Banco Popular de Puerto Rico

Receiving Wide Coverage ...Mixed Bag: The FDIC's quarterly banking profile showed loan growth (encouraging), continued loan-loss reserve releases (nice, but unsustainable) and continued squeezing of net interest margins (not so good) for the second quarter. "The lack of wind in banks' sails ... helps explain why [stock] valuations are downbeat," says the Wall Street Journal's "Heard on the Street" column. Straight news stories in the Journal and Washington Post.

Receiving Wide Coverage ...Barclays Is Very Busy: The British bank named Antony Jenkins, its head of retail and business banking, as chief executive. The Journal says the move may represent "a shift in focus" away from investment banking as Barclays tries to revamp its image following its involvement in the London interbank offered rate scandal. Soon-to-be-board chairman David Walker told the FT "it was clear that Antony was the outstanding choice" and called his track record "highly compelling." It had to help that the British-born Jenkins is apparently nothing like his predecessor Bob Diamond, "an outspoken American investment banker" who the Times notes had been "booed and heckled by shareholders" in a meeting before the Libor scandal broke. Perhaps to drive home just how different the new and old CEOs are, Jenkins will be paid a base salary of £1.1 million. He will also be eligible for an annual bonus of £2.75 million and will receive shares in a long-term incentive program worth up to £4.4 million. Last year, the Journal reports, Diamond "received a pay award" close to £16 million.

Receiving Wide Coverage ...Fed Watch: The papers preview the speech Chairman Ben Bernanke is scheduled to deliver today at the central bank's annual retreat in Jackson Hole, Wyoming. "He must once again address whether there is more the Fed can do to get the economy going and whether it is worth taking chances on controversial new programs," says the Journal. "All along he has argued these efforts are worth it and appears likely to stick to that line." In an op-ed in the Journal, Gerald O'Driscoll, a veteran of the Dallas Fed and Citigroup now at the Cato Institute, argues against a third round of quantitative easing, warning it would "would act as a sugar rush to financial markets while spurring little if any growth." PIMCO's Mohamed El-Erian writes in the FT that some have urged Bernanke to set a nominal GDP target, which "certainly would be viewed by markets as a favorable development as a GDP target would effectively re-price the 'Fed put.'" However, El-Erian doubts Bernanke will endorse any specific policy in Jackson Hole; instead, expect the Fed chairman to lay out "future options and [reiterate] the general commitment to do more if needed." Last but never least, Izabella Kaminska of the FT's Alphaville blog wrote a characteristically thought-provoking post the other day on the less-obvious objections to further easing — not that it's inflationary, as the goldbugs and Austrian economists say, but that it's potentially deflationary and, perhaps more to the point for this audience, could "ultimately spell doom for many of today's financial business models." Kaminska quotes some examples from a working paper by Bill White of the Dallas Fed: "Futures brokers demand margin, and customers often over margin. The broker can invest the excess, and often a substantial portion of their profits comes from this source. Low interest rates threaten this income source and perhaps even the whole business model. A similar concern might arise concerning the viability of money market mutual funds, supposing that asset returns were not sufficient to even cover operating expenses." And in the interest rate swap markets, White cautions, "unexpectedly low policy rates can punish severely those that bet the wrong way. This could lead to bankruptcies and other unintended consequences." Any traders hoping for more cheap money from the Fed should perhaps be careful what they wish for.

Receiving Wide Coverage ...Europe's Banking Woes Burgeon: Perhaps because of the long weekend in the U.S., this morning's banking news is dominated by headlines about Europe … and things aren't looking up. The Journal reports the French government rushed to bail out the "small, but key" Caisse Centrale du Crédit Immobilier de France (CCCIF) over the weekend after the mortgage lender requested aid to pay down bonds that were due on Monday. The $6.3 billion loan provided to CCCIF follows the French government's bailout of Franco-Belgian lender Dexia last year. French Prime Minister Jean-Marc Ayrault said in a radio interview while the county's financial sector is largely strong, both bailouts were necessary because of the areas they were focused on: housing and local governments.

