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Tag: Breaking News: Markets

  • Reddit pops as much as 70% in NYSE debut after selling shares at top of range

    Reddit pops as much as 70% in NYSE debut after selling shares at top of range

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    Reddit shares jumped as much as 70% in their debut on Thursday in the first initial public offering for a major social media company since Pinterest hit the market in 2019.

    The 19-year-old website that hosts millions of online forums priced its IPO on Wednesday at $34 a share, the top of the expected range. Reddit and selling shareholders raised about $750 million from the offering, with the company collecting about $519 million.

    The stock opened at $47 and reached a high of $57.80. At that price, the company had a market cap of about $10.9 billion. Reddit shares then dropped to $48.64 roughly a half hour after they began trading, giving the company a market cap of about $7.9 billion.

    Trading under the ticker symbol “RDDT,” Reddit is testing investor appetite for new tech stocks after an extended dry spell for IPOs. Since the peak of the technology boom in late 2021, hardly any venture-backed tech companies have gone public and those that have — like Instacart and Klaviyo last year — have underwhelmed. On Wednesday, data center hardware company Astera Labs made its public market debut on Nasdaq and saw its shares soar 72%, underscoring investor excitement over businesses tied to the surge in artificial intelligence.

    At its IPO price, Reddit was valued at about $6.5 billion, a haircut from the company’s private market valuation of $10 billion in 2021, which was a boom year for the tech industry. The mood changed in 2022, as rising interest rates and soaring inflation pushed investors out of high-risk assets. Startups responded by conducting layoffs, trimming their valuations and shifting their focus to profit over growth.

    Reddit’s annual sales for 2023 rose 20% to $804 million from $666.7 million a year earlier, the company detailed in its prospectus. The company recorded a net loss of $90.8 million last year, narrower than its loss of $158.6 million in 2022.

    Based on its revenue over the past four quarters, Reddit’s market cap at IPO gave it a price-to-sales ratio of about 8. Alphabet trades for 6.1 times revenue, Meta has a multiple of 9.7, Pinterest’s sits at 7.5 and Snap trades for 3.9 times sales, according to FactSet.

    In addition to those companies, Reddit also counts X, Discord, Wikipedia and Amazon’s Twitch streaming service as competitors in its prospectus.

    Reddit is betting that data licensing could become a major source of revenue, and said in its filing that it’s entered “certain data licensing arrangements with an aggregate contract value of $203.0 million and terms ranging from two to three years.” This year, Reddit said it plans to recognize roughly $66.4 million in revenue as part of its data licensing deals.

    Google has also entered into an expanded partnership with Reddit, allowing the search giant to obtain more access to Reddit data to train AI models and improve its products.

    Reddit revealed on March 15 that the Federal Trade Commission is conducting a nonpublic inquiry “focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models.” Reddit said it was “not surprised that the FTC has expressed interest” in the company’s data licensing practices related to AI, and that it doesn’t believe that it has “engaged in any unfair or deceptive trade practice.”

    Reddit was founded in 2005 by technology entrepreneurs Alexis Ohanian and Steve Huffman, the company’s CEO. Existing stakeholders, including Huffman, sold a combined 6.7 million shares in the IPO.

    As part of the IPO, Reddit gave some of its top moderators and users, known as Redditors, a chance to buy stock through a directed-share program. Companies like Airbnb, Doximity and Rivian have used similar programs to reward their power users and customers.

    “I hope they believe in Reddit and support Reddit,” Huffman told CNBC in an interview on Thursday. “But the goal is just to get them in the deal. Just like any professional investor.”

    Redditors have expressed skepticism about the IPO, both because of the company’s financials and its often troubled relationship with moderators. Huffman said he recognizes that reality and acknowledged the controversial subreddit Wallstreetbets, which helped spawn the surge in meme stocks like GameStop.

    “That’s the beautiful thing about Reddit, is that they tell it like it is,” Huffman said. “But you have to remember they’re doing that on Reddit. It’s a platform they love, it’s their home on the internet.”

