Banco Popular de Puerto Rico

Breaking News This Morning ...Earnings: BB&T, Fifth Third, KeyCorp, Popular

Receiving Wide Coverage ...Who Needs Volcker?: The verdict is in on Morgan Stanley's (MS) weak first quarter, and it's a rousing thumbs down. The Wall Street giant's shares fell 5.4% Thursday after it reported disappointing results and a sharp drop in trading activity. Bond-trading revenue fell 42% and stock-trading revenue 19%, according to the company. The news arrived at a time when Wall Street is supposed to be shifting away from risky trading. That's the theory, anyway. Among all financial firms that have reported first quarter results, revenues were up smartly for trading (41%) and investment-banking (43%), while there was a contraction in the core commercial-banking activities of deposit-taking (-26%) and lending (-1.5%), according to the Wall Street Journal. Morgan Stanley—whose Chief Executive James Gorman actually is seeking to play down trading and play up wealth management—appears to be stuck somewhere in the middle. It's "like a team changing sports, and the sport they are leaving didn't do so well, but the one they are going to did," Chris Grisanti, the owner and co-founder of Grisanti Capital Management (and an owner of Morgan Stanley shares) told the New York Times. "However, I think now there is some doubt in the market about their ability to make this transition." On the bright side, Gorman's wealth management push showed progress. Morgan Stanley's wealth management unit posted pretax income from continuing operations of $597 million, up 48% year-on-year. The money management business is one where the company will be joining a crowded field of players. Virtually the entire Street has concluded that docking clients for fees like clockwork is a more sustainable business model in today's environment than running a casino in the hope that someone other than regulators shows up. Richard Bove, the outspoken bank analyst now with Rafferty Capital Markets, interpreted Morgan Stanley's results and the market's reaction as reflective of broader doubts about Gorman's grand strategy. "Most investors are unhappy with the fact this company was not able to grow its trading activity as much as its peers and as a result they perceive there is a significant problem at the company," he said. Especially galling, perhaps, is that Citigroup—a brokerage joint venture partner that Morgan Stanley is in the midst of buying out—posted surprisingly strong Q1 results on the back of bond trading and investment banking. New York Times, Wall Street Journal, Bloomberg

Receiving Wide Coverage ...SEC's New Enforcer: Chairman Mary Jo White is set to appoint long-time colleague Andrew Ceresney as co-head of the Securities and Exchange Commission's enforcement unit pretty much any day now. Ceresney, who served with White while she was U.S. Attorney for the Southern District of New York and at law firm Debevoise & Plimpton LLP, will share the role with interim enforcement chief George Canellos. Dealbook calls the joint leadership "unusual, if not unprecedented," but also reports it will be temporary. Anonymous sources tell the website Canellos "is expected to return to private practice well before the end of President Obama's second term." The Journal says Ceresney's "appointment will add to the conflict-of-interest headaches at the federal agency," though it also notes such "conflicts aren't unusual." (Recall, White's own former client list includes JPMorgan Chase, Deloitte & Touche, General Electric, Verizon Communications and former Bank of America chief executive Kenneth Lewis.) According to the paper, one of the issues Ceresney and White will have to address involves "whether to change the specialized enforcement units" set up by predecessor Robert Khuzami.

Receiving Wide Coverage ...A Whole Lot of 'Puffery': Standard & Poor's is formally urging a judge to dismiss the government's civil lawsuit alleging the agency ignored its own standards and rated mortgage investments much higher than they should have been in years leading up to the financial crisis. S&P argued on Monday that the DOJ "had failed to substantiate its allegation that the CDO ratings would have been lower based on the deteriorating housing market," reports the Financial Times. It is also arguing that "snippets" of conversation cited in the DOJ's claim don't constitute evidence and, instead, "add up to 'classic puffery,' the vague and overblown language that businesses often use to describe the virtues of their products and services," Dealbook reports. Lawyers appear to be going with this argument since it has worked in the past. "Legally, that might be a tenable defense," some lawyers tell the Journal, "but politically and reputation-wise," it's not a good look for an agency that essentially sells its seal of approval to clients. A hearing to decide whether the case will proceed is scheduled for May 20, but Bloomberg reports a complete dismissal is unlikely. "S&P can't support its request to dismiss the case by supplying evidence to contradict the allegations," a formal federal prosecutor said. "It can only argue that the Justice Department will never be able to prove its civil fraud claims." Another lawyer, however, told the news provider that, in the long run, the case isn't likely to go to trial, predicting "the company will eventually reach a settlement with the government."

Receiving Wide Coverage ...HSBC's Job 'Demise': HSBC got some extra attention for what could have been a routine — and somewhat expected — job cut announcement when someone got creative with the language in its press release. In announcing plans to cut more than 1,100 U.K. jobs due to new wealth adviser regulations, the bank noted "the integration of advisers means the roles of commercial financial advisers will be demised." And then, again, a bit further down, "the bank will be demising the roles of 942 relationship managers." The use of the word "demise" in lieu of, say, cut or downsize drew the ire of Britain's largest workers' union, which said it may ask workers if they want to consider a strike ballot. It also earned the bank a fresh wave of criticism from a few media pundits, despite the bank's plan to create 2,017 new positions for which affected (or perhaps demised?) workers would be able to apply. "Let's hope HSBC used this absurd euphemism only in its baffling press release, and not in its formal letter to 3,166 employees warning them that they are at risk of redundancy," writes Nils Pratley of The Guardian. A London headhunter didn't mince words when talking to the I: "I've heard a lot of HR guff in my time. But this is something else. It makes them look not only foolish, but callous and thoughtless, too." A HSBC spokesman explained to the Journal's MoneyBeat blog (which was quick to point out demising doesn't mean what HSBC thinks it does) "the bank likes 'demising' because it suggests that while the jobs will disappear, the employees won't necessarily leave the bank." (So, perhaps, this is the opposite of job creation?) New York Times, Bloomberg

