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News of the Competition (04/30/2012)

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MADISON, Wis. (5/1/12)

  • In the worst week for bank failures since April 2011, the Federal Deposit Insurance Corp. (FDIC) closed five banks Friday for a total of 22 closures so far in 2012. There were 92 bank closures in 2011. Palm Desert (Calif.) Bank was assumed by Pacific Premier Bank, Costa Mesa, Calif.; Inter Savings Bank, Maple Grove, Minn., was assumed by Great Southern Bank Reed Springs, Mo.; Bank of Eastern Shore, Cambridge, Md., was assumed by the FDIC-created Bank of Eastern Shore, which will remain open until May 25 to allow depositors access to their insured deposits and time to open accounts at other insured institutions; Plantation Federal Bank, Pawleys Island, S.C., was assumed by First Federal Bank, Charleston, S.C.; and HarVest Bank of Maryland, Gaithersburg, Md., was assumed by Sonabank, McLean, Va. The banks had roughly $1.42 billion in assets as of Dec. 31. The FDIC estimates the most recent failures will cost its Deposit Insurance Fund about  $273 million …
  • A coalition of 23 banking and real estate groups are seeking safe harbor protections from lawsuits for lenders that originate "qualified mortgages" (American Banker April 27). The group asked the Consumer Financial Protection Bureau Friday to adopt the safe harbor, claiming the threat of increased litigation will cause lenders to further constrict credit and exit the mortgage business. The group includes the National Association of Realtors, the National Association of Home Builders and Habitat for Humanity …
  • In 2011, U.S. CEO pay at banks rose a median 16% from 2010, even though stocks tumbled, according to figures from GMI Ratings for 160 public banking companies (American Banker April 27). Pay increases were seen by banks of all asset sizes, said the government watchdog and corporate data gatherer. The median pay increase was the biggest--15.9%--at 127 institutions with less than $20 billion in assets, compared with 12.1% at banks with more than $100 billion in assets …
  • Shareholders at four U.S. community banks told directors last year that they didn't approve of executives' compensation. As a result, the banks put into practice pay policies that incentivized long-term growth in the company stock price and dissuaded excessive risk-taking (American Banker April 27). The banks are Chemical Financial, The First of Long Island, Lakeland Financial and Umpqua. The boards at the four banks received 93% shareholder approval at this year's meetings, the Banker said. Those votes make management aware that they will get a report card delivered at their annual meetings, Ron Schneider,  a senior vice president at Phoenix Advisory Partners told the Banker ...

Market News (04/30/2012)

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MADISON, Wis. (5/1/12)

  • U.S. personal income and spending both went up in March, with personal income rising by the most in three months while spending increased only slightly (The Wall Street Journal, The New York Times and Bloomberg.com  April 30). Personal income climbed 0.4% last month, and consumer spending increased 0.3%--slowing from a 0.9% pace in February, the Commerce Department said Monday. Higher gasoline prices in March hurt consumer spending, Todd Schoenberger, managing principal at the Black Bay Group in New York, told the Times.  However, because the personal income numbers improved, the second quarter is well situated for gradual job growth, Peter Newland, a U.S. economist at Barclays Capital Inc. in NewYork, told Bloomberg
  • In an indication that manufacturing may be leveling off as business investment slides, U.S. business activity grew in April at the slowest pace since November 2009, according to the Institute for Supply Management (ISM) Chicago Inc. (Bloomberg.com and Moody's Economy.com April 30). The institute Monday said its index declined six points in April to 56.2--the largest drop in nearly a year--from 62.2 in March. Readings above 50 indicate growth. A pick-up in auto inventories is likely causing the ISM-Chicago Index--which is very sensitive to the auto industry--to soften, Moody's said …

Market News (04/27/2012)

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MADISON, Wis. (4/30/12)

  • First-quarter economic growth in the U.S. was less than expected because a smaller contribution from inventories mitigated the largest increase in consumer spending in more than a year (Bloomberg.com, The Wall Street Journal and Moody's Economy.com April 27). Gross domestic product--the widest gauge of all goods and services produced in an economy--rose at a 2.2% inflation-adjusted annual rate, following a 3% gain in the fourth quarter of 2011. The deceleration of growth along with other recent data indicate a slowing labor market and factory sector are adding to evidence that--for the third consecutive year--the economy is stagnating after showing indications of a rebound, the Journal said. However, consumers have proven to be very steady and stable, Julia Coronado, chief economist for North America at BNP Paribas in New York, told Bloomberg, adding that consumer demand will need to continue to improve for the economy to recover …
  • Consumer confidence inched up in the U.S. in April to its highest level in a year because people became more positive about the economy's outlook, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index (Bloomberg.com and Moody's Economy.com April 27). The index rose to 76.4 in April from 76.2 in March. An improving economic outlook trumped eroding perceptions of current economic conditions, Moody's said. Households are getting some relief from gasoline costs that have abated since hitting an 11-month high earlier in April, Bloomberg said …
  • First-quarter employer costs increased less than expected, indicating wage pressures in the U.S will not fuel inflation (Bloomberg.com and Moody's Economy.com April 27). The employment cost index rose 0.4%, following a 0.5% increase in the fourth quarter 2011, the Labor Department said Friday. Economists had forecast a 0.5% increase in first quarter, according to a Bloomberg News survey. Businesses have been able to ratchet up hiring without corresponding pay gains because more than 12 million people are unemployed in the U.S., Bloomberg said …

News of the Competition (04/27/2012)

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MADISON, Wis. (4/30/12)

  • In attempts to replace dissipating revenue streams, more community bankers are looking to wealth management and private banking (American Banker April 26).  First Midwest Bancorp, Iberiabank, Webster Financial and Wintrust Financial said they intend to expand in those businesses--especially via acquisitions, the Banker said. Most of those banks increased their assets under management during the first quarter, adding fuel to the movement, the publication said. Small banks have few other avenues to replace revenues that were cut or eliminated by recent federal regulations and interest rates that were kept low by government action, the Banker said …
  • MetLife is getting out of the reverse mortgage business, saying Thursday it is selling its division to Nationstar Mortgage of Texas (American Banker April 26). MetLife ranks among the top five U.S. producers of reverse mortgages. MetLife said Nationstar Mortgage also will purchase its reverse servicing business. The deal is subject to regulatory approval, and MetLife banks will not accept new reverse mortgage applications and registrations, the company said …

News of the Competition (04/26/2012)

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MADISON, Wis. (4/27/12)

  • A growing number of big U.S. banks are actively wooing low-income customers with alternative products that can have high fees attached (The New York Times April 25). Banks such as Regions Financial, U.S. Bank and Wells Fargo are quickly expanding these offerings in part because the products were mostly unaffected by recent financial regulations, the Times said. Another reason for the courting of these low-income customers is banks are looking to recoup the billions in lost income incurred because of recent limits placed on credit and debit card fees, the Times said. Banks say they are offering valuable products and services at competitive prices to those who might not otherwise have access to traditional banking. However, the Consumer Financial Protection Bureau said it is checking to see if banks are violating consumer protection laws by marketing the products …
  • U.S. community bankers are attempting another round of cost reduction because their bottom lines are being hurt by regulatory costs, lackluster loan growth and historically low interest rates (American Banker April 25). Many bankers say they are going to a lower efficiency ratio. That ratio compares expenses to revenue, and it has been increasing in the first quarter from the fourth quarter, and is hurting banks, the Banker said. Some banks are closing branches to trim costs, but others are going beyond that by trying to make branches more efficient, Michael Iannaccone, president of MDI investments, told the Banker

Market News (04/26/2012)

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MADISON, Wis. (4/27/12)

  • Initial claims for U.S. unemployment benefits decreased slightly last week--but remained near a three-month high--indicating that hiring has likely ratcheted down since winter, and the labor market needs more time to improve (The  New York Times, Bloomberg.com and The Wall Street Journal April 26). Claims dropped 1,000--to 388,000--for the week ended April 21 from a revised 389,000 (originally 386,000) the prior week, the Labor Department said Thursday. Three weeks ago, claims rose steeply, a sign that employers had increased layoffs and added fewer jobs, the Times said. To lay the foundation for more hiring, fewer layoffs are required--which, in turn, would bolster consumer spending, which is the largest part of the U.S. economy, Bloomberg said. Meanwhile, continuing claims for unemployment benefits for the week ended April 14 rose by 3,000--to 3.315 million from 3.312 million the prior week (Moody's Economy.com April  26) …
  • Pending home sales increased in March and are well above a year-ago levels, another signal the housing market is recovering, according to the National Association of Realtors (NAR). The Pending Home Sale Index, a forward-looking indicator based on contract signings, rose 4.1% to 101.4 in March from an upwardly revised 97.4 in February and is 12.8 % above March 2011 when it was 89.9. The data reflects contracts but not closings. The index is now at the highest level since April 2010 when it reached 111.3. Lawrence Yun, NAR chief economist, said 2012 is expected to be a year of recovery for housing. "First-quarter sales closings were the highest first quarter sales in five years," he said "The latest contract signing activity suggests the second quarter will be equally good. The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices will be rising in more areas as the year progresses." For the NAR report, use the link …
  • With perceptions of the buying climate and personal finances diminishing, U.S. consumer confidence fell last week by the most in more than a year, according to the Bloomberg Consumer Comfort Index (Bloomberg.com April 26). The index dropped to -35.8 for the week ended April 22 from -31.4 the prior week. The measure for buying climate declined to a two-month low, and the gauge for household financial capability fell by the most since September …

FOMC keeps federal funds rate at 0 to 0.25

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WASHINGTON (4/45/12)--The Federal Reserve's decision to maintain the target range for the Federal Funds Rate at 0% to 0.25% will hurt credit unions' margins, but that will be offset by lower loan-loss provisions, according to a Credit Union National Association (CUNA) economist.

The Federal Open Market Committee (FOMC)--the Federal Reserve's monetary policymaking group--voted to maintain the target range for the federal funds rate at 0% to 0.25% at its meeting concluded today. The FOMC also said there are likely to be very low levels for the federal funds rate at least through late 2014.

"The Fed reiterated that 'economic conditions … are likely to warrant exceptionally low levels for the Federal Funds Rate at least through late 2014,'" Steve Rick, CUNA senior economist told News Now. "This is the ELEP policy, where the Fed Funds Rate is kept 'Exceptionally Low for an Extended Period.' Eleven of the 17 FOMC members do not foresee an increase in the Fed Funds Interest Rate target before 2014. So it is becoming increasing clear that we can take the Fed at its word that it won't raise short-term interest rates for another two-and-half years."

The Fed has kept short-term interest rates in the 0% to 0.25% percent range since December 2008, or more than 40 months, Rick explained. This is still having a negative impact on credit union net interest margins (yield on assets minus cost of funds). "More than likely we will see credit union net interest margins fall below 3% for the first time in credit union history during the first half of 2012," Rick said.