    OpenAI CEO Sam Altman is one of Reddit’s major shareholders along with Tencent and Advance Magazine Publishers, the parent company of publishing giant Condé Nast. Altman’s stake in the company was worth over $400 million before the stock began trading. Altman led a $50 million funding round into Reddit in 2014 and was a member of its board from 2015 through 2022.

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

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

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

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

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    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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  • Barclays touts this portfolio chip name as a ‘2nd Wave’ AI play. Cramer says buy the stock here

    Barclays touts this portfolio chip name as a ‘2nd Wave’ AI play. Cramer says buy the stock here

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  • Banks are in limbo without a crucial lifeline. Here’s where cracks may appear next

    Banks are in limbo without a crucial lifeline. Here’s where cracks may appear next

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    The forces that consumed three regional lenders in March 2023 have left hundreds of smaller banks wounded, as merger activity — a key potential lifeline — has slowed to a trickle.

    As the memory of last year’s regional banking crisis begins to fade, it’s easy to believe the industry is in the clear. But the high interest rates that caused the collapse of Silicon Valley Bank and its peers in 2023 are still at play.

    After hiking rates 11 times through July, the Federal Reserve has yet to start cutting its benchmark. As a result, hundreds of billions of dollars of unrealized losses on low-interest bonds and loans remain buried on banks’ balance sheets. That, combined with potential losses on commercial real estate, leaves swaths of the industry vulnerable.

    Of about 4,000 U.S. banks analyzed by consulting firm Klaros Group, 282 institutions have both high levels of commercial real estate exposure and large unrealized losses from the rate surge — a potentially toxic combo that may force these lenders to raise fresh capital or engage in mergers.  

    The study, based on regulatory filings known as call reports, screened for two factors: Banks where commercial real estate loans made up over 300% of capital, and firms where unrealized losses on bonds and loans pushed capital levels below 4%.

    Klaros declined to name the institutions in its analysis out of fear of inciting deposit runs.

    But there’s only one company with more than $100 billion in assets found in this analysis, and, given the factors of the study, it’s not hard to determine: New York Community Bank, the real estate lender that avoided disaster earlier this month with a $1.1 billion capital injection from private equity investors led by ex-Treasury Secretary Steven Mnuchin.

    Most of the banks deemed to be potentially challenged are community lenders with less than $10 billion in assets. Just 16 companies are in the next size bracket that includes regional banks — between $10 billion and $100 billion in assets — though they collectively hold more assets than the 265 community banks combined.

    Behind the scenes, regulators have been prodding banks with confidential orders to improve capital levels and staffing, according to Klaros co-founder Brian Graham.

    “If there were just 10 banks that were in trouble, they would have all been taken down and dealt with,” Graham said. “When you’ve got hundreds of banks facing these challenges, the regulators have to walk a bit of a tightrope.”

    These banks need to either raise capital, likely from private equity sources as NYCB did, or merge with stronger banks, Graham said. That’s what PacWest resorted to last year; the California lender was acquired by a smaller rival after it lost deposits in the March tumult.

    Banks can also choose to wait as bonds mature and roll off their balance sheets, but doing so means years of underearning rivals, essentially operating as “zombie banks” that don’t support economic growth in their communities, Graham said. That strategy also puts them at risk of being swamped by rising loan losses.

    Powell’s warning

    Federal Reserve Chair Jerome Powell acknowledged this month that commercial real estate losses are likely to capsize some small and medium-sized banks.

    “This is a problem we’ll be working on for years more, I’m sure. There will be bank failures,” Powell told lawmakers. “We’re working with them … I think it’s manageable, is the word I would use.”

    There are other signs of mounting stress among smaller banks. In 2023, 67 lenders had low levels of liquidity — meaning the cash or securities that can be quickly sold when needed — up from nine institutions in 2021, Fitch analysts said in a recent report. They ranged in size from $90 billion in assets to under $1 billion, according to Fitch.

