Trump Proposes to Cut Medicare and Spend Big on Wall, Defense

President Donald Trump will propose cutting entitlement programs by $1.7 trillion, including Medicare, in a fiscal 2019 budget that seeks billions of dollars to build a border wall, improve veterans’ health care and combat opioid abuse and that is likely to be all but ignored by Congress.

The entitlement cuts over a decade are included in a White House summary of the budget obtained by Bloomberg News. The document says that the budget will propose cutting spending on Medicare, the health program for the elderly and disabled, by $237 billion but doesn’t specify other mandatory programs that would face reductions, a category that also includes Social Security, Medicaid, food stamps, welfare and agricultural subsidies.

The Medicare cut wouldn’t affect the program’s coverage or benefits, according to the document. The budget will also call for annual 2 percent cuts to non-defense domestic spending beginning “after 2019.’

At a time when the prospect of rising annual budget shortfalls has spooked financial markets, the White House said in a statement — without explanation — that its plan would cut the federal deficit by $3 trillion over 10 years and reduce debt as a percentage of gross domestic product. Yet, in a break from a longstanding Republican goal, the plan won’t balance the budget in 10 years, according to a person familiar with the proposal.

The budget, to be released later on Monday, is unlikely to gain traction on Capitol Hill. Lawmakers routinely ignore the spending requests required annually from the executive branch. And Congress passed its own spending bill on Friday, including a two-year budget deal, which the president signed into law.

According to the summary, Trump will urge an increase in defense spending to $716 billion and a 2.6 percent pay raise for troops. He will request $18 billion to build a wall on the Mexican border, the summary indicates.

The White House also seeks $200 billion for the infrastructure proposal the administration plans to unveil alongside the fiscal year 2019 budget, as well as new regulatory cuts.

“This will be a big week for Infrastructure,” Trump said in a Twitter message Monday. “After so stupidly spending $7 trillion in the Middle East, it is now time to start investing in OUR Country!”

Monday’s document will outline proposed spending reforms the administration says would, if enacted, cut deficits over the next decade — even as recently passed tax legislation and spending caps threaten to drive future annual deficits above $1 trillion.

Trump May Struggle on $1 Trillion Pledge to Fix Crumbling U.S.

“Just like every American family, the budget makes hard choices: fund what we must, cut where we can, and reduce what we borrow,” Office of Management and Budget Director Mick Mulvaney said in a statement. “It’s with respect for the hard work of the American people that we spend their tax dollars efficiently, effectively, and with accountability.”

A year ago, Trump asked lawmakers to cut $3.6 trillion in federal spending over the next ten years, and identified deep cuts to domestic spending programs. Instead, lawmakers last week passed a two-year government funding deal that would boost military and non-defense spending by $300 billion over the next two years and add more than $80 billion in disaster relief.

But administration officials argue their proposals, dead on arrival though they may be, is still an important marker of the president’s legislative priorities.

Immigration Enforcement

The plan includes a heavy emphasis on immigration enforcement. Trump is requesting $782 million to hire 2,750 new border and immigration officers, and $2.7 billion to detain people in the country illegally. Trump is also asking for $18 billion over the next two fiscal years toward the goal of constructing a wall on the U.S. border with Mexico. That’s a key point of contention in the ongoing legislative battle over the fate of young people, known as “Dreamers,” who were brought to the country illegally as children.

The proposal also includes $13 billion in new funding to combat the opioid epidemic, which Trump has frequently cited as among his top domestic priorities. The administration would provide a $3 billion boost to the Department of Health and Human Services in the next fiscal year, and $10 billion in 2019.

The proposal takes “money that the Democrats want to put to these social programs and move it to things like infrastructure, move it to things like opioid relief, move it to things that are in line with the president’s priorities so that if it does get spent, at least it get spent to the right places,” Mulvaney said Sunday during an appearance on Fox News.

