Aurelia Butler

NEW YORK (Reuters) – The global banking industry built up capital and showed its stability during the pandemic but its return on equity plunged and it has lost favor with investors to industries with more attractive growth prospects, according to a new study.”Banks withstood the pressures of 2020, and capital reserves rose last year. But it came at a cost,” consulting firm McKinsey said on Wednesday in its annual banking review.Return on equity for banks in North America fell to 8% in 2020 from 12% in 2019 and halved for European banks to 3% from 6%.”The industry became safer, more predictable, more commoditized,” the report said.Investors now value banks as though they were utilities. Banks trade around 1.0 times book value compared with 3.0 times for all other industries, the report said. The discount was less a decade ago, about 1.0 times versus 2.0 times.The disparity comes even after the industry’s stock market value increased 20% to October 2021 from the month before the pandemic.That reflects a banking outlook that is “decent and resilient, but not attractive,” said McKinsey. Return on equity could increase from 6% to between 7% and 12% in 2025, largely depending on changes in interest rates, government economic support and how much cash is piled onto balance sheets.The banks that will fare better than peers, the consultants said, will be those that move quickly toward businesses that earn fees and require less capital, such as payments, wealth management and investment banking. More

OTTAWA (Reuters) – Canada on Wednesday excluded Boeing (NYSE:BA) Co from a multi-billion-dollar race to supply 88 new fighter jets and indicated a previous clash between the U.S. company and a Canadian aircraft maker influenced the decision.The move means only Lockheed Martin Corp (NYSE:LMT) and Sweden’s Saab AB can compete. Ottawa says it intends to make a decision next year on a contract that could be worth up to C$19 billion ($14.8 billion).Reuters reported the decision to bar Boeing’s F-18 Super Hornet on Nov. 25, citing a defense source. The formal announcement came from the federal procurement ministry and did not mention Boeing.Boeing said it was “disappointed and deeply concerned” by the announcement. “We are working with the U.S. and Canadian governments to better understand the decision and looking for the earliest date to request a debrief to then determine our path forward,” it said in a statement without giving more details.Defense analysts had expected Ottawa would exclude Saab’s Gripen plane, given Canada and the United States only fly U.S. military jets. Unlike Canada, Sweden is not a member of NATO or NORAD, the North American defense organization.Saab said in a statement that the Gripen had passed all aspects of the evaluation, including security and interoperability requirements.Canada belongs to the consortium that developed Lockheed Martin’s F-35 jet, which defense sources say is the preferred choice of the air force.The procurement ministry made clear one reason for the decision was Boeing’s formal complaint in 2017 to the U.S. Commerce Department that Ottawa was unfairly subsidizing a passenger jet made by Montreal-based rival Bombardier (OTC:BDRBF).Canada responded by saying it would look less favorably on a bid from a company that had had a negative economic impact on Canada’s interests.The procurement ministry on Wednesday said proposals had been assessed on elements of capability, cost and economic benefits.”The evaluation also included an assessment of economic impact,” it added. A spokesman for Procurement Minister Filomena Tassi declined to comment.The procurement ministry said it could now either decide which bidder offered the best plane or offer Lockheed Martin and Saab a chance to improve their proposals. Lockheed Martin said: “As a cornerstone for interoperability with NORAD and NATO, the F-35 will strengthen Canada’s operational capability with our allies.” ($1 = 1.2825 Canadian dollars) More

