Wednesday, February 25, 2015

We've moved!

The Bank Watch blog has moved and can now be found in its new home at http://www.charlotteobserver.com/news/business/banking/bank-watch-blog/.

Thanks for reading and see you there.


Investor website: Wells Fargo CEO is 'one of the best'

John Stumpf, CEO of San Francisco-based Wells Fargo, is “one of the best CEOs of our time," according to the headline of a column posted Tuesday to popular investor website Seeking Alpha.

Stumpf (Photo by Daniel Acker/Bloomberg)
The site features columns that offer financial analyses of public companies.

In the case of the Wells Fargo column, the writer points out that, among other things, the bank's stock price has risen more than 38 percent since May 2013, better than the S&P 500 Index’s rise of about 29 percent over the same period.

The column also notes that the nation’s fourth-largest lender has been increasing its dividend for the past four years.

Since the financial crisis, big U.S. banks must receive approval from the Federal Reserve to raise their dividends or buy back shares. Banks are expected to announce next month whether they have asked the Fed to let them to boost their dividends or buy back shares as part of their 2015 capital plans. In the past, the Fed has rejected some banks’ capital plans.

Wells Fargo’s quarterly common stock dividend is now 35 cents per share. The columnist expects the bank to get Fed approval to raise it.

Also, under Stumpf's watch Wells Fargo late last year became the most valuable U.S. bank ever, surpassing Citigroup 2001 record.

But Wells Fargo also has its share of challenges.

Like other lenders, it continues to cope with overall lower mortgage originations following lower demand to refinance home loans.

In addition, Wells Fargo's net interest margin, a key measure of lending profitability, has been hurt by sluggish loan growth and low interest rates. Net interest margin can shrink when deposits grow faster than loans. The margin has been squeezed at other banks, too.

Wells Fargo maintains an East Coast hub in Charlotte since its 2008 purchase of Charlotte-based Wachovia. Wells Fargo grew its Charlotte-area employment by about 1,400 positions last year, bringing the figure to 22,100.

Tuesday, February 24, 2015

'Cardless' ATMs can combat skimming but are rare

For readers who might be worried about "skimming" devices on automated teller machines after seeing my story yesterday on the increase in such scams in Charlotte, there is ATM technology available that could fight back.

Ed O'Brien
But so-called "cardless" ATMs are tough to come by, as only a handful of banks in the U.S. are making them available, according to one expert I talked to.

"It's in the early stages," said Ed O’Brien, a banking analyst for Maynard, Mass.-based Mercator Advisory Group.

Financial institutions are paying close attention to what other firms are doing before deploying the technology, O'Brien said.

"Everyone's watching everyone else," he said. "I think in the next probably year to two we'll see a lot more increased availability."

Cardless ATMs allow customers to conduct transactions without having to insert their cards into the machines. In theory, the absence of a card should reduce skimming, which involves criminals placing devices on ATMs to steal account data when consumers slip their debit or credit cards into the card reader.

One form of the technology works with smartphones. The phones scan a "quick response," or QR, code on an ATM, enabling a transaction to occur.

O’Brien said he's heard of roughly a dozen financial institutions who are either making that technology available, or expected to soon, in the U.S. He said one of those is ATM maker Diebold, which last year announced that Diebold Federal Credit Union would pilot the world's first ATM without a card reader or PIN pad.

O’Brien said he's heard of a couple of dozen other firms that are testing QR code technology, with plans to possibly offer it to customers by the end of this year.

Of course, not all ATMs are owned by banks. Some are owned by independent operators. O'Brien said it seems that only banks and credit unions are currently interested in putting the QR code technology in their ATMs, since the technology is tied into mobile-banking.

Bank of America and Wells Fargo are likely among the banks testing it, but "they've been very close to the vest" with their plans, he said.

Wells Fargo spokesman Josh Dunn said the San Francisco-based lender is "constantly evaluating ways to improve our customer’s ATM experience," but the bank has no comment regarding cardless technology at this point.

Bank of America spokeswoman Tara Burke said the Charlotte-based bank is watching changing consumer behavior "and will adapt to it." Bank of America is always looking at new technologies to make banking easier for its customers, she said.

Another type of ATM technology, which relies on biometric data such as fingerprints, is not yet being widely deployed as testing continues, O'Brien said. An ATM equipped with that technology could scan a customer's fingerprint to verify their identity.

O'Brien said he's not sure when consumers will start seeing broad use of biometric technology on ATMs.

"I know that the capabilities are available on some new-generation ATMs," he said. "The manufacturers are demoing those capabilities."

Skimming, which is also known to occur at gas pumps, is the most common type of cybercrime in the Charlotte region and is on the rise in the region, according to the U.S. Secret Service. That comes at a time when banks are reporting rising use of ATMs as they outfit them with more capabilities.

Monday, February 23, 2015

Ally CEO eyeing 'responsible' nonprime lending

Ally Financial's new Charlotte-based CEO says that while the Detroit auto lender is considering making more loans to people with nonprime credit ratings, he's not interested in ramping up lending to the riskiest of borrowers — those in the so-called "deep subprime" category.

Jeffrey Brown
"I want to be very clear: I have no strong appetite to go into deep subprime," Jeffrey Brown told me in an interview last week.

Since Ally named Brown its new CEO earlier this month, he has publicly discussed his interest in possibly boosting lending to nonprime borrowers. Brown says Ally has "underachieved" in the nonprime space and could have been "more aggressive" with that type of lending.

Those comments come at a time when Brown is seeking to boost profitability at Ally, which went public last year. His comments also come after Ally recently lost an exclusive lease agreement with General Motors, whose financing arm is replacing Ally as the exclusive lessor for Buick, Cadillac and GMC vehicles.

Brown said he might deploy the capital freed up by GM's pullback into nonprime lending.

Ally, which uses the deposits from its online-only bank to fund auto loans, has already come under scrutiny by federal authorities over subprime lending.

Last year, the company disclosed that it had received a Department of Justice subpoena as part of an investigation “related to subprime automotive finance and related securitization activities.”

Ally is among other lenders who received subpoenas from the Justice Department last year over subprime lending practices.

"All consumers need access to credit," Brown told me. "I think we (Ally) can do nonprime lending in a responsible manner and a responsible fashion that regulators would actually support."

"Deep subprime," by the way, describes a borrower with a credit score of less than 550, according to credit-reporting firm Equifax. A nonprime borrower has a credit score of 640 or less, while a subprime borrower has a score of 620 or less, according to Equifax.

Ally employs roughly 800 people in the Charlotte metro area, mostly at its South Church Street tower. Charlotte is one of a handful of U.S. hubs the company maintains.

Friday, February 20, 2015

Eric Holder asks lawyers to pursue bankers

Since the mortgage meltdown, some have criticized the federal government for failing to hold bank executives responsible.

Eight years after defaults on subprime mortgages helped spark the recession, are those critics about to get their wish?

Bloomberg reported this week that U.S. Attorney General Eric Holder is pressing for action against executives at firms that played a role in the subprime mortgage crisis, even as he prepares to leave his post.

Holder (AFP/Getty Images)
Here's an excerpt:
Holder, who is stepping down as soon as his successor, Loretta Lynch, is confirmed, has asked U.S. attorneys involved in residential mortgage-backed securities cases to report in 90 days on whether they can develop cases against individuals, he said Tuesday at the National Press Club in Washington. 

“That will be a report ultimately that will be given to Loretta to make determinations about whether further action is appropriate,” Holder said.
The story points out that Holder has faced criticism from lawmakers that the Department of Justice has not gone after bank executives to hold them responsible for their roles in the worst financial crisis since the Great Depression.

