What banks can be thankful for this year
November 21, 2017 10:00 PM
What bankers can be thankful for this year
The past year has been a wild ride for everyone, but it has left bankers, in particular, with many reasons to count their blessings.
Consider, first of all, the recent legislative action on Capitol Hill. After the surprise Republican sweep during last year's elections, bankers began puttingtogether a wish list for policymakers , which included lower corporate taxes and a higher asset threshold for systemically important financial institutions. Congress has taken already taken steps to address both issues.
Regulatory agencies in Washington are also becoming a more business friendly. In early February, days after the administration took office, theWall Street Journal asked e conomic adviser Gary Cohn how the president planned to rein in the Consumer Financial Protection Bureau. “Personnel is policy," Cohn responded.
Important personnel changes have begun to take shape this month. CFPB DirectorRichard Cordray last week announced his long-anticipated resignation, setting off a wave of speculation about his potential successor. Additionally, the Senate confirmed Joseph Otting to succeed Thomas Curry as Comptroller of the Currency. The president also named Jerome Powell his choice for chairman of the Federal Reserve, to succeed Janet Yellen.
In addition to public policy matters, business is going well. Big banks such asJPMorgan Chase and Bank of America have posted their highest profits since the financial crisis. Community banks, meanwhile, are holding their own in commercial lending, amid a yearlong, industrywide slump.
So, bankers, say a word of thanks for the current business and political environment. As the industry — and the country as a whole — learned last year during the election, things can change quickly.
Consider, first of all, the recent legislative action on Capitol Hill. After the surprise Republican sweep during last year's elections, bankers began putting
Regulatory agencies in Washington are also becoming a more business friendly. In early February, days after the administration took office, the
Important personnel changes have begun to take shape this month. CFPB Director
In addition to public policy matters, business is going well. Big banks such as
So, bankers, say a word of thanks for the current business and political environment. As the industry — and the country as a whole — learned last year during the election, things can change quickly.
A potential end to SIFI-dom for regional banks
Big banks have bulked up on compliance staff in recent years to meet heightened regulatory standards under the Dodd-Frank Act, which designated banks with assets of more than $50 billion as systemically important financial institutions.
But relief is on the way — at least for some. Alegislative deal cut earlier this month by Senate Banking Committee Chairman Mike Crapo and several moderate Democrats would lift the threshold to $250 billion 18 months after enactment. Banks with under $100 billion in assets would be immediately exempt.
Only about 12 SIFIs would remain in the industry under the legislation, including global banks and large regionals, such as the $459 billion-asset U.S. Bancorp in Minneapolis.
But relief is on the way — at least for some. A
Only about 12 SIFIs would remain in the industry under the legislation, including global banks and large regionals, such as the $459 billion-asset U.S. Bancorp in Minneapolis.
The thawing relationship between banks and regulators
Washington’s new class of banking regulators is expected to have a lighter touch.
In his first public speech as the Fed’s vice chairman of supervision, for instance, Randal Quarles told anaudience of bank executives that “changing the tenor of supervision” will be a top priority.
Change is also on the horizon at the CFPB, following Cordray's planned departure later this month. One of the names floated to lead the agency on an interim basis is Mick Mulvaney, head of the Office of Management and Budget. A former congressman, Mulvaney was a critic of the CFPB when he sat on the House Financial Services Committee. He once referred to the agency as “a sad, sick joke.”
And then there is the OCC. Duringhis six-month tenure as acting head of the agency, Keith Noreika called for rolling back the Volcker Rule, and also advocated for Congress to overturn the CFPB’s arbitration rule, among other headline-grabbing moves.
His permanent successor, Otting, is also expected to set a business-friendly tone. He waspreviously a deputy of now-Treasury Secretary Steven Mnuchin when they were at OneWest Bank, which was built on the ashes of the failed IndyMac and acquired in 2015 by CIT Group.
In his first public speech as the Fed’s vice chairman of supervision, for instance, Randal Quarles told an
Change is also on the horizon at the CFPB, following Cordray's planned departure later this month. One of the names floated to lead the agency on an interim basis is Mick Mulvaney, head of the Office of Management and Budget. A former congressman, Mulvaney was a critic of the CFPB when he sat on the House Financial Services Committee. He once referred to the agency as “
And then there is the OCC. During
His permanent successor, Otting, is also expected to set a business-friendly tone. He was
Credit is (mostly) good
After a credit scare in the energy lending business in recent years, asset quality remains mostly pristine.
Chargeoffs overall arehovering around 10-year lows , providing a boost to quarterly earnings.
Still, there are signs of trouble on the horizon. Several large banks and credit card lenders — includingJPMorgan Chase and Citigroup — have recently reported an uptick in bad credit card loans. Auto loans also continue to be a source of concern; recent data from the Fed show that subprime auto loans are deteriorating at a faster rate among nonbanks .
Chargeoffs overall are
Still, there are signs of trouble on the horizon. Several large banks and credit card lenders — including
Most depositors aren’t demanding higher rates
Banks will soon be forced to raise deposit rates for consumers. But that day hasn’t come yet, and in the meantime lenders are reaping the benefits of higher rates on loans.
There are signs the dynamic is starting to shift.Large companies and wealthy customers, for instance, have begun negotiating higher rates.
It’s unclear how, exactly, price competition will play out once it begins on a larger scale. Advances in mobile technology have made it easier to move funds between banks — and that may cause deposit prices to rise at a rapid clip as banks pay up in an attempt to encourage customers to stay put,according to industry observers.
There are signs the dynamic is starting to shift.
It’s unclear how, exactly, price competition will play out once it begins on a larger scale. Advances in mobile technology have made it easier to move funds between banks — and that may cause deposit prices to rise at a rapid clip as banks pay up in an attempt to encourage customers to stay put,
Bank stocks continue to climb
Bank stocks keep going up, up, up.
Over the past year, the KBW Nasdaq Bank Index has climbed by more than 30%. The S&P 500, meanwhile, this week hit a record high as Congress debates legislation that would slash corporate tax rates.
There have been stumbles along the way, of course. For instance, a Senate proposal to delay the corporate tax cut until 2019sent stocks tumbling in early November.
But the bull market has nonetheless charged on, sending share prices higher across the industry.
Over the past year, the KBW Nasdaq Bank Index has climbed by more than 30%. The S&P 500, meanwhile, this week hit a record high as Congress debates legislation that would slash corporate tax rates.
There have been stumbles along the way, of course. For instance, a Senate proposal to delay the corporate tax cut until 2019
But the bull market has nonetheless charged on, sending share prices higher across the industry.
Banks are co-opting the best parts of fintech
Bankers are becoming more comfortable navigating the world of financial technology.
Through partnerships with upstart firms, banks have found new ways to adopt Silicon Valley’s sleekest innovations as their own. Consider the wave of banksoffering robo-advisory services through arrangements with SigFig, FutureAdvisor and others.
Online business loans are also a core offering at many traditional banks. JPMorgan this summerextended its small-business partnership with OnDeck, a marketplace lender, while Citizens Financial Group recently announced a similar arrangement with Fundation .
Through partnerships with upstart firms, banks have found new ways to adopt Silicon Valley’s sleekest innovations as their own. Consider the wave of banks
Online business loans are also a core offering at many traditional banks. JPMorgan this summer
