Banks – Page 15 – ReportWire

Maybank CEO: We want to be the biggest bank in Islamic wealth management

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Khairussaleh Ramli, group president and CEO of Malaysia-based Maybank, says, however, that it doesn’t want to be “the biggest bank by asset in Islamic finance.”

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May 27, 2024

Cash discounts, while still rare, are up over 60% from 2015. Here’s how much you can save

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Ryanjlane | E+ | Getty Images

Sometimes, it pays to pay with cash.

More merchants are offering a lower price to customers who use cash rather than credit card for a purchase. That means opting for paper over plastic may save you money in some cases.

Just how much?

Typically, cash discounts run about 2% to 4% on purchases, though savings can be higher, experts said.

The share of cash payments with a discount is still low — in fact, only about 3% of all cash payments in 2022, according to data from the Federal Reserve Bank of Atlanta.

However, that share is up more than 60% from 2015, when 1.8% of all cash transactions had a discount, Atlanta Fed data shows. While not yet the norm, cash incentives are likely to become more widespread, experts said.

Meanwhile, other businesses add a surcharge when customers use credit cards for purchases. In such cases, paying with cash would also yield savings.

Nearly 7 in 10 cardholders said a business has charged them extra for paying with a credit card, according to a recent LendingTree survey.

The trend comes as consumers have steadily shifted away from using cash for purchases: Consumers made 18% of payments with cash in 2022, down from 31% in 2016, according to the Federal Reserve. Meanwhile, credit cards’ share grew to 31% from 18% during that period.

“Sometimes, it can make sense to just go ahead and pay cash,” said Matt Schulz, chief credit analyst at LendingTree.

That may be the case even after accounting for credit card rewards, Schulz said. The largest general cash-back return on most credit cards is 2%, for example — a percentage often exceeded by cash discounts, he said.

“If the merchant establishes a discount that’s high enough, even if you have the best rewards card in the world you may still end up paying less if you use cash,” said Adam Rust, director of financial services at the Consumer Federation of America, a consumer advocacy group.

Why businesses give cash incentives

Businesses that offer a break on cash purchases generally do so to reduce costs they incur for credit card transactions.

Credit card-processing companies like Visa and Mastercard generally charge merchants 2% to 4% for each transaction, according to the National Retail Federation. These swipe fees are the second-highest cost for most businesses, behind labor costs, the trade group said.

“The merchant is looking at your dollar and getting 98 cents in the end because you’ve chosen to use a card,” Rust said.

Businesses can take two routes to save money: offering a discount for cash purchases (thereby sidestepping those card fees), or putting a surcharge on credit card transactions to offset those fees.

Either way, such practices may yield lower prices for cash users.

Surcharges aren’t legal in all states, though.

As of May 2023, Connecticut and Massachusetts had outlawed surcharging, while Colorado and Oklahoma limited the maximum surcharge to 2%, according to the North Carolina Restaurant and Lodging Association.

Visa also capped surcharges at 3% in April 2023, down from 4%, the trade group said.

“It’s really important to understand what the cost of that surcharge is going to be, if there is one, before you go ahead and buy,” Schulz said.

When to pay with cash

Consumers are often swayed by cash incentives, even “significantly likely” to switch to cash payments “specifically because of cash discounts offered,” according to research by Joanna Stavins, a senior economist and policy advisor at the Federal Reserve Bank of Boston.

When a cash discount is offered, the odds increase by 19.2% that a consumer who prefers noncash payments will instead opt to pay with cash, Stavins wrote in a 2018 paper. This research controls for transaction value and merchant type.

In addition, small, independent businesses are more likely to offer cash discounts than big national chains, Consumer Federation of America’s Rust said.

Sometimes, it can make sense to just go ahead and pay cash.

Matt Schulz

chief credit analyst at LendingTree

Gas stations have long offered cash incentives to customers. But a rising number are now doing so, and “some major retailers are starting to implement the ability to do this in the future,” said Patrick De Haan, head of petroleum analysis at GasBuddy.

The average cash discount has been about 5 cents to 10 cents per gallon, De Haan said.

Meanwhile, more stations are also offering their own payment platform — like branded debit and credit cards — that yield even more savings than cash, he added.

Discounts are also “very prevalent” when paying for health care, said Carolyn McClanahan, a certified financial planner and physician based in Jacksonville, Florida.

McClanahan is also a member of the CNBC Financial Advisor Council.

Some big-ticket spending — like tax bills and college tuition — is also generally best accomplished with cash, said Schulz. The IRS and many universities pass on payment-processing costs to the consumer. (In these cases, that might mean writing a check.)

“There are certainly some bigger times when you should probably not use credit cards because of the fees involved,” he said.