"Fortunately, the tighter credit union margins will be more than offset by lower provisions for loan losses as loan credit quality continues to improve," he added. "Credit union loan delinquency rates fell to 1.54% in February, the lowest rate in three years. Therefore, we expect credit union return on assets to reach 90 basis points in 2012, from 68 basis points in 2011."

The FOMC said information it received since it met in March suggests that the economy has been expanding moderately. Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the FOMC said it seeks to foster maximum employment and price stability. The FOMC expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate.

Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the FOMC anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the FOMC expects to maintain a highly accommodative stance for monetary policy.

In particular, the FOMC decided Wednesday to keep the target range for the federal funds rate at 0% to 0.25% and currently anticipates that economic conditions--including low rates of resource use and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The FOMC also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

The FOMC will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

News of the Competition (04/25/2012)

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MADISON, Wis. (4/26/12)

  • U.S. community banks have seen their loan-loss provisions gradually diminish in recent quarters and then nosedive in the first quarter this year (American Banker April 24). Some banks saw their first-quarter provisions decline by more than 50% from the prior quarter. That indicates credit quality is improving in the industry, Damon DelMonte, an analyst at Keefe, Bruyette & Woods, told the Banker. In anticipation of diminishing credit trends, many banks bolstered their provision levels during past quarters, and now with the improving credit trends, the higher reserve levels are dissipating, DelMonte said …
  • JPMorgan Chase said Tuesday it is offering customers a remote check-deposit capability through the launch of its mobile image deposit application (American Banker April 24). With the application--which pilot clients started testing in December--U.S. companies can use an iPhone to deposit checks. JPMorgan Treasury Services is offering the application as part of a group of check-imaging services, the Banker said …

Market News (04/25/2012)

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MADISON, Wis. (4/26/12)

  • Mortgage loan application volume decreased 3.8% for the week ended April 20 from one week earlier, according to the Market Composite Index, part of the Weekly Mortgage Applications Survey released Wednesday by the Mortgage Bankers Association (MBA). On an unadjusted basis, the index declined 3.3%. The Refinance Index dropped 5.6%, with the Conventional Refinance Index dropping 6.1% and the Government Refinance Index falling 2.1%. The seasonally adjusted Purchase Index increased 2.7%. The unadjusted Purchase Index rose 3.6% and was essentially unchanged from the same week one year ago. The refinance share of mortgage activity decreased to 73.4% of total applications from 75.2% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 5.6% from 5.3% of total applications from the previous week. For the MBA report, use the link …
  • U.S. manufacturers' orders in March for durable goods--products designed to last at least three years--had their biggest decline in more than three years, indicating a loss of momentum in the manufacturing sector at the close of the first quarter (The Wall Street Journal, The New York Times and Bloomberg.com April 25). Orders fell 4.2% to a seasonally adjusted $202.57 billion, the U.S. Commerce Department said Wednesday. The major factor in the drop-off was a 47.6% dive in commercial aircraft orders, but computers, machinery and primary metals orders also were lower, the Journal said …
  • The number of mass layoffs--those involving at least 50 workers from a single establishment--declined in March from February, but the number of employees affected rose, according to the Bureau of Labor Statistics (Moody's Economy.com April 24). Events decreased by 20 to 1,273 from 1,293, but layoffs involved 121,310 in March--which is 1,847 more than in February. Manufacturing accounted for 22% of all mass layoff events and 21% of initial claims. Also, the 10 industries reporting the most layoffs accounted for roughly 39% of total initial claims, Moody's said …

NEW FOMC keeps federal funds rate at 0 to 0.25

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WASHINGTON (4/25/12--Filed at 1:15 p.m. ET)--The Federal Open Market Committee (FOMC)--the Federal Reserve's monetary policymaking group--voted to maintain the target range for the federal funds rate at 0% to 0.25% at its meeting concluded today. The FOMC also said there are likely to be very low levels for the federal funds rate at least through late 2014.

The FOMC said information it received since it met in March suggests that the economy has been expanding moderately. Labor market conditions have improved in recent months; the unemployment rate has declined but remains elevated. Household spending and business fixed investment have continued to advance. Despite some signs of improvement, the housing sector remains depressed. Inflation has picked up somewhat, mainly reflecting higher prices of crude oil and gasoline. However, longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the FOMC seeks to foster maximum employment and price stability. The FOMC expects economic growth to remain moderate over coming quarters and then to pick up gradually. Consequently, the committee anticipates that the unemployment rate will decline gradually toward levels that it judges to be consistent with its dual mandate.

Strains in global financial markets continue to pose significant downside risks to the economic outlook. The increase in oil and gasoline prices earlier this year is expected to affect inflation only temporarily, and the FOMC anticipates that subsequently inflation will run at or below the rate that it judges most consistent with its dual mandate.

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the FOMC expects to maintain a highly accommodative stance for monetary policy.

In particular, the FOMC decided today to keep the target range for the federal funds rate at 0% to 0.25% and currently anticipates that economic conditions--including low rates of resource use and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The FOMC also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

The FOMC will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, chairman; William C. Dudley, vice chairman; Elizabeth A. Duke; Dennis P. Lockhart; Sandra Pianalto; Sarah Bloom Raskin; Daniel K. Tarullo; John C. Williams; and Janet L. Yellen.

Voting against the action was Jeffrey M. Lacker, who does not anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate through late 2014.

News of the Competition (04/24/2012)

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MADISON, Wis. (4/25/12)

  • The outlook for merger and acquisition (M&A) activity for U.S. banks has not picked up, even though bank profits improved in the first quarter (American Banker April 23). It is expected that 2012 will be another slow year for M&A activity, executives at six acquisitive banks nationwide told analysts and investors last week, the Banker said. Ongoing price disputes between buyers and sellers will likely hamper more deals, despite increased talk of mergers, said the heads of Huntington Bancshares, BB&T and other regional banks during calls to talk about first-quarter reports, the Banker said …
  • U.S. banks and technology vendors are working with universities to help college students develop the proper skills before they look for their first job (American Banker April 23). Banks see a need to not only attract talented workers, but also to make sure they are in step with the most recent trends, the publication said. As an example, JPMorgan Chase began coordinating educational programs with Syracuse University in 2008 and the University of Delaware in 2010 to mentor students. To that end, Chase committed more than $30 million during a 10-year period, and $5 million during a five-year period, respectively. The bank also offers students paid internships on each campus through technology hubs  …
  • Wells Fargo was anticipating protests at its annual meeting held yesterday afternoon in San Francisco from a broad coalition of  activists, clergy, union advocates and other protesters from around the nation (American Banker April 23). The protests were expected to include opposition to the bank's foreclosure and lending practices. Thousands of people were expected to attend, including a substantial number of proxy shareholders who would exert their rights in the shareholder meeting, longtime activist Bucky Bagot told the Banker

Market News (04/24/2012)

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MADISON, Wis. (4/25/12)

  • U.S. house prices rose 0.3% on a seasonally adjusted basis from January to February, according to the Federal Housing Finance Agency's (FHFA) monthly House Price Index (HPI). While prices in January were unchanged, according to initial estimates reported in the last HPI release, the January result has been revised downward to reflect a 0.5% decrease. For the 12 months ending in February, U.S. prices rose 0.4%, the first 12-month increase since the July 2006 through July 2007 interval. The U.S. index remains 19.4% below its April 2007 peak and is roughly the same as the January 2004 index level. The FHFA monthly index is calculated using purchase prices of houses backing mortgages that have been sold to or guaranteed by Fannie Mae or Freddie Mac. For the nine census divisions, seasonally adjusted monthly price changes from January to February ranged from -1% in the West North Central and Middle Atlantic divisions to 1.9% in the Mountain division. For the FHFA report, use the link. In a related matter, single-family home prices in 20 U.S. cities dropped 0.8% in February to the lowest level since October 2002, according to the Standard & Poor's Case-Shiller composite index of 20 metropolitan areas  (The New York Times and Bloomberg.com April 24) ...
  • Sales of new U.S. homes in March dropped 7.1% from February to a 328,000 annualized level, according to the Census Bureau (Moody's Economy.com April 24). Months of home supply on the market inched up to 5.3 in March from 5.0 in February. The median house price has risen 6.3% year-over year. Some positive signs indicate improvement in the new-home market, including low months of inventory and a slow stabilization in the inventory of homes that are for sale, Moody's said …
  • Private research firm the Conference Board's Consumer Confidence Index dropped 0.3 of a point in April to 69.2 from 69.5 in March (Moody's Economy.com April 24). Less positive views on future conditions trumped smaller gains in sentiment concerning current conditions, Moody's said. The expectations component declined to 81.1 from 82.5, while the present conditions component increased to 51.4--its highest level in three years--from 49.9 …

Fed policymakers expected to leave rates unchanged

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WASHINGTON (4/25/12)--Federal policymakers are expected to leave policy rates unchanged after the Federal Open Market Committee (FOMC) meeting yesterday and today.

Policymakers likely will repeat their plan to keep the benchmark interest rate low at least through 2014, economists said (Bloomberg.com April 24). 

However, the Federal Reserve will raise borrowing costs by June 2014, according to a survey of economists conducted by Bloomberg News this month.

Traders will be focusing on any changes in the evaluation of the economy in the meeting announcement and on changes in guidance. Also, the Fed will release its quarterly forecast between the announcement and the chairman's press conference, according to the FOMC meeting announcement.

It is not expected that any announcement will be made regarding another round of quantitative easing (QE3) until the May/June FOMC meeting (heryliuforex.com April 24).

The FOMC will release its policy statement and forecasts early this afternoon in Washington.

Watch today's News Now coverage for a live update on the meeting.