Boost for Veterans

Other elements include $85.5 billion in discretionary funding for veterans health services, education, and vocational rehabilitation, the OMB said on Sunday. It is not clear how much of that funding would represent an increase from current spending levels.

The budget also includes $200 billion in federal funds over the next decade that the White House says would spur $1.5 trillion in infrastructure spending through partnerships with state and local governments and private developers. That includes $21 billion over the next two years that the White House says would “jump start key elements of the infrastructure initiative.”

Trump will discuss the public works proposal on Monday with governors, mayors, state legislators and other officials, and he expects to meet with Congressional leaders from both parties at the White House on Feb. 14. The president plans to visit Orlando, Florida, on Feb. 16 for an infrastructure event, and he and cabinet members will also promote the plan at events around the U.S., officials said.

The White House said its initial approach is to offset the $200 billion in the budget for its infrastructure plan with spending cuts elsewhere, including from some transit and transportation programs the administration doesn’t think have been spent effectively. But Trump is open to new sources of funding, a senior White House official told reporters.

‘Robust’ Defense

The White House also didn’t detail how much money it wanted to devote to new spending on the military, but OMB said the proposal would provide “for a robust and rebuilt national defense.” In last year’s budget proposal, Trump called for a $52.3 billion boost for the Defense Department, while asking for deep cuts to the Environmental Protection Agency, State Department, and Department of Health and Human Services.

Mulvaney said this year’s documents — theoretical though they may be — would see those agencies targeted again for budget cuts.

“There’s still going to be the president’s priorities as we seek to spend the money consistently with our priorities, not with the priorities that were reflected most by the Democrats in Congress,” he told Fox News.

Trump on Friday complained on Twitter that in order to boost military spending, “we were forced to increase spending on things we do not like or want.”

The budget proposal assumes that the U.S. economy will ramp up over the next decade to his goal of 3 percent growth, according to an administration official on Friday who confirmed figures to be contained in Monday’s budget proposal. Economic growth is projected at 3.2 percent in 2019 and 2020.

    Read more: http://www.bloomberg.com/news/articles/2018-02-12/trump-to-urge-wall-opioid-spending-as-congress-sets-own-course

    Walgreens’s Deal Aversion Can’t Last

    CVS Health Corp. wasn't frequently mentioned on Walgreens Boots Alliance Inc.'s first quarter earnings call Thursday.

    But CVS's $69 billion deal for insurer Aetna Inc. loomed large as Walgreens reported mixed results – it beat analyst revenue estimates, but profit fell 22 percent from a year earlier due largely to an impairment charge. Shares fell as much as 6 percent percent Thursday morning.

    Like CVS, Walgreens is trying to transform itself, but without a splashy deal. But unless its more modest efforts pay dividends soon, such ambition may be pushed upon it. 

    Falling Behind

    Walgreens shares fell a good ways behind the broader market in 2017

    Source: Bloomberg

    Walgreens's pharmacy business is the key to its U.S. performance. Comparable-store pharmacy sales grew by 7.4 percent in the quarter. Retail sales fell by 0.9 percent, the sixth straight quarter of decline. The company's acquisition last summer of Rite Aid Corp. stores will help boost growth of both pharmacy and retail sales in the year to come.

    But regulatory intervention meant the Rite Aid deal was for a smaller number of stores than Walgreens hoped. And it likely marked the end of the company's ability to substantially expand its pharmacy and retail footprint in the U.S.

    Problems Up Front

    Walgreens has had a hard time growing non-pharmacy sales

    Source: Bloomberg

    Neither Walgreens nor CVS can rely on torrid prescription growth forever. And retail success will be tough to achieve in an increasingly difficult environment for everything brick-and-mortar. Amazon.com Inc., already a competitor in retail, is reportedly considering getting into the pharmacy business too. 

    CVS's deal is a bet on providing more health care and squeezing more out of its pharmacy business. It's risky; CVS could alienate Aetna customers if it's too aggressive in pushing its own services, and it may irk competing insurance companies served by its pharmacy benefit management arm. CVS will have to take on a bunch of debt, which will constrain needed investment into expanding in-store clinics. 