Credit cards sometimes have advantages

There are times when credit cards have distinct advantages to cash, Rust said.

For example, unlike cash, credit cards carry certain protections related to fraud and product returns, Schulz said.

That’s why using a card may make more sense — even if there are fees involved — if consumers are first-time shoppers at a particular store, are buying something they may want to return in the future or if purchasing something fragile they’re having delivered, he added.

Additionally, a credit card may be better for those who want to more closely track their spending, or just generally prefer the ease and convenience of using a card, Schulz said.

However, consumers who have trouble paying off their credit card bills in full and on time each month may be better served via another payment method to avoid racking up interest charges, especially as those rates are near record highs.

There’s also a workaround to both cash and credit cards: debit cards. Merchants generally can’t add a surcharge to debit card transactions.

“By and large, debit cards can be a better and cheaper choice in instances where there’s a credit card surcharge,” Schulz said.

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May 26, 2024

Wells Fargo goes on quiet hiring spree to expand from lending. What it means for the stock

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Wells Fargo is breaking out of its lending roots. The bank has quietly gone on a hiring spree to grab a bigger slice of the profitable investment banking business long dominated by its Wall Street rivals. Since the start of 2023, a CNBC analysis found that Wells Fargo made at least 17 senior-level hires in its corporate and investment banking (CIB) division. Leaning on the expertise of its rivals, many of the newly employed executives previously worked at the likes of JPMorgan Chase and other big banks. Expanding investment banking “improves our outlook” on Wells Fargo stock, according to Jeff Marks, director of portfolio analysis for the CNBC Investing Club. “Adding more fee-related revenues to the overall picture makes the bank’s profits less hostage to the bond market yield curve and could improve the overall return profile of the bank.” He added, “Wells Fargo could fetch a higher multiple in the market as a result.” It’s no wonder CEO Charlie Scharf wants a bigger slice of businesses like investment banking, which garner huge revenue from fees. Services like underwriting for initial public offerings (IPO) and facilitating mergers and acquisitions (M & A) allow banks to take home a percentage of these deals and advisory fees. Fees are a more durable and less volatile revenue stream than what Wells Fargo has historically focused on. This is important because, as Scharf said in the bank’s 2023 annual report , the CIB division has positioned Wells Fargo to “increase our fee-based revenues” and “increase our returns overall.” At the top of the recent hire list, however, is Doug Braunstein, a JPMorgan veteran who was brought in as vice chairman in February to help steer Wells Fargo’s corporate finance and advisory businesses. During nearly 20 years at JPMorgan, Braunstein held many roles including chief financial officer, head of investment banking in the Americas, and head of global mergers and acquisitions. Fernando Rivas was named earlier this month co-CEO of corporate and investment banking at Wells Fargo. Formerly head of North American Investment Banking at JPMorgan, Rivas will lead CIB together with Jonathan Weiss, who had been the sole CEO of the division since February 2020. Weiss, also a JPMorgan alum, has been at Wells Fargo since 2005. Rivas had been at JPMorgan for three decades. In addition to those high-profile hires, CNBC found that Wells Fargo also poached top talent from other financial behemoths such as Barclays , Deutsche Bank , Piper Sandler, and now-defunct Credit Suisse — all within the past year. A Wells Fargo spokesperson declined to comment on the total number of CIB-related hires across all levels in the division. However, Wells Fargo’s Scharf said in the press release announcing Rivas’ hire, “We have added over 50 senior bankers and traders since 2020 and have seen the positive impact with increased revenue and market share.” Break from tradition Management has long relied on interest-based revenue streams like net interest income (NII) from its retail and business customers. NII is the difference between what a firm makes on loans versus what it pays for customer deposits. Wells Fargo and other banks have benefited in recent years as the Federal Reserve began hiking interest rates in March 2022. That’s because the cost of borrowing goes up much more than what customers earn on deposits. However, as rates have stayed higher for longer, customers began to withdraw some of their deposits for higher-yielding offerings like money market funds. Wells Fargo said NII decreased 8% during the first quarter, citing interest rate dynamics. Full-year guidance for NII is also expected to decline in the 7% to 9% range. That’s the double-edged sword of rates, which are now expected to be cut by the Fed later this year, and why Wells Fargo was glad to see its CIB-related investments pay off in the first quarter. The division saw a 1.6% increase in revenue to $4.98 billion. During the April 12 post-earnings conference call, Scharf said the bank is “beginning to see early signs of share and fee growth which will be important as we diversify our revenues and reduce net interest income as a percentage of revenue.” From 2019 to the end of 2023, Wells Fargo’s overall investment banking share moved up two ranks in the U.S. market to No. 6, management said in an annual report , citing Dealogic figures. More recent data indicates that Wells Fargo’s investment banking revenue share globally has jumped to No. 7 from No. 12 year-over-year, as of Tuesday. In the investing banking subset of M & A, Wells Fargo has been garnering more fees. The bank has been tapped for a series of high-profile deals as well, including Kroger ‘s attempted nearly $25 billion acquisition of Albertson’s in October 2022. The transaction is in limbo after the Federal Trade Commission filed a lawsuit to block the merger in February . In IPOs, Wells Fargo was among the lead book-running managers of recent IPOs: cruise line Viking and data management firm Rubrik . Wells Fargo shares, which began their upward trajectory back in November, gained more than 50% in the past 12 months — and about half that gain in 2024 alone. That’s roughly double the S & P 500 ‘s performance on both measures. The stock saw its highest close last week of $62.55 since mid-January 2018. Shares have pulled back a bit since then but remain only about 7.5% away from its all-time high close of $65.93 at the end of January 2018. In recognition of that strength, the Club trimmed its Wells Fargo position in late April and booked a healthy profit on the trade. While still bullish, we wanted to reduce the stock’s overall weighting in a show of portfolio discipline. It was near the 5% threshold that we don’t like exceeding in order to run a diversified portfolio. The Club has a 2 rating on the stock and a $62 price target . WFC mountain 2018-01-26 Wells Fargo since record high close on Jan. 26, 2018 Moving forward Wells Fargo’s CIB expansion bodes well once the firm’s Fed-imposed $1.95 trillion asset cap is gone. Although the timing is uncertain, Wells Fargo secured a key win with regulators in February after the Office of the Comptroller of the Currency terminated a penalty tied to the bank’s 2016 fake accounts scandal. That so-called consent order was believed to be a major factor in the Fed’s decision to cap Wells Fargo’s asset levels in 2017. Those regulatory burdens for past misdeeds at the bank predated Scharf’s tenure who has been clearing them since becoming CEO in 2019. Piper Sandler analyst Scott Siefers has said that Wells Fargo will be able to compete more effectively against other large Wall Street firms once the growth cap is removed. “Wells Fargo on a relative basis is very undersized in businesses such as investment banking,” Siefers told CNBC in March . “So, 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 have some of its other peers.” (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.