The Justice Department has also been faulted for resolving cases against banks with settlements that have allowed them to escape criminal charges by paying fines, improving controls and promising not to break the law, the Bloomberg story says.

Bank of America is among banks that have reached settlements with the government to resolve claims stemming from the mortgage crisis. In August, for example, the Charlotte-based bank struck a $17 billion settlement with the Justice Department over toxic mortgages. No individual at the bank was charged with a crime in connection with that case.

A Bank of America spokesman declined to comment.

Thursday, February 19, 2015

What others say about Brian Moynihan's pay cut

When Bank of America announced this week that its CEO was getting a 7 percent cut in compensation for his performance in 2014, it might have caught some people by surprise.

Moynihan (Photo: Davis Turner/Bloomberg)
After all, under Brian Moynihan's watch last year, the Charlotte-based bank reached a $17 billion settlement with the Department of Justice over toxic mortgages, a deal that removed a large legal cloud from the lender's head. On top of that, the bank last year announced that it had met the goals of Moynihan's sweeping cost-cutting program, "Project New BAC," months ahead of schedule.

But 2014 was also a year that saw the bank's earnings drop 58 percent from the year before, as that $17 billion settlement took a big bite out of the bank's profitability. It was also a year in which the bank had to delay a long-awaited increase in its quarterly stock dividend because it miscalculated its capital ratios.

The details of Moynihan's total compensation for his 2014 performance were revealed late Tuesday. (He was awarded $13 million, $1 million less than the year before.) Since then, I've reached out to analysts and others for their take on why it fell.

Some suggested Moynihan's compensation cut is a reflection of the bank's stock price not rising faster. (The bank's stock price climbed 13 percent during 2014. But the closing price of $16.30 Wednesday is far below the peak price of $50 in 2006.)

Others suggested the lower compensation might have something to do with the bank's decision in October to name Moynihan chairman. In that move, the bank took away a rare victory for shareholders who voted in 2009 to split the CEO and chairman roles over the fallout from the bank’s handling of its Merrill Lynch purchase. The decision to give Moynihan the chairman post has been unpopular with some investors.

Here's a look at comments various sources emailed me when I asked them what they thought about Moynihan's drop in compensation. Some comments have been edited for brevity and clarity:

"I assume that this is being done to offset the promotion of Mr. Moynihan to chairman." -Dick Bove, analyst with Rafferty Capital Markets

"My view would be that it's in recognition of the fact that they had yet another tough year. It's not a huge cut, but indicates to me that they felt they had to do something. (Also, the chairman appointment) was a controversial move. Perhaps this is in reaction to the controversy." -Nancy Bush, independent bank analyst

"Given the stagnancy of the stock price I am not surprised at the compensation decision." -Charles Elson, finance professor at the University of Delaware 

"The pay cut likely reflects the tougher year the company had. ... At the same time he was given $11.5M in stock grants, so if the bank executes well and profitability improves, he still ought to come out ahead." -Joe Morford, analyst with RBC Capital Markets

"We believe that the board and compensation committee should closely monitor executive pay at Bank of America to ensure that compensation is closely aligned with performance targets that focus on building shareholder value. ... While B of A's performance has improved over time, it still lags its peers in most important financial metrics." -Jonathan Finger, partner with Houston-based Finger Interests, which owns Bank of America shares

Tuesday, February 17, 2015

Wells Fargo raises fees on 'Value Checking' account

Here's some news that might upset some Wells Fargo customers.

The bank is increasing the monthly fee on its "Value Checking" account, as much as doubling it for some customers, a move the San Francisco-based lender said will make the fee the same across its customer base.

Wells Fargo said all customers who have a "Value Checking" account, one of Wells Fargo's basic checking accounts, will be charged $10 a month starting in April.

The impact of the increase will be bigger for some customers than others. Some customers have been paying $5, while others have been paying $7 or $9.

The fourth-largest U.S. bank said the change is part of its normal efforts to streamline and simplify older types of accounts and create consistency across the markets in which it does business. Until now, the monthly fees for Value Checking customers have varied depending on where they lived and when they opened their accounts, the bank said.

The change will have little impact in North Carolina, where there are a small number of Value Checking accounts, spokeswoman Richele Messick said. The company does not disclose its numbers of customers by account, she said.

The fee increase comes at a time when banks are under pressure by investors to boost their profitability. Wells Fargo reported earning $5.38 billion for common shareholders in the fourth quarter, up less than 1 percent from a year earlier.

The higher fee also comes after Wells Fargo, in October, began allowing customers to have more real-time information on their accounts, a change that has resulted in less overdraft-fee income for the bank. A drop in overdraft fees cost the bank $70 million in income during the fourth quarter compared with the third, according to a securities filing.

As it raises the fee, Wells Fargo also says it is giving Value Checking customers additional ways to have the fee waived. For example, the fee will now be waived if a customer makes 10 purchases or 10 payments a month with a Wells Fargo debit card.

Also, customers ages 17 to 24 will automatically be given a $5 discount on the fee each month.

Messick said the fee change will not affect the "vast majority" of Value Checking customers, who will now be converted to Wells Fargo's "Everyday Checking" account. Also, many customers already don't end up paying the monthly fee, because they meet requirements to get it waived, she said.

A look at other changes that will affect Value Checking customers:
  • Customers can waive the monthly fee if they maintain a minimum daily balance of $1,500. In the past, customers were required to maintain an average daily balance of $1,500 to have the fee waived.
  • The fee can also be waived if the direct deposits made into the account total $500 or more a month. That's a change from a requirement that a single direct deposit of at least $250 be made a month.

Monday, February 16, 2015

Liability issues raised in cybercrime fight

In a world where headlines about hackers breaching major U.S. companies' computer systems show no signs of stopping, President Barack Obama wants businesses to start sharing more information about cyberthreats with the federal government.

Moynihan (L) at Friday's summit (Justin Sullivan/Getty Images)
Which raises an obvious question: Why aren't companies already turning over more information to help the government go after hackers?

The reason, the Obama administration has indicated, is fear of liability.

As Obama pushes for companies turn over more cybersecurity intelligence with the government, he is also proposing that companies be given liability protection for such sharing.

Last month, the administration proposed legislation, which Congress has yet to pass, granting companies such protection. On Friday, the same day the White House held a cybersecurity summit at Stanford University in California,  the Obama administration reiterated its proposal to provide liability protection.

Even if Congress grants such protections, it's unclear whether that will encourage the kind of information-sharing the Obama administration is looking for. According to various media outlets, Silicon Valley remains wary of having a closer relationship with federal intelligence agencies, a reluctance not helped by the leaks of National Security Agency contractor Edward Snowden.

Facebook, Google and Yahoo did not send top executives to the summit, even though they were invited, a snub experts say illustrates the strained relationship between the tech industry and the White House.

On Friday, Obama signed an executive order designed to encourage companies to share cybersecurity-threat information with the federal government and one another. It remains to be seen whether that will result in companies doing so.

Bank of America's CEO, Brian Moynihan, brought up the need for liability protection during Friday's summit. Moynihan was among top corporate leaders who participated in the event as panelists.

Moynihan said there should be more collaboration between the public and private sectors to deal with cybercrimes. But he also pointed to the liability concerns.

"We've got to figure out the liability structure," Moynihan said. "That will take law change."

Once protections are in place for companies that share information, he said, "you actually, I think, can then get that collaboration."