News of the Competition (04/23/2012)

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MADISON, Wis. (4/24/12)

  • The Federal Deposit Insurance Corp. (FDIC) announced one bank closed Friday for a total of 17 closures so far in 2012. There were 92 bank closures in 2011. Fort Lee Federal Savings Bank, FSB, Fort Lee, N.J., was assumed by Alma Bank, Astoria, N.Y. The bank had roughly $51.9 million in assets as of Dec. 31. The FDIC estimates the most recent failures will cost its Deposit Insurance Fund about $14 million …
  • Corporate borrowers' revolving credit activity through March 31 fell to its lowest quarterly mark in two years, according to data compiled by Dealogic (American Banker April 20). Worldwide, 10,026 facilities were completed to tally $348 billion--the lowest quarterly level since first quarter of 2010 when 894 facilities were completed, said Dealogic, a company platform used by global and regional investment banks worldwide to help improve performance and competitiveness.  In the first quarter, the combined level of deals declined 45% from a fourth-quarter total of $630.1 billion--the highest lined-quarter on record, said Dealogic. The downturn is adding to growing evidence that some issuers are shedding loans in favor of bonds because big volumes of money added to high-yield funds push down the costs of alternative funding, the Banker said …
  • Vikram Pandit, CEO of Citigroup, and the bank's board of directors have been sued by a shareholder concerning Citi's compensation for top executives (American Banker April 20). The lawsuit alleges that directors approved more than $54 million in compensation to executives in 2011--which included a $15 million bonus for Pandit--even though the bank's performance did not merit it. Directors violated their fiduciary duty by approving such a high level of compensation, the suit claims …

Market News (04/23/2012)

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MADISON, Wis. (4/24/12)

  • Companies are more positive about the U.S. economy and plan to hire more workers as demand for their products and services increase, according to the National Association for Business Economics' April survey (Bloomberg.com April 23). About 78% of businesses surveyed--the most in a year and up from 65% in the January survey--think the biggest global economy will grow more than 3% in 2012, the survey indicated.  In the next six months, about four in 10 companies--the most since July--anticipate hiring will increase, indicating they are not daunted by Europe's debt crisis and higher oil prices, Bloomberg said. Also, 66% of those firms surveyed said they expect oil prices to remain the same during the next three months ...
  • Worldwide business sentiment is continuing to increase, despite back tracking last week, according to Moody's Analytics Survey of Business confidence (Moody's Economy.com April 23). Confidence dipped to 21 for the week ended April 20--headed by a weakening of expectations for business conditions later in the year--from 26.9 the prior week. Businesses still are upbeat in their assessment of current business conditions and strength of sales. However, they are cautious when answering specific questions about investment and hiring. South American businesses are the most positive, while Japanese businesses are the most down beat, Moody's said …

News of the Competition (04/20/2012)

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MADISON, Wis. (4/23/12)

  • Capital One Financial has earmarked an additional $75 million in its first-quarter reserve for credit card customer refunds (American Banker April 19). The move was made because Capital One said some of its salespeople didn't follow protocol when selling cross-sell products to those customers. Therefore, the company is offering a refund to all customers who purchased those products during the past couple of years, Capital One CEO Richard Fairbank said Thursday during an earnings conference call.  The company is absorbing a one-time $75 million cost for that purpose, he added …
  • More small U.S. banks moved closer to a level of nonperforming assets at or near 1% of total assets in the first quarter, said American Banker (April 19). That 1% level was considered the divider between strong banks and struggling ones before the financial crisis. Now, with more banks shedding problem assets, crossing that threshold could become a key milestone, the Banker said. Accepting nonperforming assets at 1% level as a positive signal is a component of the new and evolving "normal" for banks, Ben Crabtree, a former analyst and senior adviser to investment firm Oak Ridge Financial, told the Banker. The average nonperforming asset ratio for banks was 2.55% as of Dec. 31, according to the Federal Deposit Insurance Corp. Therefore, several more quarters may pass before 1% becomes the new normal, the Banker said ...
  • The Consumer Financial Protection Bureau (CFPB) is reviewing overdraft-fee practices at nine U.S. banks, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., said sources briefed on the examination  (Bloomberg.com April 20). CFPB will determine by the end of 2012 whether to write new rules. The agency's inquiry is centering on how financial institutions convince customers to enroll in what are termed overdraft protection programs, Bloomberg said. CFPB examiners are reviewing mailed and online marketing materials--along with scripts the banks' customer service representatives use--to ascertain whether the information could confuse consumers, the sources said …

Market News (04/20/2012)

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MADISON, Wis. (4/23/12)

  • The cost of mortgage interest deductions--one of the U.S.' most expensive individual tax breaks--is going down because the number of consumers who own homes is decreasing and mortgage interest rates are near historic lows (Bloomberg.com April 20). For 2009, federal tax filers claimed nearly $71 billion less in mortgage interest deductions than in 2007--a 14% decline, the Internal Revenue Service (IRS) said. Heading into 2010, that trend continued, with preliminary data indicating that lower home ownership, home prices and interest rates curtailed use of the tax deduction by 7.2%, according to a March IRS report. A large part of that phenomenon is due to people losing their homes and no longer having mortgage interest deductions to claim, Andrew Hanson, assistant professor of economics at Georgia State University, told Bloomberg
  • National economic reports of diminishing manufacturing activity and declining home sales are triggering worries that for the third consecutive year, the economic recovery is losing momentum and beginning a springtime swoon (The Wall Street Journal April 19). The downturn could negatively impact the shaky housing industry, which has been showing signs of rejuvenation, the Journal said. Also, weak growth in foreign markets is hurting the manufacturing sector--a strong force thus far in the recovery, according to other reports last week. Recent signals, however, have been varied--with troubling indicators following optimistic ones (auto sales and consumer confidence), indicating the economic recovery still is in place, the Journal said …

News of the Competition (04/19/2012)

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MADISON, Wis. (4/20/12)

  • With the banking industry continuing to recover from the real estate collapse, the pace of bank failures will ease substantially in 2012, said the Federal Deposit Insurance Corp.'s (FDIC) acting head (American Banker April 19). Thus far this year, 16 banks have failed. Martin J. Gruenberg, acting FDIC chairman, anticipates the total number of failures this year to be between 50 and 60, he told a small-business lending conference in Washington, D.C., Tuesday. Credit unions have recovered from the economic downturn better than banks. So far in 2012, four credit unions have closed their doors. In 2011, the number of bank failures dropped to 92 from 157 in 2010. U.S. credit unions have a consistently lower failure rate, with only nine failures in 2011 and 18 in 2010, according to creditunionsonline.com …
  • For the first time in four weeks, U.S. mortgage rates rose, with 15-year borrowing costs increasing from a record low (Bloomberg.com April 19). The average 15-year rate inched up to 3.13% from 3.11% in the week ended April 19--the lowest in Freddie Mac's records, the government-sponsored enterprise said. The average rate for a 30-year mortgage went up to 3.9% from 3.88%, Freddie Mac said Thursday ...
  • First-quarter profit at Bank of America (BofA) fell 68% due to a revenue drop and one-time accounting charges, but still was better than expectations and analysts' estimates (The Wall Street Journal and The New York Times DealBook April 19). BofA reported a profit of $653 million, compared with a year-earlier profit of $2.05 billion. Per-share earnings, which indicate the payment of preferred dividends, dropped to three cents from 17 cents a year ago. The first quarter saw a $4.8 billion pretax charge related to changes in value of BofA's debt …

Market News (04/19/2012)

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MADISON, Wis. (4/20/12)

  • Initial U.S. claims for unemployment benefits for the week ended April 14 stayed at nearly a four-month high, running counter to expectations that claims would decline after a recent surge and indicating the labor market could be stagnating (MarketWatch, Bloomberg.com and The Wall Street Journal April 19). Claims fell by 2,000--to 386,000--after claims from two weeks ago were revised upward to 388,000 from an original estimate of 380,000, the Labor Department said Thursday. The payroll gains that have helped reduce unemployment to a three-year low may level off and reduce consumer spending, Bloomberg said. Although claims should resume a downward trend in coming months, according to most economists who are monitoring conditions to see if a European downturn and slower growth in China hurt U.S. hiring, MarketWatch said. Meanwhile, continuing claims for unemployment benefits for the week ended April 7 increased by 26,000--to 3.297 million from 3.271 million the prior week (Moody's Economy.com April 19) ...
  • Existing U.S. home sales were down in March but continue to outpace year-ago levels, while inventory tightened and home prices showed further signs of stabilizing, according to the National Association of Realtors (NAR). Total existing home sales--which are completed transactions that include single-family homes, townhomes, condominiums and co-ops--declined 2.6 % to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February. However, they are 5.2% above the 4.26 million-unit pace in March 2011. Lawrence Yun, NAR chief economist, said the recovery is in the process of settling into a higher level of home sales. "The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases," he said. "Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year. With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year."  For the NAR report, use the link  …
  • For a sixth consecutive month, the Conference Board's Index of Leading Indicators for the U.S. increased in March, suggesting the biggest economy in the world will continue its expansion (Bloomberg.com and Moody's Economy.com April 19). The board's measure of the outlook for the next three to six months rose 0.3%, following a 0.7% gain in February that was the most in 11 months, the private New York-based research firm said Thursday. A recovering job market is helping consumers deal with higher fuel prices and sparking the spending that constitutes roughly 70% of the  U.S. economy, Bloomberg said. Greater resiliency in consumer demand will help maintain the more-than-two-year U.S. economic expansion and mitigate negative effects from a European slowdown, Bloomberg said …
  • Because more U.S. citizens say their finances are in better shape, consumer confidence improved last week to equal the highest level in four years, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com April 19). The index rose to -31.4 for the week ended April 15--the best reading since March 2008--from -32.8 the prior week. However, the monthly expectations gauge dropped from a one-year high, indicating consumers still are worried that too many people remain unemployed, Bloomberg said …

CUNA to IAPI Europes market impact hard to classify

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NEW YORK (4/19/12)--The impact of Europe's economy on the U.S. stock market isn't clear because so much is unknown, a Credit Union National Association (CUNA) economist told Associated Press Wednesday.

The market is "really difficult to classify" at the moment, Mike Schenk, senior economist and vice president of CUNA's economics and statistics, told the world's largest news organization.

"On one hand you hear about 'best day since whatever,' on the other hand you have days and weeks that don't look good at all," he said in the interview.

The market has been volatile, with each report coming out of Europe swinging stock market indexes up or down, depending on the news, for the past two weeks.  After a first quarter of mostly gains, the 11 days of trading in the second quarter have fallen, reported AP.

Dow Jones, Standard & Poor's and the Nasdaq indexes fell Wednesday after a report about bad loans at banks in Spain and an International Monetary Fund report on the state of the European economy.

"We don't have clarity there, we don't know what's going to happen, and we don't know, if things don't go our way, what the ramifications will be," Schenk said. "You and I and the rest of the investment world will continue to worry about uncertainty and volatility for a good while."

Major publications began picking up AP's report late Wednesday afternoon.  Among the first was Bloomberg's Businessweek.

