16th April 2019
A compendium of news from the banking sector
The banking sector seems to have come into focus in the past week, starting with the US first quarter earnings season’s numbers appearing in the public domain last Friday. JP Morgan Chase’s efforts were perceived as decent with EPS beating expectations at $2.65 a share, versus estimates of $2.35. JPM also reported a revenue beat at $29.8 billion vs the $28.4 billion estimates – shares rallied on Friday, up 4.6% at $111.20. Yesterday Goldman Sachs posted indifferent results with trading and investment income disappointing, which saw Wall Street’s largest investment bank shed 3% in value. Efforts by Wells Fargo posted also last Friday were not seen as quite so positive with EPS coming in at $1.20 per share vs $1.09 per share expected. However, revenues dipped 2% at $21.609 billion vs a $21.012 billion forecast.
Yesterday Citibank’s revenue was in line at $18.9 billion with EPS at $1.87 against estimates of $1.67. Again, stock trading (down 24% on the last quarter) proved a thorn in the side of profits. Shares fell by 0.6%. It is fair to say that the banking sector is not the flavour of the month, but US banks are in better shape than their European counterparts and it must not be forgotten that UK banks are so toughly regulated now, it is harder for them to make sufficient increased profits to significantly move their respective share prices in an upwardly direction. On the other hand, poor performances by many of these banks may not necessarily damage these respective share prices irrevocably.
There has been a compendium of banking stories breaking cover in the past few days. On Monday, Richard Meddings, Chairman, and Debbie Crosbie, CEO, announced that TSB will pay back fraud claims resulting from its IT meltdown, with a view to winning back clients rather than wait for claims. There about £354 million of fraud claims on the UK banking sector, of which only £80 odd million have been paid. Banco Sabadell, the Catalonian owners of TSB Bank, still intend to sell this bank in the next year or two.
Barclays Bank are still being plagued by Edward Bramson, the entrepreneur, who announced that he has renewed his $1.4 billion loan terms from Bank of America for his stake in Barclays. Few believe he will be successful in seeking a seat on the board. Barclays is still perceived to be lagging well down the pecking order when it comes to joint stock banking. So, if the bald eagle were to dispense with investment banking, where would it go for earnings? Maybe Mr Bramson has a predator in mind that might want to buy Barclays?
UniCredit has been fined £1.3 billion by the US authorities for breaking sanctions with countries such as Iran and Syria. This Italian bank can ill-afford such a penal find with its balance sheet still in disarray, despite recent rights issues.
Finally, Deutsche Bank, JP Morgan Chase and other banks have been subpoenaed by the House of Intelligence and Financial services, who are seeking information about loans given to the Trump Organisation and to Mr Trump, prior to him becoming President. President Trump has refused to date to disclose information on business activities with foreign counterparties or on his tax affairs, insisting that all accounts are currently being audited. Deutsche Bank is alleged to have made loans totalling $300 million to the Trump Organisation pre-the 2016 Presidential election.