Meanwhile, stories about cybercrimes keep coming. On Saturday, The New York Times reported that Russian cybersecurity firm Kaspersky Lab disclosed an investigation into a cyberattack on more than 100 banks and other financial institutions in 30 nations. Kaspersky said that could make it one of the largest bank thefts ever, the Times reported.

The Moscow-based firm says that because of nondisclosure agreements with the banks that were hit, it cannot name them, the Times reported. (Update: Bank of America spokesman Dan Frahm tells me that the Charlotte-based bank is not among the affected.)

Friday, February 13, 2015

Moynihan to attend Obama's cybersecurity summit

When the Obama administration holds its "cybersecurity summit" at Stanford University today, Bank of America CEO Brian Moynihan will be among the top U.S. executives participating as panelists.

Moynihan

Moynihan and other leaders from major financial services companies, including the CEOs of PayPal, U.S. Bank and Visa, will speak on various panels at the daylong event in California.

The panelist list also includes representatives from other types of large corporations, such as the presidents of Walgreens and QVC. In addition, Tim Cook, CEO of Apple, is scheduled to deliver remarks during the summit.

The summit is being billed by the White House as an opportunity to bring together private and public sectors leaders so they can collaborate on ways to better protect U.S. consumers and companies against the growing threat from cyber-criminals. Top officials with the Federal Bureau of Investigation, Secret Service and Department of Homeland Security will also speak on panels.

Announced by the White House last month, the event comes at a time when data breaches continue to make national headlines, becoming a greater concern for U.S. companies. Just last week, Anthem, the second-largest U.S. health insurer, disclosed that hackers breached its computer systems that stored information on up to 80 million people.

Moynihan will sit on a panel titled "Improving Cybersecurity Practices at Consumer Oriented Businesses and Organizations." The panel will "explore what CEOs and their boards are doing to move cybersecurity concerns from the IT back-office, ensuring that this critical strategic issue is part of corporate planning, communications, governance, and operations for consumer-oriented business across all sectors of our economy," according to the White House.

JPMorgan Chase & Co.,  Citigroup and Wells Fargo, which in addition to Bank of America are the top four U.S. banks, will not have participants on any panels.

Banks large and small say costs are rising to protect sensitive consumer and bank data. Last month, in a Bloomberg Television interview, Moynihan said the bank’s cybersecurity operation can spend as much as it needs to protect the lender and its customers.

Wednesday, February 11, 2015

WSJ: BofA's government-backed subsidiary financed trades

Bank of America for years used its government-backed U.S. banking subsidiary to finance billions of dollars in controversial trades for clients of its European investment-banking arm, The Wall Street Journal reported today, citing internal documents and people familiar with the matter.

SAUL LOEB - AFP/GETTY
Last year, the bank's Merrill Lynch unit "quietly" started phasing out the use of funds from its U.S. banking subsidiary to finance transactions that, among other things, helped hedge funds avoid taxes on stock dividends, according to the Journal story.

Merrill Lynch began using the subsidiary's funds to finance the transactions for its clients roughly three years ago. In an email today, a Merrill Lynch spokesman told me that it no longer uses the subsidiary, Charlotte-based Bank of America National Association, to finance so-called "dividend arbitrage."

The transactions worked like this: Bank of America National Association would make secured loans to clients to finance the purchase of stocks. Those stocks could be owned in a jurisdiction where the tax rate is lower than the rate in other jurisdictions. As a result, the withholding taxes on the dividends could be substantially lowered, saving millions of dollars in taxes. The loan itself would be secured by the stocks.

Dividend arbitrage is legal in other countries but not in the U.S.

Bank of America largely runs the strategy from London.

"Like others across the industry, we do offer services outside the United States related to dividend arbitrage through our broker dealer, Merrill Lynch International," the Merrill Lynch spokesman said in the email. The spokesman said Bank of America National Association and other affiliated entities never suffered losses from the transactions.

According to The Wall Street Journal story, experts said it is inappropriate for Bank of America to tap the entity holding federally insured deposits to finance risky investment-banking trades:
“I don’t think it’s an appropriate use,” said Sheila Bair , the former chairman of the Federal Deposit Insurance Corp. “Activities with a substantial reputational risk... should not be done inside a bank. You have explicit government backing inside a bank. There is taxpayer risk there.”
U.S. regulators have questioned Bank of America about its dividend arbitrage activities. In September, I reported that regulators asked Bank of America about the strategy during a routine examination of the bank.

At the time, a Richmond Fed spokesman told me in an email that the Fed "identified dividend arbitrage trading as an activity that required further examination of the risk and governance of the business." The bank cooperated with the Fed's examination of the practice, the spokesman said at the time.

Tuesday, February 10, 2015

Wells Fargo says it tracks 'engagement,' not 'happiness'

Well's Fargo's so-called "happy-to-grumpy" ratio is not being used to track either the happiness or the grumpiness of its employees, a spokeswoman for the lender told me today.

John Stumpf (AP Photo/Mark Lennihan)
While Wells Fargo CEO John Stumpf has referred to the ratio by that nickname, it is based off annual surveys that actually measure employee engagement and disengagement, the spokeswoman, Richele Messick, said.

"The happy-to-grumpy terminology that’s been used, it puts it into colloquial terms,” she said. “It’s (actually) a measure of engagement."

Recently, the ratio has been the focus of coverage by many news outlets ever since The Wall Street Journal mentioned it in a story last week.

According to the WSJ's story, big banks are "trying more than ever to monitor employee attitudes and values to avoid future problems" in the wake of the financial crisis, which has resulted in large fines, layoffs and losses for banks.

Regulators say they remain concerned about the culture on Wall Street years after the financial crisis.

In October, Federal Reserve Bank of New York President William Dudley said the government will have to consider breaking up large financial institutions if Wall Street doesn’t stop excessive risk-taking and breaking the law, according to another Wall Street Journal story.

Speaking at an investor conference in Florida on Tuesday, Wells Fargo's chief financial officer, John Shrewsberry, expressed skepticism that financial institutions could make quick changes to their culture to appease regulators.

"I mean, you can't turn to any group of people and say be happy and engaged," he said. "It doesn't work that way. So, I'll be curious to watch how other firms try and produce a durable, sustainable culture on a deadline."

Wells Fargo's culture, he said, has been "handed down from generation to generation. ... We celebrate it."

He said he does not know "how you come up with that in short order, which sounds like that's what ... the industry is expected to do.

"There is nothing wrong with attempting to do that. ... But I don't know how you spontaneously require tens of thousands of people firm by firm to follow in line behind what somebody says is now important if they have been behaving differently, maybe not badly but differently, prior to that."

San Francisco-based Wells Fargo determines its ratio from the results of a "team member connection" survey that Gallup administers to Wells Fargo employees each year, Messick said. The bank has conducted the survey for more than 10 years, she said.

Wells Fargo encourages its employees to take the survey, she said. Participation is voluntary, and responses are kept confidential, she said.

"The data from the survey gives Wells Fargo several different measures that help us assess our progress, as well as our areas of opportunity," she said.

Wells Fargo says the ratio in 2014 was 8:1, meaning eight engaged employees for every disengaged one. That compares with 7:1 in 2013.

Wells Fargo: Cheaper gas not fueling consumer spending

It's been hoped for by some businesses and economists that the recent decline in gasoline prices will free up money that consumers will spend elsewhere, giving a boost to the U.S. economy.

Shrewsberry

But according to Wells Fargo's chief financial officer, cheaper gas is not fueling gains in consumer spending.

"It's still good for the consumer, but it’s not leading to increased consumption in a way that people traditionally imagined," John Shrewsberry said Tuesday at an investor conference in Aventura, Fla.