News of the Competition (04/18/2012)

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MADISON, Wis. (4/19/12)

  • Hawaii is suing seven major credit card issuers, alleging illegal practices in the marketing of their payment protection plans (American Banker April 17). Defendants named in separate filings of the lawsuits Thursday include: Bank of America, Barclays, Capital One, Citigroup, Discover Financial Services, HSBC and JPMorgan Chase. The suits allege the companies illegally charged unaware customers for credit card insurance-like products and did not provide adequate plan benefits. Hawaii Attorney General David Louie, a local attorney and two plaintiffs' firms--Baron & Budd of Dallas and Golomb & Honik of Philadelphia--filed the suits …
  • Claiming U.S. Bancorp (USB) failed to maintain and market real-estate owned properties in minority neighborhoods, a fair housing advocacy group Tuesday said it intends to file a discrimination complaint against the Minneapolis-based bank (American Banker April 17). The National Fair Housing Alliance said it will file an administrative complaint with the Department of Housing and Urban Development against the bank for treating foreclosed properties "differently based on the racial composition of the neighborhood," the complaint said. The group filed a similar complaint against Wells Fargo last week, the Banker said …
  • Although it dropped less than expected, Goldman Sachs Group's first-quarter profit plunged 23% because spotty demand for deal-making hampered results (The Wall Street Journal April 17). Goldman's first-quarter revenue derived from fixed-income, currency and commodity trading totaled $3.46 billion--a 20% drop from a year earlier. However, that was more than double what the company posted in the fourth quarter. In recent quarters, less client demand for trading and investment banking--two of the company's valued sources of revenue--has been a problem for Goldman, the Journal said …

Market News (04/18/2012)

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MADISON, Wis. (4/19/12)

  • The Mortgage Bankers Association (MBA) said mortgage application volume increased 6.9% for the week ended April 13 from one week earlier, according to its Market Composite Index, part of its Weekly Mortgage Applications Survey released Wednesday. On an unadjusted basis, the index rose 6.5%. The Refinance Index jumped 13.5%. The seasonally adjusted Purchase Index decreased 11.2%. The unadjusted Purchase Index declined 10.4% and was 13.9% lower than the same week one year ago. "Renewed concerns about sovereign debt in Europe led to a drop in rates last week, with the 30-year rate tying our survey low, reached in early February," said Jay Brinkmann, MBA chief economist and senior vice president of research and education. "Refinance activity picked up in response, increasing 13.5% for the week. Participants in our survey indicated that about 32% of this refinance volume was for Home Affordable Refinance Program (HARP) loans. While purchase activity declined sharply for the week, this was mostly due to a 23% drop in applications for Federal Housing Administration (FHA) purchase loans. This drop follows big increases in the demand for FHA loans over several weeks in anticipation of the FHA mortgage insurance premium increases that went into effect last week. This was the largest weekly drop in the government purchase index since the expiration of the first-time homebuyer tax credit in May 2010.  The demand for conventional purchase loans was down only slightly," Brinkman said. For the MBA report, use the link …
  • The International Council of Shopping Centers (ICSC) chain store sale index dropped 1% for the week ended April 14--its first decline in three weeks--following the Easter holiday (Moody's Economy.com April 17). Year-over-year growth fell to 3.2% from 4.5% the prior week. Customer traffic was reported to be improved over last year's traffic at grocery stores, but weaker at apparel stores and wholesale clubs--which were negatively impacted by inclement weather, ICSC said …
  • European banks are being pressured to preserve capital and curtail lending--and could be forced to sell up to $3.8 trillion in assets through 2013 if governments cannot stem the sovereign debt crisis or face an economic jolt that their firewall can't stop, the International Monetary Fund (IMF) said Wednesday (The New York Times and Bloomberg.com April 18). The IMF--following a study of 58 European banks--predicted that under those circumstances, gross domestic product in the 17-nation Euro region would be 1.4% below what is now expected after two years. The IMF forecast banks' combined balance sheets possibly would decrease by as much as $2.6 trillion--even under its baseline scenario, Bloomberg said ...

News of the Competition (04/17/2012)

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MADISON, Wis. (4/18/12)

  • Joining its biggest competitors, Citigroup is responding to two new sets of regulatory guidelines by adjusting the way it accounted for some mortgages in the first quarter--reclassifying some mortgages and beginning to take principal write-downs (American Banker April 16). Citi--the third biggest U.S. bank by assets--reclassified roughly $840 million worth of home equity loans in the first quarter as "nonaccruing."  JPMorgan Chase and Wells Fargo each said Friday they had reclassified more than $1.5 billion worth of similar loans. Regulatory agencies issued the guidance Jan. 31. They include: the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and National Credit Union Administration. The guidance concerned allowances for loss-estimation practices on second mortgages secured by one-to-four-family properties ...
  • Some state banking regulators have expanded the use of the mortgage licensing--the National Mortgage Licensing System--to some nonbank entities, the Conference of State Bank Supervisors (CSBS) announced Monday (American Banker April 16). Currently, regulators in Massachusetts, Oklahoma, Rhode Island, Vermont and Washington are managing licenses--using the national system--for several types of nonbank companies, which include debt collectors, money transmitters and sales finance companies, the Banker said. Five other states--Louisiana, Maryland, New Hampshire, Idaho and Tennessee--and the District of Columbia intend to expand the system this year to include nonbanks, the CSBS said …

Market News (04/17/2012)

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MADISON, Wis.  (4/18/12)

  • U.S. housing starts decreased in March, while new permits--a proxy for future construction--hit their highest level since September 2008, indicating a consistent industry recovery has not taken hold yet, even while builders expect future demand (The Wall Street Journal, Bloomberg.com and Moody's Economy.com April 17). Starts fell 5.8% to a seasonally adjusted annual rate of 654,000--the least since October--the Commerce Department said Tuesday. The March drop-off was led by the volatile multifamily category. Although warmer weather may have sparked home construction at the beginning of this year, competition from a supply of cheap existing properties may be causing potential buyers to avoid purchasing new homes, Bloomberg said. That could result in home construction having minimal impact in helping the economy in 2012, Bloomberg added …
  • Weaker housing and labor markets boosted the probability in March that the U.S. will be in recession in six months to 25% from 22% in February, according to a Risk of Recession gauge created by Moody's Economy.com (April 17). March's gain is the first increase in the gauge since September. The modest uptick is not troublesome, because some slipping in the job market is a response to the mild winter, and the probability of recession still is relatively low, Moody's said. Although it is anticipated that the economy will expand below its potential in the second quarter, the downside risks to an economic recovery seem to be less of a factor, Moody's said …
  • Industrial production was unchanged in March for a second consecutive month, but rose at an annual rate of 5.4% in the first quarter of 2012, according to the Industrial Production and Capacity Utilization report released Tuesday by the Federal Reserve. Manufacturing output declined 0.2% in March, but jumped at a 10.4 % annual rate in the first quarter. The gain in manufacturing output in the first quarter was broadly based. Even excluding motor vehicles and parts, which surged at an annual rate of nearly 40%, manufacturing output moved up at an annual rate of 8.3%. Output for all but a few major industries increased 5% or more. In March, production at mines rose 0.2%, and the output of utilities gained 1.5%. However, for the quarter the output of utilities dropped at an annual rate of 13.8%, largely as a result of unseasonably warm temperatures, while the output of mining fell 5.4%. At 96.6% of its 2007 average, total industrial production for March was 3.8% above its year-earlier level. The rate of capacity use for total industry edged down to 78.6%, or 2.1 percentage points above its level from a year earlier but 1.7 percentage points below its long-run (1972-2011) average. For the Federal Reserve release, use the link ...
  • The International Monetary Fund (IMF) forecast for global economic growth is more upbeat after the organization saw faster U.S. growth and a cohesive European effort to address its debt crisis, the IMF said Tuesday (The New York Times and Bloomberg.com April 17). The U.S. economy should expand  2.1% in 2012, said the worldwide lending organization in its most recent economic report. Europe's economy is likely to contract 0.3%, while the worldwide economy is expected to grow 3.5% …

News of the Competition (04/16/2012)

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MADISON, Wis. (4/17/12)

  • As part of its ongoing endeavors to shed its inventory of distressed assets, Bank of America (BofA) is readying the sale of hundreds of foreclosed homes in bulk (American Banker April 13). BofA told institutional investors it is accepting bids on up to 500 mostly vacant, single-family properties in California, Florida, Georgia and several other states, according to a Thursday Reuters report, citing anonymous industry sources. When BofA acquired Countrywide Financial--which had been the biggest U.S. subprime lender--four years ago, it inherited a portion of those properties, the Banker said. BofA wants to take advantage of rising interest in those properties from big investment funds. Some are raising capital to purchase large groups of foreclosed homes, the sources said. Investors are mostly interested in renting out the homes to garner a consistent cash flow, rather than flipping them to make a quick profit, the sources added …
  • Urged on by regulators, Wells Fargo and JPMorgan Chase each reclassified more than $1 billion of mortgages--even though they remain in good shape--executives said Friday (American Banker April 13). It is anticipated that all U.S. financial institutions holding similar loans will conduct the same types of changes, after four federal agencies issued guidance this year on monitoring credit quality for second liens on residential properties, the Banker said. The regulatory agencies issued the guidance Jan. 31. They include: the Federal Reserve Board, Federal Deposit Insurance Corp., Office of the Comptroller of the Currency and National Credit Union Administration. The guidance concerned allowances for loss-estimation practices on second mortgages secured by one-to-four-family properties …
  • Surprisingly good first-quarter revenue growth reported Friday by JPMorgan Chase and Wells Fargo has mitigated slumps in recent quarters--with gains in their mortgage banking businesses aiding both banks (American Banker April 13). The two big banks also saw upgrades in their struggling investment banking businesses, the Banker said. Chase, which is the largest U.S. bank, and Wells Fargo, the fourth largest, are widely thought of as two of the strongest financial institutions. Similar revenue growth is anticipated from other banks when they release their quarterly financial reports during the next few weeks, the Banker said. In a related matter, Citigroup reported better-than-expected earnings Monday, even though they were down (The New York Times DealBook April 16). Citi's first-quarter net income dropped 2% to $2.9 billion, or 95 cents per share. Total revenue fell 2% from a year ago to $19.4 billion …
  • The new Jumpstart Our Business Startups (JOBS) Act, which could allow investors to remain under the radar on certain types of financial reporting, could also keep them from being aware of pending threats, said American Banker (April 13). President Barack Obama signed the JOBS Act into law earlier this month. It allows companies to deregister from the Securities and Exchange Commission if they have 1,200 or fewer shareholders. The previous threshold was 300. More than 500 banking companies could benefit from the change, say industry observers. Those companies have been actively searching for avenues to reduce costs during a difficult time for enhancing revenues, the Banker said ...

