Receiving Wide Coverage …
A day after JPMorgan Chase CEO Jamie Dimon said trading and investment banking revenues at his bank this quarter “are up about 20 per cent, maybe a little more,” Bank of America CEO Brian Moynihan “reported that his bank was enjoying similarly strong trends.” Speaking at Goldman Sachs’s virtual financial services conference, Moynihan said trading revenues at BofA “were up ‘about 15%’ compared with the year before, on top of a 2019 fourth quarter that was also up strongly from 2018.”
“Fourth-quarter growth at BofA represents a significant acceleration after a third quarter in which capital markets revenue grew just under 5%,” the Financial Times said.
Speaking at the same conference, Citigroup CFO Mark Mason said his bank “is more likely to report loan loss reserve releases than builds starting in the fourth quarter,” Reuters reported. “His comments echo those made by [other] bank executives after improved credit trends and optimism about future economic conditions increased amid positive news about the coronavirus vaccine.”
“Overall for the fourth quarter, Citi expects trading revenue to be up in the mid-teens and investment banking fees to be down in the low double-digits, Mason said.”
Meanwhile, Deutsche Bank is “switching from defense to offense,” CEO Christian Sewing told investors on Wednesday, the result of “increased cost-cutting, a better-than-expected performance of its revitalized investment bank and higher leverage.” Sewing said Germany’s largest bank “was on track to generate a return on tangible equity of 8% by 2022 and to give back €5 billion of capital to shareholders. It plans to resume dividend payments in 2022.” The bank’s shares are up 40% so far this year.
“In the first nine months of 2020 we achieved year-on-year revenue growth of 8% in the core bank,” Sewing said. “This positive momentum has continued into the fourth quarter.”
Wall Street Journal
Shareholders of Fannie Mae and Freddie Mac “met with a skeptical reception” in a hearing before the Supreme Court Wednesday in which they are asking the court to reverse a 2012 decision by the Treasury Department to retain the two agencies’ earnings. “Shareholders are asking the Treasury to stop collecting profits and return $124 billion to Fannie and Freddie,” which were seized by the federal government during the 2008 financial crisis.
“The case could have broad implications for the housing market, because the firms guarantee about half of the $11 trillion U.S. mortgage market. A ruling in favor of the shareholders could force the government to return some of the profits to Fannie and Freddie, a move that could help put the companies on a more stable financial footing and pave the way for them to return eventually to private hands.”
Some members of the court hinted that they may not rule on whether presidents can fire the director of Fannie and Freddie’s regulator, something many have assumed the court would do, American Banker reports.
Mortgage originations are on a pace to top the prior record of $3.7 trillion in 2003, driven by record low interest rates and a strong home buying market.
Haunted by the past
“Barely a month” into his new job as UBS CEO, Ralph Hamers is being investigated by a Dutch court over his “personal role in a huge money-laundering scandal” at his former employer, ING. “ING paid €775 million in penalties two years ago for compliance failures that allegedly allowed companies to launder hundreds of millions of euros and pay bribes over six years. The settlement ensured ING and its board were free from any criminal charges. The penalties were the largest ever imposed on a company by the Dutch public prosecutor service.”
“But a group of investors has pursued the case and The Hague Court of Appeal said it was ‘of the opinion that there are sufficient leads for a successful prosecution of this former director [Mr. Hamers] as the de facto supervisor of the criminal offences committed by ING.” UBS chairman Axel Weber said the bank “carried out an extensive review of Mr. Hamers’ background when it recruited him” and that it was “fully satisfied with the results of these independent evaluations and the assessment of the Dutch prosecutor at the time.”
Baffled by buffers
Bank capital buffers, “a cornerstone of post-2008 financial regulation, aren’t working,” an FT op-ed argues. “Banks were asked to build up extra capital to allow them to maintain lending during sharp economic downturns. However, many cannot fully draw down these buffers because they find themselves breaching other requirements first. International regulatory bodies must urgently address this problem of limited buffer usability.”
New York Times
Fountainhead Commercial Capital CEO Chris Hurn “wasn’t surprised scammers were trying to get government money. An enormous relief effort like the $523 billion Paycheck Protection Program is bound to attract grifters. But what shocked him was the brazen glee of the scammers who got money anyway.”
At least a dozen times, “someone tried to defraud us, got turned down and then followed up to taunt us that they got their loan,” the CEO of the Florida-based small business lender told the Times.
A new chapter
A group of Congressional Democrats has proposed a bill that would allow student loans to be more easily dischargeable in bankruptcy. The Consumer Bankruptcy Reform Act of 2020, introduced by Rep. Jerry Nadler of New York and Sen. Elizabeth Warren of Massachusetts, would “replace the current systems of chapter 7 and chapter 13 personal bankruptcies with one system, chapter 10, in addition to specifically addressing the eligibility of student loans for discharge in bankruptcy.”
“The bill aims to put student loan debt on ‘equal terms with most other types of debt,’ such as credit card debt, as well as ‘make it easier and less expensive for financially-strapped families and individuals to obtain meaningful bankruptcy relief,’” Warren said in a statement.
“We couldn’t believe how many people were trying to take advantage and game the system. A lot of my employees, including me, were a little frustrated with humanity.” — Fountainhead Commercial Capital CEO Chris Hurn, about the brazen dishonesty of some applicants for PPP loans.
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