    But the rewards could be substantial. Aetna enrollees are a large captive market for CVS offerings. Health care is increasingly moving away from traditional points of service and toward this kind of retail setting. And the combined company will have a stronger defense against Amazon, which isn't about to open clinics or start insuring people.

    Walgreens is taking a different tack. CEO Stefano Pessina said on Thursday's call that he thinks partnerships — such as those it has with distributor AmerisourceBergen Corp. and lab-testing service Laboratory Corp. of America Holdings — are just as valuable as acquisitions.

    Meanwhile, the company is focusing on geographic diversification and revamping its stores, with pilot programs testing new approaches to everything from its supply chain to beauty offerings.

    While that approach is cheaper than an Aetna-style deal, there's arguably a ceiling on the benefits it can deliver. It's unlikely that even a radical, rapid, and flawlessly executed store redesign could do much to stop the general shift toward buying things elsewhere and online — let alone counter a more aggressive Amazon entry. 

    Don't expect Walgreens to stick to limited partnerships and internal reinvention for too much longer.

    This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

      Read more: http://www.bloomberg.com/news/articles/2018-01-04/walgreens-earnings-it-can-t-avoid-deals-forever

      Junk-Bond Rally Unravels, One Bad Earnings Report at a Time

      The run-up in junk bonds is showing signs of returning to earth.

      After a spate of bad news triggered sell-offs of a few big speculative-grade borrowers, the pain has spread and even led NRG Energy Inc. to pull a $870 million bond offering on Thursday. Exchange-traded funds that buy high-yield debt have plunged the most since August, with $563 million of retail outflows since the start of this week alone. Three of the biggest junk-rated borrowers, IHeartMedia Inc., CenturyLink Inc. and Community Health Systems Inc., posted disappointing earnings that sent their bonds plunging.

      It’s hard to say whether the sell-off will accelerate. Others like it have largely been treated as buying opportunities for yield-starved asset managers. But with more supply to come, investors may be less willing to take a chance on shaky companies, especially with yields at historical lows. Matt Eagan, a debt-fund manager at Loomis Sayles & Co., said he’s not going to start buying until the market sells off by another 3 percent to 5 percent.

      “It seems like buyers have simply stepped away from the market,” Eagan said in an interview with Bloomberg Radio Thursday. “I wouldn’t be buying the market.”

      The telecom sell-off that was exacerbated by failed merger talks between Sprint Corp. and T-Mobile US Inc. has slowly crept into health-care bonds and the broader high-yield market as investors try to cash out before it’s too late.

      “It’s only the beginning,” said Jack Flaherty, a portfolio manager at GAM Holding AG who’s been buying better-graded bonds to hedge high-yield risk. “We’re starting to see a welcome correction,” he said in an interview.

      Investors are increasingly scrutinizing specific companies and rejecting their bonds when they see a problem. Alongside the earnings-driven sell-offs at Community Health and IHeartMedia, mega-deals from Staples Inc., Tesla Inc. and Netflix Inc. have traded below their face value. Tesla’s benchmark bond fell to a new low of 93.5 cents on the dollar Thursday, according to data from Trace.

      “It feels like it’s spreading,” Mike Collins, senior investment officer at PGIM Fixed Income, said in an interview. PGIM has been cutting its exposure to high-yield debt since the beginning of the year, especially BB rated companies. 

      “It’s starting to reverberate through the credit markets more,” Collins said. “If you have more dispersion, you’re going to have more losers.”

      Easy Money

      It’s hard to overstate the easy-money conditions that allowed U.S. high-yield bond markets to thrive the past eight years. The debt has returned more than 14 percent on average every year since 2009 as the Federal Reserve dropped overnight rates to near zero and bought billions of dollars of bonds. Junk-bond yields are still three percentage points below the two-decade average, but the Fed is raising rates at a faster pace and other central banks are hinting they may reduce stimulus in the near future. 

