Are you a hedge fund with a prime broker who happens to be a large bank?
Are you worried that said prime broker will no longer be able to make a lot of money from doing business with you, because of new banking regulation such as the liquidity coverage ratio (LCR), the net stable funding ratio (NSFR) or various types of leverage ratios?
Well, then JPMorgan Chase has some advice for you! Read more
Much accounting intrigue in JPMorgan’s recently-released fourth-quarter results.
According to the bank, it incurred a $1.5bn hit to net revenue after “implementing a funding valuation adjustment.” Read more
06:19:55 BRUNO says: u will feel less alone very soon
06:20:06 BRUNO says: but like u
06:20:09 BRUNO says: i did not fail
06:20:16 BRUNO says: this is not what i will be told
06:20:25 BRUNO says: unlike you Read more
New York State’s Department of Financial Services is investigating several large banks to see whether they fraudulently steered homeowners into overpriced insurance policies, reports the NYT, citing a person briefed on the investigation. JPMorgan Chase, Bank of America, Citigroup and Wells Fargo are among the banks under scrutiny, the newspaper says, in an investigation into “force-placed” insurance. These insurance policies have been increasingly required by lenders to protect the value of the house if it is damaged after the borrower defaults. The source said the investigators are looking for the potential conflict at Bank of America involving a unit called Balboa Insurance that it owned until last year. That unit’s interaction with the bank’s mortgage servicing is an important focus for Benjamin Lawsky, superintendent of the state’s financial services department. JPMorgan is a focus of the inquiry because in recent years the bank held a small financial stake in an insurance company called Assurant on behalf of its clients.
Investors in US home mortgage bonds may have to swallow losses as part of a wide-ranging settlement being discussed between leading banks and the Obama administration to resolve allegations of foreclosure misdeeds, the FT says, citing people familiar with the matter. Participants in the discussions cautioned that a final agreement remains weeks away and that the terms being discussed could change. However, they said it is likely banks would be able to reduce loan principal on mortgages owned by investors through mortgage-backed bonds. As a result, the five largest US mortgage servicers – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – would avoid some of the cost of the potential $25bn settlement. Distressed homeowners, who government officials claim were harmed by the banks’ allegedly deceptive practices, could see larger reductions in mortgage principal.
In case you missed it, last night Jon Corzine was artfully thrown under what looked like a bomb-strapped bus being driven by the Chicago Mercantile Exchange, with no Keanu Reeves in sight.
Terry Duffy, chief executive of CME group, told the Senate hearing on MF Global that the former New Jersey governor “was aware” that money had gone missing from customer accounts. Read more
Massachusetts sued the five biggest mortgage companies in the US on Thursday, accusing them of “corrupting” the state’s land records through pervasive use of fraudulent documentation in seizing borrowers’ homes, reports the FT. The lawsuit throws a wrench into discussions between various federal and state agencies and the five lenders – Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial – to settle allegations of faulty mortgage practices. The two sides have been nearing a $25bn deal over the past year to resolve claims sparked by the discovery that the banks employed so-called “robosigners”, or workers who signed foreclosure documents en masse without properly reviewing individual borrowers’ paperwork. Martha Coakley, Massachusetts attorney-general, on Thursday alleged that the banks illegally foreclosed on borrowers’ mortgages because they were not the actual holders of those mortgages, among other accusations. This was due to their failure to properly review, assign and transfer critical paperwork, she said, adding that the banks “had no legal right to conduct the foreclosure”.
Wall Street Bonuses are set to fall by an average 20 to 30 per cent this year, making it the weakest bonus season since the credit crunch, underscoring the malaise in the industry, the New York Times’ Dealbook reported, citing a survey from Johnson Associates, a boutique compensation consulting firm. Employees in trading and investment banking divisions will see their pay cut proportionately more than asset managers and commercial bankers whose compensation package will equate to 2010 levels. The year-end bonus typically represents the bulk of financial employees pay and banks tend to allocate as much as 60 per cent of their annual revenue in compensation. In the first nine months of the year, Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America and Citigroup combined allocated almost $93bn to compensate employees, up from $91.25bn, NYT said, citing figures from the survey. However, the final compensation figure is not set until the fourth quarter when firms can take stock of their annual revenue.
