Jim Cramer has been considering a potential investment in BlackRock, the world’s largest asset manager, and we’re now adding it to our Bullpen stocks-to-watch list. The news BlackRock shares surged to a record high Friday after the firm posted third-quarter earnings that crushed analysts’ expectations, yet again. Management also announced that assets under management reached another record high, an incredible $11.5 trillion, on surging inflows as the stock market rallied. “We’ve added $2 trillion organically over the last five years. $2 trillion is the equivalent of being in the ranks of the sixth largest asset managers,” CEO Larry Fink told CNBC on Friday after the release. Fink also praised BlackRock’s recent $12.5 billion acquisition of Global Infrastructure Partners, which added more than $100 billion in assets. Big picture The financial industry kicked off quarterly earnings Friday. In addition to BlackRock, Club name Wells Fargo was among the companies that delivered strong results. Morgan Stanley , also in the portfolio, reports next Wednesday. It’s been a murky operating environment for the Wall Street behemoths, which were forced to navigate higher-for-longer interest rates until the Federal Reserve finally cut rates last month. The Fed’s next move has been a point of debate. Right after last month’s jumbo 50-basis-point cut, the market had expected another 75 basis points worth of cuts before year-end. Now that odds favor just 50. Bottom line BlackRock’s stellar quarterly results highlight another reason for the Club to consider an initiation of the stock. That’s why we put the stock in the Bullpen. Management’s track record draws us in further as Fink expands the firm’s footprint in private markets, and delivers quarter after quarter of steller inflows. BlackRock shares have been on a tear recently – up more than 12% in the past month versus the S & P 500’s roughly 4% gain. Jim Cramer said Friday he knows the stock has run a lot, “but that doesn’t mean it can’t run more.” Why have we waited to pull the trigger on the stock? Jim said Thursday he wished he had but he’s been dealing with Wells Fargo and Morgan Stanley, and we don’t make these moves in haste. (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.
BlackRock CEO Larry Fink speaks during the New York Times DealBook Summit Nov. 30, 2022 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
Jim Cramer has been considering a potential investment in BlackRock, the world’s largest asset manager, and we’re now adding it to our Bullpen stocks-to-watch list.
Michael Santomassimo, Wells Fargo CFO, joins 'Money Movers' to discuss the story with the company's quarter, how the company is gaining market share, and much more.
Macrae Sykes, Gabelli Funds portfolio manager, joins ‘Squawk Box’ to discuss bank earnings and latest market trends ahead of the opening bell on Friday.
JPMorgan Chase CEO and Chairman Jamie Dimon speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, U.S., December 6, 2023.
Evelyn Hockstein | Reuters
JPMorgan Chase CEO Jamie Dimon sees risks climbing around the world amid widening conflicts in the Middle East and with Russia’s invasion of Ukraine showing no signs of abating.
“We have been closely monitoring the geopolitical situation for some time, and recent events show that conditions are treacherous and getting worse,” Dimon said Friday in the bank’s third-quarter earnings release.
“There is significant human suffering, and the outcome of these situations could have far-reaching effects on both short-term economic outcomes and more importantly on the course of history,” he said.
Dimon went deeper into his concerns last month during a fireside chat held at Georgetown University.
The international order in place since the end of World War II was unraveling with conflicts in the Middle East and Ukraine, rising U.S.-China tensions and the risk of “nuclear blackmail” from Iran, North Korea and Russia, Dimon said.
“It’s ratcheting up, folks, and it takes really strong American leadership and western world leaders to do something about that,” Dimon said. “That’s my number one concern, and it dwarves any I’ve had since I’ve been working.”
Dimon also said that he remained wary about the future of the economy, despite signs that the Federal Reserve has engineered a soft landing.
“While inflation is slowing and the U.S. economy remains resilient, several critical issues remain, including large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world,” Dimon said. “While we hope for the best, these events and the prevailing uncertainty demonstrate why we must be prepared for any environment.”
CEO of Chase Jamie Dimon looks on as he attends the seventh “Choose France Summit”, aiming to attract foreign investors to the country, at the Chateau de Versailles, outside Paris, on May 13, 2024.
