JPMorgan Chase faced an onslaught of new rules this year as Biden appointees pursued the most significant slate of regulations since the aftermath of the 2008 financial crisis.

Those efforts threaten tens of billions of dollars in industry revenue by slashing fees that banks impose on credit cards and overdrafts and radically revising the capital and risk framework they operate in. The fate of all of those measures is at risk if Trump is elected.

Trump is expected to nominate appointees for key financial regulators, including the CFPB, the Securities and Exchange Commission, the Office of the Comptroller of the Currency and Federal Deposit Insurance Corporation that could result in a weakening or killing off completely of the myriad rules in play.

“The Biden administration’s regulatory agenda across sectors has been very ambitious, especially in finance, and large swaths of it stand to be rolled back by Trump appointees if he wins,” said Tobin Marcus, head of U.S. policy at Wolfe Research.

Bank CEOs and consultants say it would be a relief if aspects of the Biden era — an aggressive CFPB, regulators who discouraged most mergers and elongated times for deal approvals — were dialed back.

“It certainly helps if the president is Republican, and the odds tilt more favorably for the industry if it’s a Republican sweep” in Congress, said the CEO of a bank with nearly $100 billion in assets who declined to be identified speaking about regulators.

Still, some observers point out that Trump 2.0 might not be as friendly to the industry as his first time in office.

Trump’s vice presidential pick, Sen. JD Vance, of Ohio, has often criticized Wall Street banks, and Trump last month began pushing an idea to cap credit card interest rates at 10%, a move that if enacted would have seismic implications for the industry.

Bankers also say that Harris won’t necessarily cater to traditional Democratic Party ideas that have made life tougher for banks. Unless Democrats seize both chambers of Congress as well as the presidency, it may be difficult to get agency heads approved if they’re considered partisan picks, experts note.

“I would not write off the vice president as someone who’s automatically going to go more progressive,” said Lindsey Johnson, head of the Consumer Bankers Association, a trade group for big U.S. retail banks.

— Hugh Son

Inflation Reduction Act.

Harris hasn’t been as vocal a supporter of EVs lately amid slower-than-expected consumer adoption of the vehicles and consumer pushback. She has said she does not support an EV mandate such as the Zero-Emission Vehicles Act of 2019, which she cosponsored during her time as a senator, that would have required automakers to sell only electrified vehicles by 2040. Still, auto industry executives and officials expect a Harris presidency would be largely a continuation, though not a copy, of the past four years of Biden’s EV policy.

They expect some potential leniency on federal fuel economy regulations but minimal changes to the billions of dollars in incentives under the IRA.

— Mike Wayland

more than $4 trillion a year.

Despite spending more on health care than any other wealthy country, the U.S. has the lowest life expectancy at birth, the highest rate of people with multiple chronic diseases and the highest maternal and infant death rates, according to the Commonwealth Fund, an independent research group.

Meanwhile, roughly half of American adults say it is difficult to afford health-care costs, which can drive some into debt or lead them to put off necessary care, according to a May poll conducted by health policy research organization KFF. 

Both Harris and Trump have taken aim at the pharmaceutical industry and proposed efforts to lower prescription drug prices in the U.S., which are nearly three times higher than those seen in other countries. 

But many of Trump’s efforts to lower costs have been temporary or not immediately effective, health policy experts said. Meanwhile, Harris, if elected, can build on existing efforts of the Biden administration to deliver savings to more patients, they said.

Harris specifically plans to expand certain provisions of the IRA, part of which aims to lower health-care costs for seniors enrolled in Medicare. Harris cast the tie-breaking Senate vote to pass the law in 2022. 

Her campaign says she plans to extend two provisions to all Americans, not just seniors: a $2,000 annual cap on out-of-pocket drug spending and a $35 limit on monthly insulin costs. 

Harris also intends to accelerate and expand a provision allowing Medicare to directly negotiate drug prices with manufacturers for the first time. Drugmakers fiercely oppose those price talks, with some challenging the effort’s constitutionality in court. 

Trump hasn’t publicly indicated what he intends to do about IRA provisions.