Receiving Wide Coverage ...Brown-Vitter TBTF Bill: Sens. Sherrod Brown and David Vitter formally unveiled their TBTF bill — or the pointedly named Terminating Bailouts for Taxpayer Fairness Act — Wednesday. Key components include a 15% capital requirement for banks with more than $500 billion in assets. Regional banks would be required to meet an 8% capital requirement while community banks would be exempt from the proposal. The bill, if passed, would also impose restrictions on a bank holding company's ability to move assets or liabilities from nonbanking to banking affiliates. (You can find a full roundup of its central elements here.) "Requiring the largest banks to finance themselves with more equity and with less debt will provide them with a simple choice," the senators explained in a New York Times op-ed. "They can either ensure they can weather the next crisis without a bailout, or they can become smaller." Reaction to the bill, thus far, appears to include some general support ("This is the appropriate direction for regulation," writes Slate blogger Matthew Yglesias), calls to give existing legislation a chance ("I'm fighting for [Dodd-Frank]," Sen. Carl Levin tells Bloomberg. "I can't at the same time give up on that and say 'break up the banks.'") and early Wall Street rallying cries. Whether the bill can actually pass is another issue entirely. "Brown and Vitter may have a difficult time getting their bill through Congress," the Washington Post notes. The bill does "not appear to have — at least so far — broad enough support in Congress to move forward," the FT echoes. "[It] was not immediately endorsed by any co-sponsors, for instance, and Mike Crapo, the top Republican on the Senate banking committee, recently disavowed the need for more stringent capital standards to be set by law."

Receiving Wide Coverage ...Bank Payday Loan Update: Regulators officially unveiled on Thursday their expected guidance on the payday-style loans or checking account advances offered by a few financial institutions. The guidance, which calls for more underwriting and stringent cooling-off periods between loans, was issued along with "a scathing assessment of the loans" from the OCC, which "warned banks that the loans could pose 'reputational risk,'" reports Dealbook. But proponents of bank payday-style products have argued they prevent needy customers from seeking out loans from less reputable and decidedly unregulated businesses. And a report, profiled today by the Washington Post, finds there is consumer demand for these short-term loans with nearly one in four Americans having used a payday product. "The rise of this kind of borrowing … reflects the needs of a population struggling to make ends meet," the Post notes. Meanwhile, this op-ed in the FT urges more British banks to challenge the burgeoning payday business by offering alternative short-term credit. "The banks have steered clear of high-interest microloans — they fear reputational damage — but I would welcome a responsible high-street challenger to the payday lending market," the author writes. But are there any suitable alternatives?

Receiving Wide Coverage ...Another Shake-Up at JPMorgan: Frank Bisignano is leaving the bank to run First Data and Matt Zames will add responsibilities as sole chief operating officer, a title he has shared with Bisignano since July. Bisignano and JPMorgan CEO Jamie Dimon go back a long way, having worked together at Citi during the Weill era. The Journal casts the departure as a significant blow to the bank, starting with the headline ("Dimon Loses…"). Amid JPMorgan's numerous operational and regulatory challenges, the article notes, "Bisignano is the ninth executive since early last year to exit Mr. Dimon's operating committee, an elite group that represents all of the firm's key decision makers." The FT offers a more optimistic take (headline: "JPMorgan promotes Zames"; first sentence: "Jamie Dimon, chief executive of JPMorgan Chase, reshuffled his executive team…"). We link, you decide. Wall Street Journal, Financial Times, New York Times, American Banker

Receiving Wide Coverage ...JPM Shakeup, Day Two: The departure of Frank Bisignano — one of a dozen senior executives to leave JPMorgan in the last four years — "has heightened worries about the persistent executive turnover at the bank," reports the Times. Some "wonder if the many reshufflings at the top point to a larger problem within the bank." Echoing the Journal's story yesterday, the Times calls Bisignano's exit "a particularly difficult loss for the bank … because he was widely considered to be skilled at tackling thorny problems at a time when the bank has been faulted over weak oversight in places." There's also the question of who will succeed chairman and CEO Jamie Dimon whenever he eventually decides to step down; "although the bank's succession plans are not known, he has told people close to him that he is confident the bank will be in good hands when he does decide to leave." Well, that settles that. Looking ahead to the upcoming annual meeting, where shareholders will vote on a proposal to ask the board to split the chairman and CEO roles, the Times says that "if the vote goes against the company and the board decides to split the role, Mr. Dimon might resign rather than see his powers reduced." A "careful-what-you-wish-for" piece in the FT includes that same warning. Even if he stayed on as CEO, the article says, the board would have to recruit "a chairman with the temperament and acumen to stand up to a rambunctious CEO while ensuring he does not walk off. Good luck with that." The Journal's "Heard on the Street" column uses the promotion of one-time bond trader Matt Zames to sole chief operating officer (a role he previously shared with Bisignano) as an occasion to reflect on JPMorgan's reliance on investment banking for profits.

Breaking News This Morning ...Obama Said to Pick Mel Watt to Run FHFA: Watt, a Democratic congressman from North Carolina, would be the agency's first official director since 2009. Ed DeMarco has toiled as the acting director since then, and his policies have been unpopular with the administration, Democrats, and housing and consumer advocates. A formal announcement is expected today, various anonymice told their preferred media outlets. Bloomberg, Huffington Post, Politico