Bank of America became the latest US bank to scrap plans for a debit card fee, acting after worries that customers of the second-largest US bank by deposits would move their accounts. BofA said its U-turn was a “response to customer feedback and the changing competitive marketplace”, the FT reports. Analysts had worried that BofA could see deposits shift to other banks, denying it a source of liquidity strength. The $5-a-month fee was proposed last month in response to new financial regulations that cap the amount retailers are charged for processing transactions. Banks have said the new rules, part of last year’s Dodd-Frank financial reforms, will cost them hundreds of millions of dollars and will end up benefiting retailers but not consumers. The rule, which was set by the US Federal Reserve and came into force last month, caps the so-called “interchange fee” at about 24 cents for an average debit card transaction, a significant decline from previous charges. According to the Wall Street Journal four other big lenders, led by JP Morgan Chase, dropped their own debit-card fee plans over the past week. Collectively the banks hold more than $3,100bn of deposits, representing almost a third of those handled by US banks.
The trustee overseeing the liquidation of Bernard Madoff’s fund suffered another setback as a US judge dismissed billions of dollars in claims filed against JPMorgan Chase and UBS, the FT reports. Tuesday’s ruling by Judge Colleen McMahon dismissed all so-called common law claims against the two banks, leaving the trustee room to pursue other claims seeking reduced damages. Irving Picard, the Madoff trustee, had sued JPMorgan for $19bn alleging the bank was Madoff’s primary bank and that it had aided and abetted in the decades-long Ponzi scheme. The trustee sued UBS for $2bn, alleging the bank mislead regulators and “lent an aura of legitimacy” to the Madoff fund by sponsoring and administering several international funds that fed money to Madoff. Following the court ruling, the trustee is left to pursue $400m in claims against JPMorgan and about $1bn against UBS. A spokeswoman for the trustee said he “remains confident” in the merits of the cases and intends to appeal against the decision.
Oil-rich Nigeria currently has $1bn in its recently formed sovereign wealth fund. It is hoped that the fund, for which up to $2.5bn could be set aside each year, will allow the country to make more long term investments, better managing the wealth from its natural resources. While the country is the 10th largest oil producer in the world, poverty is still rampant and corruption remains a significant problem, reports the NY Times’ DealBook. Goldman Sachs, Morgan Stanley, and JP Morgan Chase have all been vying for business from the fund, offering advice and services. JP Morgan Chase is reported to be acting as an advisor on structuring the fund.
Goldman Sachs and JPMorgan Chase issued more than $2bn in new long-term debt on Wednesday, reports the FT, as the banks looked to take advantage of calmer markets and lock in funding from new sources. The offerings on Wednesday – which came a day after Goldman reported only its second loss as a public company – included 50-year bonds from Goldman pitched at retail investors with a $25 price tag and a yield of 6.5 per cent. JPMorgan sold $1.75bn of 10-year notes. Goldman also announced plans to sell its first sukuk bonds – debt compliant with Islamic usury law – via an offering on the Irish Stock Exchange as part of its diversification effort. The planned $2bn Islamic bond programme was approved on Wednesday by the Central Bank of Ireland and represents the first attempt by Goldman to tap the sukuk market. “There’s been a lot of investor demand lately,” said one banker. “When you see that and you’re done with earnings you take advantage of the stable window.”
Citigroup will pay $285m to resolve a Securities and Exchange Commission probe alleging the bank misled investors in a 2007 mortgage-related security, the FT reports, adding that people familiar with the matter say the SEC is looking to resolve a half dozen more cases involving Wall Street’s sale of CDOs. The SEC alleged that Citi was negligent in failing to tell investors in a $1bn CDO – known as Class V Funding III – that the bank had helped to select $500m of mortgage assets that went into the security, and was also betting against it. The SEC has previously reached settlements with Goldman Sachs and JPMorgan Chase over their securitisation and sale of CDOs to investors, alleging they did not tell buyers that hedge funds betting against the security helped structure it. Goldman paid $550m to settle while JPMorgan paid $153.6m; as with Wednesday’s Citi settlement, neither bank admitted nor denied wrongdoing.
Europe may or may not be saved but Q3 earnings releases by US banks suggest they’re content with their exposure to the continent.