Shrewsberry offered that analysis in response to a question about whether Wells Fargo's credit card customers are charging more to their cards as a result of gas prices being down.

"We're not seeing the savings at the pump translate into a ... commensurate uptick" in consumer spending, Shrewsberry said. "It feels at the moment that people are paying down debt or saving that surplus, which cycles back in as increased deposits at a bank like Wells Fargo."

Gas prices in the Charlotte area are still the lowest in the state, but they’re rising and likely will continue to drift up in coming months, my colleague Katherine Peralta reported today:
As of early Tuesday, it’s $2.111 for a gallon of unleaded regular gas in the Charlotte metro area, while a week ago it was $1.992, according to auto group AAA. Nationwide, the average gas price has increased every day for two weeks and is now $2.185 a gallon.
AAA says it expects gas prices to increase this month due to refinery maintenance and decreased production, The Washington Post reported Monday:
Consumers should expect to see the upward trend continue in the coming weeks as it is typical to see prices increase 30 cents to 50 cents per gallon between now and the spring when more people travel and there is growing demand for fuel.

Columnist criticizes Wells Fargo's happy:grumpy ratio

Last week, The Wall Street Journal reported on how Wells Fargo tracks a "happy-to-grumpy" ratio of its employees as part of measuring the bank's culture.

According to the WSJ's story, Wells Fargo's tool for measuring employee satisfaction comes at a time when big banks are emerging from years of large fines, layoffs and losses and, therefore, "are trying more than ever to monitor employee attitudes and values to avoid future problems."

Stumpf (Photo by Daniel Acker/Bloomberg)

Lucy Kellaway, a columnist for the Financial Times, took issue with the ratio in a column this week. (Update: Wells Fargo says the ratio is actually a measure of employee engagement versus disengagement, not happiness versus grumpiness.)

Kellaway questions whether workers who claim to be happy are really less likely to do bad things:
There are no numbers to prove it; neither is there any obvious reason it should be so. If what makes bankers happy is taking risks and making money, they will be even happier when they are up to no good — provided it results in lots of money falling into their laps. Furthermore, if you are the sort of person who thinks it fine to diddle your bank out of billions of dollars, you are not going to worry about giving misleading answers on a staff satisfaction survey.
Kellaway also writes that she doesn't buy that Wells Fargo's ratio last year was eight happy employees for every grumpy one.

According to The Wall Street Journal story, Wells Fargo says that's up from 7:1 in 2013 and 3.8:1 in 2010.

"I don’t believe for a moment that the happy outnumber the grumpy by eight to one among Wells Fargo’s 260,000 people, nor is it likely that a ratio could double in such a short time," Kellaway writes.

Here's more from her column:
Underlying it all is something even more basic. Should employers even aim to make their staff happy? I’m with Freud on this one. He said it wasn’t possible to make people happy; the best that could be hoped for was normal unhappiness. 
This should be the goal at work too. Banks, and all other employers, should try to become places where employees are not abnormally unhappy.
One Wells Fargo employee made national headlines last year for his unhappiness with the bank's pay.

That employee was 30-something Tyrel Oates, who in October sent Wells Fargo CEO John Stumpf a letter asking him to distribute more of the company's profits to its employees.

Oates, who at the time processed requests from Wells Fargo customers seeking to stop debt-collection calls, pointed out in his letter that the "vast majority" of the company's employees "barely make enough to live comfortably on their own."

At the time, Oates said he was making just more than $15 an hour as a full-time employee.

Monday, February 9, 2015

Ray Grace reappointed N.C. banking commissioner

Gov. Pat McCrory announced Monday that he has reappointed Ray Grace as North Carolina's banking commissioner, an office that comes with a four-year term.

The General Assembly still has to vote on whether to confirm the reappointment.

Grace

Grace became acting banking commissioner after Joseph Smith resigned in February 2012 to oversee the roughly $25 billion national mortgage settlement.

In March 2013, McCrory appointed Grace to serve what was left of Smith's term, which was set to end this upcoming March 31.

"Ray Grace is a tremendous asset to North Carolina's banks, and his extensive experience and past achievement are reflected in his work as commissioner," McCrory said in a statement Monday. "His continued service is greatly valued and appreciated."

The N.C. Bankers Association lauded the reappointment.

“As I travel the state, bankers continually praise the work being performed by the North Carolina Office of the Commissioner of Banks under the leadership of Ray Grace,” Peter Gwaltney, the bankers association president, said in a statement.

The North Carolina Office of the Commissioner of Banks charters and regulates North Carolina's state banks, trust companies and mortgage companies.

Pittenger on financial services committee's 2015 priorities

U.S. Rep. Robert Pittenger of Charlotte says examining Dodd-Frank regulations that he argues are hurting the banking industry and U.S. economy will be on the to-do list this year for the House Financial Services Committee.

In a recent interview, the Republican shared with me other top issues he said the committee, on which he sits, will focus on in 2015. The committee oversees various financial industry regulators, including the Federal Reserve, the Federal Deposit Insurance Corp. and the Securities and Exchange Commission. It is chaired by Jeb Hensarling, a Texas Republican who is an outspoken advocate for limited government and who has criticized rules created under the 2010 Dodd-Frank Act, which was designed to prevent another financial crisis.

Pittenger, who is serving his second term in Congress, was reappointed to the committee last month by House Speaker John Boehner.

Pittenger
Here are three things that Pittenger said will be priorities for the committee this year:

1. LOOK TO EASE REGS ON COMMUNITY BANKS
Pittenger said Dodd-Frank regulations are hurting banks of all sizes but community banks are feeling it the worst. He said the committee will seek to find ways to ease the regulatory burden on community banks.

“There is consensus in our committee that we need to give relief to community banks," said Pittenger, who served as board director for Charlotte-based Park Meridian Bank, which was acquired by Regions Financial Corp. in 2001.

Today's "hyper-regulatory environment" is affecting banks large and small, he said, and putting "enormous brakes on our economy" by making it tough for some businesses to get loans. "It’s very hard for a start-up company to find capital."

2. TAKE ANOTHER STAB AT THE PATH ACT
In 2013, the committee approved the Path Act, legislation that would wind down mortgage giants Fannie Mae and Freddie Mac, which the U.S. government seized during the mortgage crisis in 2008. But the act, whose acronym stands for Protecting American Taxpayers and Homeowners, never made it out of Congress.

Pittenger said the committee will review the act. A supporter of the act, Pittenger said he is concerned about the large footprint that Fannie and Freddie now have in the mortgage market, a footprint that he said is restricting private mortgage lending.

"Ninety-eight percent of all the (mortgage) loans today are government," he said. "That means the American taxpayer is behind them all. That’s $6 trillion. There’s another ($1) trillion in (Federal Housing Administration) guarantees. What we’ve done is squeezed the private market out. ... We have ... gotten duped into thinking the government's role is the best way. ...

"The solution is for the government to step back. Make room for the private equity to come in, for private capital. There is no room for the private capital now.”

Pittenger said that he wants the federal government to play a smaller role in the housing market, not withdraw completely. And he said he supports government-backed loans to help first-time homebuyers and low-income families.

3. DETERMINE WHAT TO DO ABOUT THE EXPORT-IMPORT BANK
Pittenger said the committee will take a look at what to do about the Export-Import Bank of the United States, a federal agency that lately has become a hotly debated topic in business and political circles.

The bank's charter is set to expire in June. It is unclear whether Congress will re-authorize it as it has in the past.

