Aurelia Butler

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President Joe Biden announced plans on Monday to ease student debt that would benefit at least 23 million Americans, addressing a key issue for young voters whose support he needs as he seeks re-election in November.Those plans include canceling up to $20,000 of accrued and capitalized interest for borrowers, regardless of income, which Biden’s administration estimates would eliminate the entirety of that interest for 23 million borrowers.The latest round of debt relief affects 277,000 Americans enrolled in the SAVE Plan, other borrowers enrolled in Income-Driven Repayment plans, and borrowers receiving Public Service Loan Forgiveness, the White House said in a statement.It follows an announcement in March that $6 billion in student loans would be canceled for 78,000 borrowers. The administration said on Friday it has approved $153 billion in student debt relief for 4.3 million Americans.Biden, a Democrat, last year pledged to find other avenues for tackling debt relief after the U.S. Supreme Court in June blocked his broader plan to cancel $430 billion in student loan debt. The campaign of former President Donald Trump, Biden’s Republican challenger in the White House race, in March criticized the student loan cancellation as a bailout that was done “without a single act of Congress.”The issue remains high on the agenda of younger voters, many of whom have concerns about Biden’s foreign policy on the war in Gaza and fault him for not achieving greater debt forgiveness.Republicans have called Biden’s student loan forgiveness approach an overreach of his authority and an unfair benefit to college-educated borrowers while other borrowers received no such relief.Roughly half of federal student loan debt is held by people with a graduate degree, according to the Brookings Institution think tank. An August 2023 report by the Department of Education said graduate students received the highest share – 47 percent – of federal student loan disbursements from 2021-22, even though they accounted for only 21 percent of all borrowers. More

(Reuters) -Citigroup’s profit fell in the first quarter as it spent more on severance payments for laid-off employees and set aside money to refill a government deposit insurance fund.Net income fell to $3.4 billion, or $1.58 per share, in the three months ended March 31, the bank said on Friday. That compares with $4.6 billion, or $2.19 per share, a year earlier. “Last month marked the end to the organizational simplification we announced in September,” CEO Jane Fraser said in a statement. “The result is a cleaner, simpler management structure that fully aligns to and facilitates our strategy.” Citi expects a headcount reduction of 7,000 and $1.5 billion in annualized savings from reorganization, the lender said in its investor presentation. Shares rose 1% before the bell. The bank also paid $251 million into a Federal Deposit Insurance Corp (FDIC) fund that was drained last year after three regional lenders failed.Revenue fell 2% on a reported basis to $21.1 billion in the first quarter. Excluding one-off items such as the sales of businesses last year, it was higher in the quarter. It forecast revenue between $80 billion to $81 billion for 2024, about 1.8% to 3% higher than $78.5 billion in 2023.Performance at Citi’s services and banking divisions stood out. Revenue from the business that provides cash management, clearing and payments services for the world’s biggest corporations rose 8% to $4.8 billion, buoyed by an 18% jump in securities services revenue to $1.3 billion.Meanwhile, a resurgence in capital markets and investment banking fees fueled a 49% surge in banking revenue to $1.7 billion. Corporate lending rose 34%. Markets were a sore spot. Trading revenue fell 7% to $5.4 billion, dragged lower by fixed income and currencies. Wealth management revenue shrank 4% to $1.7 billion. While Citi’s consumer banking division grew revenue, it also stockpiled more money to cover potential losses from customers who default on their loans. The bank said credit costs of $2.2 billion were driven by higher non-conforming loans of $1.9 billion. Rival JPMorgan Chase (NYSE:JPM) reported a higher first-quarter profit on Friday, while Wells Fargo’s quarterly profit shrank as it earned less from customer interest payments. REORGANIZATION COSTS For the full year, bank expects expenses between $53.5 billion to $53.8 billion, excluding the FDIC’s special assessment fees. Its forecast included about $700 million to $1 billion of repositioning costs and restructuring charges, of which roughly $483 million was recorded in the first quarter. Fraser began a sweeping reorganization in September to simplify the bank and improve performance, pushing up expenses to $14.2 billion. The largest round of staffing moves, including reassignments and departures, was communicated to employees in late March. In the previous quarter, Citi had posted a $1.8 billion loss as one-time items dragged down its earnings.”These past months have not been