Displaying items by tag: banks

(Washington)

In a new bill to help small US banks, some of the biggest beneficiaries are exactly the opposite. The new bill is set to raise the threshold for strict oversight from regulators to $250bn in assets (up from $50 bn). However, three huge custody banks—BNY Mellon, State Street, and Northern Trust—will also see a major benefit. Because of their custodial structure they will be able to exclude some deposits, pushing their total deposits down under the $250 bn threshold. This development seems likely to boost earnings per share at the custodial banks by 8%.


FINSUM: Talk about regulation going right for these banks.

Published in Eq: Large Cap
Friday, 02 March 2018 10:53

A New Financial Crisis is on the Horizon

(New York)

One of the financial industry’s most astute crisis callers has just told Barron’s that she thinks we are in for another financial crisis. Sheila Bair, former head of the FDIC, has successfully called the Enron scandal and the subprime crisis, and now she sees another one looming. The context is that Trump and the White House are leading the charge for less bank regulation, which Bair sees as crazy given this point in the cycle. According to her, “To loosen capital now is just crazy. When we get to a downturn, banks won’t have the cushion to absorb the losses. Without a cushion, we will have 2008 and 2009 again.”.


FINSUM: We are not supportive of too much loosening of bank regulation. Banks have been very profitable since the Crisis, and it is not as if the current regulatory paradigm is over-constraining them

Published in Eq: Large Cap

(New York)

Bank of America just put out a weird warning that caught our eye. The bank—the largest retail bank in the US—said that it may face “substantial costs” as it deals with cryptocurrencies. In its SEC filing, the bank warned that cryptos were one of its risk factors for investors. The bank elaborated, saying “The widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services”.


FINSUM: Was this reference to some future risk of business disruption, or does BofA have some exposure to cryptos that is not well understood? Certainly something to pay attention to.

Published in Eq: Tech
Thursday, 01 February 2018 07:55

Why Liquidity Will Vanish

(New York)

Morgan Stanley went on the record yesterday arguing that market liquidity will likely vanish in the event of turmoil. The bank says that the reduction in bank participation in trading, brought on by post-Crisis regulation, has led to “shadow banks” taking up the burden of liquidity. Such shadow banks including entities like professional trading firms, hedge funds etc. However, Morgan Stanley points out that this type of liquidity provider has never been tested in a tumultuous market, and that liquidity is likely to vanish.


FINSUM: While there may be some truth to it, banks love to over play the amount of liquidity they provide in periods of turmoil. When the market gets ugly, they tighten up just like everyone else.

Published in Macro
Friday, 19 January 2018 10:34

Goldman to Rebuild Trading Arm After Slump

(New York)

Goldman Sachs has stuck to its guns with its trading division despite numerous changes to the industry and its competitors revamping. However, the bank finally appears to be changing its strategy. Since 2009, Goldman’s fixed income trading revenue has shrunk from over $23 bn in 2009, to just over $5 bn in 2017. Now the bank is changing its focus away from serving hedge fund clients, whom it has become overly reliant on, and towards big corporate clients, who offer a different sort of “flow” business based on interest swaps and other corporate needs.


FINSUM: We think it is smart for Goldman to diversify the focus on its fixed income unit. Especially since the $20bn plus revenue days don’t look like they are coming back.

Published in Eq: Large Cap
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