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Consumer Credit jumps, Wells Fargo dumped, Goldman Sachs trading platform | Banking insight

The hitherto bankers’ bank Wells Fargo originated more than 30% of the $385 mln in new mortgages in Q1 2012 and led the pack, #2 JP Morgan at just below 11% and Bank of America at hardly 4% ( obviously not counting foreclosures) The bank had also managed to stay away from the sub prime crisis and even managed a reputation with tougher underwriting rules for mortgages during the boom years to 2007. However under Stumpf, this week the bank was chided for trying to take the risky path by trying on new investment banking businesses. All this for a small Merlin Securities business that heralds the banks presence in big leverage country with a Prime brokerage offering. Chding the $12 bln Warren Buffet investment was Moodys’ though the bank’s rating has not been downgraded further.

Meanwhile, as suspected, the March Consumer Credit data jumped wildly (beating expectations) making it two such jumps in the three months of data we have for 2012. The jump this time also brings up the revolving credit component, while the continuing surge in non revolving ( simplified in our analyses in auto loans) was unabated too. The 10% Y/Y jump was almost evenly divided this time and the $21.4 Bln increase took the stock of outstanding retail credit to $2.54 T  SA(seasonally adjusted) that was $0.803 T credit cards and $1.74 T non revolving unsecured/auto loans. Credit Outstanding with NBFCs was less than half or $497 bln of that outstanding with banks $1.075 T. Banks hold most of the revolvers while other consumer loans are split evens between NBFC and banks. The Fed holds over $460 bln in student loans. Earlier Q4 data also saw a big jump in Consumer credit from the holiday binge.

Wells Fargo Stagecoach

Wells Fargo Stagecoach (Photo credit: Noel C. Hankamer)

Goldman Sachs is out with the ace up its sleeve. Apart from having bought a minor insurance business to facilitate its innovative Credit insurance products, the Wall Street leader is in the final stages of launching its own trading platform for Fixed Income. The bank would thus rely less on exchanges and external clearing houses as regulations evolve. The new platform Gsessions begins with Corporate bonds and will then add other FI products like CDS

Earlier interestingly, Berkshire Hathaway CEO Warren Buffet took the stage at various networks to defend the American banking system, which seems to have completed its winding way out of the crisis even as banks across the pond try to deleverage whil eholding interest free ECB loans as recession and political uncertainty spreads its way across Europe

 

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