Lucovic Marin | Getty Images
JPMorgan Chase is scheduled to report third-quarter earnings before the opening bell Friday.
Here’s what Wall Street expects:
Earnings: $4.01 a share, according to LSEG
Revenue: $41.63 billion, according to LSEG
Net interest income: $22.73 billion, according to StreetAccount
Trading Revenue: Fixed income of $4.38 billion, Equities of $2.41 billion, according to StreetAccount
JPMorgan will be watched closely for clues on how banks are faring at the start of the Federal Reserve’s easing cycle.
The biggest American bank has thrived in a rising rate environment, posting record net income figures since the Fed started hiking rates in 2022.
Now, with the Fed cutting rates, there are questions as to how JPMorgan will navigate the change. Like other big banks, it’s margins may be squeezed as yields on interest-generating assets like loans fall faster than its funding costs.
Last month, JPMorgan dialed back expectations for 2025 net interest income and expenses, and analysts will want more details on those projections.
Analysts will also want to hear JPMorgan CEO Jamie Dimon’s thoughts about the upcoming U.S. election and the industry’s efforts to push back against an array of regulatory moves to rein in fees and force banks to hold more capital.
Shares of JPMorgan have jumped 25% this year, exceeding the 20% gain of the KBW Bank Index.
Credit card interest rates hover around 20%, roughly where they have been since the early 1980s when inflation and interest rates were in double digits. Canada’s inflation has averaged about 2% between 1992 and 2022, and all interest rates have declined dramatically with it except credit card rates. Even as inflation has exceeded 2.0% for the past few years, the recent back-up in other interest rates remains well below credit card rates. In fact, one has to squint to see any decline in credit card interest rates since 1980.
Let’s compare some numbers. In 1981, the interest rate on a Visa or a Mastercard was about 25%. Inflation was 12%, and the bank rate—the rate at which the Bank of Canada loans to the banking system—was a bit over 21%. The prime rate, or the rate of interest offered to a bank’s best customers, was 22.75%, so the additional charge to use a credit card was a mere 2.25%, which compensated the bank for demanding fewer income and collateral requirements relative to prime loans.
In summer 2024, credit card interest rates are about 20%, with an even steeper 23% rate for a cash advance. The prime rate for the bank’s best customers is 6.95%, putting the credit card spread at a whopping 13.05%. If you think that’s disturbing, back in the pandemic years, inflation was 2%, the Bank of Canada’s overnight rate was one quarter of 1%, and the prime rate was 2.45%. The credit card premium over the prime rate then was a staggering 17.45% compared to just 2.25% in 1981. The credit card interest rate has declined a mere 5% in forty years compared to a 20.3% decline in the prime rate marked in the depths of the pandemic, and 15.8% as of summer 2024.
Think about what an interest rate of 17.45% would do for your savings if you could get it. And bear in mind that your savings account was likely earning a fifth of a percent during the pandemic, and it’s your savings that are contributing to the funding of the very credit card balance on which you pay about 20%.
Or compare that heavenly credit card investment return you can’t get to the return on a government bond that you can get. If you were to invest $1,000 in a thirty-year Government of Canada bond at 3.3%, you would have $2,250 by 2053. Alternatively, if you were able to invest that $1,000 at 17.45% for thirty years, you’d have $124,621 by 2053.
The rates charged on credit cards are staggeringly rapacious, but many people are forced to pay them because they have no other borrowing options, at least none that come with the convenience of fewer income and collateral requirements.
The banks, in fact, prefer that you borrow against credit cards rather than take out a prime-based loan. To borrow at prime, the bank will ask for collateral, making the hurdle to a low(er)-rate line of credit more difficult to clear than the hurdle to credit cards. They do this because they make so much more money off credit cards. OSFI (Office of the Superintendent of Financial Institutions) data show that banks make almost as much every quarter on credit cards as they do on their entire mortgage book, which has a significantly higher principal value.