Market News (04/16/2012)

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MADISON, Wis. (4/17/12)

  • Automated Clearing House (ACH) payment volume in 2011 totaled more than 20.2 billion transactions, according to NACHA--The Electronic Payments Association, which manages the development, administration and governance of the ACH network (American Banker April 13). That amount is 4% higher than 2010. More online payments by consumers, additional native electronic payments (payments that start as electronic), and a rise in the use of the ACH network for vendor payments and business-to-business transactions caused the increase, NACHA said Thursday ...
  • U.S retail sales increased more than expected in March because consumers are spending more on home improvements and handling gasoline price increases well--spending more on gasoline and cars--indicating they still have confidence in the economic recovery (The Wall Street Journal, Bloomberg.com and Moody's Economy.com April 16). Sales rose 0.8% to $411.07 billion--a gain nearly three times as much as forecast, following a 1% gain in February, the Commerce Department said Monday. Year-over-year, sales jumped 6.5%.  Building supply stores--likely benefiting from unseasonably warm weather--recorded the strongest growth by a long shot, although the sales strength was broad-based, Moody's said. There were only a few weak areas, which included drug stores, restaurants and grocery stores, Moody's added …
  • Worldwide business confidence is slowly improving at a steady rate, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com April 16). Sentiment is at the same level it has been since last summer, right before the  U.S. Treasury debt ceiling imbroglio and renewed European debt crisis, Moody's said. Businesses are most positive about the views of current conditions and sales strength. However, they still are guarded when answering specific questions about hiring and investment, Moody's said. The most optimistic responders are businesses in South America, while the most pessimistic are Japanese businesses, Moody's added …

Market News (04/13/2012)

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MADISON, Wis. (4/16/12)

  • The cost of living in the U.S., as monitored by the consumer price index (CPI), rose at a slower rate in March than in February because escalating energy prices eased, giving credence to the predictions of some Federal Reserve policymakers that  inflation  will lessen (The Wall Street Journal and Bloomberg.com April 13). The CPI--which gauges how much consumers pay for everything from automobiles to food--increased a seasonally adjusted 0.3% from February and 2.7% from a year ago, the U.S. Labor Department said Friday. As the energy price push starts to lessen, inflation will slowly decelerate, Michael Carey, chief economist for North America at Credit Agricole CBS in New York, told Bloomberg. The Fed is more concerned about the labor market and economic growth than inflation, he added …
  • U.S. consumer confidence fell in April from a one-year high in March, according to the Thomson Reuters/University of Michigan Consumer Sentiment Index, because consumers' assessments of their financial situations improved (Bloomberg.com and Moody's Economy.com April 13). The index dipped to 75.7 from 76.2 in March. Gasoline costs that are close to $4 per gallon, a slowdown in hiring last month, and a drop in stock prices the past two weeks has dampened consumer optimism, Bloomberg said …
  • Servicers of the Home Affordable Modification Program (HAMP) finished 22,260 loan modifications in February--a 24% gain from January, according to a U.S. Treasury Department report (American Banker April 11). About 20% of February loan modifications involved a write-down of the principal amount of the loan, indicated the HAMP report released April 6. The Federal Housing Finance Agency said government-sponsored enterprises (GSE) Fannie Mae and Freddie Mac are responsible for 40% to 50% of all HAMP modifications. However, the GSE regulator does not allow principal reductions on loans guaranteed by Fannie and Freddie …

News of the Competition (04/13/2012)

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MADISON, Wis. (4/16/12)

  • The Treasury Department may finally have a way to finish its bank investments under the Troubled Asset Relief Program (TARP), as signaled by its recent auction of preferred shares in six banks, said the American Banker (April 12). Although the biggest U.S. banks repaid Treasury for TARP funds long ago, 348 institutions--most of which are small--still owe $12 billion to the Treasury. Last week's auction was part of Treasury's ongoing push to end TARP, Tim Massad, the department's assistant secretary for financial stability, said in a press release, adding that TARP's bank programs stabilized the financial sector and already have garnered a substantial profit for taxpayers …
  • U.S. banks are not seeing more deposit income, even though there has been a spike in consumer deposits (American Banker April 12). In 2011, bank deposits rose by $800 billion--to $10.2 trillion, but banks collected $2 billion less in deposit-account fees than they did in 2010, according to a report from Market Rates Insight. Banks have added more than $1.8 trillion in new deposits since 2007, but their fees accruing from deposit accounts have dropped by $5 billion, or 13%, to $34 billion as of Dec. 31. The main reason banks are collecting fewer fees is not necessarily because of new regulations governing interchange and overdraft fees on debit card transactions, Dan Geller, Market Rates Insight executive vice president, told the Banker. Rather, the larger impetus is customers are keeping a closer watch on their cash and avoiding payment of fees such as overdrafts, or surcharges at foreign ATMs, he added  …
  • Lloyd C. Blankfein, CEO of Goldman Sachs, saw his total compensation drop about 35% in 2011 to $12 million--in a year in which the company's stock nosedived 46.2%. Blankfein's package included a base salary of $2 million, a $3 million cash bonus and restricted stock valued at $7 million, according to a regulatory filing disclosed Friday. Blankfein's total compensation was nearly $19 million in 2010, including a $5.4 million cash bonus and stock with a current value of $7 million …

News of the Competition (04/12/2012)

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MADISON, Wis. (4/13/12)

  • When Fair Isaac (FICO) appointed William Lansing as its CEO in late January, he was tasked with bolstering revenue from FICO's credit-score division, which is facing escalating competition from third parties and its own credit bureau customers (American Banker April 11). FICO abruptly replaced five-year CEO Mark Greene with Lansing. FICO's credit scoring unit has seen its revenue drop 20% since 2008, while its reputation deteriorated …
  • Connecticut's Attorney General plans to hire a consultant to examine foreign exchange trades made by State Street (STT), a Boston-based custody bank (American Banker April 11). Attorney General George Jespen is looking for someone to provide expert testimony if the state sues STT, which is the custodian of Connecticut's $25 billion pension fund, Reuters reported Tuesday. Several states have accused STT and rival Bank of New York Mellon of overcharging pension funds on foreign exchange trades, the Banker said …

Market News (04/12/2012)

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MADISON, Wis. (4/13/12)

  • Initial claims for U.S. unemployment benefits steeply increased last week, another indication that the labor market seems to be losing steam (The Wall Street Journal, The New York Times and Bloomberg.com April 12). Claims rose 13,000 to a seasonally adjusted 380,000--the highest level since Jan. 28--the Labor Department said Thursday. Claims in the previous week were revised upward to 367,000 from a previously reported 357,000. The combined reports from the past two weeks suggest that labor market momentum is slowing, Sean Incremona, a senior economist with 4Cast Inc. in New York, told Bloomberg. However, that doesn't mean the overall improvement trend has stalled, he added. Meanwhile, continuing claims for unemployment benefits for the week ended March 31 declined 98,000--to 3.251 million from 3.349 million the  prior week (Moody's Economy.com April 12) …
  • U.S. consumer confidence held steady last week, close to a four-year high, with consumers saying their finances had improved, according to the Bloomberg Consumer Comfort Index (Bloomberg.com and Moody's Economy.com April 12). The index was -32.8 for the week ended April 8--second only to the prior week's -31.4, the highest level since March 2008. Also, households were the most positive about their financial resources since April 2008. It is possible now for households to pay down debt and simultaneously maintain spending because of employment gains and rising incomes, Bloomberg said. Although still at the highest levels in nearly a year, gasoline prices are stabilizing and may be boosting optimism that the worst of those rising prices has past, Bloomberg said …
  • Wholesale (producer) prices in the U.S.--excluding food and fuel--increased more than expected in March--spearheaded by a rise in costs of light trucks and soaps (Bloomberg.com and Moody's Economy.com April 12). The core producer price index rose 0.3% following a 0.2% increase the prior month, the Labor Department said Thursday. Economists had forecast a 0.2% gain in March, according to a Bloomberg News survey. Fuel costs rose at a slower rate last month, and with less inflationary pressures from the energy sector, producers will see less of a rationale to forward expenses to customers, who are dealing with slow growth in their incomes, Bloomberg said. In coming months, price increases are anticipated to resume at a modest rate, so long as there are no supply surprises or a significant hike in worldwide growth expectations, Moody's said …
  • With imports falling the most in three years, the U.S. trade deficit narrowed more than expected in February, reflecting less demand for Chinese products and the lowest amount of crude oil purchases in 15 years (Bloomberg.com and Moody's Economy.com April 12). The trade gap shrank 12% to $46 billion--the lowest level since October--from $52.5 billion in January, the Commerce Department said Thursday. Economists in a Bloomberg survey predicted a $51.8 billion deficit in February. U.S. foreign-goods purchases dropped 2.7%--the largest decrease since February 2009 …

Economy continues expansion says Fed Beige Book

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WASHINGTON (4/12/12)--The nation's economy continued to expand, growing at a "modest to moderate pace" from mid-February through late March, the Federal Reserve said in its monthly "Beige Book," for the third month in a row.

The Beige Book, prepared by the Federal Reserve Bank of Cleveland, is based on anecdotal reports from the 12 Federal Reserve Districts. Information was collected before April 2. 

All districts reported growth, with manufacturing continuing to expand in most districts, especially in automotive and high technology industries. Manufacturers were "somewhat concerned about rising petroleum prices." Demand for professional business services also showed modest to strong growth, said the Beige Book.

Reports on retail spending were positive, bolstered with unusually warm weather, the Fed said.  However, "while the near-term outlook for household spending was encouraging, contacts in several districts expressed concerns that rising gas prices could limit discretionary spending in months to come," it added.

New vehicle sales were strong or strengthening across most of the U.S. Tourism increased in most districts.  Residential real estate improved some, with many of the district contacts citing expansion in multi-family housing industry.

Banking conditions remained stable with modest improvements in demand for lending, said the report.  Demand for commercial and industrial loans remained steady while several districts reported an increase in commercial real estate lending activity.  Consumer lending remained stable or rose modestly across a few districts.  The Cleveland and Richmond Districts reported increased home equity and auto lending, while Chicago reported improved credit availability for auto loans and credit cards.  Several districts reported credit standards remain stable, but Richmond bankers were said to be offering easier terms to attract commercial borrowers. Several districts reported increased credit quality, with delinquencies continuing to decline and few problem loans reported.

Overall wage growth was "constrained," and overall price inflation was modest, said the Beige Book. Hiring was steady, but several districts reported difficulty in finding qualified workers for high-skill positions, it said.

To view the full report, use the link.

