Aurelia Butler

The bank reported a 5% rise in loans in the second half after government stimulus programs kept demand low early in the year. Wells Fargo (NYSE:WFC)’s shares rose 2.2% to $57.26 in premarket trading.Overall, non-interest expenses fell 11% to $13.2 billion, driven by lower personnel costs, as well as lower restructuring charges and operating losses. Chief Executive Officer Charlie Scharf has made cost cuts a cornerstone of his turnaround plan, targeting $10 billion in savings annually over the long term.”The changes we’ve made to the company and continued strong economic growth prospects make us feel good about how we are positioned entering 2022,” Scharf said in a statement. The fourth-largest U.S. bank has been in regulators’ penalty box since 2016 when a sales practices scandal came to light and has paid billions in fines and restitution. Wells Fargo has been also operating under a $1.95-trillion asset cap imposed by the Federal Reserve in 2018, which has crimped its ability to boost interest income by improving loan and deposit growth.”We also remain cognizant that we still have a multiyear effort to satisfy our regulatory requirements – with setbacks likely to continue along the way – and we continue our work to put exposures related to our historical practices behind us,” Scharf said.Wells Fargo said profit rose to $5.8 billion, or $1.38 per share, in the three months ended Dec. 31, from $3.09 billion, or 66 cents per share, a year earlier. The bank’s profit got a boost of $943 million from the sale of its corporate trust and asset management units. Wells Fargo also reported an $875 million decrease in the allowance for credit losses. According to Refinitiv estimates, Wells Fargo earned $1.25 per share excluding items, compared with analysts’ average expectation of $1.13.Wells Fargo’s total revenue rose 13% to $20.9 billion, beating estimates of $18.9 billion. More

BERLIN (Reuters) – European nations will have to think about reining in government borrowing and reimposing budget discipline sooner than expected or markets will start to punish highly indebted euro zone states, a senior German finance ministry official said.Speaking to other ministry officials at a closed-door event on Monday, Florian Toncar said Germany would have to ensure at a European level that once the pandemic was over, the bloc returned to a more conservative era in terms of public finances.”I am quite convinced that perhaps very, very soon, Europe won’t ask itself how much debt the rules allow and how much the rules can be bent, but rather how much debt the markets allow,” Toncar said, according to a video recording seen by Reuters on Friday.European leaders have agreed to suspend the bloc’s fiscal rules until 2023 but there is now debate about whether the so-called Stability and Growth Pact should be reformed to allow more flexibility before it kicks in again next year.Chancellor Olaf Scholz’s three-party coalition government has so far signalled an openness to reforming the EU’s rules but the comments from Toncar, a member of the more fiscally conservative Free Democratic Party (FDP), mark a shift in tone. “I believe that the paradigm shift is closer than many think,” Toncar said, adding that Germany should work on its economic performance rather than thinking about how fiscal rules could be weakened further.”Because it will no longer be the case that we can take on any amount of debt in Europe,” said Toncar, a parliamentary secretary and close aide of Finance Minister Christian Lindner.A finance ministry spokesman was not available to comment and Toncar could not immediately be reached via the ministry.Prior to the pandemic, Germany was one of the most vocal members of the euro zone, along with other mostly northern states, in calling on governments with higher debt levels in the south of the bloc to reign in spending and cut borrowing.YIELD SPREADSThe European Central Bank’s (ECB) bond-buying programmes have driven debt yields down to unprecedented levels across the bloc in recent few years. This has slashed yield spreads between northern nations such as Germany with relatively low debt and southern countries like Italy with a higher debt burden.While euro area borrowing costs have risen recently as the ECB looks to unwind its pandemic emergency bond buying stimulus, they remain at historically low levels.Germany’s benchmark 10-year Bund yield is at minus 0.06%, meaning investors pay the German government to hold the debt. Bund yields last traded above 1% in 2015, and a decade ago they were at 2%. Italian borrowing costs too are relatively low, with the gap between German/Italian 10-year bond yields at 138 basis points (bps), above last year’s low of 85 bps but well below peaks above 300 before the coronavirus crisis hit.Italy is now facing fresh questions about the viability of its debt as the ECB has announced plans to dial back emergency support that has helped the euro zone’s most indebted economies survive the coronavirus pandemic.European member states, including Germany, have borrowed record sums of money from investors since the start of the pandemic in 2020 to protect citizens and companies from the coronavirus and its economic impact.In addition, the EU launched an unprecedented recovery fund worth 750 billion euros ($860 billion), debt-financed and managed by Brussels, to help member states most affected by the pandemic, such as Italy and Spain.Several states, including Italy and France, have warned that if the agreed limits on budget deficits and overall debt remain as strict as they are under the current Stability and Growth Pact, Europe risks heading into another period of austerity when more spending is needed to push ahead with climate protection.Toncar also said pressure from international markets could be a good thing as it could help to accelerate structural reforms.”In Germany, too, I think there is even a chance that we will talk about priorities and structures again, that we will have to talk again about how we can make our country better, organise our community better,” Toncar said.”This is also a chance to do everything better. It’s not just about saving euros, but overall about improving the public sector and bringing it up to date. Sometimes scarcity is also an opportunity,” Toncar said.($1 = 0.8731 euros) More