More outrageous still are the high rates of interest charged to a credit card borrower who slips up and misses a payment, as I once did during a busy period of life. After missing a monthly deadline, I received a message from TD Canada Trust—the people who advertise that their customer service is like sitting in a big comfy green chair—that screamed at me in capital letters like a text from Donald Trump:
Nick Hill, managing director and co-head of global banking at Moody’s Ratings, discusses Commerzbank and UniCredit’s ratings in regards to a potential merger.
Despite bold statements, a lot of companies are failing to produce tangible results, according to Edward J Achtner, the head of generative AI for U.K. banking giant HSBC.
“Candidly, there’s a lot of success theater out there,” Achtner said on a panel at the CogX Global Leadership Summit alongside Ranil Boteju — a fellow AI leader at rival British bank Lloyds Banking Group — and Nathalie Oestmann, head of NV Ltd, an advisory firm for venture capital funds.
“We have to be very clinical in terms of what we choose to do, and where we choose to do it,” Achtner told attendees of the event, held at the Royal Albert Hall in London earlier this week.
Achtner outlined how the 150-year-old lending institution has embraced artificial intelligence since ChatGPT — the popular AI chatbot from Microsoft-backed startup OpenAI — burst onto the scene in November 2022.
The HSBC AI leader said that the bank has more than 550 use cases across its business lines and functions linked to AI — ranging from fighting money laundering and fraud using machine learning tools to supporting knowledge workers with newer generative AI systems.
One example he gave was a partnership that HSBC has in place with internet search titan Google on the use of AI technology anti-money laundering and fraud mitigation. That tie-up has been in place for several years, he said. The bank has also dipped its toes deeper into genAI tech much more recently.
“When it comes to generative artificial intelligence, we do need to clearly separate that” from other types of AI, Achtner said. “We do approach the underlying risk with respect to generative very differently because, while it represents incredible potential opportunity and productivity gains, it also represents a different type of risk.”
Achtner’s comments come as other figures in the financial services sector — particularly leaders at startup firms — have made bold statements about the level of overall efficiency gains and cost reductions they are seeing as a result of investments in AI.
Buy now, pay later firm Klarna says it has been taking advantage of AI to make up for loss of productivity resulting from declines in its workforce as employees move on from the company.
It is implementing a company-wide hiring freeze and has slashed overall employee headcount down to 3,800 from 5,000 — a roughly 24% workforce reduction — with the help of AI, CEO Sebastian Siemiatkowski said in August. He is looking to further reduce Klarna’s headcount to 2,000 staff members — without specifying a time for this target.
Klarna’s boss said the firm was lowering its overall headcount against the backdrop of AI’s potential to have “a dramatic impact” on jobs and society.
“I think politicians already today should consider whether there are other alternatives of how they could support people that may be effective,” he said at the time in an interview with the BBC. Siemiatkowski said it was “too simplistic” to say AI’s disruptive effects would be offset by the creation of new jobs thanks to AI.
Oestmann of NV Ltd, a London-based firm that offers advisory services for the C-suite of venture capital and private equity firms, directly touched on Klarna’s actions, saying headlines around such AI-driven workforce reductions are “not helpful.”
Klarna, she suggested, likely saw that AI “makes them a more valuable company” and was consequently incorporating the technology as part of plans to reduce its workforce anyway.
The result Klarna is seeing from AI “are very real,” a Klarna spokesperson told CNBC. “We publicize these results because we want to be honest and transparent about the impact genAI is having in the real world in companies today,” the spokesperson added.
“At the end of the day,” Oestmann added, as long as people are “trained appropriately” and banks and other financial services firm can “reinvent” themselves in the new AI era, “it will just help us to evolve.” She advised financial firms to pursue “continuous learning in everything that you do.”
“Make sure you are trying these tools out, make sure you are making this part of your everyday, make sure you are curious,” she added.
Boteju, chief data and analytics officer at Lloyds, pointed to three main use cases that the lender sees with respect to AI: automating back office functions like coding and engineering documentation, “human-in-the loop” uses like prompts for sales staff, and AI-generated responses to client queries.
Boteju stressed that Lloyds is “proceeding with caution” when it comes to exposing the bank’s customers to generative AI tools. “We want to get our guardrails in place before we actually start to scale those,” he added.
