2025-10-14 18:18

WASHINGTON, Oct 14 (Reuters) - China must rebalance its economic growth model towards domestic demand, which has been weak for some time due to the country's property bust, the International Monetary Fund said on Tuesday, highlighting a message it has long delivered to Beijing. The renewed public emphasis in the IMF's World Economic Outlook is significant following U.S. Treasury Secretary Scott Bessent's calls for the global lender to step up its criticism of China's economic policies as part of a back-to-basics directive in April. Bessent's former chief of staff, Dan Katz, has recently taken over the IMF's influential No. 2 position. Sign up here. The IMF's chief economist, Pierre-Olivier Gourinchas, told a news conference that China continues to produce higher volumes of manufactured goods for export, but prices of these goods are falling. "And that suggests that somehow the market has limited capacity to draw all that is being produced," he said, adding that China's export growth engine is sputtering. "Our advice to the Chinese authorities for some time now has been to rebalance towards a sustainable domestic demand," Gourinchas said. In a blog posting accompanying the IMF's forecasts, Gourinchas described China's outlook as "worrisome." "Financial stability risks are elevated and rising as real estate investment continues to contract, overall credit demand remains weak, and the economy teeters on the edge of a debt-deflation trap," he wrote. He told reporters that China's domestic demand has been weak for more than four years because of a still-unresolved property crisis that has left the banking sector saddled with non-performing loans and which is weighing on consumer and business sentiment. Gourinchas also said China's pivot to subsidize investment in strategic sectors such as electric vehicles has had mixed results, fueling growth in these sectors but contributing to a broader misallocation of resources and significant fiscal costs. https://www.reuters.com/world/asia-pacific/imf-says-china-must-work-boost-domestic-demand-property-sector-still-an-issue-2025-10-14/

2025-10-14 17:44

Haddad says betting firms should contribute more Debate on alternatives to start after Lula's return from Italy More income tax tweaks may be presented in the future BRASILIA, Oct 14 (Reuters) - Brazil's government said it would start discussing on Wednesday measures to offset Congress' shelving of a proposal that would have overhauled taxation on investments while also raising taxes on betting and fintech companies to boost revenue. The proposal was deemed crucial to help the government meet its fiscal goal of a zero primary deficit this year and a 2026 primary surplus of 0.25% of gross domestic product. Sign up here. At the Senate's Economic Affairs Committee, Finance Minister Fernando Haddad said on Tuesday that lawmakers had expressed interest in finding ways to replace the dropped proposal, as the government seeks support for its budget. He also signaled the government may push ahead with plans to raise taxes on online betting firms, saying they must help address the side effects of an entertainment that can lead to addiction. Discussions on fiscal alternatives had been on hold pending President Luiz Inacio Lula da Silva's return from a trip to Italy on Tuesday. Senator Humberto Costa, a member of Lula's Workers Party, said it was "extremely important" for the government to decide whether to send Congress a new proposal to tax betting firms. "I think we can make it move forward. We shouldn't consider the issue of betting taxation as settled," he said. The government had expected a fiscal gain of 14.8 billion reais ($2.69 billion) this year and 36.2 billion reais in 2026 from changes sent to Congress via an executive order that needed approval by last Wednesday to remain in force. But the Lower House failed to vote on the proposal before the deadline, causing it to expire. Lawmakers said they would not support another tax hike by Lula's leftist government. The measure would still have required Senate approval. Of the total fiscal impact, only 284.9 million reais this year and 1.7 billion reais next year would have come from raising the gross gaming revenue (GGR) tax on online betting companies to 18% from 12%, as originally proposed by the government. Amid last week's negotiations, the government agreed to erase that provision, and the version that reached the Lower House no longer included the higher rate - a sign of the betting sector's lobbying power, despite broad public support for higher taxation on such firms. Most of the expected fiscal gain from the shelved proposal would have come from tighter rules on companies' use of tax credits, projected to raise an additional 10 billion reais this year and the same in 2026. MORE INCOME TAX TWEAKS Haddad said further work is needed on income tax changes, after the Lower House passed a government bill that raises income tax exemptions for the middle class while introducing a minimum levy on the wealthy, which is still pending Senate approval. According to the minister, the next steps would include changes to payroll taxation, followed by a reform targeting "pejotizacao," a common practice in Brazil of hiring workers as legal entities without formal employment ties, resulting in substantially lower taxation. "If we send everything from the Finance Ministry's kitchen at once, it'll be chaos," he said, without specifying when the new proposals could be submitted. ($1 = 5.5014 reais) https://www.reuters.com/world/americas/brazil-start-debating-fiscal-measures-after-congress-setback-finance-minister-2025-10-14/