Some of Trump’s prior efforts to lower drug prices “didn’t really come into fruition” during his presidency, according to Dr. Mariana Socal, a professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health.

For example, he planned to use executive action to have Medicare pay no more than the lowest price that select other developed countries pay for drugs, a proposal that was blocked by court action and later rescinded. 

Trump also led multiple efforts to repeal the Affordable Care Act, including its expansion of Medicaid to low-income adults. In a campaign video in April, Trump said he was not running on terminating the ACA and would rather make it “much, much better and far less money,” though he has provided no specific plans. 

He reiterated his belief that the ACA was “lousy health care” during his Sept. 10 debate with Harris. But when asked he did not offer a replacement proposal, saying only that he has “concepts of a plan.”

— Annika Kim Constantino

Paramount Global and Skydance Media is set to move forward, with plans to close in the first half of 2025, many in media have said the Biden administration has broadly chilled deal-making.

“We just need an opportunity for deregulation, so companies can consolidate and do what we need to do even better,” Warner Bros. Discovery CEO David Zaslav said in July at Allen & Co.’s annual Sun Valley conference.

Media mogul John Malone recently told MoffettNathanson analysts that some deals are a nonstarter with this current Justice Department, including mergers between companies in the telecommunications and cable broadband space.

Still, it’s unclear how the regulatory environment could or would change depending on which party is in office. Disney was allowed to acquire Fox Corp.’s assets when Trump was in office, but his administration sued to block AT&T’s merger with Time Warner. Meanwhile, under Biden’s presidency, a federal judge blocked the sale of Simon & Schuster to Penguin Random House, but Amazon’s acquisition of MGM was approved. 

“My sense is, regardless of the election outcome, we are likely to remain in a similar tighter regulatory environment when looking at media industry dealmaking,” said Marc DeBevoise, CEO and board director of Brightcove, a streaming technology company.

When major media, and even tech, assets change hands, it could also mean increased scrutiny on those in control and whether it creates bias on the platforms.

“Overall, the government and FCC have always been most concerned with having a diversity of voices,” said Jonathan Miller, chief executive of Integrated Media, which specializes in digital media investment.
“But then [Elon Musk’s purchase of Twitter] happened, and it’s clearly showing you can skew a platform to not just what the business needs, but to maybe your personal approach and whims,” he said.

Since Musk acquired the social media platform in 2022, changing its name to X, he has implemented sweeping changes including cutting staff and giving “amnesty” to previously suspended accounts, including Trump’s, which had been suspended following the Jan. 6, 2021, Capitol insurrection. Musk has also faced widespread criticism from civil rights groups for the amplification of bigotry on the platform.

Musk has publicly endorsed Trump, and was recently on the campaign trail with the former president. “As you can see, I’m not just MAGA, I’m Dark MAGA,” Musk said at a recent event. The billionaire has raised funds for Republican causes, and Trump has suggested Musk could eventually play a role in his administration if the Republican candidate were to be reelected.

During his first term, Trump took a particularly hard stance against journalists, and pursued investigations into leaks from his administration to news organizations. Under Biden, the White House has been notably more amenable to journalists. 

Also top of mind for media executives — and government officials — is TikTok.

Lawmakers have argued that TikTok’s Chinese ownership could be a national security risk.

Earlier this year, Biden signed legislation that gives Chinese parent ByteDance until January to find a new owner for the platform or face a U.S. ban. TikTok has said the bill, the Protecting Americans From Foreign Adversary Controlled Applications Act, which passed with bipartisan support, violates the First Amendment. The platform has sued the government to stop a potential ban.

While Trump was in office, he attempted to ban TikTok through an executive order, but the effort failed. However, he has more recently switched to supporting the platform, arguing that without it there’s less competition against Meta’s Facebook and other social media.

— Lillian Rizzo and Alex Sherman

Washington Post previously reported.

In keeping with the campaign’s more labor-friendly approach, Harris is also pledging to eliminate the tip credit: In 37 states, employers only have to pay tipped workers the minimum wage as long as that hourly wage and tips add up to the area’s pay floor. Since 1991, the federal pay floor for tipped wages has been stuck at $2.13.