    And regulators have added more companies to their “Problem Bank List” of companies with the worst financial or operational ratings in the past year. There are 52 lenders with a combined $66.3 billion in assets on that list, 13 more than a year earlier, according to the Federal Deposit Insurance Corporation.

    Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 7, 2024.

    Brendan Mcdermid | Reuters

    “The bad news is, the problems faced by the banking system haven’t magically gone away,” Graham said. “The good news is that, compared to other banking crises I’ve worked through, this isn’t a scenario where hundreds of banks are insolvent.”

    ‘Pressure cooker’

    After the implosion of SVB last March, the second-largest U.S. bank failure at the time, followed by Signature’s failure days later and that of First Republic in May, many in the industry predicted a wave of consolidation that could help banks deal with higher funding and compliance costs.

    But deals have been few and far between. There were fewer than 100 bank acquisitions announced last year, according to advisory firm Mercer Capital. The total deal value of $4.6 billion was the lowest since 1990, it found.

    One big hang-up: Bank executives are uncertain that their deals will pass regulatory muster. Timelines for approval have lengthened, especially for larger banks, and regulators have killed recent deals, such as the $13.4 billion acquisition of First Horizon by Toronto-Dominion Bank.

    A planned merger between Capital One and Discovery, announced in February, was promptly met with calls from some lawmakers to block the transaction.

    “Banks are in this pressure cooker,” said Chris Caulfield, senior partner at consulting firm West Monroe. “Regulators are playing a bigger role in what M&A can occur, but at the same time, they’re making it much harder for banks, especially smaller ones, to be able to turn a profit.”

    Despite the slow environment for deals, leaders of banks all along the size spectrum recognize the need to consider mergers, according to an investment banker at a top-three global advisory firm.

    Discussion levels with bank CEOs are now the highest in his 23-year career, said the banker, who requested anonymity to speak about clients.

    “Everyone’s talking, and there’s acknowledgment consolidation has to happen,” said the banker. “The industry has structurally changed from a profitability standpoint, because of regulation and with deposits now being something that won’t ever cost zero again.”

    Aging CEOs

    Another reason to expect heightened merger activity is the age of bank leaders. A third of regional bank CEOs are older than 65, beyond the group’s average retirement age, according to 2023 data from executive search firm Spencer Stuart. That could lead to a wave of departures in coming years, the firm said.

    “You’ve got a lot of folks who are tired,” said Frank Sorrentino, an investment banker at boutique advisory Stephens. “It’s been a tough industry, and there are a lot of willing sellers who want to transact, whether that’s an outright sale or a merger.”

    Sorrentino was involved in the January merger between FirstSun and HomeStreet, a Seattle-based bank whose shares plunged last year after a funding squeeze. He predicts a surge in merger activity from lenders between $3 billion and $20 billion in assets as smaller firms look to scale up.

    One deterrent to mergers is that bond and loan markdowns have been too deep, which would erode capital for the combined entity in a deal because losses on some portfolios have to be realized in a transaction. That has eased since late last year as bond yields dipped from 16-year highs.

    That, along with recovering bank stocks, will lead to more activity this year, Sorrentino said. Other bankers said that larger deals are more likely to be announced after the U.S. presidential election, which could usher in a new set of leaders in key regulatory roles.

    Easing the path for a wave of U.S. bank mergers would strengthen the system and create challengers to the megabanks, according to Mike Mayo, the veteran bank analyst and former Fed employee.

    “It should be game-on for bank mergers, especially the strong buying the weak,” Mayo said. “The merger restrictions on the industry have been the equivalent of the Jamie Dimon Protection Act.”

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  • Morgan Stanley names a head of artificial intelligence as Wall Street leans into AI

    Morgan Stanley names a head of artificial intelligence as Wall Street leans into AI

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    The Morgan Stanley digital sign is seen at the company’s Times Square headquarters in New York, U.S., on Friday, Jan. 12, 2016.