easy,” Fraser wrote in March. “Far from it. The changes we’ve made are the biggest that most of us have experienced at Citi …, putting us on the front foot and improving our competitiveness,” she had said.Investors have rewarded Fraser with a share price boost since the overhaul began in September. Next, they want to see growth in wealth management and investment banking.The company’s stock has risen 18% this year, outperforming peers and beating the benchmark S&P 500. The bank still faces challenges, including regulatory problems and an unsettled workforce. In February, Reuters reported U.S. regulators asked Citigroup for urgent changes to the way it measures default risk of its trading partners.Citi is working to fix problems laid out in two enforcement actions from the U.S. Federal Reserve and the Office of the Comptroller of the Currency from 2020. The consent orders direct the bank to repair deficiencies in its risk management, data governance and internal controls. More

MADRID (Reuters) -The International Monetary Fund raised its forecast for Spain’s economic growth this year to 1.9% from 1.5% on Friday, citing the country’s “strong resilience” amid a general weakening in the euro zone.The IMF said the higher growth should be driven by increased domestic consumption, the effects of the European Union’s post-pandemic recovery plan and an expected slowdown in inflation coupled with a relaxation of interest rates.However, it added that private investment remained weak and consumption had only recently managed to recover the levels of late 2019, “indicating subdued domestic demand overall since the pandemic”.The IMF also reiterated its prior projection of 2.1% growth of the country’s gross domestic product in 2025.Last year, Spain’s GDP expanded by 2.5%.In March, the Bank of Spain also upped its 2024 GDP growth outlook to 1.9% from 1.6%.Meanwhile, the Spanish government has said it sees GDP growing 2% this year.The IMF’s mission chief to Spain, Romain Duval, told reporters that risks were now more balanced than months ago, but added that political fragmentation could undermine the government’s reform agenda.Duval said the lack of affordable housing was one of the main structural problems that Spain needed to address. He recommended that Madrid scupper the rent controls imposed by the Catalonia region, which he described as “counterproductive”, and instead boost housing supply rather than distort demand.WINDFALL TAX REDESIGNAs part of its recommendations on the banking sector, the IMF said there was room to redesign the Spanish windfall tax should it become a permanent levy.In December, the Spanish government extended the levy by another year to 2024 and wants it to become a permanent.The tax – challenged in courts by lenders that have complained that it is unfair, distorts competition and hurts the economy and lending – carries a charge of 4.8% on their net interest income and net commissions.”Should the authorities decide to turn the temporary levies on banks and energy companies into permanent taxes, their bases should be aligned to a clearer definition of exceptional profits to minimize their distortionary effects,” the IMF said.The head of Spain’s banking association AEB, Alejandra Kindelan, said separately on Friday a permanent tax would make Spain an outlier in Europe, representing a competitive disadvantage. The IMF proposed a tax credit proportional to the size of a positive neutral counter-cyclical buffer to reduce the liability for banks from higher levies. Italian lenders have chosen to forego a one-off levy the government imposed on the sector last August, making use of an option allowing banks to boost cash reserves instead of paying the levy. More

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.The UK economy grew for the second month in a row in February, driven by expansion in manufacturing and raising hopes the UK is emerging from a technical recession.Gross domestic product increased by 0.1 per cent between January and February, the Office for National Statistics said on Friday.The benchmark FTSE 100 index rose 1.4 per cent after the news, putting it on track to close at a record high. Sterling was down 0.7 per cent against the dollar at $1.2469 in early afternoon trading in London, pushed lower by a broader surge in the dollar.February’s figure raises the likelihood that the UK economy expanded overall in the first quarter, marking the end of the technical recession it slipped into at the end of 2023 after two consecutive quarters of negative growth.