J.P. Morgan, the nation’s biggest bank, plans to cut exposure to companies that don’t align their operations with the Paris Climate Accord. Apparently, firms that don’t agree with J.P. Morgan’s political views on climate don’t deserve loans. Thankfully, there are thousands of banks still operating in the U.S. that are willing to lend to these apparent “climate heretics.” There are many reasons to rein in the big banks, but this may top the list. Billy Nauman reports in The Financial Times: JPMorgan Chase says it is shifting its financing portfolio away from fossil fuels after facing years of … [Read more...]
Here’s How to Explain Negative Interest Rates to Your Spouse
The Fed is pushing on a string. With interest rates so low, the Fed no longer has the pull it once did. It’s shadow banking that controls the money today as Andy Kessler explains in his excellent WSJ piece “The Fed Can’t See Its Own Shadow.” “What’s going on with the bond market, especially what the Journal has called ‘the relentless demand for longer-term debt securities’?” It’s called repurchase agreements, or “repos,” a form of short-term borrowing that today has led to nonbank lenders holding more assets than traditional banks. Today, no thanks to Fed intervention in the markets, … [Read more...]
Amazon Sub-Prime?
Amazon is offering a new credit card called Amazon Credit Builder to customers with credit scores that might not be good enough to get a card anywhere else. CNBC's Kate Rooney reports: Amazon is finding a way to get its rewards credit card in the hands of more people. The e-commerce giant partnered with publicly traded bank Synchrony Financial to launch “Amazon Credit Builder” — a program that lends to shoppers with no credit history or bad credit, who would otherwise be exempt from Amazon’s loyalty cards. “There’s always going to be people that we can’t give credit to — this is a large … [Read more...]
Bank Bulk Up: BB&T Buys SunTrust
In a move to compete with the larger tier of banks, BB&T will acquire SunTrust Bank in the largest banking merger in a decade. In the press release discussing the deal, management was focused on cutting costs by closing brick and mortar locations, while putting increased funding into the combined bank's digital operations. Bloomberg's Hannah Levitt reports: Industry executives have long predicted a wave of bank mergers that until Thursday had played out only in smaller or midsize deals. Brian Moynihan, chief executive officer of Bank of America Corp., said last month he could envision the … [Read more...]
What’s Happening at Deutsche Bank?
German banking giant, Deutsche Bank, has been circling the drain for some time. (Read here and here). Now, Germany is planning to back a merger between Deutsche Bank and its smaller rival Commerzbank (which is also hurting) if the two can't fix their businesses. The Wall Street Journal's Jenny Strasburg reports: Deutsche Bank AG posted a steeper-than-expected fourth-quarter loss and vowed to cut costs more aggressively as the embattled bank struggles to quell persistent speculation about its future. Friday’s results showed continued revenue declines and other signs of vulnerability, … [Read more...]
Main Street Comes Alive, Demands Lending after Tax Cuts
Regional banks are noticing a big boost in demand for borrowing from manufacturers, retailers and distributors who have been missing in action since the financial crisis hit. The tax cuts are causing optimism that is fueling businesses' desire to expand. Jenny Surane writes: After struggling with slowing loan growth throughout much of 2017, U.S. regional bank executives said the promise of lower taxes spurred a pick-up in commercial loan demand in the fourth quarter, as well as a rise in consumer spending on credit and debit cards. That, along with increased interest rates, prompted many of … [Read more...]
Banks Ask Trump to Hold Off on Crippling New Rules
Some of America's largest banks have asked the Trump administration to hold off on implementing new rules that would change the way banks book losses on their loans. Especially hard hit would be community banks. The bankers told the Trump administration the new rules could reduce lending, especially in depressed economic times. Michael Rapoport writes at The Wall Street Journal: The new loan-loss rule drawing fire from banks will require firms to immediately book all losses that they project their loans will ever suffer, as soon as the loans are issued. That is a significant change from the … [Read more...]
Scandal Plagued Wells Fargo gets Hit Again
More problems at Wells Fargo. Emily Glazer and Ruth Simon report that the Merchant Services LLC branch of Wells Fargo has fired at least two dozen employees over the last two years after a probe found them falsely reporting customers' sales and pushing costly contracts on small businesses. This comes after the market-shaking scandal last fall that saw millions of fake accounts opened for customers without their knowledge. They write: Wells Fargo discovered the full scale of abuses in the merchant-services business after undertaking a broad examination of the bank’s business practices in light … [Read more...]
Is the Auto Industry at Risk of Another Meltdown?
One of my favorite columnists, Dan Neil on the automobile bubble: But there’s a lot of paper out—over $1 trillion in outstanding automotive loans in 2016, according to the credit-score company Equifax. About 20% of auto loan originations are subprime and delinquency rates have climbed steadily. And just like risky mortgages, delinquency-prone car loans are securitized, bundled and sold as asset-backed securities (ABS), which never worked out badly for anyone, ever. Quietly, auto execs are worried sick about any contraction in auto-loan credit, but they would tear their tongue out before … [Read more...]
Referendum Puts Italy’s Banks on the Ropes
The FT reports on the fallout in Italy's banking system from the Italian referendum. Bankers are running out of private-sector solutions for Monte dei Paschi di Siena and have told the Italian lender to prepare for a state bailout this weekend after prime minister Matteo Renzi was felled by a referendum defeat. While financial markets responded relatively calmly to the referendum result, people briefed on the situation said the political upheaval made it “more difficult” to secure a €1bn investment from Qatar on which Monte dei Paschi’s €5bn capital-raising plan hinges. Senior bankers fear … [Read more...]