“In the short term, if [restaurants] have to pay higher wages to their waiters, they’re going to have to raise menu prices, which is going to lower demand,” said Michael Lynn, a tipping expert and Cornell University professor.

— Amelia Lucas

has said she and Biden “reject the false choice that suggests we can either protect the public or advance innovation.” Last year, the White House issued an executive order that led to the formation of the Commerce Department’s U.S. AI Safety Institute, which is evaluating AI models from OpenAI and Anthropic.

Trump has committed to repealing the executive order.

A second Trump administration might also attempt to challenge a Securities and Exchange Commission rule that requires companies to disclose cybersecurity incidents. The White House said in January that more transparency “will incentivize corporate executives to invest in cybersecurity and cyber risk management.”

Trump’s running mate, Vance, co-sponsored a bill designed to end the rule. Andrew Garbarino, the House Republican who introduced an identical bill, has said the SEC rule increases cybersecurity risk and overlaps with existing law on incident reporting.

Also at stake in the election is the fate of dealmaking for tech investors and executives.

With Lina Khan helming the FTC, the top tech companies have been largely thwarted from making big acquisitions, though the Justice Department and European regulators have also created hurdles.

Tech transaction volume peaked at $1.5 trillion in 2021, then plummeted to $544 billion last year and $465 billion in 2024 as of September, according to Dealogic.

Many in the tech industry are critical of Khan and want her to be replaced should Harris win in November. Meanwhile, Vance, who worked in venture capital before entering politics, said as recently as February — before he was chosen as Trump’s running mate — that Khan was “doing a pretty good job.”

Khan, whom Biden nominated in 2021, has challenged Amazon and Meta on antitrust grounds and has said the FTC will investigate AI investments at Alphabet, Amazon and Microsoft.

— Jordan Novet

]]> https://thenewshub.in/2024/10/13/trump-or-harris-here-are-the-2024-stakes-for-airlines-banks-evs-health-care-and-more/feed/ 0 https://thenewshub.in/2024/10/11/jamie-dimon-says-geopolitical-risks-are-surging-conditions-are-treacherous-and-getting-worse/ https://thenewshub.in/2024/10/11/jamie-dimon-says-geopolitical-risks-are-surging-conditions-are-treacherous-and-getting-worse/?noamp=mobile#respond Fri, 11 Oct 2024 18:19:23 +0000 https://thenewshub.in/2024/10/11/jamie-dimon-says-geopolitical-risks-are-surging-conditions-are-treacherous-and-getting-worse/

JPMorgan Chase CEO and Chairman Jamie Dimon speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, U.S., December 6, 2023.

Evelyn Hockstein | Reuters

JPMorgan Chase CEO Jamie Dimon sees risks climbing around the world amid widening conflicts in the Middle East and with Russia’s invasion of Ukraine showing no signs of abating.

“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said Friday in the bank’s third-quarter earnings release.

“There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,” he said.

The international order in place since the end of World War II is unraveling in light of conflicts in the Middle East and Ukraine, rising U.S.-China tensions, and the risk of “nuclear blackmail” from Iran, North Korea and Russia, Dimon said last month during a fireside chat held at Georgetown University.

“It’s ratcheting up, folks, and it takes really strong American leadership and Western world leaders to do something about that,” Dimon said at Georgetown. “That’s my No. 1 concern, and it dwarves any I’ve had since I’ve been working.”

The ongoing conflict between Israel and Hamas recently hit the one-year mark since Hamas’ attack on Oct. 7, 2023, sparked war, and there have been few signs of it slowing down. Tens of thousands of people have been killed as the conflict has broadened into fighting on multiple fronts, including with Hezbollah and Iran.

At least 22 people were killed and more than 100 injured in Beirut from Israeli airstrikes on Thursday. Iran launched more than 180 missiles against Israel on Oct. 1, and worries have risen that an Israeli retaliation could target Iranian oil facilities.

Meanwhile, the Russian government approved a draft budget last week that boosted defense spending by 25% from 2024 levels, a sign that Russia is determined to continue its invasion of Ukraine, analysts say.