News of the Competition (04/11/2012)

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MADISON, Wis. (4/12/12)

  • In a cost-cutting move geared to elevate overall efficiency, Capital One Financial in McLean, Va., has cut nearly 500 assistant branch manager positions nationwide (American Banker April 10). Capital One operates nearly 1,000 branches in eight states and the District of Columbia. The $205 million asset company must become leaner to expand its branch network "in a challenging economic environment," a Capital One spokesman Tuesday told the Houston Business Journal. Increased marketing costs for one of the industry's most forceful advertisers caused the company's efficiency ratio to jump to 64.46% in the fourth quarter from 55.3% in the prior quarter. Affected employees could apply for other open positions with Capital One. Those who could not obtain new jobs received severance packages, said the Houston Business Journal
  • American International Group Inc. (AIG) plans to return to U.S. property investing, an about-face from several years of attempting to shrink its real estate business after it nearly collapsed and needed a government bailout in 2008 (The Wall Street Journal April 10). Until recently, AIG had been taking apart what once peaked as a $24 billion real estate portfolio worldwide to stay solvent and pay back government loans, the Journal said. However, AIG now is starting to develop strategies for new investments nationwide that will be put into operation later this year, the Journal said …

Market News (04/11/2012)

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MADISON, Wis. (4/12/12)

  • Prepaid card use in the U.S. increased 18% last year because consumers moved from traditional banking products such as high-fee checking accounts, according to a study released Wednesday by market research firm Javelin Strategy & Research (Bloomberg.com April 11). In 2011, roughly 13% of U.S. adults had prepaid cards, compared with 11% in 2010. Regulations that have caused the cost of checking and debit products to rise may be partially forcing the shift, Beth Robertson, Javelin director of payments research, told Bloomberg. Also, consumers are choosing prepaid cards as a budgeting tool, she added. Last year, about 88% of consumers had a checking account--a decline from 92% in 2010, the survey indicated. Consumers who had debit cards dropped to 67% from 74%, while those with debit cards fell to 66% from 78% …
  • U.S. mortgage applications declined 2.4% for the week ended April 6 from one week earlier, according to the Market Composite Index released Wednesday by the Mortgage Bankers Association (MBA). The index is part of MBA's Weekly Mortgage Applications Survey. On an unadjusted basis, the index decreased 2.1%. The Refinance Index dropped 3.1%. The seasonally adjusted Purchase Index fell 0.5 %. The unadjusted Purchase Index increased 0.1% and was 5.5% higher than the same week one year ago. There was no adjustment made for Good Friday. The refinance share of mortgage activity fell for the eighth consecutive week to 70.5% of total applications from 71.2%. That is the lowest refinance share since July 29. The adjustable-rate mortgage share of activity remained unchanged at 5.5% of total applications from the previous week. For the MBA report, use the link …

News of the Competition (04/10/2012)

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MADISON, Wis. (4/11/12)

  • Independent U.S. mortgage banks and mortgage subsidiaries of chartered banks made an average profit of $1,093 on each loan they originated in the fourth quarter, down from $1,263 per loan in the third quarter of 2011, according to the Mortgage Bankers Association's (MBA) Fourth Quarter  Mortgage Bankers Performance Report released Thursday. "The fourth-quarter 2011 results were mixed for mortgage bankers," said Marina Walsh, MBA associate vice president of industry analysis. "Mortgage volume increased in the fourth quarter, driven by heavier refinancing activity, translating into higher productivity. However, net secondary marketing income dropped to $4,355 per loan in the fourth quarter from $4,563 per loan in the third quarter, lowering overall profits." Seventy-two percent of the 300 companies that reported production data for the fourth-quarter report were independent mortgage companies. For the MBA report, use the link …
  • Small Business Lending Fund (SBLF) participants increased their fourth-quarter lending to small businesses by $1.3 billion--a 37% rise from the third quarter, the Treasury Department said Monday (American Banker April 9). SBLF participants to date reported boosting their lending  $4.8 billion over baseline levels--which is the average lending reported in the four quarters before the program began. Of the program's 332 participants, more than 68% have increased their lending at least 10%, per a Treasury report to Congress released Monday on the use of SBLF funds. Critics have contended that Treasury took too much time to get the program running, after it was enacted in September 2010 as a component of the Small Business Jobs Act, the Banker said. Treasury distributed only a small portion of the funds--roughly $4.6 billion--authorized by Congress, critics added …

Market News (04/10/2012)

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MADISON, Wis. (4/11/12)

  • For the first time in seven months, U.S. small businesses' confidence level fell because companies' worries about the sales outlook moderated their plans to hire more employees, according to the  National Federation of Independent Businesses' (NFIB) optimism index for March (Bloomberg.com and Moody's Economy.com April 10). The index dropped to 92.5 from a one-year high of 94.3 in February, with nine of the index's 10 components declining. Concerns that rising fuel costs again will hurt the economic recovery could dampen hiring plans. Payrolls grew less than expected last month, Bloomberg said. In March, the largest economy in the world added 120,000 jobs--the fewest in five months. Slow, steady improvement in the mood of the small-business sector was ended with the March survey results because business owners can't get beyond market uncertainties, William Dunkelberg, NFIB chief economist, said in a statement …
  • The U.S. experienced a slowly improving labor market in February, according to the Job Openings and Labor Turnover Survey (Moody's Economy.com April 10). The number of job openings in February inched up to roughly 3.5 million from about 3.48 million in January. Hiring fared slightly better, rising to 4.4 million from 4.2 million. Separations increased to 4.1 million from 4 million, but still stayed significantly below hires, Moody's said. Several indicators from first-time unemployment benefit claims show that companies are cutting fewer jobs, but hiring has slowed, causing worries, Moody's said …
  • The International Council of Shopping Centers (ICSC) chain store sales index increased 0.5% for the week ended April 7, aided by an earlier Easter holiday and boosting year-over-year growth up to 4.5%--the highest of the year, ICSC said (Moody's Economy.com April 10). The gain follows a 3.8% rise the prior week. In the latest week, Easter spending likely boosted traffic at mall stores, ICSC said. Warmer than normal weather also has helped sales, ICSC added  …

News of the Competition (04/09/2012)

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MADISON, Wis. (4/10/12)

  • Record demand for U.S. Treasuries is causing the supply of the safest securities in the world to dwindle. That, in turn, will keep yield low, irrespective of whether the Federal Reserve creates more stimulus to combat unemployment (Bloomberg.com April 9). Demand for Treasuries is being buoyed by skepticism about the U.S. economic recovery and indications that Europe's debt problems still remain, Bloomberg said. Buyers bid $3.19 for each dollar of the $538 billion in notes and bonds sold so far in 2012--the highest price since they started releasing data in 1992 and on track to surpass the high of $3.04 in 2011 …
  • Banks should be poised to report another robust round of mortgage earnings for the first quarter because extremely low home loan interest rates persisted, boosting mortgage origination volume (American Banker April 5). Profits derived from producing each loan also are hefty because of the high volume in this capacity-constrained industry, the Banker said. Since the middle of August, mortgage rates available to consumers have been more than 100 basis points higher than required by investors in the secondary market, the Banker noted …
  • Floyd E. Stoner, a former chief lobbyist with the American Bankers Association (ABA), was named by troubled Orrstown Bank in Shippensburg, Pa., to its board of directors (American Banker April 5). After 27 years with the trade group, Stoner retired from ABA on Dec. 31 and joined the board of the $1.5 billion asset bank on April 1, Orrstown said Thursday. He also has been nominated to serve on the board of Orrstown Financial Services--the bank's holding company--and will be up for election at the company's annual meeting in May. Escalating problems in Orrstown's loan portfolio resulted in a  $30 million fourth-quarter loss and the bank being served with an enforcement order requiring it to bolster its credit and underwriting operations  ...

Market News (04/09/2012)

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MADISON, Wis. (4/10/12)

  • Business confidence worldwide for the week ended April 6 is in step with a global economy that is growing at its potential, according to Moody's Analytics Survey of Business Confidence (Moody's Economy.com April 9). Confidence dipped to 25.5 from 26.2 the prior week. The most positive businesses are in South America, while Japanese businesses are the most negative. Sentiment worldwide is inching up and is roughly as high as it was last summer just before the resurgent European debt crisis and political squabbling about the U.S. Treasury debt ceiling, Moody's said. Businesses are most optimistic in their assessment of current business conditions, but still are guarded when answering specific questions about hiring and investment, Moody's said …
  • The cumulative sales, profits and employment in 2011 among members of the Standard & Poor's 500-stock index companies exceeded the totals in 2007 before the financial crisis and recession, according to The Wall Street Journal analysis of corporate financial reports (The Wall Street Journal April 9). However, many of the jobs added were overseas. Big companies put themselves on surer financial footing by severely cutting costs during the economic downturn and being cautious during the recovery, the Journal said ...
  • Work force centers nationwide that help the unemployed are being asked to do more with less because federal funds for job training and related services have dissipated (The New York Times April 8). U.S. employers added only 120,000 new jobs in March--the Labor Department said Friday. That amount is a disappointment after each of the prior three months saw nearly twice that level of job increases, the Times said. However, with 12.7 million people still looking for employment, the U.S. is spending less on work force training than it did in good times, the Times noted. The federal government was spending more than $2.1 billion per year (in today's dollars) at its peak in 2000. Now, annual spending has dwindled to roughly $1.2 billion …

Consumer borrowing rose in February declined at CUs

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WASHINGTON (4/9/12)--Consumers' borrowing increased $8.7 billion or 4.25%  during February to a total of $2.522 trillion, rising less than forecast because of a drop in consumers' credit card debt, reported the Federal Reserve's Consumer Credit report released Friday.

Economists surveyed by Bloomberg.com (April 6) had forecast a $12 billion increase in borrowing  during the month.

Credit union members borrowed  $224.6 billion in February, less than  the previous month's total of  $226.4 billion, but more than the $218.1 billion members borrowed during first quarter 2011, according to the report. 

Consumers' overall revolving credit, which includes credit cards, totaled $794.8 billion in February. That marked a decrease of $2.2 billion or 3.25% from January, which had seen a $3 billion decrease that month, said the Fed.

Revolving credit at credit unions totaled $36.7 billion, down from $37.3 billion in January but more than $35 billion in first quarter of 2011.

U.S. non-revolving credit, which includes student loans, auto loans and mobile homes, increased by 7.75% in February, to more than $1,723 trillion, from January's total of more than $1,712 trillion.

For credit unions, members who took out nonrevolving loans in February borrowed $187.9 billion, compared with $189.2 billion in January and $183.1 billion borrowed in first quarter of 2011.

The Fed's report doesn't include statistics related to home mortgages or other real-estate secured loans.

