Bank of America Corp

Here’s how Reddit’s IPO could boost these 2 key businesses at Morgan Stanley

Reddit’s public debut is not only a watershed moment for the social media company, but it also could deliver broad benefits for the Wall Street firm leading the multibillion-dollar deal: Club holding Morgan Stanley. On Thursday, Reddit will start trading on the New York Stock Exchange with a targeted valuation of around $6.5 billion . If the initial public offering is received positively by investors, this could boost Morgan Stanley’s investment banking business and over time its wealth management segment, too. The listing comes at a crucial time for the bank after it posted lackluster quarterly results earlier this year and shares underperform peers and the broader market. Morgan Stanley stock has dropped 2% year-to-date, compared with the KBW Bank Index ‘s more than 5% gains since the start of 2024. The portfolio’s other financial stock, Wells Fargo , is up 15% over the period. The S & P 500 has advanced 9.5%. Morgan Stanley’s weak 2024 stock performance was spurred by a post-earnings sell-off back in January. Investors were seemingly underwhelmed by the cautious macro commentary from newly installed CEO Ted Pick, who replaced James Gorman at the start of the year. Pick’s comments that operating margins for the bank’s wealth management division were likely going to consolidate in the mid-20% range over the near term also didn’t help the stock, even though he maintained confidence in achieving its 30% target down the road. The Club also was disappointed in the earnings release, but we’re hopeful leadership was lowering shareholder expectations to exceed them down the line. In any case, the Club trimmed some Morgan Stanley shares earlier this month after a curious single-session surge helped erase losses tied to its fourth-quarter results. MS .SPX YTD mountain Morgan Stanley’s 2024 stock performance compared with the S & P 500. Jim Cramer described Morgan Stanley’s recent performance — both in share price and quarterly earnings — as “horrendous,” citing “desultory management” over the past six months, a period that partially included Gorman’s efforts to pass the baton to Pick. This is exactly why Reddit’s IPO could be a nice reprieve for the Wall Street giant. “As shareholders of Morgan Stanley, we need this to work or a lot of whatever faith is left in the bank will dissipate.” Jim wrote in a recent column, adding that the IPO’s “success relies on how tightly Morgan Stanley conducts the deal.” Morgan Stanley is a lead underwriter for the IPO, meaning its bankers act as middlemen to help Reddit go from a private to a public company. Underwriters typically help structure the offering, including the number of shares to be issued and the initial price range for the stock. Goldman Sachs , JPMorgan and Bank of America are also lead underwriters for the process; it’s common for multiple banks to be involved. More dealmaking Morgan Stanley can benefit from Reddit’s stock debut in two main ways. First, its investment banking business earns a fee based on the amount of the offering and for selling shares to investors during the IPO. Although Reddit’s IPO is fairly large, it will not by itself move the needle for the Wall Street giant long term. Instead, Reddit’s debut should be viewed as a way to gauge investors’ appetite and the future of the broader dealmaking environment. After a boom during the Covid pandemic, IPO activity slowed dramatically after the Federal Reserve began hiking interest rates in March 2022. The higher borrowing costs brought on by those rate hikes and an uncertain economic environment have weighed on Morgan Stanley’s once-lucrative investment banking business. If shares of Reddit are well-received by the market, other private companies who have been waiting for the IPO market to rebound in earnest may look to go public — and possibly choose Morgan Stanley as a facilitator for their offerings. Even though its multiyear push into wealth management means it is less dependent on investment banking than it was a decade ago, this IPO could have far-reaching implications that boost a crucial lagging part of Morgan Stanley’s business. Reddit’s IPO also isn’t the only one Morgan Stanley is underwriting. Chipmaker Astera Labs , which on Wednesday jumped 72.5% in its debut on the Nasdaq, tapped Morgan Stanley’s investment banking services for its offering. A virtuous circle Morgan Stanley’s wealth management division may also benefit from more IPO activity. Once Morgan Stanley’s bankers conduct a public offering for a client, this can create a virtuous cycle that ultimately boosts net new assets for the wealth management business. Jed Finn, Morgan Stanley’s head of wealth management, explained how at recent a Bank of America conference. “Going from private to public starts a very important catalyst within the system,” Finn said at the event. “Our investment bankers execute the IPO. The client becomes a public equity admin client in our workplace business. Our [financial advisors] cover the individuals and the employees and the founders and the early investors.” He continued: “We add financial wellness programs to support the company as they broaden out their employee base. [Morgan Stanley Investment Management] manages the corporate cash. So, it creates a flywheel in our system that drives” net new assets. Morgan Stanley needs them. In a CNBC interview in January, CEO Pick reiterated the firm’s long-term goal of reaching $10 trillion in assets across wealth and asset management. But Morgan Stanley is still a ways off from hitting this goal, which was first laid out by Pick’s predecessor. The bank brought in $47 billion worth of net new assets in the fourth quarter, according to an earnings release . For the full year, Morgan Stanley brought in an additional $282 billion in assets, up 7% on an annual to bring its client assets to $6.6 trillion. Correction: This article has been updated to correct the spelling of Jed Finn’s name. (Jim Cramer’s Charitable Trust is long MS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A trader on the floor of the NYSE with a Reddit T-shirt works after the opening bell as Reddit begins trading on the New York Stock Exchange (NYSE) in New York on March 21, 2024.