Dimon also said Friday that he remained wary about the future of the economy, despite signs that the Federal Reserve has engineered a soft landing.

“While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world,” Dimon said. “While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.” 

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]]> https://thenewshub.in/2024/10/11/jamie-dimon-says-geopolitical-risks-are-surging-conditions-are-treacherous-and-getting-worse/feed/ 0 https://thenewshub.in/2024/10/11/jpmorgan-chase-shares-pop-5-after-topping-estimates-on-better-than-expected-interest-income/ https://thenewshub.in/2024/10/11/jpmorgan-chase-shares-pop-5-after-topping-estimates-on-better-than-expected-interest-income/?noamp=mobile#respond Fri, 11 Oct 2024 15:27:04 +0000 https://thenewshub.in/2024/10/11/jpmorgan-chase-shares-pop-5-after-topping-estimates-on-better-than-expected-interest-income/

JPMorgan Chase posted third-quarter results that topped estimates for profit and revenue as the company generated more interest income than expected.

Here’s what the company reported:

• Earnings: $4.37 a share vs. $4.01 a share LSEG estimate
• Revenue: $43.32 billion, vs. $41.63 billion estimate

JPMorgan said profit fell 2% from a year earlier to $12.9 billion, while revenue climbed 6% to $43.32 billion. Net interest income rose 3% to $23.5 billion, exceeding the $22.73 billion StreetAccount estimate, on gains from investments in securities and loan growth in its credit card business.

CEO Jamie Dimon touted the firm’s quarterly results in a statement, while also addressing regulators’ sweeping efforts to force banks to hold more capital and expressing concern about rising geopolitical risks, saying that conditions are “treacherous and getting worse.”

“We believe rules can be written that promote a strong financial system without causing undue consequences for the economy,” Dimon said, addressing the pending regulatory changes. “Now is an excellent time to step back and review the extensive set of existing rules – which were put in place for a good reason – to understand their impact on economic growth” and the health of markets, he said.

The bank’s results were also helped by its Wall Street division. Investment banking fees climbed 31% to $2.27 billion in the quarter, exceeding the $2.02 billion estimate.

Fixed income trading generated $4.5 billion in revenue, unchanged from a year earlier but topping the $4.38 billion StreetAccount estimate. Equities trading jumped 27% to $2.6 billion, edging out the $2.41 billion estimate, according to StreetAccount.

The company also raised its full-year 2024 guidance for net interest income from the previous quarter, saying that NII would hit roughly $92.5 billion this year, up from the previous $91 billion guidance. Annual expenses are projected at about $91.5 billion, down from the earlier $92 billion guidance.

Shares rose 5% in midday trading.

JPMorgan’s provision for credit losses in the quarter was $3.1 billion, worse than the $2.91 billion estimate, as the company had $2.1 billion in charge-offs and built reserves for future losses by $1 billion.

Consumers are “fine and on strong footing” and the increase in reserves was because the bank is growing its book of credit card loans, not because the consumer is weakening, CFO Jeremy Barnum told reporters Friday.

The biggest American bank has thrived in a rising rate environment, posting record net income figures since the Fed started hiking rates in 2022.

Now, with the Fed cutting rates, there are questions as to how JPMorgan will navigate the change. Like other big banks, its margins may be squeezed as yields on interest-generating assets like loans fall faster than its funding costs.

Last month, JPMorgan dialed back expectations for 2025 net interest income and expenses. On Friday, Barnum reiterated the bank’s view that NII was headed lower before rebounding “in the future.”

The third-quarter outperformance in NII was “a bit of a blip” that was the result of “intersecting trends that happen to net out” to an increase, not a sustainable trend, he said.

Shares of JPMorgan have climbed about 25% this year before Friday, exceeding the 20% gain of the KBW Bank Index.

Wells Fargo also released quarterly results Friday, while Bank of America, Goldman Sachs, Citigroup and Morgan Stanley report next week.

