Banking Industry Faces Regulatory Probes and Restructuring Efforts

Strategic Insights -

The banking industry has been dealing with multiple regulatory probes in the last five trading days, including investigations by the U.S. Department of Justice and the Commodity Futures Trading Commission into allegations of rigging precious metal markets. Major banks such as JPMorgan Chase & Co., Bank of America Corp., and Citigroup Inc. are under scrutiny for their involvement in manipulating precious metal prices. Additionally, the industry is undergoing significant restructuring efforts, with JPMorgan announcing plans to shut down around 300 bank branches over the next two years to focus on advising retail banking clients.

Key Takeaways:

  • At least 10 global banks are being investigated by the DOJ and the CFTC for allegedly rigging prices of precious metals like gold, silver, platinum, and palladium.
  • The investigation is focused on the price-setting process for these metals in London, with the CFTC initiating a civil probe and the DOJ examining the process.
  • Banks under scrutiny include HSBC Holdings plc, JPMorgan, Credit Suisse Group AG, Barclays PLC, Deutsche Bank AG, The Goldman Sachs Group, Inc., The Bank of Nova Scotia, Societe Generale SA, Standard Bank Group Ltd., and UBS Group AG.
  • BofA has settled its lawsuit related to Fontainebleau Las Vegas, LLC by agreeing to reimburse $300 million, using an existing reserve to pay the sum.
  • Citigroup Inc.'s (C) unit Banamex (Banco Nacional de Mexico) USA is facing another regulatory probe over its money-laundering controls.
  • JPMorgan is in discussion with the Justice Department regarding inconsistency in interest rates charged by auto dealers on loans provided to different races and ethnicities.
  • The banking industry is increasingly pursuing restructuring measures with its services being more electronically inclined, with JPMorgan planning to shut down around 300 bank branches over the next two years.
  • The plan is an effort to focus more on advising retail banking clients rather than operating everyday transactions, aiming to save $1.4 billion.
  • Price performance of banking stocks has been mixed, with JPMorgan and Citigroup experiencing gains of 3.0% and 1.2% respectively, while BofA declined 2.1%.
  • Over the last six months, The PNC Financial Services Group, Inc. (PNC) and Wells Fargo & Company (WFC) were the top performers, with shares advancing 9.5% and 8.4% respectively.

Statistics:

  • At least 10 global banks are under investigation by the DOJ and the CFTC.
  • The CFTC has initiated a civil probe, while the DOJ is examining the price-setting process for precious metals in London.
  • BofA has agreed to reimburse $300 million to settle its lawsuit related to Fontainebleau Las Vegas, LLC.
  • Citigroup's Banamex USA is facing a regulatory probe over its money-laundering controls.
  • JPMorgan is planning to shut down around 300 bank branches over the next two years.
  • The bank aims to save $1.4 billion through this restructuring effort.
  • Price performance of banking stocks: JPM 3.0%, BAC -2.1%, WFC 0.6%, C 1.2%, COF -1.5%, USB 0.7%, PNC -0.1%.
  • Over the last six months, The PNC Financial Services Group, Inc. (PNC) advanced 9.5%, while Wells Fargo & Company (WFC) advanced 8.4%.

Sources:

  • Zacks.com via COMTEX, Feb 28, 2015
  • The Wall Street Journal, Feb 2015
  • BofA regulatory filing, Feb 2015
  • Citigroup Inc.'s annual filing with the SEC, Feb 2015
  • JPMorgan annual investor day conference, Feb 2015
  • SmarTrend Alert, Comtex News Network, Inc., 04-20-2012
  • SmarTrend Alert, Comtex News Network, Inc., 04-09-2012
  • SmarTrend Alert, Comtex News Network, Inc., 04-04-2012