The Bankwatch

BofA have come out with a pure non branch checking account that has the right price, i.e. free.  Everything is done via online or ATM.  This type of account is gaining momentum.  Its not a game changer but with a no fee price tag, it will change behaviours of some customers.

Bank of America

eBanking

Ideal if you do most of your banking online and at the ATM, instead of with a teller.

Learn more about eBanking>>

Monthly fee waived when:

• Deposits and withdrawals are made electronically or at our ATMs
  AND
• You choose online paperless statements through Online Banking

Otherwise, $8.95 per month

This headline caught my attention this morning.

Three Years on, Is the Financial Crisis Over? | Yahoo Finance

Three years ago to the day, BNP Paribas, the French banking giant, suspended redemptions on three funds, marking the beginning of the credit crunch.

Sure enough it was 9th August, 2007 I posted on it and noted that the US sub prime problem was going international and pointing to deeper rooted problems with banks.

Relevance to Bankwatch:
Two sets of recent events underscore the heightened risks Banks are taking to improve profits.  Speculative investment in commodity markets amongst a few Banks earlier in the year, and now the international impacts of the US Sub Prime all suggest that some Bankers are losing sight of that primary Banking mantra – ‘know your customer’.

On the weekend there were two significant developments affecting American banks that result from the last 3 years of fallout.

US to pay big sums for Wall St tip-offs

Banks’ reports speak volumes

Much of the turnaround reported this week is down to tighter cost management, disposals and a lessening of the worst news, such as impairments. On the plus side for investors, the new business trickling in is more profitable because of the fatter margins it offers. More than one chief executive this week has bemoaned the lack of appetite for fresh loans.

The FT’s point is that the length of the 4 UK banks interim reports are over 800 pages in total.  The RBS one is 303 pages alone.  This is indicative of the focus on maintaining the governance associated with government ownership and supervision and the associated costs and time commitment for a quarterly report that is longer than many annual reports.

Relevance to Bankwatch:

Banks’ response to the crisis has really been as expected and quite defensive to date.  It has been one of continuing with branding strategies and manage costs down.  Stay below the radar and hope it all gets better.  My take back in early 2009 was that we would see a ‘great unwinding’ of debt problems in banks.  I had no idea how back then but the answer has been Quantitative Easing or central banks taking over banks loans and in the UK case taking over bank ownership in lieu.  My prediction then was:

This will effectively split the financial community into two distinct sets:

1. financial utilities – significant operating restrictions in light of implicit and explicit government guarantees underpinning the business
2. risk takers – not clearly defined as yet – will be dependent on regulation applicability

We have seen lots of 1. and the RBS report highlights the workings of a bank as a regulated utility.  The word ‘innovation’ appears no-where in the document.  A search for ‘new product’ shows once as a “we continue to focus on new products to diversify …etc etc”.  It is generally a stuffier than usual document and one that reads to me as written for the regulators.

There are some germs of evidence of 2. showing finally with the likes of Metro Bank and Virgin Finance springing to mind.  Less evidence in the North American market to date, and backwards progress with the demise of Wesabe.  In terms of significant players, Lending Club and Mint spring to mind as some evidence.

Banks whose stock value is partly predicated on trading profits will come under serious pressure in the next while.

US banks braced for slump in profits | ft.com

Trading activity picked up a little in recent days after the release of European banks’ “stress tests”. However, deepening fears of a permanent end to the trading boom that supported financial groups’ earnings after the financial crisis are prompting some banks to consider laying off traders.

“July was a miserable month for trading,” one senior banker said. “If August and September don’t rebound sharply, banks will be forced to cut jobs.”

The squeeze in trading profits highlights the rising importance of groups’ consumer and commercial banking operations, whose performance is improving as the economy heals.

From the same article I came across this statistical review of investment shifts since before and after the crisis.  It seems to show that net assets have relatively shifted to cash assets, and that equities are still 25% below 2007 values.

Countries are still working out their responses to a globalised and inter-connected world.  This report from the Canadian International Council is an absorbing example of an approach for Canada.  Its the more absorbing because Canada sits on one of the longest borders in the world, with the United States.  One of the early themes is the reliance of Canada on free trade amongst US, Canada and Mexico, yet trade with the US is dropping sharply since 2000 as the US became more protectionist of its borders.  Exports to US have dropped from $37bn to $26bn in the period 2000 to 2008.  Considering the US is Canada’s largest trading partner (20% +/-) this is an important trend.

Another related theme is that for a relatively small country like Canada it must build on its strengths and bring a pragmatic approach to its dealings with other countries.  In real terms this means pick the strengths that are beneficial and abandon those that are not.  It turns out the US Canada border negotiations broke down because of Canada’s stance on protection of privacy and sharing of fingerprints, retinal scans etc.  At what cost does a Canada stick to such principles?

On the other hand, and more relevant to this blog, Canada has some real enduring strengths in fiscal conservatism and management of financial institutions. 

 Open Canada | CIC

This means Canada will have to work that much harder to find spots where we can exercise leadership, such as the Arctic Council, yet another Canadian creation, and global financial regulation. Today, our international finance officials stand out the same way our foreign service officers once did.