      Meanwhile, the much-anticipated Republican tax plan is coming into focus. 

      The Senate version would delay the corporate rate cut until 2019, Bill Cassidy, a Louisiana Republican, said Thursday. And House Republicans have proposed reducing interest deductibility, a key benefit for the junkiest of borrowers. About 40 percent of the high-yield market could feel the pinch, Bank of America Corp. strategist Oleg Melentyev said in a Nov. 3 report.  

      But not everyone is ready to bail just yet.

      “There’s stress in significant pieces of the markets, like health care and telecom, and I am not ignoring them,” Ken Monaghan, director of global high yield at Amundi Pioneer, said in an interview. “But we aren’t seeing some sort of cataclysmic event on the horizon, and I am not expecting many sleepless nights anytime soon.”

      Still, even if the sell-off doesn’t devolve into a rout, many investors are holding back and watching the action a little more closely.

      “In size and scale it’s not gargantuan, it’s a drop in the bucket,” Henry Peabody, a money manager at Eaton Vance Corp., said in an interview. “But that’s how corrections start.”

        Read more: http://www.bloomberg.com/news/articles/2017-11-09/junk-bond-rally-unravels-one-bad-earnings-report-at-a-time

        Chinas Central Bank Chief Warns of Sudden, Contagious and Hazardous Financial Risks

        China’s financial system is becoming significantly more vulnerable due to high leverage, according to central bank governor Zhou Xiaochuan, who has made a series of blunt warnings in recent weeks about debt levels in the world’s second-largest economy.

        Latent risks are accumulating, including some that are “hidden, complex, sudden, contagious and hazardous,” even as the overall health of the financial system remains good, Zhou wrote in a lengthy article published on the People’s Bank of China’s website late Saturday.

        The nation should toughen regulation and let markets serve the real economy better, according to Zhou. The government should also open up markets by relaxing capital controls and reducing restrictions on non-Chinese financial institutions that want to operate on the mainland, he wrote.

        “High leverage is the ultimate origin of macro financial vulnerability,” wrote Zhou, 69, who is widely expected to retire soon after a record 15-year tenure. “In sectors of the real economy, this is reflected as excessive debt, and in the financial system, this is reflected as credit that has been expanding too quickly.”

        The latest in a string of pro-deleveraging rhetoric from the PBOC, Zhou’s comments were speculated to have contributed to a rout in Hong Kong shares. They signal policy makers remain committed to the campaign to reduce borrowing levels across China’s economy. Concern that regulators may intensify this drive after last month’s twice-a-decade Communist Party congress helped push yields on 10-year sovereign bonds to a three-year high.

        Chinese bonds seemed to shrug off the essay early Monday, with 10-year yields down one basis point to 3.88 percent as of 11:14 a.m. in Shanghai, while the cost on five-year notes rose one basis point to 3.95 percent. Hong Kong’s Hang Seng Index slumped the most in two weeks and the Shanghai Composite Index fell for a third day in a row.

        “Investors are very sensitive to any negative news since the market is at a high level,” said Ben Kwong, executive director at KGI Asia Ltd. in Hong Kong, referring to the equity move. “Zhou’s comment about financial risks are hurting sentiment.”

        The PBOC chief’s essay reads more like an explanation of existing priorities than a sign they’re changing direction or pace, said Bloomberg Intelligence economists Tom Orlik and Fielding Chen. China may shift slightly toward a tighter stance, but macro-prudential rather than monetary policy will do the leg work to limit financial risks, they wrote in a note.

        Zhou may be set to retire after more than a decade at the helm, read more here.

        Despite the tough rhetoric around deleveraging in China, measures of credit continue to show expansion, with aggregate financing surging to a six-month high of 1.82 trillion yuan ($274 billion) in September. Corporate debt surged to 159 percent of the economy in 2016, compared with 104 percent 10 years ago, while overall borrowing climbed to 260 percent.