“GDP would need to fall by an unlikely 1 per cent month on month or more in March for the economy to contract in the first quarter as a whole,” said Paul Dales, chief UK economist at Capital Economics. “As a result, we can safely say that, after lasting just two quarters . . . the recession ended in Q4,” he added.Prime Minister Rishi Sunak welcomed the figures, describing them as “further evidence that the economy has turned a corner, with growth in both January and February and the Bank of England forecasting growth to be higher than previously forecast in the long term”.Friday’s rise in GDP was in line with analysts’ expectations and followed 0.3 per cent monthly growth in January — which itself was upwardly revised from a preliminary figure of 0.2 per cent on Friday.Services output grew 0.1 per cent in February, while production — including manufacturing, utilities and mining — increased 1.1 per cent. Construction output fell 1.9 per cent.Rob Wood, economist at the consultancy Pantheon Macroeconomics, predicted that the BoE would start cutting interest rates from their 16-year high of 5.25 per cent from June.However, he added, “stronger than expected growth means the Monetary Policy Committee is lacking a clear trigger to act quickly”.In the three months to February, the economy grew 0.2 per cent compared with the previous three months, marking the first expansion since August 2023.Jeremy Hunt, chancellor, said the figures were “a welcome sign that the economy is turning a corner, and we can build on this progress if we stick to our plan”.Hunt is hoping that growth data published in May will show that Britain has moved out of recession, removing a political weight from the governing Conservatives ahead of the general election expected this year. Prime Minister Rishi Sunak has promised economic growth in a high-profile pre-election pledge. The Conservatives trail Labour by roughly 20 points in opinion polls.Many economists expect growth to improve as wages rise faster than inflation and mortgage rates fall from last year’s peak.But while inflation is expected to soon fall below the BoE’s 2 per cent target, there are clouds on the horizon for the chancellor.Market expectations for BoE interest rate cuts in 2024 have retreated, pushing back the prospect of the start of a rate-cutting cycle that Hunt believes will shift public sentiment on the economy.Despite the two consecutive monthly increases, output was still 0.2 per cent below its level in February last year. In consumer-facing services such as restaurants, shops and hairdressers, it fell 0.1 per cent in February. That was 5.7 per cent below its February 2020 level, before the pandemic, as the cost of living crisis weighs on activity.Rachel Reeves, shadow chancellor, said the Conservatives “cannot fix the economy because they are the reason it is broken”. “After 14 years of Conservative economic failure, Britain is worse off with low growth and high taxes,” she added.The ONS said growth was widespread across the manufacturing sector with an expansion reported in 11 of the 13 subsectors, with strong growth in car and food production. Services output also grew, with public transport and haulage, and telecommunications performing strongly, offsetting falls in the health sector. By contrast, construction output was hit by wet weather and fell. More

(Reuters) -Wells Fargo’s profit fell 7% in the first quarter on Friday as it became more costly to pay customers for deposits and demand from borrowers declined.Still, adjusted profit of $1.26 per share came ahead of analysts’ estimates of $1.11, according to LSEG data, helped by a nearly 5% revenue growth in its banking unit. Wells Fargo’s shares were oscillating between gains and losses in premarket trading. They were last down about 1%.The bank’s net interest income (NII) — the difference between what it earns on loans and pays out for deposits — fell 8% to $12.23 billion. NII was hurt by higher interest rates on funding costs, including the impact of customers moving to higher yielding deposit products, as well as lower loan balances, the bank said.”It’s certainly challenging these days to forecast NII, given all of the volatility that we’ve seen across a lot of the different data points, as well as some of the uncertainty that’s out there relative to how our clients are going to behave,” finance chief Michael Santomassimo told reporters on a call.The bank reiterated on Friday that its NII could fall 7% to 9% this year. The shifting U.S. interest rate outlook is an important factor that will drive banks’ future profits. U.S. consumer prices increased more than expected in March, leading financial markets to anticipate that the Federal Reserve would delay cutting rates until September.Higher rates had boosted lenders’ earnings as they brought in more money from interest payments, but that benefit waned in the first quarter of 2024.The increased interest rate have also made it more costly for banks, prompting them to pay more to keep deposits from customers who are seeking higher yields.Tighter monetary policy could also crimp borrower demand and dampen economic activity, including Wall Street dealmaking.Wells Fargo also paid $284 million into a Federal Deposit Insurance Corp fund that was drained last year after three regional lenders failed.Average loans fell $20.6 billion, or 2%, year-over-year, driven by declines in most loan categories, the bank said.Rivals Citigroup posted lower profit as it spent more on severance payments and set aside money to refill a government deposit insurance fund, while JPMorgan Chase (NYSE:JPM) forecast 