Timothy A. Clary | AFP | Getty Images

Reddit’s public debut is not only a watershed moment for the social media company, but it also could deliver broad benefits for the Wall Street firm leading the multibillion-dollar deal: Club holding Morgan Stanley.

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March 21, 2024

Wells Fargo is up more than 15% this year — and a big catalyst is still on the horizon

Wells Fargo shares jumped over the past year as the once-embattled bank continued to clear the regulatory hurdles put in place after the phony accounts scandal of 2016. But one more milestone is still on the horizon, one that could move the stock even higher: lifting the Federal Reserve’s $1.95 trillion asset cap . That asset cap was a first for the Fed, delivered in 2018 by then-Chair Janet Yellen as her last act leading the central bank and aimed at getting Wells to clean up its act. The punitive measure was also meant to send a message to other financial institutions. Other regulatory agencies also imposed punitive measures over the years, some of which have been cleared. One of the most high-profile consent orders was lifted by the Office of the Comptroller of the Currency last month. The move pushed Wells stock higher. Many experts say that this order was a key reason behind the Fed’s asset cap in the first place — giving investors reason to think the lifting of the cap is not a matter of if but when. What would that mean for Wells? First, investor sentiment should improve. The Club has maintained that once Wells Fargo’s asset cap is terminated the stock will have even more room to run. After climbing in the final months of 2023, shares of the bank continued higher in 2024. They have jumped nearly 17% year to date, outperforming their big bank peers as evidenced by the KBW Bank Index’s gain of just 2.4% over the period. In a note to clients dated Tuesday, Citigroup cut the rating on Wells Fargo stock to neutral, arguing the “risk/reward is fairly balanced” after the stock’s rally. Still, analysts at the firm also boosted their price target on Wells Fargo to $63 per share from $57 apiece, implying a 10.5% increase from Tuesday’s closing price. WFC YTD mountain Wells Fargo (WFC) year-to-date performance Lifting the years-long order would likely soothe shareholders’ concerns as well. “The sooner the bank can get the asset cap lifted, the greater confidence investors will have in management’s ability to drive a sustained 15% return on tangible common equity,” Jeff Marks, director of portfolio analysis for the CNBC Investing Club, said earlier this month. “The stronger a return Wells can generate, the higher the multiple investors will be willing to pay for the stock.” Wall Street analysts agreed. “It’s safe to say that it would be another leg up [for the stock],” Piper Sandler’s senior banks analyst, Scott Siefers, told CNBC in an interview. To be sure, Wells Fargo hasn’t disclosed when it expects this restriction will be lifted. But the latest consent order termination leads the Club to believe it’s more likely to extend at least into 2025. When it does happen, the bank can take on more customer deposits. Think of these deposits as income-producing assets: The bank can use them to lend more and rake in additional revenue from fees and interest. “If we got rid of the asset cap, they would have the flexibility to take on money to their heart’s content,” Siefers said. “In other words, it just opens up a lot of possibilities.” In a recent CNBC interview, Gerard Cassidy, head of U.S. bank equity strategy at RBC Capital Markets, said that the “silver lining in this entire period for Wells has been they have now built out a very strong core deposit base, as they’re forced to push out less profitable deposits due to the limit on what they can put on their balance sheet.” In turn, Cassidy said Wells can benefit from more wholesale deposits. These are generally much larger sums from institutions that the bank can make more money off of. This is because what Wells Fargo pays these clients to hold their funds is lower than what the bank would earn on lending it out. A lift of the cap would also allow the bank to expand. Wells Fargo CFO Michael Santomassimo said last month the bank’s markets business has inevitably scaled back because of balance sheet restrictions. “When you look at the markets business, in particular, that definitely was a business that was impacted by the asset cap,” the exec said at the UBS Financial Services Conference. “There’ll be some opportunity, we think, to increase the activity there,” he added. “Some of it could be financing type trades, some of it’s inventory that you hold in certain businesses, but all within sort of the risk appetite that we’ve got.” The firm’s corporate and investment banking business, in particular, could gain from this increased activity. “Wells Fargo on a relative basis is very undersized in businesses such as investment banking,” Siefers said, comparing the firm to rival JPMorgan. “One part of the investment banking business is being able to commit capital. … In other words, put some risk on your balance sheet. But thanks to the asset cap, Wells has not been able to build out its investment bank to the same degree as some of its other peers.” Siefers added: “So in my mind, that will be the most visible area where they’ll have more of a free rein to grow and try to compete more effectively with their largest peers.” Santomassimo said that once the asset cap is lifted, shareholders shouldn’t expect big short-term changes. “I would just caution that when it does happen, it’s not this light switch kind of moment where … all of a sudden, you start to see this growth,” Santomassismo said. “But we do believe that there’ll be some opportunity there. And I think we’re positioning ourselves to be relevant for clients.” (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Spencer Platt | Getty Images News | Getty Images