        Read a QuickTake Q&A about China’s efforts to tackle financial risks

        Zhou’s article was included in a book that was published recently to help the public and party members better comprehend the spirit of the 19th party congress, according to the official Xinhua news agency and information on the PBOC’s website.

        Here are some of the other points Zhou made:

        On risks and regulation

        • China’s financial system faces domestic and overseas pressures; structural imbalance is a serious problem and regulations are frequently violated
        • Some state-owned enterprises face severe debt risks, the problem of "zombie companies" is being solved slowly, and some local governments are adding leverage
        • Financial institutions are not competitive and pricing of risk is weak; the financial system cannot soothe herd behaviors, asset bubbles and risks by itself
        • Some high-risk activities are creating market bubbles under the cover of "financial innovation"
        • More companies have been defaulting on bonds, and issuance has been slowing; credit risks are impacting the public’s and even foreigners’ confidence in China’s financial health
        • Some Internet companies that claim to help people access finance are actually Ponzi schemes; and some regulators are too close to the firms and people they are supposed to oversee
        • China’s financial regulation lags behind international standards and focuses too much on fostering certain industries; there’s a lack of clarity in what central and regional government should be responsible for, so some activities are not well regulated
        • China should increase direct financing as well as expand the bond market; reduce intervention in the equity market and reform the initial public offering system; pursue yuan internationalization and capital account convertibility
        • China should let the market play a decisive role in the allocation of financial resources, and reduce the distortion effect of any intervention
        • China should improve coordination among financial regulators

          Read more: http://www.bloomberg.com/news/articles/2017-11-04/china-s-zhou-warns-on-mounting-financial-risk-in-rare-commentary

          Even Illinois’s CFO Doesn’t Know How Many Bills Are Unpaid

          How big is Illinois’s pile of unpaid bills? Even the state’s chief fiscal officer doesn’t know for sure.

          The state sold $4.5 billion of bonds on Wednesday to help pay down the estimated $16.6 billion it owes to contractors, health care providers and others who waited to get paid during Illinois’s record-long fight over the budget. But Comptroller Susana Mendoza, a Democrat, says her office doesn’t know the size of that backlog for sure, and she wants that to change.

          Under current law, state agencies only have to report to the comptroller once a year — on Oct. 1 – the amount of unpaid bills they had by the end of June, making the information already outdated by the time it’s submitted. According to the comptroller’s website, the backlog reached $16.6 billion as of Oct. 24, including an estimated $6.1 billion of unpaid bills with state agencies.

          To get a better picture of how deeply Illinois is in debt, Mendoza is urging lawmakers to override Republican Governor Bruce Rauner’s veto of a measure that will require state agencies to report bills on a monthly basis and include how old the bills are, whether funds have been appropriated to pay those bills and how much interest is owed. The Illinois House of Representatives voted to override the veto on Wednesday. The Senate must do the same for the bill to become law.

          “This is a first step in hopefully even giving the markets greater confidence that Illinois is moving in the right direction when it comes to full transparency on our finances,” Mendoza said in a telephone interview.

          The legislation is “definitely favorable from a credit perspective,” said Eric Friedland, Lord Abbett’s director of municipal research in Jersey City, New Jersey. He noted that the amount of unpaid bills isn’t a surprise to investors who monitor the state’s finances, but requiring monthly reporting may spur Illinois leaders to reduce the number of unpaid bills. 

          “In my opinion, if they have to report every month in a transparent way, then that will hopefully cause this practice to change for the better,” said Friedland, whose firm manages about $20 billion of municipal debt, including some Illinois bonds.

          In his veto message on Aug. 18, Rauner applauded the push for transparency but criticized Mendoza for trying to “micromanage” agencies, adding that they don’t have the technology to meet the requirements in the bill.

          Mendoza disagrees, saying that agencies are equipped to put those numbers together. The bill would help Mendoza keep track of how much interest the state is paying: She estimates that Illinois is already on the hook for $900 million in late-payment penalties.