    John Taggart | Bloomberg | Getty Images

    Morgan Stanley promoted a tech executive in its wealth management division to become the bank’s first head of firm-wide artificial intelligence, CNBC has learned.

    The bank is elevating Jeff McMillan, a veteran of the New York-based bank, to help guide its implementation of AI across the firm, according to a memo sent Thursday from co-presidents Andy Saperstein and Dan Simkowitz.

    Last year, Morgan Stanley became the first major Wall Street firm to create a solution for employees based on OpenAI’s GPT-4, a project overseen by McMillan.

    The move shows the rising importance of artificial intelligence in financial services, sparked by the meteoric rise of generative AI tools that create human-like responses to queries.

    While Wall Street firms broadly pared back jobs last year, they competed to fill thousands of AI positions, poaching employees from one another.

    In June, JPMorgan named Teresa Heitsenrether its chief data and analytics officer in charge of AI adoption. At Goldman Sachs, Chief Information Officer Marco Argenti is seen as the lead AI advocate.

    Read the full Morgan Stanley memo announcing McMillan’s new role:

    We are pleased to announce that Jeff McMillan has assumed a new position as Head of Firmwide Artificial Intelligence, co-reporting to us.

    Jeff previously led Wealth Management’s Analytics, Data and Innovation organization where he played a key role in driving Wealth Management’s technological evolution, from our Modern Wealth Management platform to most recently our groundbreaking work with our exclusive partner, OpenAI.

    In his new role, Jeff will coordinate across the Firm to ensure we have the appropriate AI strategy and governance in place. In doing so, he will partner with the business units and infrastructure areas to identify and prioritize AI opportunities; help position the Firm within the flow of AI development across the industry and ensure that Morgan Stanley continues to be a well-respected innovator in AI.

    To execute on our AI strategy, Jeff will work closely Mike Pizzi, Head of U.S. Banks and Technology, Sid Visentini, Head of Firm Strategy and Katy Huberty, Head of Global Research. Katy and Jeff will co-chair the Firmwide AI Steering Group, comprised of business unit and infrastructure representatives.

    Please join us in congratulating Jeff on his new role.

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  • HSBC is ‘very positive’ about the future of China’s economy, CFO says

    HSBC is ‘very positive’ about the future of China’s economy, CFO says

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    The Hong Kong observation wheel and the HSBC building in Victoria Harbour in Hong Kong.

    Ucg | Universal Images Group | Getty Images

    HSBC is “very positive” about the mid- to long-term outlook for the Chinese economy despite current headwinds, the British bank’s chief financial officer told CNBC.

    Growth in China has been weighed down over the past year by a slump in the country’s traditional economic pillars of real estate, infrastructure and exports. This prompted Beijing to ramp up its efforts to bolster manufacturing and domestic tech in a bid to modernize its economy and remain globally competitive.

    Speaking to CNBC’s Karen Tso on Wednesday, HSBC CFO Georges Elhedery said the lender — which is headquartered in London but does a lot of its business in Hong Kong and across the Asia-Pacific — was confident that the world’s second-largest economy would overcome its short-term headwinds.

    “We’re looking at major economic transition, which is taking place, which gives us very strong grounds to be very positive about the medium- and long-term outlook,” Elhedery said.

    He suggested that China’s economic maturity has reached such a stage that now is the “right time to transition into what more mature economies are.”

    Elhedery characterized this maturity as being more heavily reliant on consumers, the services industry and high-value and sustainability-driven products, such as electric vehicles and batteries, aspirations he said were evidenced by the Chinese government’s recent massive push toward these sectors.

    “That transition will mean that China will avoid falling in this middle income trap and be able to continue the growth pattern,” he added.

    “Some of the Western economies have gone through those transitions in the past, [and] China is going through a transition today. That gives us a lot of positive outlook for the medium- to long-term for China.”