Wells Fargo shares jumped over the past year as the once-embattled bank continued to clear the regulatory hurdles put in place after the phony accounts scandal of 2016.

But one more milestone is still on the horizon, one that could move the stock even higher: lifting the Federal Reserve’s $1.95 trillion asset cap.

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March 20, 2024

Wells Fargo has cleared 6 regulatory hurdles since Charlie Scharf took over as CEO in 2019. Here’s how shares reacted to each

Since taking over as CEO of Wells Fargo in 2019, Charlie Scharf has been cleaning up the bank. He’s cleared six consent orders tied to past misdeeds there that predated his tenure. Management has eight more to go, a source told CNBC , including one from the Federal Reserve about six years ago that caps the bank’s assets at $1.95 trillion. However, every order does not have to be cleared before the cap can be removed. Most recently, shares surged after a major penalty tied to Club name Wells Fargo’s 2016 fake accounts scandal was lifted by the Office of the Comptroller of the Currency (OCC) on Feb. 15. Wells Fargo’s 16% stock gain in 2024 makes it this year’s top performer among the biggest U.S. banks. For comparison, JPMorgan Chase and Bank of America are up nearly 11% and 6%, respectively, year to date. Fellow Club holding Morgan Stanley is down more than 6.5% in 2024. The KBW Bank Index is up 3.2% year-to-date. The S & P 500 index is up more than 7.5% in 2024. WFC .SPX,.BKX 5Y mountain Wells Fargo vs. S & P 500 vs. KBW Bank Index over 5 years The February OCC action is getting a lot of attention because that 2016 consent order was believed to be one of the main reasons the Fed imposed an asset cap on Wells Fargo in the first place. The cap curbs the bank’s capacity to write new loans. A consent order in banking is a legal agreement between a bank and a regulatory agency to address business practices without admitting or denying the changes. “That’s why I think investors really gravitated or rallied around this one getting lifted. Because even though they’ve already had a number of them lifted — and still have many more to go — this was kind of at the heart of the matter for them,” Scott Siefers, Piper Sandler senior banks analyst, told CNBC on Friday. “I think, at least psychologically, it led investors to believe ‘Okay, we’re finally getting closer to the finish line.’” Wells Fargo’s recent outperformance can be pinned on higher hopes that the Fed-imposed asset cap will be lifted sooner rather than later. Club analysts think this may be a 2025 event. While shareholders wait, here’s a look at the progress Scharf has made to clean up the bank’s act and how shares have reacted to consent order terminations and expirations along the way. Feb. 15, 2024: The 2016 consent order lifted by the OCC last month compelled the bank to revamp how it sells its retail products and services. The stock surged more than 7.2% on the announcement. Since then, the stock added more than 9.5% and hit a series of 52-week highs, including Thursday’s peak price of $57.68. “The OCC’s action is confirmation that we have effectively put in place new systems, processes, and controls to serve our customers differently today than we did a decade ago,” Scharf said in a statement last month. “It is our responsibility to ensure we continue to operate with these disciplines.” This cleared a big hurdle for Wells Fargo regarding the Fed’s balance sheet restrictions. Days later on Feb. 20, the Club decided to make a sale on that strength to right-size the portfolio. Wells Fargo had swelled to be our largest position at nearly 5% on recent gains. At the time, Jeff Marks, director of portfolio analysis for the Club, described the regulatory news as a “clear-cut win” for Wells Fargo. Once the Fed’s asset cap is gone, he added, this will assure more confidence in management’s ability to deliver a sustained 15% return on tangible common equity (TCE), Marks added. Dec. 20, 2022: The Consumer Financial Protection Bureau (CFPB), a little over two years ago, terminated its 2016 consent