“Banks in particular have been using AI and machine learning for probably about 15 or 20 years,” Boteju said, signaling that machine learning, intelligent automation and chatbots are things traditional lenders have been “doing for a while.”
Generative AI, on the other hand, is a more nascent technology, according to the Lloyds exec. The bank is increasingly thinking about how to scale that technology — but by “using the current frameworks and infrastructure we’ve got,” rather than by moving the needle significantly.
Boteju and Achtner’s comments tally with what other AI leaders of financial services have said previously. Speaking with CNBC last week, Bahadir Yilmaz, chief analytics officer of ING, said that AI is unlikely to be as disruptive as firms like Klarna are suggesting with their public messaging.
“We see the same potential that they’re seeing,” Yilmaz said in an interview in London. “It’s just the tone of communication is a bit different.” He added that ING is primarily using AI in its global contact centers and internally for software engineering.
“We don’t need to be seen as an AI-driven bank,” Yilmaz said, adding that, with many processes lenders won’t even need AI to solve certain problems. “It’s a really powerful tool. It’s very disruptive. But we don’t necessarily have to say we are putting it as a sauce on all the food.”
Johan Tjarnberg, CEO of Swedish online payments firm Trustly, told CNBC earlier this week that AI “will actually be one of the biggest technology levers in payments.”But even so, he noted that the firm is focusing more of the “basics of AI” than on transformative changes like AI-led customer service.
One area where Trustly is looking to improve customer experience with AI is subscriptions. The startup is working on an “intelligent charging mechanism” that would aim to figure out the best time for a bank to take payment from a subscription platform user, based on their historical financial activity.
Tjarnberg added that Trustly is seeing closer to 5-10% improved efficiency as a result of implementing AI within its organization.
Jenny Zeng from Allianz Global Investors discusses whether the PBOC’s stimulus package is enough to sustain the current Chinese market rally, adding that she is watching if the Chinese government will stay ahead of market expectations.
Erika Najarian, UBS large cap banks analyst, joins ‘Squawk on the Street’ to discuss what bank investors want from interest rates, if the bank outlooks stand, and much more.
Meta is facing calls from U.K. banks and payment firms like Revolut to financially compensate people who fall for scams on their services.
Jaap Arriens | Nurphoto via Getty Images
Tensions are escalating between banking and payment companies and social media firms in the U.K. over who should be liable for compensating people if they fall victim to fraud schemes online.
Starting from Oct. 7, banks will be required to start compensating victims of so-called authorized push payment (APP) fraud a maximum £85,000 if those individuals affected were tricked or psychologically manipulated into handing over the cash.
APP fraud is a form of a scam where criminals attempt to convince people to send them money by impersonating individuals or businesses selling a service.
The £85,000 reimbursement sum could prove costly for large banks and payment firms. However, it’s actually lower than the mandatory £415,000 reimbursement amount that the U.K.’s Payment Systems Regulator (PSR) had previously proposed.
The PSR backed down from its bid for the lofty maximum compensation payout following industry backlash, with industry group the Payments Association in particular saying it would be far too costly a sum tor the financial services sector to bear.
But now that the mandatory fraud compensation is being rolled out in the U.K., questions are being asked about whether financial firms are facing the brunt of the cost for helping fraud victims.
On Thursday, London-based digital bank Revolut accusedMeta of falling “woefully short of what’s required to tackle fraud globally.” The Facebook-owner announced a partnership earlier this week with U.K. lenders NatWest and Metro Bank, to share intelligence on fraud activity that takes place on its platforms.
Woody Malouf, Revolut’s head of financial crime, said that Meta and other social media platforms should help cover the cost of reimbursing victims of fraud and that, by sharing no responsibility in doing so, “they have no incentive to do anything about it.”
Revolut’s call for large tech platforms to financially compensate people who fall for scams on their websites and apps isn’t new.
Tensions have been running high between banks and tech companies for some time. Online fraud has risen dramatically over the last several years due to an acceleration in the usage of digital platforms to pay others and buy products online.
