1 IMF warns of fresh crisis (Larry Elliott in The Guardian) The International Monetary Fund has highlighted risks of a new financial crisis, warning that global output could be cut by 4% over the next five years by a repeat of the market mayhem witnessed during the 2008-09 recession.
The IMF used its half-yearly global financial stability report to call for urgent action on the problems of banks in the eurozone, a third of which it said faced “significant challenges” to be sustainably profitable.
The IMF said there needed to be a comprehensive strategy to deal with €900bn (£715bn) of non-performing loans (NPLs) on the books of eurozone banks, adding that banks also needed to be closed in order to deal with excess capacity.
“The hardest hit banking systems within the euro area in February have been those of Greece, Italy and, to a lesser extent, Portugal, along with some large German banks, reflecting some or all of the following factors: structural problems of excess bank capacity, high levels of NPLs and poorly adapted business models.”
The IMF also expressed concerns about China, the world’s second biggest economy, which is in the throes of a transformation of its economic model away from exports and towards consumer demand. It said China’s rebalancing was inherently complex, and slower growth had eroded corporate sector health.
2 Verizon’s 40,000 workers on strike (BBC) On Wednesday, 40,000 Verizon workers across six US states went on strike after contract negotiations failed to produce a settlement. The unions organising the action represent customer service and network technicians. Verizon called the strike “regrettable” and said it had brought in 10,000 non-union workers.
Presidential candidate Bernie Sanders spoke at a protest in New York in praise of the workers. He said they were “standing up to this powerful special interest”. CWA representative Bob Master said the new workers would not be able to make up the workload left by those out on strike. “There’s no way that these 10,000 people … can make up for 40,000 people who have decades of experience [in highly technical jobs],” he said.
The union workers have been without a contract since August and negotiations have stuck on Verizon’s plan to cut healthcare and pension benefits over a three-year period. During the last contract talks in 2011 workers also went out on strike. A deal was eventually reached through mediation.
The strike could affect Verizon’s television, phone and Fios Internet businesses, is not expected to impact Verizon wireless, which made up 29% of the company’s 2015 revenue.
3 JP Morgan profit drops (Khaleej Times) JPMorgan Chase & Co, the biggest US bank by assets, reported a drop in quarterly profit – its first in five quarters – as costs to cover sour loans to troubled oil companies rose and revenue from trading and investment banking declined.
But both earnings and revenue beat analysts’ lowered expectations, helping to lift the bank’s shares by about 2.6 per cent to $60.85. JPMorgan is the first US bank to report results for what is generally being seen as the banking industry’s worst start to a new year since the 2007-08 financial crisis.
A slide in commodity and oil prices, a slowdown in China, near-zero interest rates, mounting regulatory costs and hefty capital requirements have all contributed to the weakness. Industry-wide, investment banking fees fell 29 per cent in the first three months of 2016, the slowest first-quarter since 2009.
JPMorgan’s investment banking revenue slumped 24.5 per cent on lower debt and equity underwriting fees even though the bank topped the global league table with $1.22 billion in fees during the quarter. Financial stocks were the worst performers in the S&P 500 index in the quarter, falling 5.6 per cent compared with the overall index’s rise of 0.8 per cent.