We looked at the methodology behind exposure disclosure in this post. The headline numbers cited by some news reports at the time struck us as misleading: the form banks use to register foreign exposure is fairly conservative and too often numbers weren’t labelled by reporters as net or gross. Read more
Fears about the health of US consumer balance sheets grew on Monday, the FT reports, as Citigroup and Wells Fargo joined JPMorgan Chase in reporting new signs that homeowners and credit-card borrowers are falling behind on their payments. The banks’ third-quarter results were hit by expected declines in investment banking, reflecting turbulence in global markets. But the reports also revealed weakness in the consumer side of their businesses – with mortgage delinquency numbers suggesting that record low mortgage rates and government loan modification programmes are failing to help a large swathe of homeowners. Overall revenues fell 8 per cent at Citigroup year-on-year and 6 per cent at Wells, sending their shares down 1.7 per cent and 8.4 per cent, respectively. The S&P 500 index fell 1.9 per cent. Wells said delinquencies of more than 90 days in its main portfolio of consumer loans – including mortgages and credit cards – rose 4 per cent to $1.5bn, the first increase since 2009. Citi’s results, like JPMorgan’s, also included a $1.9bn revenue gain from credit valuation adjustments, FT Alphaville reported.
The improvement in US mortgage delinquencies has flattened or reversed, according to quarterly earnings from three of the four biggest US lenders, sparking fresh fears over the resilience of the American consumer, writes the FT. Record low mortgage rates and government loan modification programmes have failed to help struggling mortgage borrowers, the data from Wells Fargo, Citigroup and JPMorgan Chase show. Citigroup, which announced earnings on Monday, said the percentages of mortgages that were 90 days delinquent rose for the first time in almost two years – up from 3.87 per cent in the second quarter to 3.88 per cent in the third. Citigroup chief financial officer John Gerspach said it was seeing “redefaults” even on modified mortgages. “We could begin to see increased delinquencies,” he added.
JPMorgan Chase produced an uninspiring start to the bank earnings’ season, reporting flat year-on-year earnings after a torrid summer hit investment banking revenues and offset improvements in the consumer business, reports the FT. Jamie Dimon, chief executive, described the third-quarter results as “reasonable given the current environment” and on a conference call pointed to a significant increase in lending to small and medium-sized businesses as reason for optimism on the economic outlook. FT Alphaville explains the perversity behind some of the bank’s accounting and warns that it’ll be repeated elsewhere on Wall Street.
US bank reporting season is almost upon us and we’re looking forward to investigating the mysteries surrounding the performance of the bulge bracket since the turn of the year.
To give you a sense of how bad it’s been for the 1 per cent, here’s an interesting table from a Goldman Sachs research note published Tuesday: Read more
JPMorgan Chase analyst Mark Moskowitz said research from his colleagues in Asia about a cut in Apple iPad orders doesn’t represent the views of the securities firm’s US team, Bloomberg reports. “Apple is fine,” Mr Moskowitz wrote in a research note, maintaining his forecast that Apple will sell 10.9m to 12m of the devices in the fourth quarter. Apple is cutting orders to vendors in the supply chain for its iPad tablet computer, a move that may mean slower sales for companies including Hon Hai Precision Industry, according to the earlier report by Hong Kong-based JPMorgan analyst Gokul Hariharan. Analysts at other firms also issued research aimed at quelling speculation that demand for iPads had diminished — a concern that dragged down Apple’s stock as much as 3.2 per cent in Nasdaq trading on Monday.
JPMorgan Chase’s trading revenue will slide about 30 per cent in the third quarter, the company’s head of investment banking said on Tuesday, one of the first signs of the impact on bank revenues of a torrid summer in the markets, the FT reports. Jes Staley said the “volatile” market, particularly in August, had depressed revenues from trading, where the bank made $5.5bn in the second quarter. Investment banking fees also dropped, he said, as equity and debt raisings slowed and companies were “putting a pause” on mergers and acquisitions. With much of the turmoil stemming from the eurozone crisis, banks have been trying to reassure investors about their exposure. Mr Staley said JPMorgan was “not worried” about individual European banks and had “a great dialogue” with them.