Some conservatives have pushed for an end to the bank, which, among other things, provides U.S. companies with loans to fulfill export orders. Pittenger is among conservatives who refer to the bank as a form of "corporate welfare."

Through the bank, the government is “picking and choosing winners and losers," he said.

“You help one company, but then you hurt another one. Boeing gets helped, but it hurts Delta. You’re playing favorites."

Pittenger points out that the bank's services are a taxpayer-funded perk that affects only a small amount of U.S. exports. He said the bank's services aid only 1 percent of U.S. exports but puts taxpayers at risk of a bailout if the loans default.

Just as scrutiny is sometimes placed on the high costs of welfare programs for Americans, scrutiny also should be placed on the "corporate welfare" provided by the Export-Import Bank, he said.

Advocates say the bank is particularly an important resource for small companies and that it is an important tool for expanding sales of U.S. goods and services abroad. In North Carolina, the bank has supported about 190 companies over the past seven years, more than half of them smaller businesses, including textiles and other manufacturers.

Pittenger is not the only member of the committee from the Charlotte area. The others are Rep. Patrick McHenry, of Lincoln County, and Mick Mulvaney, a Republican from Indian Land.

McHenry is the committee's vice chairman.

Thursday, February 5, 2015

5 things to know about Ally Financial's new CEO

Detroit-based Ally Financial this week promoted Charlotte executive Jeffrey Brown, 41, to the CEO post to replace Michael Carpenter, who is retiring as chief executive and from the lender's board. Brown's promotion became effective immediately when it was announced this past Monday. He will be tasked with steering the lender nearly a year after it went public and two months after it exited the U.S. Treasury Department's Troubled Asset Relief Program, also known as the federal bailout. This morning, Brown will address investors for the first time as CEO. Here are five things to know about Brown.

1 HE WILL BE BASED IN CHARLOTTE
Even though Ally is headquartered in Detroit, the lender says Brown will call Charlotte home base, although his work-travel schedule will probably take him outside the Queen City frequently. At the time of his promotion, Brown was already based in Charlotte, where he headed Ally's auto finance and insurance business. He will be the company's second chief executive based in Charlotte, after Al de Molina, a former chief financial officer for Bank of America. De Molina resigned from GMAC Financial Services, the name Ally used to go by, in 2009.

Jeffrey Brown
2 HE WAS BANK OF AMERICA'S TREASURER
Brown joined Ally in 2009 as corporate treasurer. Before that, he served as Bank of America's treasurer for a year, during the period when the Charlotte-based bank was buying Merrill Lynch. According to court documents, Brown told Bank of America's chief financial officer at the time that Merrill Lynch's mounting losses should be disclosed to shareholders before they voted on the purchase of the company. Those undisclosed losses have since been the subject of costly settlements for Bank of America.

3 HE CHAIRS A BOARD AT QUEENS UNIVERSITY
Brown chairs the board of advisers for the McColl School of Business at Queens University of Charlotte, the business school named after retired Bank of America CEO Hugh McColl Jr. Brown is also a graduate of the McColl school, from which he earned an executive master's degree in business.

4 HE THINKS NEW LEADERS SHOULD HAVE AN OPEN MIND
In a video interview Queens University published on YouTube in October, Brown said he would advise new leaders to have an open mind, among other things. "Come into the situation with a very open mind," he said. "You've got to be open, willing to understand challenges, opportunities." He also said it's important for leaders to have work-life balance. "Family is very important, and you've got to be willing to balance both the personal demands along with the professional demands."

5 HIS DREAM CAR IS A PORSCHE
That's what he told me in an interview last spring.

Wednesday, February 4, 2015

Bank of America cuts 202 mortgage jobs in Virginia

Bank of America continues to eliminate jobs in its mortgage division that works with troubled borrowers.

In its latest round of cuts, the Charlotte-based lender confirmed this week it is eliminating 202 jobs in Virginia. No Charlotte-area jobs will be affected by the cuts in Norfolk, a Bank of America spokesperson told me.

The Virginia layoffs are in the bank's Legacy Assets and Servicing operation, which was created in 2011 and handles mortgages that borrowers are struggling to pay. Many of the mortgages that LAS has serviced were acquired by Bank of America in its 2008 purchase of Countrywide Financial Corp.

CEO Brian Moynihan said mortgage staffing was cut last year.
As the economy has improved and people have done a better job of paying their mortgages, Bank of America has been cutting its LAS staffing.

"The number of delinquent mortgage loans we service has decreased to one-seventh of their peak levels," the bank told me in an emailed response. "Due to the dramatically lower demand for these specialized services, we are reducing the size of the operations."

Affected employees are eligible for open positions at the bank, the emailed response says.

In the fourth quarter, the bank reduced its LAS headcount by roughly 1,000 from the third quarter, CEO Brian Moynihan said last month.

The cuts to LAS jobs have also come as Bank of America looks to slash the still-high costs in that operation. Those expenses have been a drag on the bank's earnings.

Last month, the bank's chief financial officer, Bruce Thompson, said the bank is seeking to lower its quarterly LAS costs, excluding litigation expenses, to $800 million by the end of this year, from $1.1 billion in the fourth quarter of 2014.

Past LAS job cuts have impacted the Charlotte area, although the bank will not disclose how many LAS cuts there have been in Charlotte.

Wells Fargo lets customers cash out rewards at ATMs

In an era when banks are investing heavily to enhance their mobile apps, they aren't neglecting a far older piece of technology: the automated teller machine.

Case in point: Wells Fargo announced today that its credit card customers can now use the lender's automated teller machines to redeem the points they earn in the form of cash. San Francisco-based Wells Fargo says it is the first major U.S. financial services provider to give customers that option.

Wells Fargo also announced today that its credit card holders who have accumulated rewards can use the lender's ATMs to apply those rewards to lower their Wells Fargo credit card balances or their balances on Wells Fargo loans, such as home-equity loans.

Photo courtesy of Wells Fargo
So why is Wells Fargo investing in putting more functions in its ATMs in the year 2015?

Because they remain popular with the lender's customers, Wells Fargo spokesman Kristopher Dahl told me.

Wells Fargo has roughly 12,500 ATMs, and customers are using them more and more, he said.

“We’ve seen growth in ATM usage year over year for, I think, five or six years if not longer. That’s both in number of transactions and the average transaction. We don’t think the popularity of ATMs is fading at all.”

Interesting fact: All of Wells Fargo's ATMs are in the U.S., with the exception of a handful in Antarctica, Dahl says.

But that's a story for another day.

Tuesday, February 3, 2015

Carolina Premier Bank names new CEO

Ballantyne-based Carolina Premier Bank said Tuesday it has named a replacement for its CEO whose sudden resignation last summer surprised its board.

David Barksdale, who most recently served as chief strategy officer for Greensboro-based NewBridge Bank, will officially become Carolina Premier's CEO on Wednesday. Barksdale will also hold the title of president at the community bank.

Carolina Premier's chairman, Charles Davis, said Barksdale will help the bank expand its client base of small and midsize businesses in south Charlotte and elsewhere.

"David's broad range of experience in banking, including mergers and acquisitions, makes him the perfect leader to develop strategy for our next phase of growth," Davis said.

David Barksdale
While at NewBridge, Barksdale helped spearhead NewBridge's acquisition of Security Savings Bank, CapStone Bank and Premier Commercial Bank, according to a press release from NewBridge.

Barksdale's hiring comes after John Kreighbaum's announcement in August that he was stepping down as head of the lender he helped launch in 2007. In an interview at the time, Davis said the resignation surprised the board.

Carolina Premier Bank has assets of $250 million.