2025-10-14 16:04

Wells Fargo raises ROTCE target to 17-18% in medium-term Credit quality strong across the board, CFO says Investment banking fees jump 25% Shares rise 7.6% in midday trading Oct 14 (Reuters) - Wells Fargo (WFC.N) , opens new tab on Tuesday beat Wall Street estimates for third-quarter profit and raised its closely watched profitability target after regulators removed an asset cap on the bank, paving the way for it to pursue growth. The U.S. Federal Reserve lifted the lender's seven-year, $1.95 trillion asset cap in June, drawing a line under its fake accounts scandal and freeing it to accelerate CEO Charlie Scharf's growth plans. Sign up here. Shares of the bank jumped 7.6% in afternoon trading. Until Monday's close, the stock had gained 12.4% this year, underperforming rivals JPMorgan Chase (JPM.N) , opens new tab and Citigroup (C.N) , opens new tab. GROWTH ASPIRATIONS Wells Fargo is now targeting a 17% to 18% return on tangible common equity (ROTCE) over the medium term, compared with its earlier expectations of 15%. "Wells Fargo, without the regulatory constraints and with the changes we have made, is a significantly more attractive company than what we were several years ago and we believe this positions us for continued higher growth and returns," CEO Charlie Scharf told analysts on a conference call. "We are now on a path to grow more broadly with the lifting of the asset cap." Scharf said Wells Fargo was aiming to become the top U.S. consumer and small business bank and wealth manager, as well as a top five U.S. investment bank. Wall Street had been anticipating the bank to raise the target following the removal of the cap, a punishment that restricted its expansion. Wells Fargo met its 15% return target in both the second and third quarters. "Management is acting with a newer urgency and addressing concerns that WFC is not moving fast enough from defense to offense," said Piper Sandler analysts, referring to the new ROTCE target. Profit jumped to $5.59 billion, or $1.66 per share, in the three months ended September 30, beating expectations of $1.55 per share, according to estimates compiled by LSEG. The fourth-largest U.S. lender has closed seven regulatory punishments, known as consent orders, this year and 13 since 2019. It still has one remaining consent order from 2018. "This was an encouraging quarter as the company started to show off why the asset cap limitation was holding them back. We've been impressed by the continued upward trajectory of the company's ROTCE," said David Wagner, head of equity & portfolio manager at Aptus Capital Advisors. The bank's total assets also surged past $2 trillion in the quarter for the first time in its history as it registered the highest loan growth in over three years relative to the previous quarter. STRONG CREDIT QUALITY U.S. consumers continue to spend money and repay their loans on time, reflecting strong credit quality. Still, uncertainty looms as the labor market is showing signs of softening. "While some economic uncertainty remains, the U.S. economy has been resilient and the financial health of our clients and customers remains strong," Scharf said in a statement. Provision for credit losses shrank to $681 million in the quarter from $1.07 billion a year earlier. "It (credit quality) was strong across the board, and I think it's been very consistent now with what we've been seeing," Chief Financial Officer Santomassimo told journalists. Asked about the recent developments in the auto market, Santomassimo said the bank was not a big player in the subprime auto market and the performance in its auto portfolio continues to be good. While bankruptcies in the auto sector have raised new concerns about hidden risks in parts of the credit market, analysts have said the episodes are idiosyncratic problems. INVESTMENT BANKING SHINES Dealmaking has rebounded as corporate boardrooms shrugged off persistent uncertainty from President Donald Trump's trade policies and chased big-ticket purchases in their pursuit of scale. Global dealmaking surged past the $3 trillion mark in the first nine months of 2025, lifted by a 33% surge in U.S. M&A volumes, according to data from Mergermarket. Wells Fargo's investment banking fees jumped 25% to a quarterly record of $840 million. They have surged 19% through the first nine months of 2025, from a year earlier. "Pipelines look good, the activity levels are good, and the conversations are constructive across the client set," Santomassimo said. Rivals Goldman Sachs (GS.N) , opens new tab and JPMorgan Chase (JPM.N) , opens new tab also beat profit estimates on Tuesday as bankers cashed in on big deals. Wells Fargo has been steadily building out its investment banking business, tapping dealmakers from rivals to bolster its ranks. Santomassimo said the bank had added 80 to 100 people in investment banking in the last few years and will continue to hire. Wells Fargo clinched a major win in the third quarter, advising freight rail giant Union Pacific (UNP.N) , opens new tab on its $85 billion acquisition of smaller rival Norfolk Southern (NSC.N) , opens new tab - the largest deal announced globally this year. Scharf said the bank was increasingly winning bigger and more complex M&A deals, adding that Wells Fargo advised on half of the top industrial deals announced or closed in 2025. https://www.reuters.com/business/finance/wells-fargo-profit-rises-higher-interest-income-2025-10-14/