In June, the Financial Times reported that the Labour Party had drafted proposals to force technology firms to reimburse victims of fraud that originates on their platforms. It is not clear whether the government still plans to require tech firms to pay compensation out to victims of APP fraud.
A government spokesperson was not immediately available for comment when contacted by CNBC.
Matt Akroyd, a commercial litigation lawyer at Stewarts, told CNBC that, after their victory on lowering the maximum reimbursement limit for APP fraud down to £85,000, banks “will receive another boost if their efforts to push the government to place some regulatory liability on tech companies is also successful.”
However, he added: “The question of what regulatory regime could cover those companies who do not play an active role in the PSR’s payment systems, and how, is complicated meaning that this issue is not likely to be resolved any time soon.”
More broadly, banks and regulators have long been pushing social media companies for more collaboration with retail banks in the U.K. to help combat the fast-growing and constantly evolving fraud threat. A key ask has been for the tech firms to share more detailed intelligence on how criminals are abusing their platforms.
At a U.K. finance industry event focusing on economic fraud in March 2023, regulators and law enforcement stressed the need for social media companies to do more.
“We hear anecdotally today from all of the firms that we talk to, that a large proportion of this fraud originates from social media platforms,” Kate Fitzgerald, head of policy at the PSR, told attendees of the event.
She added that “absolute transparency” was needed on where the fraud was occurring so that regulators could know where to focus their efforts in the value chain.
Social media firms not doing enough to combat and remove attempts to defraud internet users was another complaint from regulatory authorities at the event.
“The bit that’s missing is the at-scale social media companies taking down suspect accounts that are involved in fraud,” Rob Jones, director general of the National Economic Crime Centre, a unit of the U.K. National Crime Agency, said at the event.
Jones added that it was tough to “break the inertia” at tech companies to “really get them to get after it.”
Meta has pushed back on suggestions that it should be held liable for paying out compensation to victims of APP fraud.
In written evidence to a parliamentary committee last year, the social media giant said that banks in the U.K. are “too focused on their efforts to transfer liability for fraud to other industries,” adding that this “creates a hostile environment which plays into the hands of fraudsters.”
The company said that it can use live intelligence from big banks through its Fraud Intelligence Reciprocal Exchange (FIRE) initiative to help stop fraud and evolve and improve its machine learning and AI detection systems. Meta called on the government to “encourage more cross-industry collaboration like this.”
In a statement to CNBC Thursday, the tech giant stressed that banks, including Revolut, should look to join forces with Meta on its FIRE framework to facilitate data exchanges between the firm and large lenders.
FIRE “is designed to enable banks to share information so we can work together to protect people using our respective services,” a spokesperson for Meta said last week. “Fraud is a multi-sector spanning issue that can only be addressed by working collaboratively.”
Newfound optimism on Morgan Stanley helped its stock close Friday’s session at its highest level of the year. Jim Cramer is still unsure what the Club’s next move should be. Morgan Stanley’s persistent underperformance has made the stock one of our thornier positions — so much so that Jim has openly considered dumping it for investment banking rival Goldman Sachs . Dealmaking activity has picked up, but it’s not been enough to fully unlock Morgan Stanley shares. That is in large part because the bank’s wealth management division has failed to impress. Analysts at HSBC see better days ahead for Morgan Stanley and in a note to clients late Thursday upgraded the stock to a buy rating from hold, arguing its “long period of underperformance could be ending.” Among the reasons for the call: A healthy market backdrop should support the financial performance of both its investment banking and wealth management operations, analysts said. They added that negative sentiment around the stock more generally also seems to have bottomed. Shares of Morgan Stanley rose more than 3% Friday, to $107.88 each, helped by both HSBC’s upgrade and better-than-expected jobs data , which lifted the entire banking sector higher, including fellow portfolio name Wells Fargo . Morgan Stanley ended Friday within a dollar of its all-time closing high of $108.73 reached back in February 2022. Still, the stock is up only 15.7% year to date and 36.4% over