The financial crisis has presented us with a mini-Suez moment. We have our own interests at stake and  helping our friends and allies find a way out of the jam serves those interests alongside the greater good. We can show them what we learned digging ourselves out from 20-plus years of deficits and how we did it without igniting riots in the streets. We can show them how prudent financial regulation and market principles can co-exist. We can apply our knowledge and credibility to the development of some kind of ‘peacekeepers’ of the financial order.

Relevance to Bankwatch:

There are some quite deep and genuine themes that Banks could learn from and lever in this report.  For starters, if Canadian finance is as strong then why are more takeovers/ integrations/ partnerships not taking place between Canadian and US financial institutions.

Next up is Innovation.  Canada fares badly here.

Yet it turns out three Canadian banks somehow made the list of innovative Canadian companies.  I must find the list, but either we don’t understand innovation, or we should lever this strength.

Innovation is the greatest generator of wealth in today’s global economy. Ideas have replaced industry on the  commanding heights of the postindustrial economy. Yet in a recent ranking of Canadian companies, the top dozen consisted of eight in the resource-extraction business, three banks and only one (Waterloo’s Research In Motion) that could be described as a homegrown innovation success.

By its nature this report is aimed at Government and the approaches they should consider, but Banks and particularly Canadian banks with their relatively large size within the Canadian economy have some role to play here.

FT have been running the CEBS announcement on European bank stress test live since 16:45 BST.  Biggest surprise the the small number of failures.  One Spanish bank is all I picked out so far.  Portugal, Italy all passed.  I have seen nothing on Greece as yet.   More later.

Internet has resulted in more than a fair share of amateur experts on everything from technology to economics.  it was interesting to watch the antics of the armchair group when back in May Apple market cap overtook Microsoft.  The end of an era, as reported by their technology reporter.

Fast forward to this morning, and look at the market caps.

No-one doubts the shift to mobile and I still love my iPhone.  However care should be taken in isolating daily jumps in emotional stock markets which can generate attention grabbing headlines that may well prove to be proof of a long term trend, but that must be tempered with the next days reality too.  Trends are not made in daily shifts.  That May 26th headline looks a bit lame this morning, with real doubts about the reputation management at Apple being expressed in the 8.95% drop. 

Apple reputation is at stake

Who knows how much this will translate into product quality issues at Apple.  That would take a brave predictor of the future.  Will my next phone be an iPhone or an Android?  Already after 6 months iPhone use I have shifted entirely to non-native app usage including browser based gmail using the new html5 app which is superb and features google docs too.  Same with youtube. 

So now my decision point in phone choice is solely hardware quality and little to do with native app quality, or even App (as in app store) quality.  So long as I have a quality browser that deals with html 5 I am app agnostic and simply want the best hardware, something android devices have severely lacked, but are improving steadily.  Of course development is still required to make the app work on iphone or android but the user experience will be similar in a browser on both presumably because html 5 is the consistent standard.  Which brings me back to the best hardware.  iphone currently win that battle, but last weeks antennagate indicates a potential chink in the armour.

I suspect that is why we see the large market sentiment drop on Apple this morning.  That may change by afternoon, however how Apple restore reputation on hardware quality over the coming months will still be  critical in the long term.

An interesting chart from ft.com that reviews marketing shifts in the UK.  While there is a general downward shift in marketing in Q2, the mix continues to shift away from traditional and towards internet.

Q2 2010 Bellwether: marketing spend down

The latest IPA/BDO Bellwether survey published today (12th July 2010) reveals that marketing budgets were revised down in Q2 amid uncertainty regarding the economic outlook, with around 20% of companies reporting a downward revision against 15% that reported an increase.  Business confidence has also dipped with positive sentiment the lowest for a year. However the rate of budget trimming was much slower than at the height of the downturn

This is an off-topic rant on iOS 4.  if you are not using iPhone please disregard

<rant>

As cool as the iphone is, there are some things that just don’t change under the covers, whether its windows, or apple OS and thats memory management.  This is lazy code development.

The example here is the use of memory in the fake multitasking implemented in iOS 4.  Multitasking is not multitasking in iOS 4 – it is restricted to 3 areas (audio, VoIP, and location data).  Read here for the experts outline.  So if it is not real, then at least do not unnecessarily use up my memory with the apps that are not multitasking by retaining them in the multitask bar. Here is why it bugs me. 

1) here is the memory status on my phone after 2 or 3 weeks without rebooting.  Note free memory is 10 MB.

2.  After running memory clean, I got another 42MB free.

3. But the real kicker.  I closed all the apps in the multitask bar which included no music apps, and 3 geo-location apps.  Those should be the only multitask apps with live api access.  The other 13 apps are just sitting in the multitask bar taking up memory as far as I can see.  How much?  I closed everything and ran mem status again.

4. 70 MB!!!  This is ridiculous.  There is not even a function in a non-jailbroken iphone to restrict which apps head into the multitask bar.

Ho hum.  I love iphone, but iOS 4 is a loser so far in my view when the single largest promise is such a failure.

</rant>