US investment banks revved their engines
An annual study of the investment banking industry conducted by Morgan Stanley found firms appear primed for growth. Regulatory reform and other restructuring have weighed on investment banks for a number of years. The study predicts regulatory costs to peak this year and fall by as much as 40% over the next three years.
“This is the first year since we’ve been producing this paper that we’re looking to see a significant shift to the positive in terms of revenue growth, operational leverage and return on equity,” said Magdalena Stoklosa, head of European financials research at Morgan Stanley.
The study also highlighted the dramatic divide that continues to separate US investment banks and their European counterparts. Slower reforms and restructuring in Europe have left banks on that side of the pond lagging. To wit: U.S. banks are sitting on combined $83 billion of excess capital, while European banks are sitting on a paltry $1 billion.
The Gensler-esque evolution of Neel Kashkari continued
Federal Reserve Bank of Minneapolis President Neel Kashkari was passionate in offering his explanation for why he cast the lone dissenting vote when the Federal Open Markets Committee decided to raise interest rates earlier this week.
“I dissented because the key data I look at to assess how close we are to meeting our dual mandate goals haven’t changed much at all since our prior meeting,” Kashkari said. “We are still coming up short on our inflation target, and the job market continues to strengthen, suggesting that slack remains.”
Kashkari rose to prominence when he was tapped to run the US government’s $700 billion bank bailout program back in 2008. I have written before about how that experience and some dabbling at PIMCO and in California gubernatorial politics have had a striking effect on Kashkari. Judging from today, his pivot to more populist market philosophies is not done yet.
The ECB confirmed the obvious about Deutsche Bank
According to an inspection by the European Central Bank, Deutsche Bank isn’t exactly a market leader when it comes to risk management. Really? Who’d a thunk that the bank that recently flirted with a regulatory fine worth as much as its entire market-cap, took out a full-page newspaper ad to apologize for its misdeeds and is now about to tap shareholders for its fourth cash infusion since 2010 had risk management problems?
And speaking of those Deutsche Bank fines, it sounds like the bank is taking an unusual approach to satisfy the homeowner-relief clause of the settlement.
The FT looked at the tricks of the penalty kick trade
When a soccer player steps up to take a penalty kick, does success have more to do with nerves or physical ability? This excellent piece from the Financial Times outlines how it depends on the individual player. Some kickers and some goalkeepers are simply better than others. That being said, analytics can still play a role in helping either side when the pressure-packed duel. Perhaps the biggest surprise about the FT piece is that Simon Kuper didn’t write it.
WYWW Appetizers for St. Patrick’s Day