Wells Fargo tells the story. Wells Fargo is America’s best-performing bank — its shares trade at a premium to its book value while the shares of other banks sell for a discount. Overnight, it and JPMorgan, its bigger competitor, released June-quarter results. Morgan had a profit rise, but that was only due to lower legal costs (Morgan has been sued from pillar to post in recent years for all sorts of dodgy activities in the US and Europe) and a lower tax bill. Wells Fargo’s profit growth slowed as low interest rates cut income growth, lending activities slowed and the bank’s net interest margin fell to 2.97 cents in the dollar from 3.15 cents. That’s still a third higher than the average for our big four banks.

Both reported huge rises in new mortgages in the quarter, but both face a slowdown in this highly profitable business in the third and fourth quarters as the US Federal Reserve moves toward the first rate rise since 2006. And the relevance to Australia? Our big banks are facing a similar slowdown in mortgage lending (for different reasons) as APRA and the Reserve Bank push them to slow lending to investors, and the housing boom slows. The two US majors (and others) and our Big Four also have to find more capital in coming years to make them safer. Returns on equity — the prime profit measure for all banks (executive pay is linked to it, in many cases) — will slow as a result. The bank boom is fading here and in the US. — Glenn Dyer

Not so Yum anymore. Yum Brands is the owner of Pizza Hut and KFC, and it’s doing it tough as sales continue sliding in its two most important markets — China and the US. In China it was the fourth quarterly fall in a row as the company battles a food scandal from a year ago (one of its suppliers was accused of using out-of-date meat). Same-store sales fell 10% in the three months to June. China matters to Yum, it is its most profitable market. Group sales fell 3% in the quarter as consumers abandoned Yum’s standard stodge for newer, fresher stodge (less-manufactured hamburgers, pizzas and Mexican foods). McDonald’s is suffering from the same consumer malaise in the US. With an asset write-down in Mexico, Yum’s earnings fell 30% to US$235 million, from US$334 million a year ago. The company reckons its second-half performance will rebound, led by China. This trend away from package foods has been the big story from US retailing and business for much of the past year, General Mills, a big cereals and packaged-food group recently reported weak sales growth and wrote down the value of its key Green Giant frozen and canned foods division (by US$268 million) because of falling sales. — Glenn Dyer

Greece: IMF rational at last? Amid the hundreds of stories overnight on Greece, Greek PM Alexis Tsipras said in an interview he doesn’t believe in the deal with the rest of Europe, but will implement it anyway. He is being cute ahead of a vote in the Greek Parliament tonight (our time), after which he and his supporters are likely join with pro-European opposition members to try and approve the deal. But in what can only be described as a stunning outbreak of realism, someone at the IMF has leaked a three-page memo from staff to management pointing out that Greece can never repay the huge debts it already has, and the extra it is taking on under the proposed new bailout. The memo says the budget surpluses can’t be achieved — Greece’s debt will rise to 200% of GDP over the next two years from 127% back at the start of the dramas in 2010.

The memo’s main point is the most explosive: it says Greece needs debt relief, and needs it quickly and for a long period of time, which is something the rest of Europe and especially Germany won’t come at. But that is what Germany got from the rest of the world, including Greece, in 1953 when it had half its debt written off (that is the debt left over from before, during and after WWII). Greece already has a grace period under the current bailout to 2022. However, the memo says Greece needs a period of grace (i.e. no payments of interest and principal) for at least 30 years, to 2053, meaning most of you reading this will be aged, infirm, a pensioner or dead before Greece starts paying interest.
— Glenn Dyer