            Read more: http://www.bloomberg.com/news/articles/2017-10-25/even-illinois-s-cfo-doesn-t-know-how-many-state-bills-are-unpaid

            Key GOP Senator Susan Collins Lays Out Her Demands for Tax Bill

            Republican Senator Susan Collins of Maine said Monday she’s opposed to two tax breaks for the wealthy that her party leaders are pushing for, indicating that her vote won’t be easy to win on President Donald Trump’s top legislative priority.

            “I do not believe that the top rate should be lowered for individuals who are making more than $1 million a year,” Collins said during an interview with Bloomberg News. “I don’t think there’s any need to eliminate the estate tax.”

            Repealing the estate tax and cutting the individual rate from 39.6 percent for top earners “concern me,” she said, adding that she’s conveyed her opposition to party leaders.

            Collins, a moderate Republican who played a decisive role in thwarting several iterations of Obamacare replacement legislation, offered her most pointed comments on her priorities for a tax bill to date.

            She added that the structure of the estate tax — a 40 percent levy applied to estates worth more than $5.49 million for individuals or $10.98 million for couples — means it avoids hitting “the vast majority of family-owned businesses and farms and ranches.” She said she’s open to adjusting the cutoff level slightly upward.

            The White House and GOP leaders released a tax framework last month that calls for a top individual rate of 35 percent and leaves room for tax committees to add another rate above that. It also proposes the repeal of the estate tax. The House Ways and Means Committee is scheduled to release its version of a tax bill on Wednesday. Collins said the Senate will likely offer a tax bill that differs from the House version.

            Collins’s demands are important because Republicans have only 52 seats in the 100-member Senate and little hope of Democratic support — they can’t afford to lose more than two members to get a bill passed. 

            Still, she said: “There is far more outreach on the tax bill” than there was on health care.

            Collins declined to say she’ll oppose a tax bill that adds to the deficit, in contrast to her colleague Senator Bob Corker of Tennessee. But she said she cares about the debt and doesn’t want the tax bill to “blow a hole” in the deficit. She argued that “certain tax cuts done right will increase economic growth” and produce revenue.

            “I hope very much to be able to support a tax reform package," Collins said. "It’s very difficult — I’m not going to say I can guarantee that because I don’t know what’s going to be in it.”

              Read more: http://www.bloomberg.com/news/articles/2017-10-30/key-gop-senator-susan-collins-lays-out-her-demands-for-tax-bill

              Banks Pine for Loan Growth as Clients Wait on Trumps Promises

              President Donald Trump’s pledges to overhaul taxes, trade, infrastructure and health care may thrill some corporate leaders, but it’s causing many to delay expansions. That’s bad for banks.

              Lending growth probably decelerated for a fourth straight quarter in the three months ended Sept. 30 across more than a dozen of the biggest U.S. banks, according to Royal Bank of Canada analysts and Bloomberg calculations. Their total loans may have ticked up just 1.8 percent, the smallest increase in more than two years, as commercial and industrial customers held off on buying equipment and building plants.

              Executives are “hesitant to borrow in the face of uncertainty,” said Jason Goldberg, an analyst at Barclays Plc. “Whether it’s potential tax reform, health-care uncertainties, or they’re unclear what infrastructure spending is going to look like, you’ve definitely seen corporates take a pause.”

              Washington’s inaction has been frustrating bankers for months, a sentiment that may surface anew when they start posting quarterly results this week. During the last round in July, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon lashed out, saying, “There would be much stronger growth if there were more intelligent decisions and less gridlock.” In June, Bank of America Corp. Chief Operating Officer Thomas Montag said corporate clients need clarity to make big investment decisions.

              Trump and his top economic adviser, Gary Cohn, have said they expect the financial industry to help fund growth. But instead, a dearth of progress on big legislation has stymied that business.