2025-10-14 16:00

JPMorgan's equities, fixed income trading desks shine Investment banking rebound powers fee growth CEO signals US economy remains resilient Oct 14 (Reuters) - JPMorgan Chase (JPM.N) , opens new tab raised its full-year forecast for net interest income on Tuesday, after strong performance in its trading and investment banking businesses helped it beat expectations for third-quarter profit. Economic resilience despite tariff war risks and hopes of U.S. interest rate cuts have prompted companies to strike big deals and consider stock offerings, lifting investment banking business across Wall Street. Dealmakers expect an even stronger 2026. Sign up here. "While there have been some signs of a softening, particularly in job growth, the U.S. economy generally remained resilient," CEO Jamie Dimon said in a statement. "However, there continues to be a heightened degree of uncertainty stemming from complex geopolitical conditions, tariffs and trade uncertainty, elevated asset prices and the risk of sticky inflation," he added. Overall, the U.S. consumer remains healthy, and the bank was not witnessing signs of stress, Chief Financial Officer Jeremy Barnum said. "Consumers and small businesses remain resilient based on our data, and while we are closely watching the potentially softening labor market, our credit metrics, including early stage delinquencies, remain stable and slightly better than expected," Barnum told reporters. JPMorgan shares pared early losses and were last down 1.7% in late-morning trading. The stock was up 28% year-to-date as of Monday. "It was another classic, strong quarter from the bank, and the expectation is set high. Sometimes we see this with JPMorgan stock that, despite everything, there's not quite enough to drive a positive earnings day stock reaction," said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual Wealth Management. Mac Sykes, portfolio manager at Gabelli Funds, said the bank's suggestion, in response to an analyst's question, that expenses could rise about 4% next year, might be weighing on the stock. MARKETS REVENUE JUMPS The bank's traders capitalized on portfolio repositioning by their clients as equity markets hit record levels during the quarter. Revenue from the markets division, which includes both equities and fixed-income trading, rose 25% to $8.9 billion to a third-quarter record, far surpassing an earlier estimate. "The quarter showcased the strength of JPMorgan's diversified business model, with all major segments contributing to growth. We think this will lead the momentum for the rest of 2025 and into 2026," Kenneth Leon, director of equity research at CFRA Research, wrote in a note. JPMorgan also noted losses related to "borrower-related irregularities" in its commercial and investment bank, as well as a loss related to a single client in its asset and wealth management unit. The bank said it has exposure to bankrupt auto dealer Tricolor, and it took a $170 million loss in the third quarter related to the situation. Referring to Tricolor, Dimon said this was "not our finest moment," and said the bank was looking at all risk and control frameworks. He also warned that similar situations with other borrowers could arise. "When you see one cockroach, there are probably more." NII BOOST Large banks such as JPMorgan and Bank of America (BAC.N) , opens new tab can check the pulse of the U.S. economy by offering insights into consumer spending, borrowing, and business activity. Net interest income, the difference between what banks earn on loans and pay on deposits, continues to prop up industry earnings. JPMorgan revised its NII forecast for the year higher to roughly $95.8 billion, compared with an earlier estimate of $95.5 billion. It had also raised its forecast in July. "As a traditional bank, NII is a core earnings engine," said Brian Mulberry, senior client portfolio manager at Zacks Investment Management, which holds the bank's shares. "The fact that JPMorgan has raised its NII guidance indicates confidence in its interest-earning asset performance." It expects interest income, excluding markets, of $95 billion in 2026, driven by balance sheet growth and partially offset by the impact of lower rates. WALL STREET OPERATIONS SHINE Corporate dealmaking has picked up this year as companies take advantage of a booming stock market. Investment banking fees at JPMorgan rose 16% in the third quarter. Trading revenue also soared at a time when economic uncertainty remains. "There is a lot of stuff in the queue (on initial public offerings) and ready to go, and now conditions are much more favorable in terms of equity market valuations," Barnum said, adding that merger and acquisition activity has also risen. "It was the busiest summer we have had in a long time in terms of announced M&A activity, and we're seeing that play through," he added. JPMorgan has collected the most investment banking fees among its rivals this year, according to analytics firm Dealogic. Revenue from equities business jumped 33% to $3.3 billion in the third quarter, while that from fixed income surged 21% to $5.6 billion, largely driven by higher revenue in rates, credit and the securitized products. Uncertainty about interest rates and the U.S. government shutdown could reignite market volatility, benefiting Wall Street trading. JPMorgan reported a profit of $5.07 per share for the latest quarter, comfortably beating analysts' estimates of $4.84 per share. Rival Wells Fargo (WFC.N) , opens new tab and Goldman Sachs (GS.N) , opens new tab also beat Wall Street estimates for third-quarter profit on Tuesday. https://www.reuters.com/business/finance/jpmorgan-profit-rises-investment-banking-boom-trading-strength-2025-10-14/

