Financial Weekly Notes: JPMorgan, U.S. Bancorp & Barclays
The movement in share prices of bank stocks this week were largely in line with the mixed response seen across the equity markets, with shares across sectors losing value towards the middle of the week when the Federal Reserve released the minutes of its Open Committee Meeting conducted in late October. [1] The Fed hinted at beginning its tapering plans “in coming months” given that the economic recovery continues at its current pace in the near future – triggering a sell-off among investors. The decline in share prices were temporary, though, with the shares recouping the losses towards the end of the week.
Below are some significant events pertaining to major banks that were witnessed over this week.
JPMorgan Chase
Diversified banking group JPMorgan Chase (NYSE:JPM) finally announced its much-awaited $13 billion settlement with the government earlier this week. The deal had been under negotiation for a couple of months – being stalled on several occasions when the various regulatory bodies forming RMBS Working Group of the Financial Fraud Enforcement Task Force couldn’t agree on some contentious issues pertaining to the settlement.
The record settlement puts to rest all actual and potential MBS-related civil litigation by the DoJ, FDIC, NCUA, FHFA as well as the Attorneys Generals of the states of New York, California, Massachusetts and Illinois against JPMorgan Chase, Bear Stearns and Washington Mutual, and is a major breakthrough for the bank towards clearing its legal backlog from legacy mortgage issues. As the bank already set aside sufficient reserves to cover the settlement in Q3, there will be no impact from this on income figures for this quarter.
You can read more about JPMorgan’s settlement in our article Key Takeaways From JPMorgan’s Mammoth Settlement Of Legacy Mortgage Issues.
See our full analysis for JPMorgan Chase
U.S. Bancorp
U.S. Bancorp (NYSE:USB) had a couple of announcements to make this week, with the country’s largest regional banking group aiming to grow its credit card business through a partnership with American Express (NYSE:AXP) and to expand its overseas alternative investment management business with the acquisition of Quintillion Limited.
The bank has already begun working with AmEx to customize offerings for its existing customers, and will begin issuing cards which will be accepted across AmEx’s global payment network in the second half of 2014. The move marks a significant step by U.S. Bancorp towards reviving its credit card business which has seen stagnant card loan growth over the last three years. More details about the deal and its impact on U.S. Bancorp can be found in the article U.S. Bancorp’s Partnership With AmEx Should Unlock Value For Both Companies.
The bank’s presence in the European wealth management industry is also set to receive a boost with the acquisition of Dublin-based full-service hedge fund administrator Quintillion. [2] The deal will add $18 billion in hedge fund assets under management to raise the size of U.S. Bancorp’s alternative assets under management to $84 billion while increasing the size of total assets managed by U.S. Bancorp Fund Services to $832 billion.
See our full analysis for U.S. Bancorp’s stock
Barclays
Barclays (NYSE:BCS) is reportedly reviewing a decision to sell its index business after it received an offer for the unit from index provider MSCI (NYSE:MSCI). [3] While preliminary talks are underway between the U.K.-based banking giant and the index provider best known for its MSCI World and MSCI EAFE equity indices, Barclays may seek more suitors for the business if it decides to go ahead with the sale of its index business.
Indexes provided by Barclays are tracked by exchange-traded products and mutual funds managing about $2.3 trillion in assets, making its index unit second only to Standard & Poor’s (S&P) in the industry. MSCI has been on the lookout for opportunities to grow over recent years – especially in providing fixed-income indices – and Barclays’ unit clearly fits the bill in this regard.
See our full analysis for Barclays
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Notes:- Minutes of the Federal Open Market Committee, October 29-30, 2013, Federal Reserve Website, Nov 20 2013 [↩]
- U.S. Bancorp Fund Services, LLC Acquires Quintillion Limited, U.S. Bancorp Press Releases, Nov 20 2013 [↩]
- Barclays weighs index unit sale after MSCI approach – sources, Reuters, Nov 19 2013 [↩]