The bank has branches in North and South Carolina. Its Premara Bank division has a branch in Washington, D.C.

Carolina Premier Bank also owns the Bank of the Urban League of the Central Carolinas, whose only branch is in Charlotte.

Carolina Premier Bank is a subsidiary of Premara Financial, a bank holding company with headquarters in Washington, D.C.

Paragon Bank wins OK to sell shares over the counter

The parent company of Raleigh-based Paragon Bank said it has won approvals for its shares to be traded over the counter, a move the lender said will make it easier for investors to trade the shares.

Paragon Commercial Corp. announced last week that the Depository Trust Company and Financial Industry Regulatory Authority gave it approval for the shares to trade over the counter under the symbol PBNC.

The decision follows Paragon's 125-for-1 stock split in July. Paragon said the split lowered the share price to a level thought to be more attractive to investors.

“This is an exciting time for Paragon,” CEO Robert Hatley said in a statement. “We can now provide a way for our shareholders to buy and sell Paragon stock in an established market.”

Paragon Bank's Charlotte office at 6337 Morrison Blvd.  
Hatley said shifting to over-the-counter trading will enable anyone to buy shares through a broker, thereby providing the bank’s existing 600 shareholders with greater liquidity and hopefully a better price for their shares when they choose to sell, according to story last July by The (Raleigh) News & Observer.

Here's more from that story:
Paragon’s share price hasn’t recovered as much as it should have since the recession ended, Hatley said, because the shares are so thinly traded and buying and selling shares isn’t easy. Many sellers end up going to the bank to get a list of potential buyers. 
“Now that we’re doing well as a bank and we have climbed out of the recession, we have to pay particular attention to our shareholders,” Hatley said.
Investment firm Raymond James & Associates will become a market maker in the stock. A market maker is a firm that stands ready to buy and sell a certain stock on a regular basis.

Also last week, Paragon recorded fourth-quarter profit of $2.7 million, about double the $1.4 million in profit from the same quarter a year earlier, as it grew deposits and loans.

Paragon has one branch in the Charlotte metropolitan area. That branch is at 6337 Morrison Blvd., where Paragon relocated offices from Piedmont Town Center last year.

Paragon is a private bank focused on businesses and individuals. Recently, the lender has been trying to draw more attention to its private-banking services. As part of that effort, in 2013 it changed the name of its bank from Paragon Commercial Bank to Paragon Bank.

Monday, February 2, 2015

BB&T: Regulators OK branch purchases from Citibank

BB&T Corp. said Monday it has won approval from regulators to buy 41 branches in Texas from Citibank.

The Winston-Salem lender first announced plans to buy the branches in the Dallas, Houston, Midland and Odessa markets in September. Through the deal, BB&T will acquire $2.3 billion in deposits and $87 million in loans.

On Monday, BB&T said the Federal Deposit Insurance Corp. and the North Carolina Office of the Commissioner of Banks have approved the purchase.

The deal boosts BB&T's branches in Texas to 123 and its deposits in the state to $5.3 billion. BB&T also said the deal makes it the 12th-largest bank in Texas.

The purchase is the latest example of BB&T's push into Texas. In a separate deal completed in June, BB&T acquired 21 Citibank branches in the state.

Thursday, January 29, 2015

BofA ending support for Windows phone app

(Note: This post has been updated with a comment from Bank of America.)

Bank of America is cutting off support for its Windows phone app, according to a message on the Charlotte-based lender's webpage for the app.

Below is a screenshot I took of the page, which says the support will end in March:


The bank sent me the following comment when I asked what was behind the decision:

"We’re committed to giving Bank of America customers a variety of ways they can manage their finances conveniently through mobile and online banking. As we evaluate our platforms, we’ll continue to support those which our customers utilize the most. Windows phone customers will still be able to access their account by using bankofamerica.com on their device."

According to a story posted Wednesday by USA Today, the news comes just after JPMorgan Chase & Co. last week announced that it will no longer offer a banking app for Windows mobile devices. Chase Bank customers took to social media to protest the decision, according to a separate USA Today story.

Here are some excerpts from USA Today's story on Wednesday:
The timing is a bit curious since it comes just a week after Microsoft unveiled its upcoming Windows 10 operating system, which will allow the same apps run on phones, computers and tablets.

The move leaves investors that relied on the Bank of America app on their Windows Phone to check their balances and deposit checks to use a browser on their phones. Consumers continue to show their preference of apps versus mobile browsing on their mobile devices.
Wells Fargo appears to still be supporting its mobile app for smartphones that run Microsoft’s Windows operating system. Below is a screenshot I took Wednesday night of Wells Fargo's webpage for the app:

Wednesday, January 28, 2015

Moynihan tops among CEOs for corporate jet costs, report says

Bank of America CEO Brian Moynihan is No. 1 in a ranking of U.S. chief executives whose use of corporate jets costs their companies the most.

Fortune magazine, citing data from research firm Equilar, reported the finding this week. Moynihan's corporate jet use was valued at $448,251 in fiscal 2013, which puts him among the five "most expensive CEOs to fly around," the magazine said.

Moynihan
The figure does not include the value of Moynihan's corporate jet use for personal reasons, an amount the Charlotte-based bank does not disclose.

Under an agreement with Bank of America, Moynihan reimburses the bank for non-business flights on the lender's corporate aircraft, the bank said in its 2014 proxy statement.

Bank of America spokesman Lawrence Grayson declined to comment on Equilar's ranking when I contacted him Wednesday.

For comparison's sake, Moynihan's corporate jet use was valued at $477,060 in fiscal 2012, according to a proxy statement.

Tuesday, January 27, 2015

Yadkin Financial profit jumps following merger

Raleigh-based Yadkin Financial Corp., parent company of North Carolina's biggest community bank, announced this week that it earned $14.7 million for shareholders in the fourth quarter — after a merger last year doubled Yadkin's size.

Yadkin, parent of Yadkin Bank, reported profit of $14.7 million in the fourth quarter, an increase of 745 percent from the same quarter a year earlier.

That sizable gain follows the bank's merger in July with Raleigh-based VantageSouth Bancshares, a deal that created the state's biggest community bank.

Yadkin reported total assets of $4.3 billion as of Dec. 31. That's double the $2.1 billion in assets it reported for Dec. 31, 2013, before the merger with VantageSouth.

The fourth quarter was the second quarter for the combined company. In the wake of the merger, Yadkin is now seeking to cut costs by eliminating redundancies that often result when two companies are combined, CEO Scott Custer said Tuesday.

"We are very focused on reducing costs throughout the company," Custer told me in an interview. "That being said, key markets like Charlotte are places where we will continue to make appropriate investment, both in people and in distribution, that makes sense for us."

In the Charlotte metro area, Yadkin Financial has about 260 employees and about a dozen branches.

Custer said the company has been adding bankers in the Charlotte region. "Clearly, Charlotte's an area we will continue to try and invest in in appropriate ways," he said.

In the fourth quarter, Yadkin Financial achieved "robust" annualized net loan growth of 10 percent, Custer said in the company's earnings press release.

That came as Yadkin's Small Business Administration lending operation, which is headquartered in Charlotte, posted $2.9 million in income for the fourth quarter — the highest quarterly SBA-lending income in the company's history.

The merger, a deal worth $299 million, created a bank with a footprint stretching from Wilmington to the Triangle to Charlotte.

Yadkin had been based in Elkin before the merger. Under the deal, the merged bank holding company kept the Yadkin name but made Raleigh its headquarters.