the past 12 months, lagging behind the KBW Bank Index , which has climbed 19.4% and 52.6%, respectively, over those timeframes. For its part, Goldman Sachs has jumped 28.4% so far in 2024 and 60.5% in the past year. Friday’s positive developments are welcome news – but not enough to add clarity on our path forward for Morgan Stanley. We’re maintaining our hold-equivalent 2 rating on the stock. “Candidly, I think that [Morgan Stanley] is not priced for a good IPO market and [Goldman Sachs] is,” Jim said Friday. “The reason for that is because I think that people believe the wealth advisory business isn’t doing as well as it can be and the E-Trade buy seems to not be working out,” Jim said, referring to Morgan Stanley’s $13 billion acquisition of the brokerage firm in 2020. “We still do not have answers for that so I can’t say that we are going to upgrade.” However, there’s hope Morgan Stanley’s stock can climb higher if its sizable investment banking business continues its recovery. In order for that to happen, there must be a more meaningful resurgence in initial public offerings (IPO) and mergers and acquisitions (M & A) after more than two downbeat years for both dealmaking markets. Banks like Morgan Stanley and Goldman Sachs have long relied on fee-based revenues from deals. The more activity there is, the more fees available for them to collect. The nascent rebound has already showed up in Morgan Stanley’s results. In the second quarter, revenue for the firm’s investment banking segment surged 51% year over year. Meanwhile, advisory and equity underwriting fees both increased 30% and 56%, respectively, over the same period. The environment for deals is not back to normal just yet, though. During an industry conference in September, Morgan Stanley co-president Dan Simkowitz said that M & A and IPOs will likely remain below trend through year-end. To be sure, the executive also forecasted that this activity would accelerate in 2025 as the Federal Reserve’s interest rate-cutting efforts ripple through the economy. Morgan Stanley’s wealth management franchise — a major growth priority for the bank — is a lingering concern after a miss on revenues last quarter, which caused the stock to briefly sink. Meanwhile, Goldman Sachs beat analysts’ expectations for revenues in wealth. Morgan Stanley’s quarterly results on Oct. 17 will provide an important look at whether this challenged part of its business is showing any reason for optimism. For the time being, the Club is taking a wait-and-see approach with Morgan Stanley stock. If there is a surge in IPO and M & A activity that HSBC forecasted, Morgan Stanley is well-positioned to benefit. “If we get deals, [Morgan Stanley] will be a good place to be,” Jim said. (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.
Bing Guan | Bloomberg | Getty Images
Newfound optimism on Morgan Stanley helped its stock close Friday’s session at its highest level of the year. Jim Cramer is still unsure what the Club’s next move should be.
A Spirit commercial airliner prepares to land at San Diego International Airport in San Diego, California, U.S., January 18, 2024.
Mike Blake | Reuters
Spirit Airlines shares tumbled to a record low on Friday after a report that it’s exploring Chapter 11 bankruptcy protection. The carrier faces a deadline this month to renegotiate more than $1 billion in debt.
A bankruptcy filing would mark a dramatic turn for the carrier with its iconic yellow planes that caters to budget-conscious travelers.
Profitable and punctual before the pandemic, Spirit’s no-frills service became a punchline for late-night comedians and a thorn in the side of big network carriers, enticing customers with double-digit fares and fees for everything else from seat assignments to carry-on luggage.
But big airlines soon successfully copied much of that business model with their lowest bare-bones fares. And a federal judge at the start of the year blocked Spirit’s planned acquisition by JetBlue Airways on antitrust grounds, halting what both carriers argued was a key avenue to compete with larger rivals. The scuttled dealleft Spirit on its own to struggle with a Pratt & Whitney engine recall, shifting consumer travel patterns and higher costs.
After the JetBlue deal fell apart, Spirit said in January that it was looking at options to refinance its debt.
Spirit has $1.1 billion in loyalty-program backed debt that is due next September. It has until Oct. 21 to refinance or extend those secured notes.
The carrier has been losing money since 2020 and has reported disappointing results this year, including a nearly $193 million loss in the second quarter. The company has spent much of this year scrambling to cut costs, including furloughing pilots, slashing flights and deferring Airbus jetliner orders.
Spirit reduced its November and December capacity growth plans by about 17%, Barclays airline analyst Brandon Oglenski said earlier this week.