Market News (04/06/2012)

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MADISON, Wis. (4/9/12)

  • The economy added 120,000 jobs in March for the lowest gain in five months, said a Labor Department report last week. Surveys of economists had predicted increases of more than 200,000 jobs, so the lower-than-expected results prompted concerns that the jobs market recovery could be faltering (Bloomberg.com April 6). Warm weather probably caused some hiring to occur in January and February instead of waiting until March, which , Moody's Economy.com stated, made the three-month average of 212,000 additional jobs per month a more accurate way to view the job market. The Labor Department also revealed that Americans worked fewer hours and had lower weekly earnings than expected. Industries that contributed to lower-than-anticipated growth included the construction, retail and temporary help sectors, which are typically tied to the seasons (Moody's Economy.com April 6). Slow growth in employment and wages could hamper the economic recovery, since 70% of the U.S. economy is based on consumer spending. Unemployment decreased from 8.3% in February to 8.2% in March, its lowest level since January 2009 …
  • The Economic Cycle Research Institute's future inflation gauge for the U.S. fell slightly from the revised figure of 101.3 in February to 101.2 in March. The slim decrease in the inflation indicator could reflect that inflation is peaking at a rate that is unlikely to prove bothersome to the economy (Moody's Economy.com April 6). The March gauge is higher than the 98.8 average recorded in the second half of 2010 but is 3.5 points below the March 2011 level of 104.7 and remains near the middle of its range during the last two years …
  • The U.S. Monster Employment Index for March remained at its February level of 143. The index increased by 5% when compared with March 2011, but fell short of the unusually high one-year increase of 8.8% recorded in February due to the early arrival of warmer weather (Moody's Economy.com April 6). Growth occurred in March in occupations related to trade, transportation and mining while agriculture, other services and business/professional service industries had decreases. The index, which is based on help-wanted ads, is interpreted by Moody's Economy.com as indicating an ongoing recovery in the job market …

News of the Competition (04/06/2012)

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MADISON, Wis. (4/9/12)

  • Fifth Third Bancorp is selling the assets of 16 mutual funds to Touchstone Advisors, which is part of Western & Southern Financial Group in Cincinnati. Fifth Third also announced plans to sell $5 billion in money market funds to Federated Investors. The sales for an undisclosed price are expected to close in the third quarter (American Banker April 5). A Fifth Third representative stated the transactions will allow Fifth Third to focus on institutional clients and individuals in the ultra-high net worth group …
  • Rival traders claim that Bruno Iksil, a London-based trader for JPMorgan Chase & Co, is making such large trades in credit-derivative indexes that he may be distorting prices in the market (Bloomberg.com April 6). Investors use credit-derivative indexes when making trades that aim to profit from potential company defaults. Analysts and economists also use the indexes to evaluate risk in credit markets, while bondholders use indexes to provide balance for fixed-income holdings. Traders expressed concern that Iksil's activities could "break" some credit indexes by creating a disproportionate difference between the index price and the average price of credit-default exchanges on individual companies …

News of the Competition (04/05/2012)

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MADISON, Wis. (4/6/12)

  • The National Fair Housing Alliance (NFHA) intends to file administrative complaints against banks that allegedly failed to provide maintenance for foreclosed homes in African-American and Hispanic neighborhoods. NFHA, which is a consortium of more than 220 housing agencies and organizations, announced that it will file its first complaint alleging discrimination under the Fair Housing Act against a single bank on Tuesday with the Department of Housing and Urban Development. The group plans to file an additional complaint against another bank a week later with more complaints to follow this summer. An NFHA investigation that examined more than 1,000 homes held by six banks allegedly found that properties in minority neighborhoods were more likely to have unsecured doors and broken windows; accumulated mail or garbage; overgrown lawns and bushes; and damage to the exteriors such as obstructed gutters or damaged siding. The NFHA complaints aim to show a nationwide pattern of disparate treatment (American Banker April 4). The investigation's maintenance standards were based on best practices for maintenance from Freddie Mac and its real-estate owned division …
  • Regions Financial has repaid the $3.5 billion it received through the Troubled Asset Relief Program (TARP) to the U.S. Treasury Department. Regions represented the largest remaining financial institution in the program (American Banker April 4). TARP has received $263 billion so far in bank repayments, dividends, interest and other income, which means it has an $18 billion profit on its original investment of $245 billion. In addition to repaying the original TARP investment, Regions has paid $593 million in dividends to the Treasury, which still holds warrants to purchase Regions' common stock. About 350 of the 707 banks participating in TARP still owe funds to the program …
  • ING Mortgage will no longer offer broker-originated home loans. A spokesperson for Capital One, which owns ING Direct, stated the company exited the wholesale channel to concentrate on direct-to-consumer mortgage originations (American Banker April 4). ING's loan brokers can submit existing loan applications that have already been completed by consumers through May 3, with closing required to take place by July 2. The shift will not impact ING Direct mortgage customers or customers who have applied directly to the company for loans. Capital One purchased ING Direct in February …

Market News (04/05/2012)

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MADISON, Wis. (4/6/12)

  • Consumer confidence reached a four-year high last week in the Bloomberg Consumer Comfort Index. The Bloomberg index increased to -31.4 in the week that ended April 1, which compares to -31.4 the previous week and represents the best report since March 2008. An improving job market appears to have buoyed consumer confidence as unemployment claims fell and employers expanded hiring (Bloomberg.com April 5). Confidence improved in all survey segments: personal finances, the economy and the buying climate (Moody's Economy.com April 5). The Midwest and the South both showed gains in confidence, while confidence in the West and Northeast declined. People making more than $50,000 annually were more positive than most segments making under that amount. In a separate survey, The Conference Board said CEO confidence increased to 63 for first quarter 2012, compared to 49 for the fourth quarter 2011. Consumer-loan delinquencies reported by the American Bankers Association also declined to 2.49% for the fourth quarter 2011, compared with 2.59% in the preceding three months, with the decrease occurring in all 11 loan categories for the first time in eight years …
  • The number of U.S. job cuts decreased 8.8% in March from the same month one year earlier, according to the Challenger report provided by job-placement company Challenger, Gray & Christmas Inc. (Bloomberg.com April 5). While job cuts often slacken in the month of March, the 2012 decline was roughly two and a half times the average decline seen in that month during the previous 10 years (Moody's Economy.com April 5). A key factor was fewer cuts in government jobs, with job eliminations at government and nonprofit agencies declining 86% when the first quarter of 2012 is compared with the same period in 2011. Telecommunications companies had the greatest cuts in March at 4,089 jobs, followed by 3,733 layoffs in education. Hiring plans also increased in the March report, with employers planning to hire 12,390 workers, compared to 10,720 one month earlier …
  • Jobless claims fell to their lowest level in four years for the week ended March 31. The Labor Department reported that 6,000 fewer claims for U.S. unemployment benefits were filed, with total claims of 357,000 marking the lowest level of filings since April 2008. The number of people getting unemployment benefits declined by 16,000 to 3.34 million in the week ended March 24, while Americans receiving extended benefits through federal programs increased by 17,000 to 3.26 million for the week ended March 17. Among people eligible for benefits, the unemployment rate remained at 2.6%. Observers predicted slow, gradual improvement in the jobs market overall for the months ahead (Bloomberg.com and Moody's Economy.com April 5) …

News of the Competition (04/04/2012)

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MADISON, Wis. (4/5/12)

  • Banks' loan growth slowed in the first quarter due to lower demand among commercial and industrial borrowers. Business loan growth decreased from an annual rate of 17% in the fourth quarter of 2011 to 9% in the first quarter of 2012, based on balance sheet figures as of March 21. The shift marks the first decline in the rate of loan growth in 18 months. Banks that have continued to expand may have added new clients, but growth was often based on taking businesses from competitors and buying loans from European banks (American Banker April 3). Overall loan growth at domestically chartered commercial banks decreased from an annual rate of 4.1% in the fourth quarter to 1.3% in the first quarter, according to Federal Reserve data. Deposit growth was at 5.2% in the first quarter, maintaining its fourth quarter rate, while growth in assets increased its pace as commercial banks increased their holdings of securities and cash. Large businesses continue to exercise caution by holding on to record levels of cash …
  • GFI Mortgage Bankers announced plans to contest a Justice Department lawsuit alleging that the mortgage lender charged higher interest rates and fees to African-American and Hispanic borrowers regardless of their creditworthiness from 2005 to 2009. Many banks have settled similar lawsuits related to violations of the Fair Housing Act and Equal Credit Opportunity Act, including a recent $335 million settlement with Countrywide. The GFI lawsuit is based on the theory of "disparate impact," which claims fair lending laws are violated when a lender's policies have a disparate impact on a group of borrowers, even if that impact appears unintentional. Critics counter that the theory is based on faulty economic research (American Banker April 3). The Justice Department suit also alleges that GFI's practice of compensating lending officers with a percentage of loan profits created an incentive for discriminatory pricing …
  • Expiration dates, spending minimums and other rules are decreasing consumers' satisfaction with credit card rewards programs. The Capitol One Rewards Barometer survey revealed that 50% of about 1,000 consumers surveyed in February described rewards program as "very good" or "excellent," down from 55% in November. Only 47% were pleased by how quickly rewards can be redeemed, a drop from 52% three months earlier. Other survey responses indicated that consumers want a simpler process, with almost half saying they would be more likely to claim rewards if the process was easier.  Just 45% of consumers currently redeem rewards (American Banker April 3). Other options cited as ways to improve the experience included eliminating expiration dates, cited by 40%, and special merchant discounts, cited by 60%. Cash remains the most popular reward, selected by 45% of consumers, with gift cards moving up into second place at 32% and airline tickets dropping to third at 28%…
  • Bank of America (BofA) has added 45 small-business lenders in Georgia, 32, in North Carolina and 13 in South Carolina as it works toward its goal of having an additional 1,000 relationship bankers nationwide by mid-year.  Almost 800 small-business bankers have been hired so far, which helped BofA boost small-business loan originations in 2011 by 20% to $6.4 billion. Most new hires in Georgia went to Atlanta where businesses with less than 100 employees hire 54% of the work force and account for two-thirds of job growth (American Banker April 3). The remaining Georgia hires went to Savannah, Augusta and other markets. In North Carolina, the focus was on Charlotte, Raleigh-Durham and the Piedmont Triad region. Additional employees in South Carolina are aimed at Charleston, Columbia and Greenville-Spartanburg …

Market News (04/04/2012)

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MADISON, Wis. (4/5/12)

  • Credit card issuers may have difficulty convincing consumers that their private data are protected after Global Payments Inc. (GPI) disclosed that a security breach exposed sensitive information for up to 1.5 million credit card accounts. The GPI incident highlights the ongoing occurrence of large and small data breaches, despite temporary lulls in activity in 2010 and 2011 as the payments industry tightened security. The GPI hackers accessed magnetic stripe data that contain account numbers, but were unable to steal names, addresses or Social Security numbers. Observers say every security breach increases consumers' concerns about whether credit cards remain trustworthy (American Banker April 3). While retailers hit by fraud based on stolen account numbers could face the greatest financial risk, issuers bear the cost of soothing consumers and dealing with cardholders directly impacted by the breach and any resulting fraud  …
  • Employment at U.S. companies increased by 209,000 in March on top of a revised gain of 230,000 for February, said the ADP Employer Services Report. The ADP report indicated that manufacturers, construction companies and other goods-producing employers added 45,000 workers while service providers added 164,000 workers. The moderate growth in payrolls was seen as a positive indicator for the labor market and economy overall (Bloomberg.com April 4). An upcoming Labor Department report is expected to reflect the addition of 215,000 jobs for March, with unemployment remaining at 8.3% …
  • Mortgage applications increased 4.8% for the week ending March 30 in the Weekly Mortgage Applications Survey of the Mortgage Bankers Association (MBA). After six weeks of consecutive decreases, the refinance index increased 4% compared with one week ago. An MBA release said applications to buy a home are more than 2% above their level during the same period in 2011, while home purchase applications for conventional loans are 10% above the 2011 level. Applications for government loans rose by more than 10% for both purchases and refinancing, which is linked to increased Federal Housing Administration mortgage insurance premiums that took effect in April. Refinance activity fell to 71.2% of total applications, down from 71.9% one week earlier, for the lowest refinance share since July 2011. Adjustable-rate mortgage activity increased to 5.5% of total applications, up from 5.4% one week earlier …

Fed minutes indicate less interest in QE

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WASHINGTON (4/4/12)--The Federal Reserve's policymaking group  may be less likely to introduce another around of bond buys or asset purchases--known as quantitative easing--to assist the economy, according to minutes of its March 13 meeting, which the Fed released Tuesday afternoon.

