company faces a different kind of protest, this one over its lending and foreclosure practices (and the demonstrators won't just be picketing outside the building — Occupy-type activists have acquired shares so they can voice their concerns inside).

Receiving Wide Coverage ...Throw a TARP Over Them: The U.S. Treasury will soon have to stop doing premature victory laps and start tallying the red ink for its Troubled Asset Relief Program. That's the politically inconvenient conclusion Christy Romero draws in a report scheduled for release Wednesday. The newly installed Tarp special inspector general, Romero declares that 351 small banks, with some $15 billion Tarp loans still outstanding, face a "significant challenge" in raising new funds to repay the government, the Wall Street Journal writes. The Small Business Lending Program, in particular, culled a large number of the healthier banks from Tarp, but left stragglers with less capital, missed dividend payments and in many cases regulatory enforcement actions to contend with, American Banker notes. Romero's comments are part of her first quarterly report to Congress since becoming special inspector general in March and are part of her push to get government and regulators to help banks raise funds to repay their Tarp loans. Just how much the Tarp program will cost taxpayers—if anything—is a hot political topic. The Congressional Budget Office in December forecast a lifetime cost of $34 billion, noting that to date Treasury had spent $414 billion on Tarp and taken in $330 billion in dividends and repayments. Unwilling to let such facts get in the way of a good story, Treasury has been bragging about Tarp's financial success ahead of November's elections and claiming the government will "at least break even on its financial stability programs and may realize a positive return," the Journal notes. Romero takes issue with such claims, stating that taxpayers are still owed $118 billion, a figure she says includes investments in AIG, General Motors (GM), Ally Financial and other smaller programs under the Tarp umbrella, in addition to the outstanding loans to smaller banks. "It is a widely held misconception that Tarp will make a profit. The most recent cost estimate for Tarp is a loss of $60 billion," the report says, as quoted by TheStreet.com. Romero also counted $4.2 billion that Treasury had written off and realized losses of $9.8 billion "that taxpayers will never get back." Wall Street Journal, The Street, American Banker

Receiving Wide Coverage ...Maiden’s Suitors: Following the Citi-Goldman-Credit Suisse team-up, two more consortiums have been formed to bid for the complex securities from the New York Fed’s Maiden Lane III portfolio, the papers report. The second alliance consists of Bank of America Merrill Lynch (no comma missing there; that mouthful is just one dealer), Morgan Stanley and Nomura. The third partnership is the most interesting since it’s made up of the two investment banks that are said to have a special pricing advantage: Barclays and Deutsche Bank. The European duo reportedly intends to unwind the CDOs and sell off the underlying bonds for a profit, a play that would be difficult or at least expensive for any other bidders since Deutsche already owns other pieces of the same CDOs and Barclays is the interest rate swap counterparty on the transactions (hence both firms must be bought out to collapse the deals). Old-school CitiGoldSuisse, on the other hand, plans to just resell the CDOs in their current form to clients if it wins the auction. Most interestingly, BankAmeriMorgNom wants to repackage the CDOs into new securities with higher ratings, according to the FT. (CDOs of other CDOs? Ratings arbitrage? Where have we heard that one before?) The Journal, and to a lesser extent the Times, emphasize the “how far we’ve come” angle: The reason the New York Fed owns the Maiden Lane assets in the first place is that it took the stuff off the hands of investment banks in the fall of 2008 when AIG, which had insured the then-radioactive paper, was wobbling. Yet the same bonds are now in hot demand on the Street. Financial Times, Wall Street Journal, New York Times

Receiving Wide Coverage ...Money Market Funds, Again: The Journal reports that money market funds are getting eleventh-hour support from two Republican congressmen in their fight against new regulations. Spencer Bauchus and Jeb Hensarling, both senior members of the House Financial Services committee, recently fired off a pointed letter to SEC Chairman Mary Schapiro, urging that she do more analysis before pressing ahead with new rules. This came after money fund executives held a whirlwind series of meetings with lawmakers on both sides of the aisle last month. A formal SEC proposal was supposed to come out a few weeks ago, but it’s apparently been delayed for at least a month. Among the agency’s five commissioners, two are against the Schapiro plan, two support it, and Luis Aquilar remains officially undecided but publicly skeptical. Separately, in an op-ed in the Journal, Eric S. Rosengren, president of the Boston Fed (which ran an emergency loan program for MMFs during the crisis, Beantown being home to many mutual fund managers) argues that the funds still need reform. The subset of MMFs known as prime funds take on credit risk to a degree that’s “inconsistent with investors' perceptions of a low-risk, highly liquid investment,” he writes. For example, more than 60 of these funds had exposure to Dexia, the French bank that got bailed out last year. (Former banking regulator and current money fund advocate Jerry Hawke has cited MMFs’ ability to meet a high number of redemptions without incident during last year’s Euro panic as evidence that the SEC’s 2010 reforms were sufficient.) Rosengren also says a forthcoming white paper from the Boston Fed will show that money fund sponsors had to shore up their funds at least 50 times from 2007 to 2010. You can’t rely on sponsors to always have the will and the wherewithal to step in like this, he argues (and if the sponsor’s a bank, you can’t assume regulators would allow it to do so). Rosengren calls the SEC’s plan, which would require floating net asset values and capital buffers and restrict immediate redemptions, “thoughtful [and] stability-minded.”