“As we’ve said, Spirit has been implementing a comprehensive plan to help us better compete, strengthen our balance sheet, and return to profitability,” CEO Ted Christie said in a note to staff on Friday. “We remain engaged in productive conversations with our bondholders, and we’re focused on securing the best outcome for the business as quickly as possible.”
A Spirit spokesman declined to comment on a the Wall Street Journal report that the carrier is considering a bankruptcy filing. Spirit adviser Perella Weinberg Partners declined to comment.
Spirit’s stock price dropped more than 24% Friday to a record low of $1.69. Shares are down nearly 90% so far this year.
Shares of Frontier Airlines, which originally planned to merge with fellow budget airline Spirit before JetBlue swooped in in 2022, surged 16% on Friday. Shares of other airlines also rallied.
“Jamie Dimon has not endorsed anyone. He has not endorsed a candidate,” Dimon spokesman Joe Evangelisti told CNBC in a phone call.
Trump on Truth Social had posted a screenshot falsely claiming, “New: Jamie Dimon, the CEO of JPMorgan Chase, has endorsed Trump for President.”
The claim appears to have originated from a verified account on X earlier Friday. It was quickly amplified on social media by other pro-Trump accounts, and then the former president himself, before the bank issued its denial.
When NBC News asked Trump about the post later Friday, Trump said he did not know about it and that it was not posted by him.
“Somebody put it up,” Trump said, adding, “I don’t know.”
The post, published at 1:56 p.m. ET, was still visible on Trump’s official account more than two hours later.
The Trump campaign did not respond to CNBC’s requests for comment.
Former President and GOP Presidential candidate Donald Trump post a Truth that claims J.P. Morgan CEO Jamie Dimon has endorsed Trump for President.
Source: @realDonaldTrump | Truth Social
In September, Dimon said that he is not backing either Trump or Democratic nominee Kamala Harris.
“I’m not endorsing anyone at this time,” Dimon told CNBCTV-18 at the JPMorgan Investor Summit in Mumbai.
Dimon has at times offered qualified praise for Trump, but the two men have also clashed repeatedly over the years.
During the Republican presidential primary season, Dimon had urged corporate leaders to support former South Carolina Gov. Nikki Haley over Trump.
Trump tore into Dimon for siding with Haley, saying he “had to live with this guy when he came begging to the White House.”
Mark Avallone of Potomac Wealth Advisors likes non-bank financials and diversified banks who do not rely on deposits. He says to avoid private credit due to its risky nature.
Feroze Azeez from Anand Rathi Wealth, discusses the issues barring the financial deployment of household savings in India, as well as some of the long-term challenges that Indian banks could face.
Great news for Club stocks Wells Fargo and Morgan Stanley : The rebound in investment banking isn’t over yet. The catalyst? Dealmaking is expected to continue to rise as the Federal Reserve delivers more interest rate cuts. This should, in turn, boost revenues for a key business within both Wall Street firms. We’ll find out to what extent when Wells Fargo reports earnings on Oct. 11 and Morgan Stanley delivers quarterly results on Oct. 16. Lower borrowing costs tend to spur mergers and acquisitions (M & A) and initial public offerings (IPO), which means more business for the banks. Recent numbers from consulting firm KPMG and financial data provider S & P Global Market Intelligence indicate a solid pickup in activity for M & A and IPOs already. So far in 2024, mergers and acquisitions transaction values and money raised from initial public offerings are largely outperforming all of last year’s lackluster activity. U.S. mergers and acquisitions rose 37% to $1.3 trillion in the first nine months of 2024 compared to the same period a year ago, according to KPMG, citing data through Sept. 15. Global M & A transaction values so far this year of roughly $2 trillion have already beat 2023’s total of $1.6 trillion, according to S & P Global data captured on Oct. 1. The IPO market has improved, too. According to KPMG, public offerings listed in the U.S. raised $28.3 billion during the first nine months of 2024. That’s up 50% year over year. All of this bodes well for the kind of advisory and underwriting fees that investment banks can charge to facilitate these deals. To be sure, M & A and IPO values are still down significantly from their Covid peaks in 2021 after the Fed delivered two emergency rate cuts in March 2020 that took the cost of borrowing to near zero. Rates remained that way until March 2022 when central