]]> https://thenewshub.in/2024/10/11/jpmorgan-chase-shares-pop-5-after-topping-estimates-on-better-than-expected-interest-income/feed/ 0 https://thenewshub.in/2024/10/10/the-fed-is-finally-cutting-rates-but-banks-arent-in-the-clear-just-yet/ https://thenewshub.in/2024/10/10/the-fed-is-finally-cutting-rates-but-banks-arent-in-the-clear-just-yet/?noamp=mobile#respond Thu, 10 Oct 2024 18:57:42 +0000 https://thenewshub.in/2024/10/10/the-fed-is-finally-cutting-rates-but-banks-arent-in-the-clear-just-yet/

Federal Reserve Board Chairman Jerome Powell holds a press conference following a two-day meeting of the Federal Open Market Committee on interest rate policy in Washington, U.S., September 18, 2024. REUTERS/Tom Brenner

Tom Brenner | Reuters

Falling interest rates are usually good news for banks, especially when the cuts aren’t a harbinger of recession.

That’s because lower rates will slow the migration of money that’s happened over the past two years as customers shifted cash out of checking accounts and into higher-yielding options like CDs and money market funds.

When the Federal Reserve cut its benchmark rate by half a percentage point last month, it signaled a turning point in its stewardship of the economy and telegraphed its intention to reduce rates by another 2 full percentage points, according to the Fed’s projections, boosting prospects for banks.

But the ride probably won’t be a smooth one: Persistent concerns over inflation could mean the Fed doesn’t cut rates as much as expected and Wall Street’s projections for improvements in net interest income — the difference in what a bank earns by lending money or investing in securities and what it pays depositors — may need to be dialed back.

“The market is bouncing around based on the fact that inflation seems to be reaccelerating, and you wonder if we will see the Fed pause,” said Chris Marinac, research director at Janney Montgomery Scott, in an interview. “That’s my struggle.”

So when JPMorgan Chase kicks off bank earnings on Friday, analysts will be seeking any guidance that managers can give on net interest income in the fourth quarter and beyond. The bank is expected to report $4.01 per share in earnings, a 7.4% drop from the year-earlier period.

president said that expectations for NII next year were too high, without giving further details. It’s a warning that other banks may be forced to give, according to analysts.

“Clearly, as rates go lower, you have less pressure on repricing of deposits,” JPMorgan President Daniel Pinto told investors. “But as you know, we are quite asset sensitive.”

There are offsets, however. Lower rates are expected to help the Wall Street operations of big banks because they tend to see greater deal volumes when rates are falling. Morgan Stanley analysts recommend owning Goldman Sachs, Bank of America and Citigroup for that reason, according to a Sept. 30 research note.

Morgan Stanley analysts upgraded their ratings on US Bank and Zions last month, while cutting their recommendation on JPMorgan to neutral from overweight.  

Bank of America and Wells Fargo have been dialing back expectations for NII throughout this year, according to Portales Partners analyst Charles Peabody. That, in conjunction with the risk of higher-than-expected loan losses next year, could make for a disappointing 2025, he said.

“I’ve been questioning the pace of the ramp up in NII that people have built into their models,” Peabody said. “These are dynamics that are difficult to predict, even if you are the management team.”

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]]> https://thenewshub.in/2024/10/10/the-fed-is-finally-cutting-rates-but-banks-arent-in-the-clear-just-yet/feed/ 0 https://thenewshub.in/2024/10/09/govt-to-turn-full-focus-on-large-drt-cases-move-smaller-ones-to-lok-adalats/ https://thenewshub.in/2024/10/09/govt-to-turn-full-focus-on-large-drt-cases-move-smaller-ones-to-lok-adalats/?noamp=mobile#respond Wed, 09 Oct 2024 00:00:05 +0000 https://thenewshub.in/2024/10/09/govt-to-turn-full-focus-on-large-drt-cases-move-smaller-ones-to-lok-adalats/

The Centre plans to pursue only high-value cases—where banks’ claims are more than ₹100 crore—in the tribunals, according to two people aware of the development. Such cases will be aggressively pushed to get early order from the tribunals.

As for low-value cases, they will be closed or withdrawn, the first person cited above said. These are cases that have been pending for long, where the default amount is low, and where the transaction cost of pursuing them is higher than the recovery itself.

Some low-value cases may even be moved to Lok Adalats or other frameworks devised by banks with willing borrowers, the people cited above added on condition of anonymity.