2024 NII below analysts’ expectations. EASING SCRUTINYCredit card lending was a bright spot, while auto lending suffered a sharp 23% fall in the quarter. The bank is operating under a $1.95 trillion asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal. The lender still has eight open consent orders after the U.S. Office of the Comptroller of the Currency (OCC) terminated a 2016 punishment in February.”We reached an important milestone in the first quarter when the OCC announced the termination of a consent order it issued in 2016 regarding sales practices misconduct,” CEO Charlie Scharf said in a statement. “The remaining risk and control work continues to be our top priority and we will not be satisfied until all work is complete,” he added.Scharf became CEO in 2019, the fourth person to lead Wells Fargo since the scandal first emerged. He has worked to turn the lender around, cutting costs and exiting businesses after it racked up billions in lawsuits and regulatory fines. Overall, non-interest expenses rose 5% in the quarter, driven in part by customer remediation accruals for historical matters and higher FDIC assessments, the bank said. Wells Fargo’s stock has climbed about 15.2% so far this year, compared with a 10.4% gain in the S&P 500 Banks Index, which tracks large banks. More

(Reuters) -JPMorgan Chase’s profit rose 6% in the first quarter, although its shares dropped after the bank’s forecast for its income from interest payments came in below analysts’ expectations.High borrowing costs have helped lenders boost net interest income (NII), or the difference between what banks earn on loans and pay out for deposits. JPMorgan, the biggest U.S. bank by assets, also added billions of dollars of loans to its balance sheet after acquiring failed First Republic Bank (OTC:FRCB) in May last year, fueling its interest income further.CEO Jamie Dimon, however, stuck to his cautious tone, despite growing optimism in the last several months about a soft landing for the economy. “Many economic indicators continue to be favorable. However, looking ahead, we remain alert to a number of significant uncertain forces,” he said in a statement.Those include “unsettling” global conflicts, persistent inflationary pressure and quantitative tightening, Dimon said. The bank expects full-year NII, excluding trading, of $89 billion, depending on market fluctuations. That is up from a previous estimate of $88 billion but lower than the $90.68 billion analysts had expected, according to LSEG. Shares of the bank fell 2% in trading before the bell. The bank’s executives have warned for months that its surging NII was not sustainable. Despite the fall in shares, analysts believe that this was yet another “solid” quarter from JPMorgan. “The bank’s financials looked very encouraging,” said Octavio Marenzi, CEO of management consultancy firm Opimas, adding that the only negative was the increase in non-interest expenses. The lender also earmarked $725 million to replenish a government deposit insurance fund, less than the $3 billion it set aside at the end of last year.JPMorgan was among the banking giants that made up the bulk of contributions to the Federal Deposit Insurance Corp fund, which was drained when three regional lenders failed last year.That drove the bank’s expense forecast to $91 billion, compared with the $90 billion it had estimated earlier.In contrast to peers that are trimming staff, JPMorgan added about 2,000 employees to its workforce of 311,921. That is 5% higher than a year earlier. Profit was $13.42 billion, or $4.44 per share, for the three months ended March 31, compared with $12.62 billion, or $4.10 per share, a year earlier. NII rose 11% to $23.2 billion. Excluding the impact of First Republic, it was still 5% higher than last year. It set aside $1.88 billion as provisions for credit losses, compared with $2.28 billion last year.Trading revenue at JPMorgan fell 5% to $8 billion, with revenue from fixed income, currency and commodities (FICC) dropping 7% and equities flat.Investment banking revenue gained 27% to $2 billion, driven by higher fees earned on debt and stock underwriting. Overall revenue rose 9% to $41.93 billion. SUCCESSIONJPMorgan’s succession plans have been in focus for months, especially after Morgan Stanley and Lazard (NYSE:LAZ) named new CEOs.The bank’s board identified potential successors to CEO Jamie Dimon on Monday, paving the way for a leadership transition at the largest U.S. bank.Contenders for the top job include Jennifer Piepszak and Troy Rohrbaugh, recently appointed co-CEOs of JPMorgan’s expanded commercial and investment bank, and Marianne Lake, CEO of consumer and community banking. “We do not have any reason to believe that Dimon will depart in the immediate future,” said Brian Mulberry, client portfolio manager at Zacks Investment Management. “There is a lot of speculation around him being offered some kind of Cabinet position in a new administration but neither candidate nor Dimon have given any indication that the rumor is even remotely plausible right now.” More