The banking sector has tumbled about 10% this month, with what may be a stalling of the Trump de-regulatory agenda serving as a good enough excuse for satiated bulls to lighten up (the KBW Bank Index remains about 25% higher since the election).
Don't give up on de-regulation just yet, writes Aaron Back in the WSJ. The GOP may not have been able to push health reform through Congress, but those outside the legislative branch have ample powers to ease the regulatory burden on their own.
One change might be removing the "gold plating" of capital requirements for the largest banks. KBW sees this alone as boosting 2018 EPS by an average of 4.6% for the eight U.S. mega banks. Citigroup (NYSE:C) would be the biggest beneficiary with nearly a 10% increase in earnings. Next in line would be Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC), Goldman Sachs (NYSE:GS), Wells Fargo (NYSE:WFC), JPMorgan (NYSE:JPM), State Street (NYSE:STT), and BNY Mellon (NYSE:BK).
Next would be a change in the way total leverage is calculated, which currently doesn't count safe assets like Treasurys and deposits at the Fed. This would result in a 13.5% increase in EPS, says KBW, with the two trust lenders - STT and BK - benefitting the most.
A team of 75 bank employees is checking out as many of eight cities on the Continent, writes Max Colchester in the WSJ. Among them are Paris, Frankfurt, Dublin, and Luxembourg.
A final decision looks like it's months away.
JPMorgan (NYSE:JPM) is the largest investment bank in Europe, and in 2015, one-third of the lender's $33.5B of investment banking revenue came from EMEA.
Like its American peers, JPMorgan's staff and activities are highly concentrated in the U.K., where it employs a whopping 16K people. That setup, though, may not work for European clients in a post-Brexit world.
Moving HQ is only a step in what should be a fairly complicated transition, writes Colchester, and bank executives have a number of operating models to choose from.
They're now mulling plans to work together to slash even more from back-office functions, with one effort being dubbed "Project Scalpel." The hope is that at least another $2B could be cut from expenses.
At work is a change in the way the financial world works. In the past, the ability to process trades, ownership transfers, dividend and interest payments were considered competitive advantages. Now those processes and systems are commoditized, meaning it may make more sense for the likes of BAC, C, WFC, GS, JPM, and MS to just join forces.
The YouTube advertising exodus continues as Johnson & Johnson (NYSE:JNJ), JPMorgan (NYSE:JPM) and Lyft (Private:LYFT) pull ads from the platform amid concerns they may have appeared on channels that broadcast offensive videos.
Whether the recent events are a harbinger of bigger problems may depend on whether Google can give businesses more control over ad placement.
Alphabet (GOOG, GOOGL) shares this week have already fallen more than 3%.
"Group stink has never been more conspicuous than in financial sector stocks," says Doug Kass, calling the top in the piping hot names.
A strong economy, eased regulation, and higher interest rates have all been fully baked into valuations, says Kass, but being ignored: signs of a slowing economy, peaking auto sales, growing protectionism, and valuations at pre-crisis levels.
Then there's the housing market, and it's "reached an inflection point in price and activity," says Kass. He notes prices of higher-end West and East coast homes have turned lower - usually a bell-ringer for the residential housing cycle.
Favored shorts: MetLife (MET -1.1%), Lincoln Financial (LNC -2.9%), Goldman Sachs (GS -2%), Morgan Stanley (MS -2.7%). Others he's eyeing: Bank of America (BAC -4.4%), Citigroup (C -0.8%), JPMorgan (JPM -1.3%).
One name he's a fan of is Hartford Financial (HIG -0.5%).
After all, the "dots" showed the Fed as being no more hawkish than a couple of meetings back when it surprised the world by predicting three rate hikes this year. Inflation and growth expectations were essentially unchanged as well.
So while the Fed may have been faster with a rate hike than many expected just a couple of weeks back, it appears the timetable past today remains the same.
Lake will be JPM's head of international ETFs with a mandate for running the bank's passive funds expansion across Europe and Asia. JPMorgan in little time has built a nearly $1.5B ETF business in the U.S.
For now, Washington D.C. is winning the battle against those in favor of quickly rolling back swaths of Dodd-Frank. For now, the Senate Banking Committee and House Financial Services Committee are working on other things, while Republicans instead spend political capital on things like Obamacare repeal and tax reform.
Barney Frank is taking a victory lap, telling Bloomberg nothing substantial will get through Congress. He does expect the possibility of relief for smaller banks, but the likes of JPMorgan (NYSE:JPM), Citigroup (NYSE:C), Goldman Sachs (NYSE:GS), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), Morgan Stanley (NYSE:MS) and others probably shouldn't be holding their breath for big changes.
KBW's Brian Gardner: “Changes to the Dodd-Frank Act are second-tier agenda items and are unlikely to pass Congress in the near term ... Improvement in the regulatory regime is likely to be subtle and not seen by the public."
In total, the underwriters will split about $85M in fees, or 2.5% of the $3.4B raised. Goldman (NYSE:GS) in next in line in payouts, with $21M.
It's more than just those dollars. There's bragging rights (and maybe the next deal) to be had for pulling off a successful high-profile IPO amid what's been a tough market for offerings. Snap had wanted to sell shares for between $14 and $16, but they priced at $17, opened at $24, and closed today at $24.48.
Also getting a taste (in descending order) are JPMorgan (NYSE:JPM), Deutsche Bank (NYSE:DB), and Barclays (NYSE:BCS).
Top 10 Holdings as of 12/31/2016: Citigroup Inc (C): 3.47259%, JPMorgan Chase & Co (JPM): 2.91496%, US Treasury Note 1.75%, Bank of America Corporation (BAC): 2.73851%, US Treasury Note 0.5%, Morgan Stanley (MS): 2.06454%, Citizens Financial Group Inc (CFG): 1.70203%, Apache Corp (APA): 1.65946%, Devon Energy Corp (DVN): 1.5071%, Royal Dutch Shell PLC Class A (OTCPK:RYDAF): 1.39213%
Banks globally have paid $321B in fines since 2008 for an abundance of regulatory failings from money laundering to market manipulation and terrorist financing, according to data compiled by Boston Consulting Group.
That tally is set to increase in the coming years as European and Asian regulators catch up with their more aggressive U.S. peers, who have levied the majority of charges to date.
Fighting to protect its high-end market, American Express (NYSE:AXP) will begin to offer new perks and benefits on its Platinum charge cards, while upping its annual fee by $100 to $550.
Both JPMorgan (NYSE:JPM) and Citigroup (NYSE:C), which has a $450-per-year Prestige card with its own mix of spending credits and perks, are using cards to try to eat away at AmEx profit margins, which have long been higher than their own.
Overnight comments from two influential Fed voices suggested the market was way underpricing the odds of a March rate hike. Not anymore, as rate hike odds have jumped to more than 75% in busy morning trade.
Cheering the action the most are the banks. BAC +2.75%, JPM +2.1%, C +2.3%, GS +2.2%, MS +2.5%, USB +1.8%, XLF +1.9%, KBE +1.9%, KRE +2.25% premarket