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Financials Overview: Week of October 27–November 3, 2017

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Financials Overview: Week of October 27–November 3, 2017 PART 2 OF 3

Solid Jump in Banks’ Borrowings from FHLB System

FHLB System’s advances

A report from the Office of Financial Research showed that large US banks (XLF) borrowing from the FHLB (Federal Home Loan Bank) System more than doubled in the past decade. The advances in the FHLB System stood at $706 billion or 65% of its assets as of June 2017. Large banks with assets of more than $250 billion accounted for ~30% of the FHLB advances in June—up from 14% from a decade ago. The FHLB System is made up of 11 regional FHLB banks. It funds the mortgage market by making advances to its members—banks, credit unions, and insurers.

In the past few years, JPMorgan Chase (JPM), Wells Fargo (WFC), and Citigroup (C) have increased their FHLB funding. These three banks accounted for ~24% of the total advances.

Solid Jump in Banks&#8217; Borrowings from FHLB System

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AIG posted a huge loss

AIG (AIG) recorded a net loss of $1.74 billion in 3Q17—compared to a profit of $462 million in 3Q16. It booked catastrophe losses. The company had set aside $836 million to meet losses related to accident claims the previous year.

Morgan Stanley departed from the Broker Protocol

Last week, Morgan Stanley (MS) announced its departure from the Broker Protocol. It resulted in nine teams managing more than $6 billion leaving for rivals J.P. Morgan Securities, Stifel, and RBC Wealth Management. Morgan Stanley’s departure disrupted a recruiting protocol that has seen a rapid transformation in the past few quarters.

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