order regarding student loan servicing misconduct. At the same time, Wells Fargo said it agreed to a $3.7 billion settlement with the CFPB regarding overdraft fees, auto loans, and mortgages. Shares fell 2% that day to $40.98 apiece. The stock began trending upwards in the year to follow, jumping 19% for all of 2023. The S & P 500 rose 26% last year while the KBW fell slightly Wells Fargo was able to notch gains over the period despite the regional bank fallout from the failure of Silicon Valley Bank in March of last year, which sent tremors through the entire sector. Jan. 20, 2022: Wells Fargo said more than two years ago that an OCC consent order was removed that addressed add-on products that the bank offered to certain customers before 2015. The stock fell 1% to $55 apiece that day. Shares tumbled 14% in 2022, much less than the KBW’s 24% decline. 2022 was a terrible year for the overall market: The S & P 500 sank 19.4%. Sept. 9, 2021: Less than three years ago, a CFPB 2016 consent order around Wells Fargo’s retail sales practices expired. The bank stock was up 1.2% on the announcement, climbing to $44.36 apiece. By year-end 2021, shares experienced another 8% advance since the expiration news. Wells Fargo stock gained 59% for all of 2021 compared with the KWB’s 36% rise. The S & P 500 gained nearly 27% in 2021. Jan. 5, 2021: During the same year, Wells Fargo announced that an OCC consent order from 2015 had been terminated. This was related to the bank’s anti-money laundering compliance program. Shares jumped 2.8% that day to $30.35 apiece on the update. January 2020: There was another CFPB consent order that expired more than four years ago. However, the bank did not formally announce the action at the time. CNBC reached out to Wells Fargo for clarification, and a spokesperson confirmed that on Jan. 22 the consent order had expired. Wells Fargo shares plunged nearly 44% in 2020, which were the early days of the Covid pandemic. The KBW lost 14% in 2020. The S & P 500, which dropped 30% in 22 sessions in March 2020, ended that year up just over 16.3%. Bottom line Overall, we’re upbeat on continued efforts by Wells Fargo’s management to fix the bank’s previous misdeeds. Adapting to regulatory demands will push the bank closer to having its Fed-imposed asset cap lifted. Although the Club doubts whether it will happen this year, they are optimistic that once the bank’s growth is no longer restricted, shares will have more upside. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Wells Fargo bank signs in New Brighton, Minnesota.

Michael Siluk | UCG | Universal Images Group | Getty Images

Since taking over as CEO of Wells Fargo in 2019, Charlie Scharf has been cleaning up the bank.

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March 9, 2024

Wells Fargo’s Mike Mayo offers his top bank stock picks

Mike Mayo, Wells Fargo, joins 'Closing Bell' to discuss his top bank stock picks and sector outlook.

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February 26, 2024

Bank of America CEO: 3 rate cuts this year will bring economy into equilibrium by the end of 2025

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CNBC’s Leslie Picker and Bank of America CEO Brian Moynihan join ‘Squawk on the Street’ to discuss the state of the economy, strength of the consumer, the Fed’s rate path outlook, the impact of Capital One-Discover deal, regional bank turmoil, and more.

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February 21, 2024

Big banks have drastically cut overdraft fees, but customers still paid $2.2 billion last year

Pedestrians pass a JPMorgan Chase bank branch in New York.

Michael Nagle | Bloomberg | Getty Images

The three biggest American retail banks collected 25% less overdraft revenue last year as the companies, under pressure from regulators to cap the fees, created new ways for customers to avoid the penalties.

JPMorgan Chase, Wells Fargo and Bank of America reported a combined $2.2 billion in overdraft fees in 2023, roughly $700 million less than in the previous year, according to regulatory filings.