Consumers 'addicted' to mobile banking, report says

Smart phone screen sizes that keep on growing are among the factors driving Americans to do more of their banking on mobile devices, according to a report released Tuesday.

Americans are "addicted" to mobile banking, which is "hyper accelerating," says the report by Charlotte-based Carlisle & Gallagher Consulting Group, a firm that serves the financial services industry.

The report says bigger smart phones and the emergence of the so-called "phablet"  a smart phone that's not quite as big as a tablet device  are helping to boost the adoption of mobile banking.

According to the report, 46 percent of U.S. consumers are more likely to do their banking on mobile devices thanks to those devices getting larger. Also, one in six consumers surveyed said mobile banking is an important reason to buy a large-screen smart phone or a phablet.

Another key finding in the report: 55 percent of consumers are accessing their mobile accounts two to three times a week or more.

Byl Cameron
The report underscores the ongoing adoption of mobile banking, a trend that has banks re-examining the role of branches. Some banks, such as Bank of America and Wells Fargo, have begun experimenting with smaller branches at a time when consumers are able to do more transactions on their own with the swipe of a finger on their smart phone or other mobile device.

"Mobile is utterly changing the landscape of how people do banking," Byl Cameron, who led the study, told me Monday, as he gave me a sneak peek at the report. He said mobile banking is the "technology story of the day for banks.”

The report's findings are based on online surveys of 1,005 consumers across the U.S. and phone interviews of executives with the 20 largest U.S. financial institutions. The surveys and interviews were conducted in September.

The study, funded by Carlisle & Gallagher, is the firm's first ever on mobile banking.

Here are some highlights from the report:
  •  Depositing checks with mobile devices is gaining popularity, with more than 60 percent of phablet and smart phone users depositing checks remotely.
  • Customers prefer to conduct mobile banking on all of their mobile devices. Those who have what the report calls a "three-device lifestyle" said they interchangeably use their laptops, tablets and smart phones for the most frequent mobile banking activities.
  • Checking balances, transferring funds and paying bills are the three most-frequently conducted mobile banking activities on mobile devices.
  • All of the survey's respondents said they expect to buy more mobile devices by 2016. Specifically for banking, 81 percent expect to use a laptop in 2016, 62 percent a smart phone, 44 percent a tablet and 11 percent a phablet.
  • Phablets will dominate approximately 30 percent of the mobile device market share by 2020 and become the dominant device for mobile banking, Carlisle & Gallagher predicts. It also predicts that tablets will decline in popularity, especially as a device on which to do banking. The report found that 68 percent of consumers do not use tablets today for banking. 
Below are more findings, in charts and graphs, from the report (click on them for a larger version):




Friday, January 23, 2015

Philadelphia councilman seeks to ban deposits with BofA

Bank of America is getting some negative vibes in the city of brotherly love.

A member of Philadelphia's city council is seeking to ban the city from depositing its funds with Charlotte-based Bank of America and New York-based Citigroup, The Philadelphia Inquirer reports.

According to the Inquirer, the move comes after the city in 2013 filed suit in federal court against nine major banks, including Bank of America and Citigroup, in connection with their manipulation of the London Interbank Offered Rate, or Libor, which artificially suppressed the city's returns on interest-rate swap agreements.

On Thursday, Councilman James Kenney introduced a bill that would not permit the city to give its deposits to the two banks. Here's an excerpt from the story:

According to Kenney's bill, municipal entities such as Philadelphia "were paid lower amounts during the life of their swaps, and they were subjected to huge — and sometimes devastating — financial penalties when they terminated the investments, which were artificially inflated by defendants' misconduct." 
Citigroup and Bank of America "are the two worst actors in the whole game," Kenney said. "To park citizen money in those banks while we're in a bad-swaps deal seems stupid."
The bill does not affect other types of business with the banks, the story says.

I reached out to Bank of America and Citigroup for comment. A Citigroup spokesman said the company had no comment. Here's what a Bank of America spokeswoman said in an email:
Given we have not received any correspondence from the City of Philadelphia relating to this bill, we'd prefer not to comment.

Aquesta Bank profit rises 3.6 percent

The parent company of Cornelius-based Aquesta Bank said Friday its fourth-quarter profit was 3.6 percent higher than the same quarter a year earlier, as the community bank grew its loans and deposits.

The bank recorded profit of $374,000, or 15 cents per share. That was up from $361,000, or 14 cents per share, a year ago, Aquesta Financial Holdings said.

Jim Engel
Also Friday, Aquesta reported its full-year results for 2014, which were better than its 2013 results.

In 2014, it made $1.71 million in profit, or 67 cents per share, up from $1.47 million, or 57 cents per share, in 2013.

Aquesta was established in August 2006. Its strategy is to be the dominant community bank in the Lake Norman area, where all of its six branches are currently located.

Last year, it opened two branches: one in Huntersville and its second in Cornelius.

In November, Aquesta President said Jim Engel said the bank has no plans for additional branches at least until 2017.

When the bank does start adding branches, it will likely eye three main sites, he said: the area west of Lake Norman, Huntersville and a yet-to-be-determined area in south Charlotte.

At the end of December, Aquesta had $263.2 million in assets, up from $233.9 million at the end of December 2013. The bank grew its total loans to $172.3 million from $130.3 million over the same period. It grew its total core deposits to $119.8 million from $97.7 million.

In addition to its banking business, Aquesta operates an independent insurance agency that represents multiple carriers of business and personal lines of property and casualty insurance.

Wednesday, January 21, 2015

Moynihan: BofA's cybersecurity unit can spend as much as it needs



Underscoring the rising focus on cybersecurity at large financial institutions, Bank of America’s CEO said Wednesday the bank’s cybersecurity operation can spend as much as it needs to protect the lender and its customers.

“I go to bed every night feeling comfortable that that group has all the money (it needs),” Brian Moynihan said in a Bloomberg Television interview from Davos, Switzerland, where he has been attending the World Economic Forum this week. “They never have to ask.”

“The only place in the company that doesn’t have a budget constraint is that area,” he said. “Why would I take my judgment and say, ‘You could do this cheaper?’”

(For those interested in watching the video above, Moynihan's comments about what the bank is spending on cybersecurity come roughly five minutes in.)

Moynihan said the Charlotte bank, the second-largest in the U.S. by assets, spends more than $400 million a year on cybersecurity. “And it's going north of that.”

His comments come at a time of growing concern among major U.S. companies about cyberattacks. In November, Sony Pictures became the victim of a destructive online attack. Before that incident, recent data breaches affecting Target, Home Depot and other large retailers made national headlines.

Banks large and small say their cybersecurity costs are rising. Wells Fargo CEO John Stumpf, speaking last week to analysts on an earnings conference call, said the San Francisco-based lender is “spending more on cyber today.”

One ongoing area of concern for banks are so-called “distributed denial of service” attacks. In such attacks, criminals overwhelm a bank’s computer or telecommunications networks with large amounts of data requests, which can slow or block customer access to online accounts.

In its latest annual report, Bank of America says its websites have been subject to “a series” of denial of service incidents. Those incidents have not resulted in unauthorized access to Bank of America or customer information, according to the report. But the report says the bank believes such incidents may continue.

The bank’s cybersecurity group is “judicious” in how it spends money on cybersecurity, Moynihan said.

“But the reality is you’ve got to be willing to do what it takes at this point.”

Tuesday, January 20, 2015

Moynihan: Swiss currency decision a boon for BofA



The end of the cap on the Swiss franc is leading to major losses for some banks — but it's been a good thing for Charlotte-based Bank of America, its CEO told CNBC Tuesday.