A woman walks past Wells Fargo bank in New York City, U.S., March 17, 2020.

Jeenah Moon | Reuters

Wells Fargo is breaking out of its lending roots. The bank has quietly gone on a hiring spree to grab a bigger slice of the profitable investment banking business long dominated by its Wall Street rivals.

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May 24, 2024

CNBC Daily Open: Dow’s worst day in 2024, Nvidia shares pop

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Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the Nvidia GPU Technology Conference (GTC) in San Jose, California, US, on Tuesday, March 19, 2024.

David Paul Morris | Bloomberg | 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

Dow sinks 600 points
The Dow Jones Industrial Average suffered its worst day of the year, dropping over 600 points on Thursday. Boeing led the decline on the Dow. Despite reaching intraday record highs earlier, both the S&P 500 and the Nasdaq Composite ended the day in negative territory. Nvidia‘s blockbuster earnings and guidance failed to prop up markets, with more than 400 stocks on the S&P 500 trading lower. Treasury yields extended gains as the Fed delays rate cuts, while oil prices bounced back after a three-day decline.

Nvidia pops
Shares of Nvidia soared as much as 11% after the AI chipmaker’s earnings that beat Wall Street’s estimates. It also issued strong guidance as demand for its artificial intelligence accelerators remains robust. Shares passed $1,000 for the first time, reaching an all-time high of $1,063.20 during intraday trading, and are up about 111% this year.

Musk disapproves China EV tariffs
Tesla CEO Elon Musk said he’s not in favor of tariffs on Chinese electric vehicles, which were imposed last week by President Joe Biden. “Neither Tesla nor I asked for these tariffs,” Musk said in response to a question from CNBC’s Karen Tso. “Tesla competes quite well in the market in China with no tariffs and no preferential support. I’m in favor of no tariffs.”

Boeing sinks
Shares of Boeing dropped 7.6% after CFO Brian West said the company would continue to burn through cash this year. Delivery of new planes, a major source of revenue, will not improve in the second quarter. Boeing is facing a host of production issues related to safety concerns. The company burned through nearly $4 billion in cash in the first quarter and West believes that figure could be similar or “possibly a little worse” in the second quarter.

Asia-Pacific markets slide
Stocks in the Asia-Pacific region fell on Friday as investors assessed inflation data from Japan. The Nikkei 225 fell 1% as inflation slowed for the second straight month. While the Bank of Japan is under pressure to raise interest rates, inflation is expected to push higher in the coming months. South Korea’s Kospi dropped 1% after a report said Samsung Electronics’ new chip wasn’t ready for Nvidia. Samsung shares fell 2.4%. Hong Kong’s Hang Seng dipped 1.3%, mainland China’s CSI 300 index declined 0.4%, and Australia’s S&P/ASX 200 shed 1.1%.

