JP Morgan profits boost bank shares

NEWS
JP Morgan profits boost bank shares
Wednesday, April 14, 2010

••• The sprawling U.S. banking empire JP Morgan has delivered a stark illustration of the American economy’s two-tier recovery by chalking up vast profits from trading on Wall Street while suffering losses on the high street as millions of recession-hit customers struggle to repay mortgages and credit card loans.

Smashing analysts’ forecasts, JP Morgan enjoyed a 55 percent surge in first-quarter profits to $3.3 billion compared with a year earlier, setting a tough target for rivals such as Goldman Sachs, Morgan Stanley and Citigroup, which will report earnings over the next week. The firm’s shares climbed nearly 3 percent during early trading in New York.

But the bank’s figures clearly demonstrated the uneven nature of America’s gradual return to economic prosperity. While JP Morgan’s investment banking division produced a $2.4 billion profit, the firm’s retail financial services operation suffered a $131 million loss and its card services arm lost $303 million. Chief executive Jamie Dimon placed the credit for the bank’s overall profitability squarely with investment banking staff in New York, London and other financial capitals: “Our traders did a good job,” he said.

The upward march of stock markets on both sides of the Atlantic, together with a thaw in credit markets and a revival in corporate deal-making, has helped investment banks return swiftly to near-record levels of profitability, holding out the promise of more multimillion-dollar bonuses for star employees.
On the high street, Dimon said there were indications of a modest improvement in business, with credit trends “starting to look hopeful”, aided by a recent fall in U.S. unemployment: “When unemployment stops going up, you start to see an improvement in these things.”

He added that the chances of a “double dip” downturn opening up a fresh chapter in the recession appeared to be “rapidly going away”.

The patchy nature of recovery has led analysts to predict that a large chunk of the banking industry will remain in the red for some time to come. In a recent research note, Barclays Capital forecasts that 10 of America’s 25 leading banks will reveal a first-quarter loss as middle-ranking institutions without a Wall Street presence continue to struggle.

Wary of public outrage over a tiny elite accelerating to recovery ahead of the rest, the Obama administration has proposed a fee on banks to recoup bailout funds. Speaking on a conference call, Dimon, who was paid $17 million last year, took a swipe at this: “Let’s all not call it a bank fee and call it what it is: a punitive bank tax.”

A broader package of financial regulatory reform is mired in Congressional wrangling, with Republicans in the Senate objecting to plans for a ban on banks’ proprietary trading. Meeting congressional leaders today, President Obama urged enactment of plans for greater transparency in derivatives trading and told Republicans that the bill would help future bailouts of firms considered “too big to fail”.

In an industry that has seen its public reputation collapse, JP Morgan is among the few banks to emerge from the credit crunch in a position of enhanced strength. With relatively few toxic liabilities on its balance sheet, the firm was able to snap up the valuable assets of defunct rivals, picking up the remnants of Bear Stearns and Washington Mutual.

Problems have emerged, however, at some of these operations. JP Morgan has inherited a mortgage book of distinctly dubious quality from Seattle-based Washington Mutual, which collapsed in September 2008 in the largest commercial banking failure in U.S. history. The bank revealed it was setting aside $2.3 billion to cover litigation largely related to fraudulent or predatory mortgage lending.

JP Morgan’s earnings won praise from industry watchers. In a research note, Matt Albrecht, an equity analyst at Standard & Poor’s, highlighted a drop in the bank’s provision against bad debt: “Delinquency rates have stabilised or improved across most businesses, suggesting further reductions in loan loss provisions.”

Matt McCormick at Bahl & Gaynor in Cincinnati said JP Morgan was a bellwether for the financial sector: “Anyone who does not come in with similar results will suffer the consequences in the market.”

White House fights for finance reforms

NEWS
White House fights for finance reforms
Wednesday, April 14, 2010

••• A bipartisan meeting on financial regulatory reform between President Barack Obama and GOP congressional leaders broke up early and acrimoniously Wednesday – as the White House warned Republicans against trying to water down the bill.

“Obama made clear that bipartisanship should not be equated with an openness to lobbyists’ loopholes and special interest carve-outs and that he would be unwilling to negotiate on some key issues,” said White House Press Secretary Robert Gibbs, in an e-mailed readout of the meeting, “And that he could not accept bad policy” in pursuit of a deal with the GOP.

“It appears the bipartisan talks have broken down,” pronounced Senate Minority Leader Mitch McConnell (R-Kent.), after meeting for less than an hour with Obama, House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.).

