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TheStreet Open House

Most Bank Stocks Rise on 'Credit Suisse Day'

Stocks in this article: CSJPMI:BKX

NEW YORK (TheStreet) -- The health of the U.S. banking industry is continuing to improve, although the hostile interest rate environment is placing a drag on operating revenue.

The broad indices ended roughly flat, as investors shrugged off the latest high-profile housing report, which this time included a positive surprise. The KBW Bank Index (I:BKX) rose 0.3% to 68.48, with all but seven of the 24 index components ending with gains. The winner among major domestic banks was First Niagara Financial Group (FNFG), with shares rising 1.5% to $9.05.

The Census Bureau on Wednesday said sales of new single-family homes in the United States rose 9.6% month-over-month and 2.2% year-over-year to an annual pace of 468,000. That number was way ahead of the consensus estimate of 404,000 among analysts polled by Thomson Reuters.

But the Census Bureau said its preliminary estimate of the 9.6% sequential increase had a margin of error of plus or minus 17.9%, meaning the actual change in the annual pace of new-home sales in January was likely to range from a decline of 8.3% to an increase of 27.5%.

Swiss Banking Show

The major piece of banking industry news on Wednesday was the release of a scathing 176-page report by the Senate Permanent Subcommittee for Investigations, entitled OFFSHORE TAX EVASION: The Effort to Collect Unpaid Taxes on Billions in Hidden Offshore Accounts.  The Subcommittee in the report took the Swiss Government, the Justice Department and even the full U.S. Senate for taking inadequate action to address the problem and help the U.S. government recover lost tax revenue.  The report also featured a "case study" of the efforts by some Credit Suisse (CS)employees to help some U.S. clients evade U.S. taxes.  The Subcommittee followed the release of the report with a hearing that featured Credit Suisse CEO Brady Dougan and Hans-Ulrich Meister, the bank's co-head of private banking and wealth management.

Credit Suisse in a statement said the wrongdoing had been limited to "a small group of Swiss-based private bankers," and outlined various steps it had taken to prevent U.S. customers from hiding assets and income from the U.S. government.  The bank also said it had provided as much information on U.S. clients to U.S. government authorities as was allowed under Swiss law, and that it was ready to provide additional information, but was unable to do so, "because the U.S. Senate has not yet ratified the Protocol to the Double Taxation Treaty agreed to by the U.S. and Swiss governments in 2009 and approved by the Swiss Parliament in 2010."

The Senate Subcommittee report also said the full Senate should promptly ratify the 2009 Protocol to the U.S.-Switzerland tax treaty to take advantage of improved disclosure standards."

Two major problems with the agreements between the Swiss government and the U.S. government on sharing client data to prevent tax evasion is that the rules can't retroactively force the handing over of customer data from periods before the agreements were made, and the agreements call for a high level of specificity in requests for the information by the U.S.  But going forward, it would appear that the Foreign Account Tax Compliance Act, or FATCA, with its strict reporting requirements for foreign banks serving U.S. clients, will greatly curtail the hiding of assets.  Swiss banks will begin complying with FATCA on July 1.

American depositary receipts of Credit Suisse were down 2.5% in trading on the New York Stock Exchange, to close at $30.83.

Improved Banking Industry Earnings

The Federal Deposit Insurance Corp. on Wednesday said U.S. banks earned $40.3 billion during the fourth quarter, increasing from $36.0 billion in the third quarter and from $34.4 billion during the fourth quarter of 2012.  The sequential improvement mainly reflected the weak results for JPMorgan Chase (JPM) and its main banking subsidiary during the fourth quarter.  Please see TheStreet's coverage for much more on this topic, including the earnings benefit from lower provisions for loan loss reserves by the nation's largest banks.

-- Written by Philip van Doorn in Jupiter, Fla.

Swiss Banks Still Protecting Criminals

What Wall Street Is Saying About JPMorgan's Investor Day

Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.

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