Overdraft fees are triggered when a customer attempts to spend more than the balance in their checking accounts. At around $35 per transaction at many banks, the fees have been a lucrative line item for the industry, generating $280 billion in revenue since 2000, according to the Consumer Financial Protection Bureau.

The industry is girding itself for a battle over overdraft fees after the CFPB in January unveiled a proposal to limit charges to as little as $3 per transaction. Banks say overdraft services are a lifeline that helps users avoid worse options such as payday loans, while critics including President Joe Biden say the fees exploit struggling Americans.

The practice has brought unwelcome attention to big banks. During a 2021 hearing, Sen. Elizabeth Warren needled JPMorgan CEO Jamie Dimon on the fees. Dimon at the time refused her call to refund $1.5 billion to customers.

But even before recent efforts by regulators, banks’ haul from overdraft has been on the decline. Pandemic stimulus money helped Americans trigger fewer of the fees starting in 2020, and then firms including Capital One, Citigroup and Ally voluntarily ended the practice.

Those who kept the fees, including JPMorgan, limited the types of transactions that trigger penalties, got rid of fees for bounced checks and introduced one-day grace periods and $50 cushions to reduce their frequency.

Bank of America cut the fees to $10 from $35 in 2022.

“Whether folks eliminated some fees or dramatically reduced the cost of others, there’s been very significant shifts here,” said Jennifer Tescher , CEO of nonprofit group Financial Health Network. “Banks aren’t just getting rid of overdraft, they’re trying to find more customer-friendly ways of meeting their liquidity needs while making sure they aren’t overextended.”

Steady decline

Industrywide overdraft revenue totaled $7.7 billion in 2022, 35% below the 2019 level, according to a May CFPB report that included all U.S. banks with at least $1 billion in assets.

Recent regulatory filings show that the steady decline continued last year, though JPMorgan and Wells Fargo remain by far the largest players in overdraft.

JPMorgan had $1.1 billion in overdraft revenue last year, about 12% lower than in 2022. Wells Fargo saw a 27% decline to $937 million. Bank of America posted a 64% decline to $140 million.

More than 70% of overdraft transactions no longer incur fees, and customers can choose accounts that don’t allow the penalties, a JPMorgan spokesman told CNBC.

“Our customers continue to tell us they want and need access to overdraft protection, which helps them when they are temporarily short on money,” the JPMorgan spokesman said.

Wells Fargo declined to comment. A Bank of America spokesman noted that after the company voluntarily changed its overdraft policies in 2022, revenue from the practice fell more than 90%, and they now collect less than smaller banks.

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February 9, 2024

Oppenheimer says bank stocks are ‘significantly undervalued’ and gives its top picks

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January 30, 2024

CNBC Daily Open: Big Bank earnings point to a grim season

(L-R) Brian Moynihan, Chairman and CEO of Bank of America; Jamie Dimon, Chairman and CEO of JPMorgan Chase; and Jane Fraser, CEO of Citigroup; testify during a Senate Banking Committee hearing at the Hart Senate Office Building on December 06, 2023 in Washington, DC.

Win Mcnamee | Getty Images

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Banks kick off earnings
Four of Wall Street’s Big Banks reported earnings Friday. JPMorgan Chase started the season with lower fourth-quarter profit as it paid a $2.9 billion fee linked to the rescue of some regional banks last year. Citigroup reported a $1.8 billion quarterly loss, while also announcing that it would slash 10% of its workforce. Bank of America’s fourth-quarter net income fell more than 50% from a year ago, while Wells Fargo reported higher quarterly earnings but warned about lower interest income this year.

Positive inflation signal?
An unexpected decline in wholesale prices indicated inflation could be declining for good. The Labor Department’s producer price index fell 0.1% in December, as opposed to a 0.1% rise seen by economists surveyed by Dow Jones. PPI data measures inflation from the producer or manufacturer’s perspective.

Markets rose for the week
The blue-chip Dow Jones Industrial Average shed over 100 points on Friday but rose 0.3% for the week. The S&P 500 and the Nasdaq closed the day nearly flat, while also ending higher for the week. Markets digested the start of the earnings season and an unexpected decline in producer prices. In Asia, China stocks erased losses from earlier in the session after the country’s central bank left its medium-term policy loans rate unchanged, while Taiwan stocks gained after election.

China skeptic wins Taiwan elections
Taiwan’s Lai Ching-te won the island’s presidential election on Saturday. This was the Democratic Progressive Party’s third straight win. Lai, who is seen as a strong China skeptic, won by more than 40% of the popular vote. He said he was “determined to safeguard Taiwan from threats and intimidation from China.” Beijing dismissed his victory.

