Receiving Wide Coverage ...
An Ominous Sign: JPMorgan Chase's third-quarter results do not bode well for the rest of the banking sector. Revenue fell in all of JPMorgan's major businesses, dropping at a faster rate than analysts had projected. Trading was down, as was asset management, mortgage banking, commercial banking and consumer banking. Sluggish results were expected, because of the current interest rate environment, according to the “Heard on the Street” column. Any progress in the quarter resulted from JPM's weight-loss program.
Overall assets declined as JPMorgan is trying to become smaller ahead of the Fed's application of new capital surcharges, the Wall Street Journal pointed out. JPMorgan believes it has shrunk enough to be able to have the surcharge cut to 4% from 4.5%. JPMorgan has reduced deposits and assets to address the capital surcharge, including the shedding of deposits from some institutional customers that have become less profitable; and has scaled back its holdings of debt and equity trading assets.
Wall Street Journal
The paper takes a look at the regulatory and financial reasons underpinning General Electric's reasons for getting out of the finance business. There was the Federal Reserve taking over the job of chief federal regulator of GE Capital, and designating GE Capital as a systemically important financial institution. There were the impatient GE investors who wanted to see GE's stock move up and who thought the finance arm was a drag on the stock price.
There was the freezing of the market for short-term commercial paper during the financial crisis; it was a bread-and-butter business for GE Capital. GE's latest move to dismantle the financial empire came Tuesday, when it announced a sale of most of its commercial lending and leasing business to Wells Fargo. But GE isn't getting rid of all of its financial businesses and that irks Nelson Peltz and his Trian Fund Management operation.
Goldman Sachs is under investigation for its role in transactions at 1Malaysia Development Bhd. (1MDB), which is entangled in allegations of money laundering. The FBI and Justice Department are probing Goldman Sach focusing on information gathering, with no suggestion yet of wrongdoing by Goldman. Goldman was the adviser to 1MDB on its acquisition of Malaysian firm Genting's power-generation business. Goldman has also advised 1MDB on other matters, including a $3 billion bond sale.
Financial Times
Mobile wallets appear to be taking hold in developing countries, more so than in the “developed world,” according to analysts. Juniper Research found mobile wallets have helped “highly underbanked markets to achieve first-time financial inclusivity.” But Deloitte found only 1% of consumers in the U.K. use their phones to make payments. An analyst at Arthur D. Little said mobile wallets are just getting started and the market will grow in coming years.
New York Times
The former auditor of Bank of Internet USA has sued the lender for wrongful termination, saying he was fired because he blew the whistle on its shoddy accounting practices. Among his allegations, Matt Erhart says Bank of Internet skirted anti-money laundering laws and provided incomplete information to regulators, including spreadsheets that contained accounts without tax identification numbers. Bank of Internet CEO Gregory Garrabrants blasted Erhart's lawsuit and denied the allegations. The San Diego company may also sue Erhart in return, for abusing the bank's private information.
Another former JPMorgan Chase executive takes a CEO job elsewhere, and the Reuters Breakingviews column in the Times takes a look at the management-development acumen of Jamie Dimon. Now that Jes Staley appears set to become the new CEO at Barclays, there's one more person to add to the “coterie of former Dimon lieutenants in chief executive roles,” the paper notes. Bill Winters is now at Standard Chartered. Charlie Scharf is at Visa. Scott Powell is at Santander, as is Tim Ryan (in a chairman's role) Frank Bisignano (described by the Times as Dimon's “erstwhile consigliere”) is at First Data.
Despite the U.S. Education Department's crackdown on “bad actors” in the for-profit college industry, some of those schools continue to receive federal funds. Education Management Corp. has been investigated or sued in at least 12 states; the Justice Department has accused it of illegally using incentives to pay recruiters. But the company received $1.25 billion in federal funds during the last school year.
Elsewhere ...
The Hill: Former Rhode Island Gov. Lincoln Chafee appeared to admit during Tuesday's Democratic presidential debate that he didn't understand the bill to repeal Glass-Steagall, when he voted for the measure in 1999. “Glass-Steagall was my very first vote. I'd just arrived, my dad had died in office,” Chafee said during the debate, referring to his vote for the Gramm-Leach-Bliley Act.
The question arose after Chafee attacked Hillary Clinton for being too close to big banks. American Banker's coverage of the Democratic debate focused on the question of whether to break up the big banks, a plan which Clinton opposes and which challenger Bernie Sanders supports.
Pittsburgh Post-Gazette: The Justice Department charged a Moldovan man for attempting to use bank accounts held by a Pennsylvania school board and oil company to steal about $4.5 million. The suspect allegedly hacked into a First National Bank of Pennsylvania account owned by a school board, and a First Commonwealth Bank account owned by an oil company, and then attempted to initiate electronic fund transfers of millions of dollars.