To be sure, government data shows that more than 75% of pending cases in DRTs are low-value ones, which involve claim amounts between ₹20 lakh (the jurisdictional value for reference of cases to DRTs) and ₹1 crore. Withdrawal of such cases from the tribunal framework would significantly ease the load on DRTs.

As part of this plan, the Union finance ministry has asked state-run banks to prepare two lists of debtor entities to separate high-value cases from low-value ones, according to the first person cited above.

Also read | Supreme Court pulls up finance ministry for burdening debt recovery tribunals

Banks would also put in place a monitoring and oversight mechanism for efficient management of these high-value pending cases in DRTs while the tribunals itself have been asked to the process more effective and less time consuming, the first person added.

Queries sent to the finance ministry and department of financial services remained unanswered till press time.

Big-sized problem

More than 200,000 cases are awaiting judgement at different DRTs involving claim amounts of an aggregate value of ₹18 trillion, according to data from the finance ministry.

About 50,000-60,000 new cases involving claim amounts of around ₹4 trillion get added every year while DRTs on average have been able to close only about 30,000 cases per year for the past five years.

“A resolution-based approach and not being solely focused on maximising the recovery is required to be adopted for resolution of large cases,” said Divyanshu Pandey, partner at law firm JSA Advocates & Solicitors, adding that this requires assessing whose skin is in the game and whether efficient resources and strategy are being deployed by public sector banks to deal with such cases.

To be sure, government data shows that more than 75% of pending cases in DRTs are low-value ones, which involve claim amounts between ₹20 lakh (the jurisdictional value for reference of cases to DRTs) and ₹1 crore.

“This needs to be complemented by improving the infrastructure at DRTs, strengthening the DRT benches and the legal teams of the banks,” Pandey said.

Currently, there are 39 DRTs and five DRATs (debt recovery appellate tribunals) with each tribunal addressing around 900 cases annually for the past five years while more than 1,500 fresh cases were getting added to them every year.

Also read | Government considers tweaks to reduce huge backlog at debt recovery tribunals

Government data shows that recovery through DRTs stood at ₹12,879 crore in FY22, ₹7,669 crore in FY23 and ₹11,117 crore in FY24.

Mukesh Chand, senior counsel at law firm Economic Laws Practice said that banks often file cases in DRTs where recovery is unlikely, especially in situations where there is no security or the security has been disposed of, leaving little to enforce through decrees. As a result, these cases remain unresolved, contributing to the backlog.

“Also, while the banks do prudential write-offs of cases, there is no actual write-off and these accounts also remain in the books (though not accounted). Unless the banks also have a clear policy of actual write-offs, such cases would keep pending in DRTs without recovery,” he added.

A prudential or technical write-off is the amount of non-performing assets (NPAs) or loans that are outstanding in the books of the branches, but have been written off at the head office level.

The NCLT-IBC angle

Another issue that is keeping DRTs occupied with cases that run endlessly in the tribunals is shift in focus of banks to NCLTs for cases involving larger companies and complex resolutions under the Insolvency and Bankruptcy Code (IBC). DRTs now mostly handle routine filings to protect limitation periods or cases that do not qualify for IBC. This lack of focus on cases with DRTs is often responsible for delays in getting orders on payment default.

In eight years since 2016, 31,394 corporate debtors involving a value of ₹13.9 trillion have been disposed of under IBC, as of March 2024. Comparatively, over the past five financial years, ₹72,708 crore has been recovered by scheduled commercial banks through DRTs from around 150,000 cases.

Also read | Banks to take Future to debt recovery tribunal

“Reduction of cases pending in DRTs will have a direct impact on the balance sheets of banks,” said Abhishek Swaroop, Partner at Saraf and Partners, adding that banks will be able to improve recovery rates, liquidity and financial health, and lend more effectively.

“Importantly, quicker resolutions will also reduce the legal and administrative costs associated with prolonged litigation,” he added. “The de-clogging of the existing DRTs coupled with the establishment of additional DRT benches, as announced in the 2024 budget, will cumulatively lead to achieving optimum results.”

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