Wells may restate earnings; Capital rule phase in

Breaking News

BofA beats estimates: Bank of America said its first-quarter profit jumped to $6.92 billion from $5.34 billion a year ago and revenue rose to $23.125 billion from $22.25 billion.

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Not good enough: Robust earnings reported by Wells Fargo, Citigroup and especially JPMorgan Chase — which reported a record $8.7 billion in net income for the period, up 35% from a year earlier — were attributed to a lower tax bite and higher revenue from lending and securities trading. But the good news failed to impress investors, who took profits in bank stocks on Friday “on signs of tepid loan growth, particularly from businesses, and a lack of new earnings drivers after a run-up in valuations.” Wall Street Journal, Financial Times, New York Times

“For their shares to keep moving higher, they need economic optimism to translate into real loan growth,” the Heard on the Street column said.

Wells disclosed in its first-quarter earnings report that it may need to restate its earnings for the period. The bank also noted, which had been previously reported, it faces a possible $1 billion in fines from the Consumer Financial Protection Bureau and the Office of the Comptroller of the Currency. The bank said it charged thousands of auto loan customers for insurance they didn’t need, causing some of them to default on their loans, and improperly charged rate-lock fees on some mortgage customers.

“Such a penalty would dwarf the $185 million in fines and restitution Wells was ordered to pay” in 2016 after it opened millions of accounts without customers’ knowledge or approval,” the Financial Times notes. In February, the Federal Reserve barred the bank from growing beyond its current $1.95 trillion in assets. Wall Street Journal, Financial Times, Washington Post, American Banker

The five biggest Wall Street banks and “smaller, nimbler players who escape big-bank regulation or aren’t weighed down by outdated IT” are likely to be the winners among global investment banks going forward, the Journal says. Meanwhile, “second tier” big banks — which include large foreign banks like Barclays, Credit Suisse and Deutsche Bank — “are being squeezed on revenues and hurt by growing transparency, which erodes their advantages over small players.”

Wall Street Journal

Reg reboot: Regulators have proposed phasing in a loan-loss accounting rule over three years and delay having it impact stress tests until 2020. The Federal Reserve approved the proposal on Friday and the Federal Deposit Insurance Corp. is scheduled to discuss it on Tuesday.

The Dodd-Frank rollback bill passed by the Senate last month and currently stalled in the House doesn’t do much for some small community banks. “The mixed sentiment about the bill poses a challenge to the lawmakers trying to push the legislation through the House and to President Donald Trump’s desk. Some Republicans say it doesn’t go far enough to deregulate the industry, echoing complaints from some banks.”

Different strokes: Meredith Whitney, who was credited 10 years ago for “foreseeing the calamity that would lay waste to some of the nation’s biggest banks,” prefers to keep a low profile. But Nouriel Roubini, “Dr. Doom,” who warned about the 2008 housing market collapse two years before it happened, “basks in his fame.”

Financial Times

Marching on: Goldman Sachs has agreed to buy Clarity Money, a free app that aims to help consumers make better financial decisions. The move continues Goldman’s “march from Wall Street to Main Street.”

New York Times

We’re the other guys: The Lower East Side People’s Federal Credit Union in New York City isn’t your typical financial institution. In 2011, it acted as the bank for Occupy Wall Street protestors, and was the only one to sue to block Mick Mulvaney’s appointment as acting head of the Consumer Financial Protection Bureau. The credit union “serves a mostly low-income, largely immigrant population.”

Elsewhere

Credit bonus: Starting Monday, some consumers may find themselves with a credit score as much as 30 points higher than before, as the major credit bureaus start excluding tax liens from consumer credit reports. According to LexisNexis Risk Solutions, about 11% of borrowers will have a tax judgment or lien removed from their credit files.

Quotable

“It’s spring time for banks: it’s finally warm in New York, and this is the warmest time for banks since the financial crisis. These are the highest post-crisis returns that we’ve seen.” — Mike Mayo, banking analyst at Wells Fargo Securities, about Friday’s first-quarter results from three big banks.