U.S. GDP Growth in First Quarter Revised Up to 1.1% Rate

WASHINGTON—The U.S. economy expanded more than previously thought in the first three months of the year, but underlying trends suggest it remains vulnerable in the face of global economic turmoil.

Gross domestic product, the broadest measure of goods and services produced across the U.S., grew at a seasonally adjusted annual rate of 1.1% in the first quarter, the weakest pace in a year, the Commerce Department said Tuesday. The agency previously estimatedthe economy grew at a 0.8% pace.

The main factors behind the upward revision: The U.S. exported more goods and services than previously thought. And companies spent more than initially estimated on software and research and development.



Millions of U.S. Consumers Escaping Subprime Credit

The percentage of Americans with subprime credit scores has fallen to the lowest level in more than a decade, a development that could give bank lending and the overall economy a boost.

The share of U.S. adults with credit scores that are considered “subprime” fell to 20.7% in April, the sixth consecutive year-over-year decline and the lowest level since at least 2005, when Fair Isaac Corp., or FICO, started tracking the data. The ranks of subprime borrowers swelled during the financial crisis, peaking at 25.5% in 2010 as mortgage payments, credit-card bills and other debts went unpaid.

The improving trend could bring relief to big banks, which tightened credit standards in the wake of the crisis. An increase in more-creditworthy borrowers could allow them to increase lending without lowering standards. Banks are desperate for revenue growth since the same superlow rates helping borrowers are also squeezing their own profits.

“It will have a positive impact on loan volume, loan growth and revenue,” said Morgan Whitacre, consumer client underwriting executive at Bank of America. Credit-card and auto lending would be the first type of loans to benefit.




Walmart Canada will no longer accept Visa cards due to high fees

Walmart Canada is breaking up with Visa over high transaction fees.

The company’s Canada division will no longer accept Visa cards because the fees Visa charges to accept its branded cards are “unacceptably high,” Walmart Canada said in a statement over the weekend.

Walmart said the fees conflict with its mission of saving customers money and subsequently keeping business costs low. The change will start taking place July 18 and rolled out in phases to its more than 400 stores across Canada.

Walmart Canada said it pays more than $100 million in fees every year to accept credit cards, though it didn’t break out how much of that goes to Visa. Stores will still accept MasterCard, Discover and American Express.





Bank of America plans more job cuts


Bank of America is expected to reduce staffing in its consumer banking division by as many as 8,000 more jobs.

The nation’s largest retail bank by deposits has already reduced the staffing in its consumer division from more than 100,000 in 2009 to about 68,400 as of the end of the first quarter of 2016, said Thong Nguyen, Bank of America’s president of retail banking and co-head of consumer banking at the Morgan Stanley Financials Conference Tuesday.

Those reductions have come as Bank of America transforms its retail financial centers for digital banking. Eventually, the headcount will “probably go down to the low 60s,” although Nguyen did not offer a timeframe for reductions, according to transcripts of his comments.


Bank of America has 23% fewer branches than 2009

Bank of America has 23% fewer branches and 37% fewer workers than in 2009, the bank said in a presentation on Wednesday.



U.S. Banks Unite to Form Industry Leading Secure Real-Time Payments Network

Payment processes have become the hottest working areas for banks in financial technology. Banks have started to realize the importance of real-time payments and Wells Fargo & Co (NYSE:WFC) now joins other banks to enable customers to make immediate payments through ClearXchange.

ClearXchange is a network owned by several other major banks such as Bank of America and JPMorgan. It was launched in 2011 but at that time, the customers had to wait two to three days in order for payment to be processed completely. The network’s immediate processing capability got live this year. Wells Fargo has turned down several fintech start-ups, which signifies that the firm does not believe in alternative ventures for payments systems.

Three banks are now live with realtime peer-to-peer payments on the ClearXchange network: U.S. Bank, Bank of America, and as of yesterday, JPMorgan Chase. U.S. Bank and Bank of America joined the realtime network in March.

P2P payments were realtime within Chase since 2012, but now they are realtime among all banks on the ClearXChange network.

Venmo and Square Cash may get all the attention, but bank peer-to-peer payments see more volume and larger payments. Chase QuickPay, the bank’s P2P solution, became part of the ClearXChange network in 2012. Usage is projected to grow 40% year over year, and Chase customers transferred $20 billion peer-to-peer in 2015, while the average transaction size is now more than $300, according to Chase.

Compare those numbers to Venmo, which processed $3.2 billion last quarter. Venmo grew 150% over 1Q 2015, according to CEO Dan Schulman on PayPal’s April earnings call. Ron Shevlin, research director at Cornerstone Advisors, puts the average Venmo transaction size at around $2, which seems low compared to the Chase number. Two possibilities: 1) People use Venmo much differently than they use bank-based P2P; or 2) People are not self-reporting accurately about Venmo usage, and they transact less frequently than they think they do.




Fed Leaves Policy Rate Unchanged, Lowers Outlook for Increases


WASHINGTON—The Federal Reserve held its benchmark lending rate steady on Wednesday and officials lowered projections of how much they expect to raise short-term interest rates in the coming years, signs that persistently slow economic growth and low inflation are forcing the central bank to rethink how fast it can move rates higher.

“We are quite uncertain about where rates are heading in the longer term,” Chairwoman Janet Yellen said at a press conference following the Fed’s two-day policy meeting.

New projections show officials expect the fed-funds rate to rise to 0.875% by the end of 2016, according to the median projection of 17 officials. Their forecasts imply they see two rate increases this year. That is the same number of increases they saw when they last released projections in March. However a greater number of officials now see one increase, rather than two. In March only one official saw one rate increase this year and seven saw three or more. Now six officials see one increase this year and only two see three or more.

Ms. Yellen said a rate increase at the Fed’s next meeting in July is “not impossible,” but she doesn’t know how quickly officials will gain confidence the economy is on firm footing. “We need to assure ourselves that the underlying momentum in the economy has not diminished,” she said.


CoreLogic: April’s US Home Prices Up 6.2 Percent Since Last Year



IRVINE, Calif.— CoreLogic® today released its CoreLogic Home Price Index (HPI™) and HPI Forecast™ data for April 2016 which shows home prices are up both year over year and month over month.

Home prices nationwide, including distressed sales, increased year over year by 6.2% in April 2016 compared with April 2015 and increased month over month by 1.8% in April 2016 compared with March 2016, according to the CoreLogic HPI.

Continue reading