(Reuters) -JPMorgan Chase & Co reported a 14% fall in fourth-quarter earnings on Friday but sailed past analysts’ estimates, helped by a stellar performance at its investment banking unit that offset a slowdown in its trading arm.The country’s largest lender, whose fortunes are often seen as a barometer of the health of the U.S. economy, posted a 28% jump in investment banking revenue, while overall trading revenue fell 13%.Large U.S. lenders have benefited from higher consumer spending, while their trading arms gained from exceptional volatility in financial markets last year.However, soaring inflation, a potential Omicron-induced economic slowdown and trading revenues returning to normal levels after an exceptional year are set to challenge the banking industry’s growth in the coming months.JPMorgan (NYSE:JPM)’s shares, up 6% this year, slipped 3% in trading before the bell on Friday.”The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks,” JPMorgan Chief Executive Jamie Dimon said.”We remain optimistic on U.S. economic growth as business sentiment is upbeat and consumers are benefiting from job and wage growth.”The trading shortfall in the forth quarter was cushioned by yet another strong showing at its investment bank as global mergers and acquisitions activity shattered all-time records in 2021 and pushed investment banking fees to a record-high in the first half of the year.Wall Street banking remained strong for most of the past year, as large, cash-flush financial sponsors and corporates embarked on a dealmaking spree, helping drive up investment banking fees to their highest-ever levels.During the quarter, JPMorgan maintained its position as the banking world’s second-biggest provider of worldwide M&A advisory after Goldman Sachs (NYSE:GS), according to Refinitiv. The league tables rank financial services firms by the amount of M&A fees they generate.Overall, the lender posted a profit of $10.4 billion, or $3.33 per share, in the quarter ended Dec. 31. Analysts had estimated a profit of $3.01 per share, according to Refinitiv data.Revenue remained nearly flat at $30.3 billion. The bank’s earnings were also buoyed by reserve releases of $1.8 billion.During the quarter, JPMorgan took down more funds that it had set side during the height of the pandemic in anticipation of an expected wave of loan defaults. But that didn’t happen, thanks to a consumer-friendly monetary policy and government stimulus checks that buoyed consumer spending, allowing banks to release billions from their loan-loss reserve. Citigroup (NYSE:C) will report results later on Friday. Wells Fargo (NYSE:WFC) & Co reported an 86% jump in fourth-quarter profit on Friday, propped up by gains from the sale of its corporate trust and asset management businesses.Goldman Sachs, Wall Street’s premier investment bank, will report earnings on Tuesday, while Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC) round out the earnings season on Wednesday. More