[PRO] What’s next for Nvidia?
Wall Street analysts are revising their price targets for Nvidia upwards after its blowout earnings and guidance. Some had feared a slowdown in demand as Amazon and Microsoft wait for Nvidia’s more powerful AI chips. Nvidia’s decision to split its stock could provide more upside for investors.

The bottom line

Nvidia's blockbuster earnings and forecast couldn't stop Wall Street from taking a late dive. Nvidia held up well, its stock closing above $1,000, up 9% on the day after reassuring investors its sales of graphics chips that power artificial intelligence weren't a flash in the pan.

What comes next for Nvidia is a 10-for-1 stock split; Post-split shares will start trading on June 10. Stock split will help retail investors, put off by a share price of a thousand-plus dollars, to buy them at around $100. Nvidia shares are up more than 240% in the last 12 months.

CNBC's Ryan Ermey explains more on the psychology of the move and how the mechanism of the stock split works.

So what's freaking markets? According to the Charles Schwab Trader Sentiment Survey, the bullish outlook among traders fell to 46% from 53% in the second quarter.

"Traders began the year feeling pretty confident that the economy was improving and Fed rate cuts would be quick to follow," said James Kostulias, head of Trading Services at Charles Schwab. "But inflation concerns have jumped significantly."

Before the latest minutes from the Federal Reserve meeting, suggesting concern about stubborn inflation, some strategists had estimated the Fed could cut interest rates at least three times this year as prices cooled. Now, traders are lowering their expectations to just one reduction, possibly in September or November.

As the first-quarter earnings season winds down, investors are shifting their attention to geopolitical concerns.

"The Fed has been pretty clear that they're not going to cut rates, so you don't have this, 'Will they or won't they' [scenario] keeping everybody on edge. We are going to start to see a turn to some of this geopolitical stuff, whether it's elections or the two ongoing wars," said Melissa Brown, managing director of applied research at SimCorp.

While events such as the U.S. and UK elections don't necessarily result in economic impacts, they do increase uncertainty, Brown noted.

"People may go from saying 'I'm just going to buy now,' to, 'Look, I'm gonna wait and see the outcome of this before I decide to commit more money to market,'" Brown said.

The Daily Open will be back on Tuesday as U.S. markets will be closed for Memorial Day on Monday.

— CNBC's Hakyung Kim, Samantha Subin, Ryan Ermey, Jeff Cox, Sophie Kinderlin, Spencer Kimball, Ece Yildirim, Sarah Whitton and Ryan Browne contributed to this report.

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May 23, 2024

Asia as a region is ‘supremely interesting,’ says JPMorgan’s Filippo Gori

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“You have Japan, which is on fire. India, which is very in high demand,” said Filippo Gori, co-head of global banking at JPMorgan, explaining why Asia as a region is interesting for investors.

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May 22, 2024

CNBC Daily Open: Nvidia shares top $1,000 on AI boom

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A sign is posted in front of Nvidia headquarters on May 21, 2024 in Santa Clara, California.

Justin Sullivan | 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

Nvidia to split stock, sales to soar
Shares of Nvidia rose more than 7%, topping $1,000 for the first time, in after-hours trading after its first-quarter earnings and sales beat analysts’ expectations. The chipmaker expects second-quarter sales of $28 billion, compared with estimates of $26.6 billion. The company plans to split its stock 10 for 1.

Wall Street sinks on inflation fears
The Dow Jones Industrial Average plunged more than 200 points, marking its worst day so far this month as minutes of the Federal Reserve’s latest meeting stoked concerns about sticky inflation. The S&P 500 and the Nasdaq Composite also lost ground. Treasury yields inched higher as the prospect of rate cuts was pushed further out. Oil prices fell for the third consecutive day ahead of an OPEC meeting.

Fed inflation worries
Minutes of the Federal Reserve’s latest rate-setting meeting showed the central bank was concerned about the “lack of progress” in bringing inflation closer to its 2% target, sending the Dow down 200 points. The minutes also revealed that “various participants mentioned a willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.” The Fed policymakers maintained the benchmark borrowing rate within the 5.25%-5.5% range.

Alexa’s AI makeover
Amazon plans to upgrade its Alexa voice assistant with generative artificial intelligence and charge a monthly subscription for the service, according to people familiar with the plans. The move comes after Google and OpenAI launched similar products. Subscription for the new AI-powered Alexa will not be included in the $139 per year Prime offering.

