Morgan Stanley shines; Biden's pick for OCC chief?

Receiving Wide Coverage ...

Blowout quarter

Morgan Stanley, the last big Wall Street bank to report earnings, said its fourth quarter profit jumped 51% as revenue increased 26%, the Wall Street Journal reported. The bank was the latest “to emerge from a turbulent year in better shape than was expected at the onset of the coronavirus pandemic. The nation’s big banks continued to benefit from a recovery on Wall Street and federal pandemic-response measures that forestalled the worst-case economic scenario.”

“With its focus on wealthy Americans and big corporations and money managers, Morgan Stanley is less exposed to mass unemployment and small-business closures than more Main Street banks.”

Morgan Stanley “caps a strong results season across Wall Street driven by a boom in trading and fundraising,” the Financial Times said. “The results clear the way for Morgan Stanley to spend about $2 billion buying back its shares in the first quarter, in line with a cap announced by the Federal Reserve in December.”

Wall Street Journal

On tap at the OCC?

President Biden is expected to nominate Michael Barr, the former assistant treasury secretary who “helped craft the 2010 Dodd-Frank Act, as comptroller of the currency.” He would succeed Brian Brooks, who stepped down last week as acting comptroller.

“If nominated and confirmed, Mr. Barr would likely work to help fulfill Mr. Biden’s campaign push to expand access to banking services in underserved communities. The Biden campaign has also pledged to strengthen the Dodd-Frank Act, although it was vague on details. Another expected focus: an overhaul of the rules for the Community Reinvestment Act.”

Extended relief

On his first day in office, President Biden signed an executive order extending the moratorium on federal student loan payments and evictions.

Small loans, big problems

The survival of small businesses in Europe, fighting “to stay afloat through the pandemic, is key for the region’s banks, which together have over €2 trillion on loan to them—40% of the lenders’ entire business loan books. Overall, lenders have considerably cleaned up bad loans from the previous crisis, but many are still stuck with souring portfolios. They are also struggling to make money in a negative-rates environment.”

“Regulators fear a new—and potentially bigger—wave of defaults could send banks scrambling to cover losses. Weaker ones could require state help to survive. Andrea Enria, the head of banking supervision at the European Central Bank, has warned that bad loans in the eurozone could soar to as high as €1.4 trillion—more than during the aftermath of the financial crisis—if the economy contracts more than expected.”

We’re covered

The European property market isn’t doing so well either, but “the biggest landlords are staying afloat during the Covid-19 pandemic thanks to robust central-bank buying of bonds backed by property debt.” But “some worry that the policy is obscuring long-term pain should workers and shoppers never return in their pre-coronavirus numbers. Commercial real estate is among the top sectors expected to deteriorate in 2021, according to a survey from the European Banking Authority.”

“The ECB, like the Federal Reserve, launched extensive relief efforts in the wake of Covid-19 economic lockdowns. In addition to buying corporate bonds issued by property developers, it has supported commercial real estate by being a huge buyer of covered bonds, a popular type of debt instrument in Europe issued by banks and backed by a pool of loans made to commercial and residential borrowers.”

Washington Post

Sensitive issue

On former President Trump’s last full day in office, the Small Business Administration “proposed new rules that would permanently allow religious businesses to receive taxpayer-backed small-business loans, forcing the Biden administration into a politically sensitive debate that raises questions about separation of church and state. If the rule were finalized, it would open up seven SBA loan programs to a range of religious-affiliated businesses, such as Christian publishers and for-profit schools affiliated with religious organizations. It is unclear whether the rules would also apply to tax-exempt places of worship such as churches or nonprofit health-care organizations such as Catholic hospitals.”

“The proposed rule still faces a lengthy approval process, starting with a public comment period ending Feb. 18. Even when that process concludes, it will fall to an SBA headed by Biden-appointed administrator Isabel Guzman, a former small-business owner who was SBA chief of staff in the Obama administration, to decide whether and how to move forward.”

Elsewhere

Testing the water

BlackRock, the world’s largest asset manager, “is set to dip its considerably massive toes into the world of cryptoassets,” MarketWatch reports. “The gargantuan money manager headed by Larry Fink has filed to offer its clients exposure to bitcoin futures” through two of its funds.

“The interest in bitcoin futures for the money manager that manages some $8.7 trillion comes as bitcoin prices have been seeing parabolic moves higher, with a pullback in recent days highlighting the inherent volatility in the virtual asset. BlackRock’s latest moves come after Fink back in December said bitcoin, which has gained greater traction among institutional investors over the past 12 months, has ‘caught the attention and the imagination of many people.’ ”