              Congressional Republicans spent much of September trying to resurrect a failed health-care bill. Then Trump told lawmakers his $1 trillion infrastructure plan may not rely on public-private partnerships, potentially throwing a wrench into a key priority. The president also released a tax plan that many analysts consider unlikely to win support until designers can prove it won’t balloon the federal deficit.

              For banks, the uncertainties are compounding challenges in lending, which also is being constrained by tighter regulation and slower-than-expected interest-rate hikes — factors that have crimped trading revenue too. Low yields have encouraged firms to issue bonds and use the proceeds to repay bank loans, said Alison Williams, an analyst at Bloomberg Intelligence. U.S. Bancorp CEO Andrew Cecere addressed the challenges at an investor conference last month.

              “With the low yield curve, there was a lot of debt issuance, and that debt issuance was used to pay down some bank lending,” he said. In addition, “there was some more uncertainty that entered the market because of some of the slowdown in the perceived timing of tax policy and trade policy and regulation,” slowing companies’ capital expenditures.

              ‘Mental Signal’

              Corporate executives’ outlook for the next six to 12 months deteriorated in July and August, with some respondents citing heightened policy uncertainty, the Federal Reserve Bank of Chicago said last month. The number of workers on U.S. payrolls declined in September for the first time since 2010, reflecting major disruptions from hurricanes Harvey and Irma.

              For now, bank investors are willing to look beyond that. The 24-company KBW Bank Index surged more than 30 percent from the November election to early March on optimism that Trump’s administration will eventually ease bank regulation, reignite inflation and drive up interest rates. The rally resumed in September as attention shifted to taxes.

              “People were underweight financials for a long time,” said Chris Whalen, an independent analyst and consultant. “When Trump got elected that was a mental signal for these guys that we should increase our allocation.”

              Investors continue to see reasons for optimism. Trump’s plan to cut corporate tax rates would be particularly beneficial for banks, whose burdens are often elevated by a lack of deductions. The six largest U.S. banks could see net income rise $6.4 billion under the administration’s proposal. And lenders still produce big profits. JPMorgan generated $26.5 billion in the 12 months through June, a record for any U.S. bank.

              Mortgage, Autos

              Yet expectations for the third quarter are measured. JPMorgan, the nation’s largest bank, may say Oct. 12 that adjusted profit rose 2 percent to $5.89 billion, according to analysts surveyed by Bloomberg. At Citigroup Inc., set to report the same day, profit probably slipped 1 percent to $3.57 billion.

              Wells Fargo & Co. and Bank of America report the following day and Goldman Sachs Group Inc. and Morgan Stanley release earnings next week.

              There are other reasons for concern. While consumers are still borrowing more, there’s mounting evidence they’re becoming less reliable, potentially ending a period in which losses were low. Credit cards face heightened competition, while an overheated auto market has led some lenders like Wells Fargo to pull back.

              And for mortgage lending, a big driver for banks in the run-up to the 2008 financial crisis, new rules have made it more difficult to make money. Survivors have been buying loans from smaller “correspondent” lenders, a strategy that’s started to run out of room.

              “You will see some pain this quarter,” Whalen said. “JPMorgan and Wells Fargo have been bidding aggressively.”

              Trading Declines

              Trading also is expected to be down, in part because the lack of congressional action has left clients with few reasons to buy or sell. Executives from JPMorgan, Citigroup and Bank of America told investors last month to expect declines ranging from 15 percent to 20 percent in the third quarter from the same period a year ago.

              That may leave investors and analysts looking past this quarter’s results to the end of the year, when lawmakers may have more progress to show on tax policy and other priorities.

              “Banks tend to be more optimistic looking out than they are in the current quarter, so we’ll see,” Barclays’s Goldberg said. “Pipelines are good. At the end of the day though, loan growth is a reflection of the economy and economic growth has been a little bit more subdued than desired.”

                Read more: https://www.bloomberg.com/news/articles/2017-10-09/banks-pine-for-loan-growth-as-clients-wait-on-trump-s-promises