bankers started their tightening cycle to fight inflation. The Fed hiked rates 11 times over 18 months before cutting rates by 50 basis points last month. Speaking at a National Association for Business Economics event in Nashville, Tennessee, Fed Chairman Jerome Powell said Monday that he expects an additional 50 basis points worth of rate cuts this year — 25 in November and 25 in December. The market is not quite ready to take Powell at his word. As of Tuesday, the CME FedWatch tool was putting roughly 66% odds on a 50 basis point cut in December. Rebecca Brokmeier, group head of KPMG’s investment banking platform, sees “an increase in new deals in the market in the fourth calendar quarter and expects this trend to continue as we move into 2025” while the Fed continues to lower rates. Brokmeier told CNBC Tuesday that a lot of this activity is expected to be driven by private equity, which is “more reliant on low interest rates for transactions than corporations and have record levels of dry powder to deploy as well as long-held assets that must be exited in order to return cash to their investors.” MS YTD mountain Morgan Stanley (MS) year-to-date performance For Morgan Stanley, a resurgence in its investment banking division is crucial to our investment thesis and why we stuck with it. Following nearly two downbeat years, we saw reason to be optimistic about Morgan Stanley’s IB business last quarter, which was out in July. IB segment revenue jumped 51%. Breaking IB down further, advisory and equity underwriting fees both surged 30% and 56%, respectively, from the prior year. Last month, however, Jim Cramer criticized the stock’s underperformance , adding that he was considering exiting Morgan Stanley and swapping in investment banking rival Goldman Sachs , where he used to work during his days on Wall Street. Part of that underperformance came after co-president Dan Simkowitz said that M & A and IPOs will remain below trend for the rest of 2024 at an industry conference. To be sure, he also predicted that this activity would accelerate in 2025 as the Fed lowers rates. “Morgan Stanley is in no man’s land, too low to sell and too high to buy. That means wait, which is exactly what we are doing,” Jim said during the Club’s Monthly Meeting on Sept. 12, two days after Simkowitz’s comments. “It might be time to say goodbye and pick up some of the much better run Goldman Sachs.” A week later, Morgan Stanley stock rose on the Fed rate cut, and the Club settled for trimming the position . Morgan Stanley has diversified its portfolio and moved more heavily into wealth management in recent years to reduce its exposure to the volatility of the IB business. So, it remains to be seen how investment banking performance fits into the whole profit picture. WFC YTD mountain Wells Fargo (WFC) year-to-date Morgan Stanley’s IB business is much larger than Wells Fargo’s. However, Wells Fargo, known for its roots as a traditional money center bank, has been working diligently to build out its dealmaking side of the shop. It’s kind of the opposite of Morgan Stanley. Wells Fargo, which has a strong wealth management franchise, is branching out to take a slice of the IB pie. Wells has made a series of senior-level hires in recent years to expand its corporate and investment banking (CIB) division. This helps the bank rely less on interest-based incomes from its consumer lending business, which have been long at the mercy of the Fed’s monetary policy decisions. We’ve seen positive signs already, as CIB revenue jumped 38% year over year in the July quarter. “We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income,” Wells Fargo CEO Charlie Scharf said during the July 12 earnings call. “The investments we have been making allowed us to take advantage of the market activity in the quarter with strong performance in investment advisory, trading and investment banking fees.” In another positive development in Scharf’s bid to clean up the bank’s past missteps and get regulatory permission to expand, Bloomberg News reported last week that Wells Fargo submitted a third-party review of its risk and control overhauls to the Fed in an effort to get the central bank-mandated $1.95 trillion asset cap removed. The restriction was put in place by the Fed in 2018 after a series of scandals under previous leadership. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) 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Federal Reserve Chairman Jerome Powell speaks during a news conference following the September meeting of the Federal Open Market Committee at the William McChesney Martin Jr. Federal Reserve Board Building on September 18, 2024 in Washington, DC.