New York-based Citigroup, Germany-based Deutsche Bank AG and England-based Barclays Plc are said to have suffered $400 million in cumulative losses following the Swiss central bank’s decision to abandon the cap on the franc's value against the euro, Bloomberg reported Monday. Those losses may be followed by others in coming days, according to the news agency.

But Bank of America CEO Brian Moynihan told CNBC that his bank has benefited from the Swiss currency shock that rocked markets and companies last week.

"We made money in the last few days and we helped our customers," Moynihan said in the CNBC interview in Davos, Switzerland, where he's attending the World Economic Forum, the annual gathering of financial and political elites from across the world. "It hasn't been a big impact on us but it caught everybody by surprise."

Here are more excerpts from CNBC's story on the interview:
Moynihan said that his bank made money in the currency markets and trading in the wake of Thursday's announcement that the Swiss franc would no longer be pegged to the euro. 
He said the Swiss National Bank decision was good even though it caused some "dislocation in the system." 
"The volatility helps activity, and if you keep your exposures low, any activity actually helps generate revenue," he said. "We were fine, and we look forward to letting the economy adjust."

Why bankers will be watching the State of the Union

My prediction of the day: More bankers than normal will be tuned in to tonight's State of the Union address.

Here's why:

During the address, President Barack Obama is expected to propose a fee — some people are referring to it as a "bank tax" — on the largest U.S. financial institutions, a group that includes Bank of America and Wells Fargo.

Specifically, the proposal calls for a 0.07 percent fee on the liabilities of the roughly 100 U.S. financial institutions that have assets of more than $50 billion each.

According to a fact sheet released by the Obama administration over the weekend, the fee is designed to make it more costly for the institutions to finance their activities by borrowing heavily. That, in turn, would reduce the probability of major defaults that can ripple through the economy, the administration says.

If the idea sounds familiar, it's because Obama proposed a similar tax in 2010, when the financial crisis was fresher on the minds of many Americans than it is today. That proposal, designed to recover taxpayer funds used to bail out big banks, went nowhere.

To be sure, the odds of this new proposal going anywhere are long. I mean, there's that whole Republican-controlled-Congress variable you've got to factor in to the equation.

And you can bet that the banks, which already lament post-financial crisis regulations as being too costly, will lobby hard against the proposal if it seems to start gaining any traction.

In a Forbes column, Tim Worstall writes that the tax is founded on a good idea. But, he writes, its chances of passing would be improved if it were presented as an premium charged to banks in exchange for an insurance backstop from the federal government.

"It’s not a tax: it’s an insurance premium and if the banks don’t want to pay it they can not have these liabilities and thus not need the insurance," he writes.

"Put that way Obama’s proposal might actually have a chance. ... Call it a change to the FDIC’s insurance premiums and attain the same goal that way."

For another view, here's what investment bank Keefe, Bruyette & Woods said about the fee in a report Monday:

We view this as political posturing and not a serious policy proposal. In our view, chances of this proposal passing are low. 
Instead we think it is part of the administration's effort to draw contrasts with congressional Republicans and make it look like the White House is against Wall Street, while Republicans are defenders of the industry. We view this to energize the President's political base.

And here's what the Financial Services Forum, a Washington, D.C.-based group whose members are the CEOs of 18 large financial services institutions that do business in the U.S., has to say about the proposal. The statement below is from forum President Rob Nichols:
We urge policymakers to reject this tax targeting a small group of companies and instead focus on achieving broad-based, pro-growth tax reform that ensures our economic recovery continues.
As the largest financial institutions continue to simplify, reduce risk and leverage, build capital, provide the credit to keep the economy growing, and make the necessary investments to protect customers from cyber threats, it would be counterproductive to layer on one more way to make it more difficult to achieve those public goals.

McHenry moves up on banking panel, Pittenger reappointed

Rep. Patrick McHenry, of Lincoln County, has been named vice chairman of the House Financial Services Committee, while Rep. Robert Pittenger, of Charlotte, has been reappointed to the committee.

The appointment is a move up on the committee for McHenry, who has served on it since his first term in 2005.

In addition to the vice chairman position, McHenry will be a member of the Capital Markets and Government Sponsored Enterprises Subcommittee and the Oversight and Investigations Subcommittee.

Pittenger was named to the committee in 2012, the year he was elected to his first term. He was sworn in for his second term earlier this month.

Pittenger is also on the Financial Institutions and Consumer Credit Subcommittee and the Monetary Policy and Trade Subcommittee.

The two Republicans are among three Charlotte-area lawmakers on the committee. Mick Mulvaney, a Republican from Indian Land, is the third.

Monday, January 19, 2015

BofA: 800,000 customers signed up for Apple Pay

Bank of America says about 800,000 of its customers have enrolled in Apple Pay, nearly three months after the Charlotte-based bank began making the service available.

The disclosure was tucked inside last week's press release for Bank of America's fourth-quarter earnings. To put that number in some perspective, Bank of America says it has approximately 17 million mobile users, of which 800,000 is only about 5 percent.

Apple's new mobile payments system allows shoppers to use their iPhones to make purchases at participating stores. The system, whose adoption is being closely watched by the payments industry, debuted in October.

Since then, some banks have scrambled to give their customers access to the service, at a time when consumers are expecting to do more and more on their mobile phones. Wells Fargo has even been promoting Apple Pay in advertisements in Charlotte.

(You can see which banks are participating in Apple Pay at this page on Apple's website. The list has only 39 banks, a number that took me by surprise as I was expecting perhaps more by now.)

According to a post earlier this month on appleinsider.com, major credit unions have been slow to sign on with Apple Pay. Of the top 10 banks in the U.S., only two — Bank of New York Mellon and HSBC — haven't joined Apple Pay, according to appleinsider.com.

Bank of America's roll-out of the service hasn't been snag-free.

The same week Apple Pay launched, Bank of America disclosed that some of its customers were double-billed for purchases they made with the service.

Friday, January 9, 2015

Richmond Fed announces appointments to Charlotte branch

The Federal Reserve Bank of Richmond this week announced five appointments to the Charlotte branch's seven-member board of directors. All of the appointments are effective as of the start of this year.

A NEW CHAIR: The branch's board of directors elected Elizabeth Fleming, president of Converse College in Spartanburg, chair of the board. She has served as a director since 2013.

Fleming replaces David Zimmerman, president of Charlotte-based Southern Shows, whose term on the board ended.

NEW DIRECTORS: The Board of Governors of the Federal Reserve and the board of directors of the Federal Reserve Bank of Richmond have also appointed four directors to the Charlotte branch's board. They are:

  • Michael Crapps, CEO of Lexington, S.C.-based First Community Bank, for a term of two years.
  • Claude Demby, vice president of business development for Durham-based Cree, was re-appointed for a term of three years.
  • Paul Szurek, chief financial officer of Asheville-based Biltmore Farms, was re-appointed for a term of three years.
  • Mark Williamson, CEO of High Point Bank and Trust, for a term of one year.
DEPARTING DIRECTORS: Two directors are leaving the Charlotte branch's board. They are:
  • Robert Hill, CEO of Columbia, S.C.-based South State Corp. and South State Bank. Hill served on the Charlotte branch board since 2011. He's now going to serve a three-year term on the Federal Reserve Bank of Richmond's board. That appointment took effect Jan. 1.
  • John Kreighbaum, former CEO of Ballantyne-based Carolina Premier Bank Kreighbaum served on the Charlotte branch's board since 2009. (Kreighbaum announced his resignation from Carolina Premier Bank in August.)
The Charlotte's branch's territory covers North and South Carolina.