    The more immediate economic challenges may last “a few quarters to a couple of years,” Elhedery said, but expressed confidence that China will be in a better position for the long run, as the country puts itself on a “materially better forward-looking track.”

    HSBC missed its full-year 2023 pretax profit forecasts on the back of a $3 billion write-down on its 19% stake in China’s Bank of Communications, while the lender cut its overall exposure to Chinese commercial real estate by $4.6 billion year on year.

    Yet, Elhedery on Thursday insisted that most of the challenges related to the ailing Chinese property market were “behind us,” even as he said the sector is not “out of the woods” so far.

    “We think the trough of that sector is behind us. We think in our case, our exposure and our ECL (expected credit losses) covers the bulk of the charges behind us, but that still means there will be lingering effects as the sector continues to adjust, and we may continue to see some impact but not to the tune that we’ve seen last year on our credit charges,” he said.

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  • Top banking analysts see 3 reasons why Wells Fargo stock should push even higher this year

    Top banking analysts see 3 reasons why Wells Fargo stock should push even higher this year

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    Justin Sullivan | Getty Images News | Getty Images

    Wells Fargo‘s run of form continued Wednesday, with shares hitting another 52-week high. Wall Street analysts see more upside ahead for what’s been the best-performing major U.S. bank stock in 2024.

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  • Shareholder payouts hit a record $1.7 trillion last year as bank profits surged

    Shareholder payouts hit a record $1.7 trillion last year as bank profits surged

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    Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., March 5, 2024.

    Brendan Mcdermid | Reuters

    LONDON — Global dividend payouts to shareholders hit a record $1.66 trillion in 2023, according to a new report by British asset manager Janus Henderson.

    The Global Dividend Index report, published Wednesday, said payouts rose by 5% year-on-year on an underlying basis, with the fourth quarter showing a 7.2% rise from the previous three months.

    The underlying figure adjusts for the impact of exchange rates, one-off special dividends and technical factors related to dividend calendars, along with changes to the index.

    The banking sector contributed almost half of the world’s total dividend growth, delivering record payouts as high interest rates boosted lenders’ margins, the report found.

    Last year, major banks including JPMorgan Chase, Wells Fargo and Morgan Stanley announced plans to raise their quarterly dividends after clearing the Federal Reserve’s annual stress test, which dictates how much capital banks can return to shareholders.

    “In addition, lingering post-pandemic catch-up effects meant payouts were fully restored, most notably at HSBC,” Janus Henderson’s report added.

    “Emerging market banks made a particularly strong contribution to the increase, though those in China did not participate in the banking-sector’s dividend boom.”

    However, the positive impact from banking dividends was “almost entirely offset by cuts from the mining sector,” according to Janus Henderson.

    The report noted that large dividend cuts by some major companies such as BHP, Petrobras, Rio Tinto, Intel and AT&T diluted the global underlying growth rate for the year by two percentage points, masking significant broad-based growth in many parts of the world.

    ‘Key engine of growth’

    Around 86% of listed companies around the world either increased dividends or maintained them at current levels in 2023, Janus Henderson said.

    A total of 22 countries, including the U.S., France, Germany, Italy, Canada, Mexico and Indonesia, saw record payouts last year.

    Europe was described as a “key engine of growth,” with payouts rising 10.4% year-on-year on an underlying basis.

    For 2024, Janus Henderson expects total dividends to hit $1.72 trillion, equivalent to underlying growth of 5%.

    — CNBC’s Hugh Son contributed to this report.

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  • It’s been one year since SVB’s collapse sent shockwaves through the banking sector. Here’s where the industry and our financial names stand now

    It’s been one year since SVB’s collapse sent shockwaves through the banking sector. Here’s where the industry and our financial names stand now

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    A combination file photo shows Wells Fargo, Citibank, Morgan Stanley, JPMorgan Chase, Bank of America and Goldman Sachs.