New international bank capital rules are “anti-American” and the US should consider pulling out of the Basel group of global regulators, Jamie Dimon, chief executive of JPMorgan Chase, told the FT. Mr Dimon said he was supportive of forcing banks to have more capital but argued that moves to impose an additional charge on the largest global banks went too far, particularly for American banks. “I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are blatantly anti-American,” he said. “Our regulators should go there and say: ‘If it’s not in the interests of the United States, we’re not doing it’.” Mr Dimon also criticised global liquidity rules, arguing that regulations that viewed covered bonds – a European market feature – as highly liquid but discounted government-backed mortgage-backed securities in the US were unfair and that other details hit investment banking activity core to US banks hardest.
Big US banks in talks with state prosecutors to settle claims of improper mortgage practices have been offered a deal that is proposed to limit part of their legal liability in return for a multibillion dollar payment. The FT says talks aim to settle allegations that banks including Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial seized the homes of delinquent borrowers and broke state laws by employing so-called “robosigners”, workers who signed off on foreclosure documents en masse without reviewing the paperwork. The settlement might also release the companies from legal liability for wrongful securitisation practices, however officials from some states fear such provisions could be too lenient, and both parties stressed that talks remained fluid.
— By John McDermott and Cardiff Garcia
The details of the US government’s attempted bank raid are coming in on Friday afternoon. Read more
Friday promises to be an ugly day for US financials:
Turns out that some banks don’t need sovereigns to create their own funding loop problems.
Not for the first time, Bank of America is in a league of its own. Read more
US financials are melting on Monday:
The US credit union authority is seeking $629m in damages from a Royal Bank of Scotland unit accused of misrepresenting the risk in mortgage securities sold to a Californian credit union, the LA Times reports. The National Credit Union Administration lawsuit was filed Monday in US District Court in Los Angeles. It alleged that RBS Securities knew or should have known that there were “systematic” misrepresentations in the loans backing bonds sold to Western Corporate Federal Credit Union, which was seized by the government in March 2009 after incurring nearly $7bn in losses, largely because of bad MBS investments. The NCUA is pursuing several cases as it seeks to recoup about $50bn losses on investments by failed credit unions. RBS and JP Morgan Chase were named in a Kansas lawsuit last month.
JPMorgan Chase reported a 13 per cent jump in quarterly profits on fewer loan defaults and surprisingly resilient trading revenue, defying expectations that a litany of economic, legal and regulatory challenges would weigh heavily on US banks’ results, according to the FT. Revenue rose, net income exceeded Wall Street estimates, and JPMorgan’s chief executive downplayed two of investors’ biggest concerns: the bank’s potential losses in Greece and other troubled European economies, and the effects of sweeping financial regulatory reform on banks’ profits. Reuters notes that Citigroup, which reports on Friday, now has an uphill climb to match JPM’s strong results.
JPMorgan Chase has agreed to pay $228m to settle allegations brought by state and federal officials that it made municipalities pay more for management of their bond issuance proceeds by rigging the tender process for the business, according to the US Department of Justice. The FT reports the settlement is the largest to date in the ongoing probe by the DoJ and various other state and federal agencies. In December, Bank of America agreed to pay $137m to settle similar claims, followed in May by UBS, which agreed to pay $160m. In addition to the banks, 18 individuals have been charged, including James Hertz, a former JPMorgan employee. Nine of the 18 have pleaded guilty, including Mr Hertz, the DoJ said.
JPMorgan Chase has agreed to pay $228m to settle allegations brought by state and federal officials that it made municipalities pay more for management of their bond issuance proceeds by rigging the tender process for the business, according to the US Department of Justice, writes the FT. The settlement is the largest to date in the ongoing probe by the DoJ and various other state and federal agencies. In December, Bank of America agreed to pay $137m to settle similar claims, followed in May by UBS, which agreed to pay $160m. In addition to the banks, 18 individuals have been charged, including James Hertz, a former JPMorgan employee. Nine of the 18 have pleaded guilty, including Mr Hertz, the DoJ said. JPMorgan said it had agreed to pay $211.2m, net of a $17m credit to the Securities and Exchange Commission and the Office of the Comptroller of the Currency. The money will be divided among 24 state attorneys-general – including Connecticut, New York, Illinois and Texas – the Internal Revenue Service, SEC and OCC.