NEW YORK (Reuters) – The U.S. central bank needs to be ready to respond to the possibility that inflation may not recede in the second half of next year as most forecasters currently expect, Federal Reserve Chair Jerome Powell said on Wednesday. In his second day of testimony in Congress, Powell reiterated that he and fellow policymakers will consider at their upcoming meeting a faster wind-down to the Fed’s bond-buying program, a move widely seen as opening the door to earlier interest rates hikes. With very strong consumer demand colliding with persistent supply chain problems, the Fed may be nearing the time when it must choose between aiming for full employment and keeping inflation in check. On Tuesday, Powell said he thinks it’s likely that inflation will come down “meaningfully” in the second half of next year as supply chains get fixed, but “the risks of higher inflation have moved up.””We have to use our policy to address the range of plausible outcomes, not just the most likely one,” he told the U.S. House of Representatives Financial Services Committee. As if to underscore those concerns, a survey published Wednesday by the Federal Reserve showed firms across the country are increasingly grappling with higher prices and scrambling to fill jobs amid labor shortages, though they are able in many cases to pass on higher costs to customers, with little resistance. “Nearly all Districts reported robust wage growth,” according to the Fed’s Beige Book, an anecdotal survey of businesses in the Fed’s 12 districts.Soon after Powell’s appearance in Congress alongside Treasury Secretary Janet Yellen, public health officials announced the first known U.S. case of a patient with the Omicron COVID-19 variant, suspected of being more infectious than prior strains of the coronavirus. Though lawmakers asked Powell no questions about how the new variant might change the economic outlook or the Fed’s policy response, New York Fed President John Williams told the New York Times in an interview published Wednesday that it could both slow economic activity and exacerbate inflationary pressures. That daunting combination could add to the challenges Fed policymakers face as they calibrate their response to the good news from a strengthening economy, the bad news of a possible new COVID-19 surge, and inflation that is persisting longer and staying higher than expected.Last month, the Fed began reducing its purchases of Treasuries and mortgage-backed securities from $120 billion per month at a pace that would put it on track to end purchases by mid-2022. The program was introduced in early 2020 to help nurse the economy through the pandemic.Powell repeated Tuesday that policymakers would discuss at their Dec. 14-15 meeting whether to end that program a few months earlier in light of the strength of the economy.TENSIONPowell said the U.S. recovery is stronger than those of other major economies, thanks in part to more robust fiscal support. U.S. consumer spending surged in October and first-time applications for unemployment benefits are at a 52-year low, leading economists to raise their GDP growth estimates for the fourth quarter. Still, consumer confidence dropped to a nine-month low in November amid worries about the rising cost of living and pandemic fatigue. The Omicron variant is also creating more uncertainty for households and businesses.Powell said Fed officials are monitoring the evolving economic landscape and acknowledged they might face “tension” as they pursue the U.S. central bank’s dual mandate of achieving maximum employment and price stability. “We have to balance those two goals when they are in tension, as they are right now,” Powell said. “But I assure you we will use our tools to make sure that this high inflation we are experiencing does not become entrenched.”Powell noted that wages have been rising, particularly for low-wage workers, and said the Fed is tracking the increases.”We have seen wages moving up significantly,” Powell said. “We don’t see them moving up at a troubling rate that would tend to spark higher inflation, but that’s something we’re watching very carefully.” More

WASHINGTON (Reuters) -Leading Democrats and Republicans in the U.S. Senate scrambled on Wednesday to head off the threat of a partial federal government shutdown posed by Republicans opposed to President Joe Biden’s COVID-19 vaccine mandates. Congress has until midnight on Friday to pass a measure that would continue funding federal government operations during the pandemic, amid concerns about a new rise in COVID-19 cases and the arrival of the Omicron https://www.reuters.com/world/us-tightens-covid-19-travel-rules-countries-race-quell-omicron-threat-2021-12-01 variant in the United States. A partial government shutdown https://www.reuters.com/world/us/what-happens-when-us-federal-government-shuts-down-2021-09-27 would create a political embarrassment for both parties, but especially for Biden’s Democrats who narrowly control both chambers of Congress.Top lawmakers in the Senate and House of Representatives have yet to agree on a resolution that Congress could vote on.Once a measure is set and passed by the House, all 100 senators would need to agree to circumvent Senate rules and pass such a measure before the Friday deadline. That effort ran into opposition on Wednesday from a group of hardline conservative Senate Republicans, including Mike Lee, Roger Marshall, Ron Johnson and Ted Cruz, who demanded a vote on a measure to block federal money for Biden’s vaccine mandates for federal and private sector employees, which they say put U.S. jobs at risk. “The federal government needs to feel the pressure of what a vaccine mandate really does,” Marshall told reporters.Marshall said the group wants to see language barring vaccine mandate funding in the resolution to keep the government open but would also accept a vote on a separate amendment.”We should use the leverage we have to fight against what are illegal, unconstitutional and abusive mandates,” Cruz said.Schumer told reporters that talks with McConnell to iron out an agreement were making “good progress” but acknowledged the possibility of a shutdown if the Senate was forced to observe procedural rules that would require a series of votes. “We’ll have total chaos. It’s up to the leaders on both sides to make sure that doesn’t happen,” Schumer told reporters.McConnell did not seem overly concerned. “We’re going to be okay,” he told reporters.Senator Kevin Cramer said the vast majority of his fellow Republicans are not in favor of forcing a shutdown.”What’s the outcome that you achieve? The government shuts down and you still don’t have a vaccination mandate lifted,” Cramer said.The House had been expected to vote as early as Wednesday on a funding resolution. But negotiations between the two parties remained stalled over issues including how long to continue to fund the government. Democrats want to extend current funding levels until January and then pass new spending bills, while Republicans have urged a delay until later in the spring, a move that would leave spending at levels agreed to when Republican Donald Trump was president. More