Vivek takes Buzzfeed stake
Buzzfeed shares shot up 20% after the former GOP presidential candidate Vivek Ramaswamy bought an 8% stake in the online media company. In a filing with the Securities and Exchange Commission, Ramaswamy said he would talk with Buzzfeed’s management about every aspect of the company’s operations, including an acquisition by a third party. The media outlet went public in 2021 and has seen its shares fall 94% since then.

[PRO] Under-the-radar AI plays
Hedge funds are loading up on these lesser-known beneficiaries from the artificial intelligence boom while cutting back on their exposure to mega caps, according to Goldman Sachs. The Wall Street investment bank analyzed the holdings of 707 hedge funds with $2.7 trillion of gross equity positions at the start of the second quarter.

The bottom line

There were two major announcements after the markets closed on Wednesday.

First from Prime Minister Rishi Sunak of the United Kingdom, the world's sixth-largest economy with a GDP of about $3 trillion, calling a general election, which barely had any market impact. The pound was largely unchanged.

The second was from a 31-year-old graphics chip company valued at $2.3 trillion, Nvidia, which delivered its much-anticipated earnings — and saw its shares soar to record highs.

There were expectations of a $200 billion swing one way or the other in the company's stock, depending on the outcome of its earnings. In after-hours trading, the stock rose more than 7%. Nvidia's shares are up 92% this year and 200% over the last 12 months. Nvidia is the bedrock of the artificial intelligence revolution, with Google, Amazon, Meta, and Microsoft estimated to be spending $200 billion buying up its AI chips.

"The next industrial revolution has begun," Chief Executive Officer Jensen Huang said in a statement. "We are poised for our next wave of growth."

Dan Niles, founder of Niles Investment Management, has likened Nvidia to Cisco in the 1990s. Cisco was the go-to company for internet gear. From 1994 to its peak in 2000, Cisco's shares rose 4000%. Niles believes Nvidia will go through a similar cycle.

"We're still really early in the AI build," Niles told CNBC's "Money Matters" on Monday. "I think the revenue will go up three to four times from current levels over the next three to four years, and I think the stock goes with it."

"If you look at today for the AI build-out, who's really driving that?" Niles said. "It's the most profitable companies on the planet — it's Microsoft, it's Google, it's Meta, and they're driving this."

Crucially, Nvidia said it expects second-quarter sales to soar to $28 billion, up from the $26.6 billion analysts were expecting. Even with the prospects of increased competition from Advanced Micro Devices and Google building its own custom chip, Piper Sandler analysts expect Nvidia to keep at least 75% of the AI accelerator market.

Nvidia's done everything that's been asked of it, now it's over to Wall Street to decide if it's time to crack through more milestones or consolidate.

— CNBC's Kif Leswing, Jeff Cox, Kate Rooney, Hakyung Kim, Lisa Kailia Han, Yun Li and Rohan Goswami contributed to this report.

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May 22, 2024

Fintech nightmare: ‘I have nearly $38,000 tied up’ after Synapse bankruptcy

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A dispute between a fintech startup and its banking partners has ensnared potentially millions of Americans, leaving them without access to their money for more than a week, according to recent court documents.

Since last year, Synapse — an Andreessen Horowitz-backed startup that serves as a middle-man between customer-facing fintech brands and FDIC-backed banks — has had disagreements with several of its partners about how much in customer balances it owed.

The situation deteriorated in April after Synapse declared bankruptcy following the exodus of several key partners. On May 11, Synapse cut off access to a technology system that enabled lenders, including Evolve Bank & Trust, to process transactions and account information, according to court filings.

That has left users of several fintech services stranded with no access to their funds, according to testimonials filed this week in a California bankruptcy court.

One customer, Chris Buckler, said in a May 21 filing that his funds at crypto app Juno were locked because of the Synapse bankruptcy.

“I am increasingly desperate and don’t know where to turn,” Bucker wrote. “I have nearly $38,000 tied up as a result of the halting of transaction processing. This money took years to save up.”

Until recently, Synapse, which calls itself the biggest “banking as a service” provider, helped a wide swath of the U.S. fintech universe provide services like checking accounts and debit cards. Former partners included Mercury, Dave and Juno, well-known fintech firms that catered to segments including startups, gig workers and crypto users.

Synapse had contracts with 20 banks and 100 fintechs, resulting in about 10 million end users, according to an April filing from founder and CEO Sankaet Pathak.

Pathak didn’t immediately return an email seeking comment. A spokesman for Evolve declined to comment, instead pointing to a statement on the bank’s website that read, in part:

“Synapse’s abrupt shutdown of essential systems without notice and failure to provide necessary records needlessly jeopardized end users by hindering our ability to verify transactions, confirm end user balances, and comply with applicable law,” the bank said.