The Federal Open Market Committee (FOMC) did not discuss at length any form of qualitative easing at the meeting, a fact that was reflected in the stock market as world stocks dropped within minutes of the news (Reuters and The Wall Street Journal April 3).

The minutes noted that the committee "is prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability.  A couple of [committee] members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate-consistent rate of 2% over the medium run," said the minutes.

Media reports indicated that this is a subtle shift in policy, with only  a  "couple " of FOMC members" expressing interest in qualitative easing at the meeting. The reports point out that at January's meeting, "a few" committee members indicated that the Fed could introduce more long-term securities before long while "a number of participants" said they were open to that idea if the economy lost ground  (MarketWatch, CBSNews.com, Reuters and The Wall Street Journal April 3).

The committee members  at the March meeting noted recent signs of slightly stronger growth.  "Members viewed the information on U.S. economic activity received over the intermeeting period as suggesting that the economy had been expanding moderately and generally agreed that the economic outlook, while a bit stronger overall, was broadly similar to that at the time of their January meeting," the minutes said. 

The document noted that  FOMC "members generally expected a moderate pace of economic growth over coming quarters, with gradual further declines in the unemployment rate."

FOMC members  agreed that  "for the period ahead …it would be appropriate to maintain the existing highly accommodative stance of monetary policy," the minutes said.

Nearly all the members agreed to indicate that the committee expects to maintain a "highly accommodative stance for monetary policy and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run are likely to warrant exceptionally low levels for the federal funds rate at least through 2014."

News of the Competition (04/03/2012)

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MADISON, Wis. (4/4/12)

  • Some small banks are considering adding or expanding student loans even while some national and regional banks are ending student loan programs. Peoples State Bank in Many, La., began making loans to Northwestern State University students in 2011-2012 (American Banker April 2). The $497 million asset bank is now discussing loan options with Tulane University and Louisiana State University. In contrast, U.S. Bancorp and First Financial Bankshares discontinued student lending, and JPMorgan Chase will limit student lending to current customers as of July. Issues that deter smaller banks from student lending include the federal government's activities as a direct lender; the inability to securitize loans; and U.S. Sen. Richard Durbin's (D-Ill.) proposed legislation that would make it possible to discharge private student loans through bankruptcy. The Consumer Financial Protection Bureau (CFPB) and the Department of Education will issue a joint report on student loans to Congress on July 21. The CFPB reports loans held by students currently total more than $1 trillion …
  • A majority of mobile banking users want mobile banking applications to offer technical support and advice, according to a survey conducted by Power Consulting, Boston, Mass. When asked what single improvement they most wanted, 60% of users asked for links or contact information for technical support. Users also cited difficulty navigating applications and showed a lack of awareness about mobile services such as remote deposit capture. When asked about desirable new features for mobile banking, 62% asked to store and maintain reward points and 61% wanted coupons or special offers. Just over half wanted to conduct debit transactions at a store or restaurant (American Banker April 2). Other responses included investing money in stocks or bonds, cited by 19%; applying for a loan, 16%; and purchasing a certificate of deposit, 16%. Person-to-person (P2P) mobile payments appeal to some users, with 34% saying it would be highly desirable to pay people with a mobile phone, while another 28% cited an "average" level of interest. The survey also showed mobile users' preference for electronic channels, with 70% preferring online banking as their primary channel; 16%, mobile banking; 9%, branch; 3%, telephone; and 2%, ATM …

Market News (04/03/2012)

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MADISON, Wis. (4/4/12)

  • Sales of repossessed properties are projected to rise 25% from the 2011 total of one million sales, but prices paid for foreclosed homes could drop as much as 10% in coming months. Falling prices are blamed on deterioration that occurred while vacant homes were held in limbo during state officials' investigations into foreclosure abuses (Bloomberg.com April 3). A March report by the Federal Reserve Bank of Cleveland showed homes that change hands within a year of foreclosure sell for about 35% below lenders' valuations, but that loss is nearly 60% if the property is sold two years after foreclosure. The lower prices paid for foreclosed homes are expected to drive down the S&P/Case-Shiller home price index by 5% to 10% in 2012. The Case-Shiller index has dropped 34% since 2006 to reach its lowest level in almost 10 years, although the rate of decline slowed in recent months. The Cleveland Federal Reserve report said one-fourth of homes in long-term foreclosure may require bulldozing because many are vacant and marred by homeowners' inability to afford repairs or improvements …
  • Sales of investment and vacation homes surged in 2011. A National Association of Realtors (NAR) release reported investment-home sales increased by 64.5% to total 1.23 million in 2011, which compares to 749,000 in 2010. Vacation-home sales increased 7% to reach 502,000, compared with 469,000 in 2010. Meanwhile, owner-occupied home sales decreased 15.5% to 2.78 million. Overall, vacation-home sales made up 11% of all transactions and investment-home sales made up 27% of purchases. New owners paid cash in 49% of investment-home sales and 42% of vacation-home sales. Half of all investment-home sales and 39% of vacation-home sales involved distressed properties, NAR said. Investment homes typically are located in suburban areas, while vacation properties are in rural or suburban areas …
  • Auto manufacturers reported significant increases in American vehicle sales in March despite rising gas prices (The New York Times April 3). Sales increases were reported in March by Chrysler Group, which saw a 34% boost in car and truck sales; General Motors (GM), 12%; Ford, 5%; Hyundai, 13%; Nissan, 13%; and Volkswagen, 35%. GM noted that small cars were responsible for the most expansion, with the company selling a record 100,000 vehicles with a fuel-economy rating of 30 miles per gallon or better. Analysts projected combined sales would top 1.4 million vehicles in March, increasing 15% over one year earlier for the highest monthly sales since 2007. Factors cited for higher sales included warm weather, lower unemployment, new models and access to financing. Sales for the full year are projected to exceed 14 million vehicles, compared to 12.8 million in 2011 and 11.6 million in 2010 …

News of the Competition (04/02/2012)

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MADISON, Wis. (4/3/12)

  • U.S. Bank has stopped making new student loans while JPMorgan Chase will limit student lending to existing customers beginning in July (American Banker March 30). U.S. Bank cited its 1.5% student lending market share as too small to be meaningful. JPMorgan Chase pointed to a continuing decline in the student loan market and laid off 24 employees who contacted colleges to sell student loans. One observer claimed some private lenders are concerned by indications that the Consumer Financial Protection Bureau (CFPB) will take a greater role in regulating student loans, including accepting complaints online. Meanwhile, Discover Financial Services and other lenders are increasing student loan activity. Outstanding private and federal student loans currently total more than $1 trillion, according to CFPB figures …
  • A federal judge denied a Securities and Exchange Commission (SEC) motion that would have forced Wells Fargo to comply with an administrative subpoena related to documents that are part of an investigation of mortgage-backed securities. Instead, the judge in the Northern District Court in San Francisco ordered the SEC and Wells Fargo to meet to resolve the dispute (American Banker March 30). Wells Fargo claims it has already turned over more than 750,000 pages of documents in the SEC investigation. The SEC is examining whether Wells Fargo misrepresented information in the securitization and sale of residential loans to investors …
  • Ohio Gov. John R. Kasich wants to reduce taxes for about 230 community banks that operate in the state. Kasich has proposed replacing both the corporate franchise tax and dealers-in-intangibles tax with a financial institutions tax of 0.8 cent per dollar on the first $500 million in equity and 0.25 cent per dollar for any remaining equity (American Banker March 30). The switch could reduce taxes for small banks by as much as 39%. The "revenue-neutral" proposal would replace lost revenue from small banks by closing loopholes that lessen taxes for large banks …
  • A poll revealed mixed feelings among American Banker readers toward potential federal legislation on mobile payments. The survey's largest group was opposed to federal legislation, a position taken by 40% of respondents. In contrast, 26% responded that legal standards for security and consumer protection would be helpful. More than one-fourth of respondents, or 26%, signaled that whether legislation would help or hinder depends on the nature of the legislation. Congress held an initial hearing on mobile payments in late March (American Banker March 30) …

Market News (04/02/2012)

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MADISON, Wis. (4/3/12)

  • The U.S. Commerce Department reported an unanticipated drop in U.S. construction spending in February (Bloomberg.com April 2). The 1.1% decline came on top of a revised 0.8% drop in January, with both monthly decreases exceeding earlier economists' estimates in Bloomberg surveys. Factors that dampened construction activity include the potential for additional foreclosures; sluggish home prices that discouraged builders from launching new projects; and budget cutbacks by local, state and federal governments. Private construction declined 0.8% in February due to decreases in non-residential projects. In the private residential market, home improvement spending went up 1.2% but was countered by decreased homebuilding. Public spending decreased 1.7% for the month. The Commerce Department reported that construction spending increased 7.4% for the 12 months ending in February …
  • Manufacturing activity increased in March based on the Institute for Supply Management (ISM) index of national factory activity. The index increased from 52.4 in February to 53.4 in March, beating economists' predictions of 53. The gauge of new orders was slightly weaker for March, declining from 54.9 to 54.5. Manufacturing increases were fueled by rising auto sales, ongoing corporate equipment purchases and replenishing inventory. Growth could be slowed by lower demand from overseas companies. In China, activity is growing slightly, while euro-zone manufacturing continued its eight-month decline. In the U.S., production is at a three-month high while the gauge of factory employment increased to 56.1, its highest level since June and an increase from 53.2 one month earlier (Bloomberg.com and Reuters April 2) …