    Reuters

    It’s been a year this week since the collapse of Silicon Valley Bank sent shockwaves through the banking sector. While the crisis most directly affected the regionals, major U.S. financial institutions for most of 2023 also found their stocks under assault. Big banks, like Club holding Wells Fargo, were largely able to turn the corner. The question is still out on the smaller lenders.

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  • Time to sell Nvidia? How to trade stocks that have ‘gone parabolic’

    Time to sell Nvidia? How to trade stocks that have ‘gone parabolic’

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

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

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    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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  • Wells Fargo’s Mike Mayo on why Citi is his top bank stock pick

    Wells Fargo’s Mike Mayo on why Citi is his top bank stock pick

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    Mike Mayo, Wells Fargo Securities head of U.S. large-cap bank research, joins ‘Squawk Box’ to discuss the latest market trends, why Citi is his top bank stock pick, and more.

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  • Pimco’s Sonali Pier lets her ‘cautious contrarianism’ speak for itself: The bets she’s making now

    Pimco’s Sonali Pier lets her ‘cautious contrarianism’ speak for itself: The bets she’s making now

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    Sonali Pier is a portfolio manager with Pimco

    Pimco’s Sonali Pier strives for outperformance.

    The youngest of three and the daughter of Indian immigrants, Pier set her sights on Wall Street after graduating from Princeton University in 2003. She began her career at JPMorgan as a credit trader, a field that doesn’t have a lot of women.

    “In the ladies room, I don’t bump into a lot of people,” said Pier, who moved from New York to California in 2013 to join Pimco.

    Fortunately, she’s seen a lot of changes over the years. There has not only been some progress for women entering the financial business, but the culture has also changed since the financial crisis to become more inclusive, she said. Plus, it’s an industry where there is clear evidence of performance, she added.

    “There’s accountability,” she said, in a recent interview. “Therefore, the gender role starts to break down a little bit. With responsibility and accountability and a number to your name, it’s very clear what your contributions are.”

    Pier has risen through the ranks since joining Pimco and is now a portfolio manager within the firm’s multi-sector credit business. The 42-year-old mother of two credits mentors for helping her along the way, as well as her husband for supporting her and moving to California sight unseen. Her father also raised her to value education and hard work, Pier said.

    “He was the quintessential example of the American dream,” she said. “Being able to see his hard work and a lot of progress meant that I never thought otherwise, that hard work wouldn’t lead to progress.”

    Pier’s work has not gone unnoticed. Morningstar crowned her the winner of the 2021 U.S. Morningstar Award for Investing Excellence in the Rising Talent category.

    “Pier’s cautious contrarianism and rising influence at one of the industry’s premier and most internally competitive fixed-income asset-management firms stands out,” Morningstar said at the time.

    Putting her investment strategy to work

    Pier is the lead manager on Pimco’s Diversified Income Fund, which was among the top performers in its class — ranking in the 13th percentile on a total return basis in 2023, according to Morningstar. It has a 30-day SEC yield of 5.91%, as of Jan. 31.

    “We’re really broadly canvassing the global landscape, and then looking for where there’s the best opportunities,” Pier said. “It’s getting the interest rate sensitivity from investment grade, high-quality parts of EM [emerging markets], and the equity-like sensitivity from high yield and the low-quality parts of EM.”

    The fund also invests in securitized assets, with about 23% of the portfolio is allocated to the sector, as of Jan. 31.

    Stock Chart IconStock chart icon

    Pimco Income Diversified Fund

    While the fund has a benchmark, the Bloomberg Global Credit Hedged USD Index, it is “benchmark aware” and doesn’t “hug it,” Pier said.

    Morningstar has called the fund a “standout.”

    “Pimco Diversified Income’s still ample staffing, deep analytical resources, and proven approach make it a top choice for higher-yielding credit exposure,” Morningstar senior analyst Mike Mulach wrote in January.