“The strings were kind of pulled by the Democratic leaders,” added McConnell, who said that Democrats “are trying to jam us” for political gain.

“If there’s one lesson that we’ve learned,” said Obama in televised remarks prior to the meeting, “it’s that an unfettered market where people are taking huge risks and expecting taxpayers to bail them out when things go sour is simply not acceptable.”

Pelosi said Obama and the Democrats confronted McConnell and House Minority Leader John Boehner, saying they asked the Republicans, “Do you want to rein in Wall Street?”
Despite McConnell’s claims, Democratic staffers have expressed confidence that regulating Wall Street is such a poisonous issue for the GOP this fall that many in the party will ultimate side with Democrats – with as many as half a dozen defections possible.

Senate Democrats are lining up behind a proposal passed by lame-duck Banking Committee Christopher Dodd (D-Conn.) that would create a consumer protection bureau with authority to write rules governing all financial entities, including banks and other institutions, in addition to “authority to examine and enforce regulations for banks and credit unions with assets over $10 billion and all mortgage-related businesses.”

Acrimony aside, Dodd and Sen. Richard Shelby (R-Ala.), the ranking Republican on the committee, are due to meet this afternoon in hopes of hashing out a broader deal. But Dodd earlier Wednesday threatened to end negotiations with Republicans on a financial regulatory reform bill if they continue to lead what he called a misinformation campaign based on Wall Street talking points.

In a blistering floor speech Tuesday, McConnell laid out the GOP’s counterargument – claiming the Democrats’ bill would put taxpayer on the hook for future bailouts.

Emerging from his Tuesday meeting, McConnell hammered home that point, saying, “It’s a bill that actually guarantees future bailouts of Wall Street banks, if you look carefully… hat is clearly not the direction the American people want to go.”

A seething Reid, squinting in the bright sunlight of the West Wing driveway, called McConnell’s claim that Democrats had abandoned talks a “figment of his imagination” and vowed to pass the overhaul quickly.

The White House has accused McConnell of parroting the party’s talking points, driven by polls.

Participants described the meeting as “lively” and “candid” but demurred when reporters pressed him on the number of GOP “yes” votes he hoped to get.

“It’s difficult to work with the party of no,” he said.

The majority leader, facing a tough reelection fight in Nevada this fall, seized on a FOX Business News report that McConnell and Sen. John Cornyn (R-Tex.) recently met privately with about 25 hedge Wall Street executives, many of them hedge fund managers, to talk fundraising and regulatory reform.

McConnell dodged questions about the meeting saying only that he had heard criticism of the Dodd bill from “community banks in Kentucky.”

But when a reporter pressed him about his relationship with Wall Street, McConnell said, “Sure, we talk with people all the time, I’m not denying that,” – saying it was “inaccurate to say the GOP was fighting for the big banks.

As the meeting took place, Boehner’s staff released a list of talking points the leader planned to make, including the argument that the Dodd bill “sets up a huge new bureaucracy” and “does nothing to address the root causes of the Fannie & Freddie.”

But a person familiar with the situation that Boehner “actually said none of that” during the brisk, businesslike meeting.

Twitter snags more than 100 million users

NEWS
Twitter snags more than 100 million users
Wednesday, April 14, 2010

••• Microblogging sensation Twitter has signed up more than 100 million users and hopes to snag hundreds of millions more in coming years by making the service easier and more accessible on mobile devices like cell phones.

Twitter continues to grow. According to its co-founders Biz Stone and Evan Williams, who were far short on numbers, the service microblobbing now has nearly 105 million (105,779,710) users. Unless it’s users with an account without one knows if they are actually active. Every day they are 3,00,000 new Twitter accounts that are open.

Several studies have shown that the publication of tweets is mainly confined to a core group of users. These famous short messages of 140 characters are still published at a rate of 55 million per day, and there is no doubt that Twitter is a phenomenon to watch.

Search engines in particular are not mistaken. While Twitter treats 19 billion search queries per month ($ 600 million per day), Google manages over 90 billion it lends a special interest. The search giant has announced the launch of a new feature in English which can be traced back through time to dig into the archives of Twitter. A journey time for the moment limited to February 11, 2010 but will soon be extended until March 21, 2006.

At the same time, Bing Microsoft has started testing its real-time search with a few users in the United States by displaying the search results page of Twitter stream. Recall that for Google, this real-time search was launched for everyone.

Recently, Twitter has made some changes on its website to display on the home page a selection of the best tweets of the day. This week, the major announcement that Twitter will nevertheless remain of Promoted Tweets and an attempt to find a new means of monetization.