The draft rules will tighten scrutiny over money market funds with a large size or a great number of investors, to protect investors’ interest. “Major” funds are defined by the rules as those with more than 200 billion yuan ($31.49 billion) in net assets, or with over 50 million investors. Yu’e Bao, controlled by Ant Group, the payment affiliate of Alibaba (NYSE:BABA) Group Holding Ltd, is China’s biggest money market fund with 764.6 billion in net assets by the end of September. The new rules “will further strengthen fund managers’ risk-management ability, improve product resilience, and ensure safety and liquidity” of investments, the China Securities Regulatory Commission (CSRC) said in a statement. It did not name any companies. China has imposed a sweeping restructuring on Ant, whose record $37 billion initial public offering was derailed by regulators in late 2020. In April last year, China’s central bank urged Ant to reduce the size of Yu’e Bao.Yu’e Bao, previously the world’s biggest money market fund, has already seen its asset under management (AUM) more than halve from its peak of 1.7 trillion yuan in early 2018. According to Friday’s rules, major money market funds “must not expand blindly”, and their managers’ pay must not be linked to the fund size. In addition, fund managers must set aside 40% of the management fees as risk reserves, and should put in place more stringent risk control measures, and increase the frequency of stress tests.Yu’e Bao, integrated with Ant’s ubiquitous Alipay, is managed by Tianhong Asset Management Co Ltd, which is controlled by Ant. ($1 = 6.3508 Chinese yuan renminbi) More

The surveys will be published on the day after the publication of the MPC’s minutes starting on Feb. 4, the BoE said on Friday.”The survey, which is formulated by Bank of England staff, has previously been run in pilot form as a quantitative complement to the Bank’s routine market intelligence gathering functions.” it said. “The survey will collect information on market participants’ expectations about monetary policy and financial markets. It will run eight times a year, aligned with the six-week schedule of the monetary policy meetings of the MPC.” More

Investors rushed into funds that buy US loans over the past week, hoping to profit from higher interest rates as the Federal Reserve readies to tighten monetary policy to combat inflation.Funds invested in US loans pulled in $1.9bn in the week to Wednesday, the largest weekly addition to the asset class in five years, according to flows tracked by data provider EPFR.The push into the loan market came as the US central bank prepares to withdraw pandemic stimulus measures and lift interest rates for the first time since December 2018. Minutes from the Federal Open Market Committee meeting in December showed that policymakers may raise interest rates more swiftly than had previously been expected.Traders are betting the Fed will lift rates between three and four times this year to about 1 per cent, according to futures markets. That view in US financial markets has been reinforced by data showing rising employment and soaring consumer prices, cementing investors’ expectations of a hawkish shift from the central bank.“I think we may have reached the inflection point. The question is no longer ‘if’ rates will go higher, but ‘how soon and by how much’,” said Jeff Bakalar, group head of leveraged credit at Voya Investment Management. “Every time this has happened, the loan market has become a safe harbour.”Loans are seen as better insulated from a Fed’s policy shift than corporate bonds because the coupon paid to investors rises and falls with benchmark interest rates. Interest on corporate bonds, by contrast, is fixed and does not change over time. That means that as interest rates rise, so do the returns from loans that flow back to investors, while bond prices tend to fall.The total return on a widely watched index of US leveraged loans run by the Loan Syndications and Trading Association is up 0.5 per cent this year, pushing the average price on the loans up to 99 cents on the dollar, its highest level in more than seven years.Those returns have eclipsed the performance of the benchmark S&P 500 stock index, which is down more than 2 per cent, and high yield corporate bonds, which have lost 0.6 per cent this year, according to Ice Data Services.Recent volatility in financial markets, where investors have retooled portfolios to adjust for higher interest rates, has weighed on corporate bond funds. Funds that buy high-yield bonds suffered redemptions of $1.6bn over the past week, the first outflows since the start of December.“Loans provide two much-needed characteristics for investors in 2022 — rate protection and relatively stable performance,” Citi analysts Michael Anderson and Philip Dobrinov wrote in a report. “If the first week of 2022 is a harbinger of persisting volatility, loans should be a compelling investment.”

Investors have shown less interest in one corner of financial markets that has benefited from rising consumer prices over the past year: inflows into inflation-linked bond funds have dropped. The funds counted about $40m of inflows, down from $1.1bn the previous week.The modest addition indicated that in spite of the hefty rise in December consumer price inflation reported this week, investors have confidence in the Fed’s pledge to tighten monetary policy and curb inflation.“The Fed appears more sensitive to realised inflation prints than it has been in the past and stronger prints appear to be leading to expectations of more hawkish policy,” Barclays analysts Michael Pond and Jonathan Hill wrote in a note to clients. “If seen as credible and effective, talk of tighter monetary policy should lead to lower forward inflation expectations.” More