[PRO] Goldman Sachs picks unloved stocks
Goldman Sachs said Europe’s utilities sector may not have had much action in the last three years, but there could be a potential shift waiting to happen. The investment bank names which European stocks, that have lagged the broader market by nearly 20%, are worthy plays in the industry in 2024.

The bottom line

Fourth-quarter earnings have officially begun with four of Wall Street’s top six banks reporting rather bleak results.

JPMorgan Chase, the biggest U.S. bank by assets, paid a sizeable fee linked to the government seizures associated with regional banking crisis last March, which impacted its earnings.

CEO Jamie Dimon said: “the U.S. economy continues to be resilient, with consumers still spending, and markets currently expect a soft landing.”

But he added that deficit spending and supply chain adjustments “may lead inflation to be stickier and rates to be higher than markets expect.”

Citigroup was also hit by last year’s regional banking crisis but focus was mostly on CEO Jane Fraser’s massive overhaul plan aimed at lifting sentiment around the bank’s financial health and also its stock price.

The third largest U.S. bank by assets said it will slash about 20,000 jobs over the “medium term,” but did not make it immediately clear on the exact duration. Citigroup has lagged its Wall Street peers since the 2008 financial crisis and remains the lowest valued among the top six banks.

Outlook from Wall Street’s biggest lenders was cautious against the backdrop of markets pricing in interest rate cuts by the Federal Reserve as early as March. Lower rates hurt the net interest income generated by banks.

Separately, data showing a decline in wholesale prices came as a positive surprise. It came a day after prices consumers pay for goods and services rose 0.3% in December and were up 3.4% on the year. Still remaining much above the Fed’s 2% target for the year.

“What inflation risks remain in the U.S. economy clearly cannot be sourced to any upward pressure in producers’ costs,” said Kurt Rankin, senior economist at PNC.

“Whether surveying from producers’ intermediate or final demand perspective, there is little to no pricing pressure headed into the U.S. economy from the supply side entering 2024.”

During Asia hours, Taiwan’s election results stole the show. Voters in the island chose the ruling Democratic Progressive Party, or DPP for a third straight presidential term, handing victory to China-skeptic Lai Ching-te.

Lai, who won by more than 40% of the popular vote, said he was “determined to safeguard Taiwan from threats and intimidation from China.”

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January 14, 2024

CNBC Daily Open: Big Bank earnings signal downbeat quarter

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., on Monday, June 27, 2022.

Michael Nagle | Bloomberg | Getty Images

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

What you need to know today

Banks kick off earnings
Four of Wall Street’s Big Banks reported earnings Friday. JPMorgan Chase kicked things off with lower fourth-quarter profit as it paid a $2.9 billion fee linked to the government’s take over of some regional banks last year. Citigroup reported a $1.8 billion quarterly loss, while also announcing that it would slash 10% of its workforce. Bank of America’s fourth quarter net income fell more than 50% from a year ago, while Wells Fargo reported higher quarterly earnings but warned about lower interest income this year.

Positive inflation signal?
An unexpected decline in wholesale prices indicated inflation could be declining for good. The Labor Department’s producer price index fell 0.1% in December, as opposed to a 0.1% rise seen by economists surveyed by Dow Jones. PPI data measures inflation from the producer or manufacturer’s perspective.

Markets rose for the week
The blue-chip Dow Jones Industrial Average shed over 100 points on Friday but closed 0.3% higher for the week. The S&P 500 and the Nasdaq closed the day nearly flat, while also ending higher for the week. Markets digested the start of the earnings season and an unexpected decline in producer prices. European stocks ended higher, but shares of British luxury firm Burberry fell 7% after a profit warning.

China skeptic wins Taiwan elections
Taiwan’s Lai Ching-te won the island’s presidential election on Saturday. This was the Democratic Progressive Party’s third straight win. Lai, who is seen as a strong China skeptic, won by more than 40% of the popular vote. He said he was “determined to safeguard Taiwan from threats and intimidation from China.” Beijing dismissed his victory.

[PRO] Buffett’s view on airlines
Wall Street legend Warren Buffett will most likely never add airline stocks to his portfolio again. The “Oracle of Omaha” has been swift in unloading $4 billion worth of airline stocks in the pandemic and recently with disappointing profit forecast, more aircraft groundings and midair emergencies, he will not give such stocks a chance again.