2025-10-14 15:43

IMF highlights elevated risks in global financial stability report Nonbank financial sector growth could impact bank capital in downturn Central banks urged to remain cautious on monetary easing amid tariff risks WASHINGTON, Oct 14 (Reuters) - Global markets are too comfortable with risks, including trade wars, geopolitical tensions and yawning government deficits, which, combined with already overpriced assets, increase the chance of a "disorderly" market correction, the International Monetary Fund said on Tuesday. Underscoring the IMF's warning, U.S. President Donald Trump's revived threats on Friday to hike tariffs on China stoked investor fears of a major asset price correction. The comments sparked a sell-off in U.S. stocks and sent bitcoin tumbling. Sign up here. Despite this recent volatility, markets have mostly been resilient since April, when Trump unleashed his trade war, underpinned by expectations of monetary easing in most major advanced economies. However, this market optimism masks the potential damage from tariffs and high government debt. The IMF warned that the close ties between banks and less-regulated financial firms could amplify these risks. "Beneath the calm surface, the ground is shifting in several parts of the financial system, giving rise to vulnerabilities," the global lender wrote in its semi-annual Global Financial Stability Report. "Valuation models indicate that risk asset prices are well above fundamentals, increasing the probability of disorderly corrections when adverse shocks occur," it wrote. Despite some negative economic data, equity and corporate credit valuations are "fairly stretched" as enthusiasm over AI mega-cap stocks drives historic stock market concentration. That creates the risk of a "sudden, sharp correction" if expected returns fail to justify lofty valuations, the IMF said. ASSET PRICES SIGNAL DANGEROUS BUBBLE TERRITORY Analysis of sovereign bond markets also highlights growing pressure from widening fiscal deficits on market functioning. While bond markets have been mostly stable so far, abrupt jumps in yields could strain bank balance sheets and pressure open-ended funds like mutual funds, the IMF said. U.S. bond markets sold off last month as concerns about global fiscal health escalated, although the pain was quickly reversed and bonds rallied on weak economic data. Speaking to reporters in Washington on Tuesday, Tobias Adrian, director of the IMF's monetary and capital markets department, warned that term premium - the risk premium investors demand for holding longer-term bonds rather than rolling over short-term debt - is now at levels not seen since before 2009. It may continue to rise as supply increases, he said. Last week, the IMF also warned that banks have significant dollar exposure in their balance sheets, making them vulnerable to potential funding shocks. The dollar is down nearly 9% this year against a basket of currencies