Receiving Wide Coverage ...Spanish Bank Launches Big IPO: Spain's Banco Santander is launching an initial public offering of its Mexican unit in an effort to raise up to $4.2 billion as the Spanish economy continues to falter. The Madrid-based bank will sell as much as 24.9% of its aptly named Santander Mexico unit with shares costing between 29.00 and 33.50 pesos each. Santander is one of the few Spanish banks still able to issue debt, but that doesn't mean the bank is thriving. According to the Times, it reported a 93% drop in second-quarter profit "as it set aside more money to cover bad loans in the Spanish market." The FT says the IPO is in line with a strategy Santander has used throughout the financial crisis "to sell stakes in its overseas subsidiaries to raise capital and to establish clearer valuations" in troubled times. The paper also points out that the IPO is the "second-largest in the world this year after Facebook" and, as such, could provide a "welcome jolt" to the U.S. economy. Let's just hope the debut, expected on September 26, goes smoothly.

Receiving Wide Coverage ...Another U.K. Banking Probe: Lloyd's Banking Group is at the center of the U.K. Financial Services Authority's crackdown on the mis-selling of financial products. According to the Journal, the FSA found Lloyd's to be "particularly aggressive in its sales strategies" of products, such as payment protection insurance, during its wider investigation of the practice and, as such, have launched an official probe into the commissions the bank offered branch employees on sales. Lloyd's, which has come under fire for mis-sold payment protection insurance before, says it has "made significant changes" to its "incentive schemes" since the start of the year.

Receiving Wide Coverage ...Carl Levin, Whale Hunter: Just when you thought you'd heard the last about the London Whale affair … Senator Carl Levin's Permanent Subcommittee on Investigations is conducting a probe of the JPMorgan chief investment office's derivative trades, the FT and Bloomberg News report. The subcommittee has subpoenaed JPM's regulators for documents and is seeking testimony from CIO veterans, the reports say. If the bank's executives are asked to testify before the subcommittee, we suspect it'll be a less decorous affair than Jamie Dimon's June appearances before the Senate and House banking panels, given Levin's penchant for indignant showboating. Especially since Dimon could give Levin a run for his money in a grandstanding competition. We wonder if Levin might also take the opportunity to ask someone at JPM about its planned copper exchange-traded fund, which the senator warns could corner the copper market but that the bank insists won't affect prices.

Receiving Wide Coverage ...AIG Stock for Sale: The Treasury Department announced on Sunday that it is getting ready to sell $18 billion of the stock it purchased in American International Group during the controversial 2008 bailout of the insurance firm. The sale is expected to reduce the federal government — or, as the FT notes, "the U.S. taxpayer" — to a minority shareholder in the company for the first time since the financial crisis. According to the Times, the Treasury could reduce its holdings from 53% to as little as 15%, a move that marks "the realization of a long-held goal by both the Obama administration and the company." The Journal was quick to note this sale "could raise questions about timing, coming less than two months before a closely contested presidential election," though the Treasury was just as quick to tell the paper the unwinding of AIG has nothing to do with the political season.

Receiving Wide Coverage ...Wait a Minute … Do Bailouts Work?: That seems to be the question following the Treasury Department's now official sale of a massive chunk of AIG stock it purchased at the height of the financial crisis. According to the Journal, the Treasury sold shares to the public at $32.50 apiece, netting $18 billion, and bringing the federal government's return on its original $182.3 billion investment in the insurance firm to a combined total of $194.7 billion (or $12.4 billion in profit). So were the bailouts a necessary evil? Dealbook's Andrew Ross Sorkin, not surprisingly, seems to think so. In this column (which isn't so much a column as it is a transcript of the "told-you-so" conversation he had with former SIGTARP-turned-author Neil Barofsky), Sorkin essentially elaborates on the thesis posed at the end of his bailout book "Too Big to Fail": "As distasteful as the rescue effort was, it should be clear by now that without it, we faced an economic Armageddon. And the results thus far of bailing out the big banks, and AIG, indicate a profit."

Receiving Wide Coverage ...A Golden Age for Whistleblowers?: The Internal Revenue Service has awarded Bradley Birkenfeld, a convicted former banker, $104 million for the role he played in exposing the aid Swiss bank UBS provided to wealthy clients in a decades-long effort to help them evade paying taxes. According to the Journal, details provided by Birkenfeld ultimately led UBS "to turn over the names of more than 4,000 account holders who were U.S. taxpayers and pay $780 million to resolve a criminal case involving secret offshore accounts." The agency has also collected more than $5 billion in taxes and penalties from over 33,000 U.S. taxpayers, who confessed to holding undeclared overseas accounts following news of the scandal. Birkenfeld himself was charged with conspiracy for failing to come clean about his role in the matter and is currently serving the remainder of a 40-month prison sentence in home confinement in New Hampshire.