It is unclear why Synapse switched the system off, and an explanation couldn’t be found in filings.

The freeze-up of customer funds exposes the vulnerabilities in the banking as a service, or BAAS, partnership model and a possible blind spot for regulatory oversight.

The BAAS model, used most notably by the pre-IPO fintech firm Chime, allows Silicon Valley-style startups to tap the abilities of small FDIC-backed banks. Together, the ecosystem helped these companies compete against the giants of American banking.

Customers mistakenly believed that because funds are ultimately held at real banks, they were as safe and available as any other FDIC-insured accounts, said Jason Mikula, a consultant and newsletter writer who has tracked this case closely.

“This is 10 million-plus people who can’t pay their mortgages, can’t buy their groceries … This is another order of disaster,” Mikula said.

Regulators have yet to take a role in the dispute, partly because the underlying banks involved haven’t failed, the point at which the FDIC would usually intervene to make customers whole, Mikula added.

The FDIC and Federal Reserve didn’t immediately return calls seeking comment.

In pleading with the judge in this case, Martin Barash, to help the impacted customers, Buckler noted that while he had other financial accounts besides the one that is frozen, others are not as lucky.

“So far the federal government is not willing to help us,” Buckler wrote. “As you heard, there are millions affected who are in far worse straits.”

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May 22, 2024

CFPB says buy now, pay later firms must comply with U.S. credit card laws

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Rohit Chopra, director of the CFPB, testifies during a House Financial Services Committee hearing on June 14, 2023.

Tom Williams | Cq-roll Call, Inc. | Getty Images

The Consumer Financial Protection Bureau declared on Wednesday that customers of the burgeoning buy now, pay later industry have the same federal protections as users of credit cards.

The agency unveiled what it called an “interpretive rule” that deemed BNPL lenders essentially the same as traditional credit card providers under the decades-old Truth in Lending Act.

That means the industry — currently dominated by fintech firms like Affirm, Klarna and PayPal — must make refunds for returned products or canceled services, must investigate merchant disputes and pause payments during those probes, and must provide bills with fee disclosures.

“Regardless of whether a shopper swipes a credit card or uses Buy Now, Pay Later, they are entitled to important consumer protections under long-standing laws and regulations already on the books,” CFPB Director Rohit Chopra said in a release.

The CFPB, which last week was handed a crucial victory by the Supreme Court, has pushed hard against the U.S. financial industry, issuing rules that slashed credit card late fees and overdraft penalties. The agency, formed in the aftermath of the 2008 financial crisis, began investigating the BNPL industry in late 2021.

Surging debt

The use of digital installment loan-type services has ballooned in recent years, with volumes surging tenfold from 2019 to 2021, Chopra said during a media briefing. Among CFPB concerns are that some users are given more debt than they can handle, he said.

“Buy now, pay later is now a major part of our consumer credit market as these loans provide a meaningful alternative to other options for consumers,” Chopra told reporters. “The CFPB wants to make sure that these new competitive offerings are not gaining an advantage by sidestepping longstanding rights and responsibilities enshrined under the law.”

It’s unclear how many BNPL providers don’t comply with refund and dispute requirements; on the website for Affirm, for instance, there are pages for both activities.

While the CFPB acknowledged that many BNPL players offer those services, the new rule will ensure that they are applied consistently across the industry, a senior agency official told reporters.

The new rule will go into effect in 60 days, and the agency is now accepting public commentary on it, the official said.

Shares of Affirm were off 5.2% Wednesday, while PayPal slipped 3%.

Litigation ahead?

For some time, BNPL providers have anticipated greater regulation, including efforts to apply existing card rules onto the industry. In March, Klarna published a post arguing that its no-interest product was less risky for customers than credit cards — which can often come with steep interest rates — thus requiring less oversight.

“Instead of trying to jam BNPL into an outdated credit card framework that does little to actually protect consumers, leaders in Washington should draft and implement a framework for BNPL that is proportionate to the risk it poses,” Klarna said at the time.

In a statement provided Wednesday, Klarna called the CFPB move a “significant step forward” in BNPL regulation, adding that it already adhered to standards for refunds, disputes and billing information.

“But it is baffling that the CFPB has overlooked the fundamental differences between interest-free BNPL and credit cards, whose whole business model is based on trapping customers into a cycle of paying sky-high interest rates month after month,” said a Klarna spokesperson.

An Affirm spokesman said the company was “encouraged” that the CFPB was promoting industry standards, “many of which already reflect how Affirm operates,” and that it was engaged with the regulator on improving how it operates.