on expectations of further U.S. Federal Reserve monetary easing and Trump's trade policies. "While financial conditions are easy, the macro financial risks remain," said Adrian. The IMF said central banks should remain alert to tariff-driven inflation risks and take a cautious stance on monetary easing to minimize further valuation spikes in riskier assets. Central bank independence is "critical" for anchoring market expectations and allowing those institutions to fulfill their mandates, it added, without referring to a specific institution. Trump's attacks on Fed policymakers are emerging as the biggest threat to central bank independence in decades, sparking worries among central bankers worldwide, Reuters reported in August. The IMF also called for "urgent fiscal adjustments" to curb deficits and ensure resilient bond markets. NONBANK FINANCIAL FIRMS CREATE CONTAGION RISK Heightened interconnectedness between banks and the more lightly regulated nonbank sector would amplify any shocks stemming from sectors such as private credit or cryptocurrencies, the IMF said. The group for years warned about patchy nonbank oversight but cautioned on Tuesday that the sector - which includes insurers, pension funds and hedge funds - continues to grow and now holds roughly half of the world's financial assets. In the U.S. and Europe, many banks have nonbank exposures that exceed their high-quality loss-absorbing capital, the IMF said. Roughly 10% of U.S. banks and 30% of European banks would experience a substantial hit to their capital if nonbanks drew down all their credit lines, according to an IMF analysis. "Vulnerabilities in the nonbank sector are interconnected," the IMF wrote. "They can quickly transmit to the core banking system, amplifying shocks and complicating crisis management." The global lender urged policymakers to adopt a more comprehensive approach to assessing these less visible risks, particularly around interactions between banks and nonbanks. Echoing European policymakers, the IMF also called on governments to adopt a comprehensive policy response to crypto assets, including stablecoins, the adoption of which could weaken a government's control over its own currency and disrupt the traditional banking system. https://www.reuters.com/business/finance/imf-warns-rising-odds-disorderly-global-market-correction-2025-10-14/

2025-10-14 15:31

FRANKFURT, Oct 14 (Reuters) - European Central Bank President Christine Lagarde said on Tuesday she didn't see any sign of disorder in the euro zone bond market despite an ongoing budget crisis in France. "I said previously that we are monitoring financial markets, that we're looking at spreads..., but there's nothing disorderly at the moment," Lagarde told CNBC. "If there were..., we have tools, they have criteria, they have conditions." Sign up here. https://www.reuters.com/business/finance/ecbs-lagarde-sees-no-disorder-bonds-despite-french-crisis-2025-10-14/