“Affirm’s success is aligned with responsibly extending access to credit as we do not charge late or hidden fees,” the spokesman said. “We urge other companies that offer buy now, pay later products to live up to the industry’s promise to provide consumers with a more flexible and transparent alternative to other payment options.”

The industry’s stance raises the possibility that, like other financial players including payday lenders, BNPL companies could push back against the CFPB rule by suing the agency.

The CFPB rule capping credit card late fees at $8 per incident, which was set to go into effect this month, was challenged and paused by a federal judge recently.

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May 22, 2024

Citi fined $79 million by British regulators over fat-finger trading and control errors

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People walk by a CitiBank location in Manhattan on March 01, 2024 in New York City.

Spencer Platt | Getty Images

LONDON — British regulators on Wednesday dished out a combined £61.6 million ($79 million) in fines to U.S. investment bank Citi for failings in its trading systems and controls.

The fines were issued by the Prudential Regulation Authority and the Financial Conduct Authority, whose investigation focused on the period between April 1, 2018, and May 31, 2022. Citi qualified for a 30% reduction in the amount of the penalty after agreeing to resolve the matter.

“Firms involved in trading must have effective controls in place in order to manage the risks involved. CGML [Citigroup Global Markets Limited] failed to meet the standards we expect in this area, resulting in today’s fine,” Sam Woods, deputy governor for prudential regulation and the chief executive officer of the PRA, said in a statement Wednesday.

The regulators said that certain system and control issues persisted during the probe period and led to trading incidents, such as so-called fat-finger trading blunders. The main incident highlighted took place on May 2. 2022, when an experienced trader incorrectly inputted an order, which resulted in $1.4 billion “inadvertently being executed on European exchanges.”

“Deficiencies in CGML’s trading controls contributed to this incident, in particular the absence of certain preventative hard blocks and the inappropriate calibration of other controls,” the statement read.

In a statement to CNBC, a Citi spokesperson said that the bank was pleased to resolve the matter from more than two years ago, “which arose from an individual error that was identified and corrected within minutes.”

“We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.” the spokesperson said.

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May 22, 2024

CNBC Daily Open: S&P 500 and Nasdaq hit new heights ahead of Nvidia’s earnings

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Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2024 in New York City.

Angela Weiss | AFP | 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

Wall Street reaches new highs
The S&P 500 and the Nasdaq Composite rose to fresh record highs as investors await earnings from AI chipmaker Nvidia after the close on Wednesday. The Dow Jones Industrial Average closed 0.17% higher at 39,872.99. Nvidia’s shares rose 0.6% with option traders pricing in swings of as much as 9% up or down in reaction to its earnings. Treasury yields fell and oil prices drifted lower.

Rate cuts several months away
Federal Reserve Governor Christopher Waller said he does not think further rate increases are necessary, but he will need convincing before backing any rate cuts. “I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” Waller said. According to the CME Group’s FedWatch Tool, the first rate cut could come as early as September.

Gasoline reserve release
The Biden administration will release 1 million barrels of gasoline from reserves to reduce prices at the pump ahead of the Fourth of July holiday. OPEC production cuts and fears the Israel-Hamas war could engulf the wider Middle East sent U.S. gasoline futures soaring 19%. “By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state [region] and northeast at a time hardworking Americans need it the most,” Energy Secretary Jennifer Granholm said.

Pixar job cuts
Pixar Animation Studios will lay off about 175 employees, or around 14% of its workforce, a spokesperson for parent company Walt Disney told CNBC. CEO Bob Iger wants Pixar to focus on box office releases and not on short series for Disney+. Pixar and Walt Disney Animation have struggled to generate more than $480 million at the global box office since 2019. Before the pandemic, “Coco” generated $796 million globally, while “Incredibles 2″ tallied $1.24 billion, and “Toy Story 4” snared $1.07 billion worldwide.

Asia-Pacific stocks eke out gains
Hong Kong’s Hang Seng rose 0.18% and mainland China’s CSI 300 index gained 0.7% on Wednesday. Chinese electric car company Xpeng reported an improvement in profit margin and an upbeat outlook for second-quarter deliveries — its Hong Kong-listed shares soared 13%. Japan’s Nikkei 225 was down 0.5% as investors digested a slew of economic data. South Korea’s Kospi and Australia’s S&P/ASX 200 both inched higher. As did New Zealand’s S&P/NZ50, up 0.1%, after the Reserve Bank of New Zealand held rates unchanged at 5.5% for the seventh consecutive time.

[PRO] When Nvidia rises
CNBC’s Ganesh Rao takes a look at six artificial intelligence-related stocks that have historically reacted positively to Nvidia’s quarterly earnings. Five listed in the United States and one in Japan have risen between 6% and 33% in the past after Nvidia revealed bumper earnings.

The bottom line

Few CEOs are strong-willed and have the vision or audacity to redefine their industries. Steve Jobs revolutionized mobile phones with the iPhone, Elon Musk challenged gas-guzzling Detroit's dominance with electric vehicles, and Jamie Dimon, CEO of JPMorgan Chase, has done the same for the often-criticized grey banking industry.

Dimon might seem like an unusual addition to this list of innovators. Yet, he took a bank ranked eighth on Wall Street in 2006 and propelled it to the top spot within five years, surpassing giants like Goldman Sachs, Deutsche Bank, and Citi.

However, Dimon's inclusion here isn't solely due to his bank's impressive growth. Like his peers, he isn't afraid to stand up to his big institutional investors. This was evident at a recent investor day, where the headline revolved around his potential retirement in the next five years.

When pressed on when the bank would repurchase its own shares, Dimon's response was unequivocal: "I want to make it really clear, OK? We're not going to buy back a lot of stock at these prices."

He went on to say, "Buying back stock of a financial company greatly in excess of two times tangible book is a mistake. We aren't going to do it."CNBC's Hugh Son covered this exchange in detail, providing further insight into the share buyback debate.

Unlike CEOs of companies like Apple, Alphabet, and Meta, who have succumbed to pressure and used their vast cash reserves for share buybacks, Dimon resists this trend. Share buybacks primarily benefit large investors by inflating the value of their holdings.

Dimon could have easily agreed, considering his estimated $2.2 billion net worth, largely tied to his bank holdings. Critics might argue it's easy for him to forego additional wealth, given his substantial $36 million compensation package in 2023.

However, it's undeniable that Dimon has successfully navigated nearly two decades of banking crises, recessions, and a volatile political climate. He has built JPMorgan Chase into the largest bank in the United States by assets, with a market capitalization approaching $600 billion, and at 68 he's still going strong.

— CNBC's Jeff Cox, Hakyung Kim, Alex Harring, Sophie Kinderlin, Leslie Josephs, Hugh Son, Spencer Kimball and Sarah Whitton contributed to this report.

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May 21, 2024

CNBC Daily Open: New highs on Wall Street, Fed’s Waller says rate cuts months away

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Traders work on the floor of the New York Stock Exchange during morning trading on May 17, 2024 in New York City.

Angela Weiss | AFP | 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

Wall Street reaches new highs
The S&P 500 and the Nasdaq Composite rose to fresh record highs as investors await earnings from AI chipmaker Nvidia after the close on Wednesday. The Dow Jones Industrial Average closed 0.17% higher at 39,872.99. Nvidia’s shares rose 0.6% with option traders pricing in swings of as much as 9% up or down in reaction to its earnings. Treasury yields fell and oil prices drifted lower.

Rate cuts several months away
Federal Reserve Governor Christopher Waller said he does not think further rate increases are necessary, but he will need convincing before backing any rate cuts. “I need to see several more months of good inflation data before I would be comfortable supporting an easing in the stance of monetary policy,” Waller said. According to the CME Group’s FedWatch Tool, the first rate cut could come as early as September.

Gasoline reserve release
The Biden administration will release 1 million barrels of gasoline from reserves to reduce prices at the pump ahead of the Fourth of July holiday. OPEC production cuts and fears the Israel-Hamas war could engulf the wider Middle East sent U.S. gasoline futures soaring 19%. “By strategically releasing this reserve in between Memorial Day and July 4th, we are ensuring sufficient supply flows to the tri-state [region] and northeast at a time hardworking Americans need it the most,” Energy Secretary Jennifer Granholm said.

Pixar job cuts
Pixar Animation Studios will lay off about 175 employees, or around 14% of its workforce, a spokesperson for parent company Walt Disney told CNBC. CEO Bob Iger wants Pixar to focus on box office releases and not on short series for Disney+. Pixar and Walt Disney Animation have struggled to generate more than $480 million at the global box office since 2019. Before the pandemic, “Coco” generated $796 million globally, while “Incredibles 2″ tallied $1.24 billion, and “Toy Story 4” snared $1.07 billion worldwide.

Singapore Airlines: one dead, 30 injured
One person died and 30 people were injured aboard a Singapore Airlines flight that was hit by severe turbulence and forced to land in Thailand. Singapore Airlines Flight 321 encountered “sudden, severe turbulence” about 10 hours into a flight from London to Singapore, the airline said. The Boeing 777-300ER plane was carrying 211 passengers and 18 crew members.

[PRO] Stubborn bear
With the S&P 500 index up more than 11% so far this year, Wall Street strategists have been revising their previously pessimistic outlooks for the benchmark. Against this backdrop, CNBC’s Jesse Pound explores why JPMorgan’s Marko Kolanovic is maintaining his negative outlook for stocks.