    It hasn’t always been smooth sailing. The fund has more international holdings and a more credit-risk-heavy profile than its peers, which has sometimes “knocked the portfolio off course,” like it did in 2022 during the Russia-Ukraine conflict, Mulach said. Still, he likes it over the long term.

    So far this year, the fund is relatively flat on a total return basis.

    In addition to also leading PDIIX, Pier is also a manager on a number of other funds, including the PIMCO Multisector Bond Active ETF (PYLD), which was launched in June 2023. It currently has a 30-day SEC yield of 5.12%, as of Tuesday, and an adjusted expense ratio of 0.55%.

    Stock Chart IconStock chart icon

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    Multisector Bond Active Exchange-Traded Fund performance since its June 21, 2023 inception.

    “It’s maximizing for yield, while looking for capital appreciation, and obviously, with the same Pimco principles of wanting to keep up on the upside, but manage that downside risk,” she said.

    Where Pier is bullish

    Right now, Pier prefers developed markets over emerging markets and the U.S. over Europe.

    Within investment-grade corporate, she likes financials over non-financials. Credit spreads have widened in financials over the concerns about regional banks, she said.

    “Maybe some of it’s warranted for the fact that they need to issue significant supply year after year, but we think that the metrics of, say, the big six … look quite resilient on a relative basis,” Pier said.

    Within corporate credit, the team looks at the “full flexibility of the toolkit,” she noted. That could include derivatives and cash bonds, she added.

    “Are we looking at the euro bond or the dollar bond in the same structure? The front end or the long end? Cash versus derivatives? However we can most efficiently express our view and trade that will lead to the best total return,” Pier said.

    She also likes securitized assets, which she said can be a lot more resilient during a downturn. One of Pier’s preferences is the legacy non-agency mortgage-backed securities market.

    “We have the data on how long they’ve been in the home, how much home equity has been built, what their mortgage rate is, what’s been their alacrity to pay, so we can see — is there any delinquency?” she said. “We have a lot of data there and a lot of comfort around that asset class.”

    Agency mortgage-backed securities are also attractive and could be a good substitution for single-A rated corporate debt, she said.

    About 60% of homeowners have a mortgage rate below 4%, according to a Redfin analysis of data from the Federal Housing Finance Agency’s National Mortgage Database.

    “It’s more liquid, implicitly guaranteed by the government and it’s a pretty similar spread,” she said.

    Pier finds the work exciting and encourages women to join her in the business.

    “Anyone can excel who wants to really put in the work and wants to bet on themselves,” she said.

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  • Steven Mnuchin on NYCB investment: Great opportunity to turn this into an attractive regional bank

    Steven Mnuchin on NYCB investment: Great opportunity to turn this into an attractive regional bank

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    Former U.S. Treasury Secretary and Liberty Strategic Capital founder and managing partner Steven Mnuchin joins ‘Squawk on the Street’ to discuss the firm’s investment in New York Community Bancorp as part of a $1 billion capital injection into the struggling regional bank, the bank’s loan portfolio, whether this will be a long-term investment for Mnuchin, and more.

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  • Watch Fed Chair Powell testify live before Senate Banking Committee

    Watch Fed Chair Powell testify live before Senate Banking Committee

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    [The stream is slated to start at 10 a.m. ET. Please refresh the page if you do not see a player above at that time.]

    Federal Reserve Chair Jerome Powell is back Thursday on Capitol Hill, offering to the Senate Banking Committee his second day of congressionally mandated testimony on the state of the economy and monetary policy.

    In an appearance Wednesday before the House Financial Services Committee, the central bank chief reiterated that he expects interest rate cuts later this year but did not specify when. Instead, he said policy moves will depend on incoming data, and there isn’t enough evidence yet that inflation is headed back to the Fed’s 2% goal.

    Along with hits overview, he faced questions from committee members largely focused on the proper calibration of monetary policy, as well as his views on proposed bank capital rules known as the Basel III Endgame.

    The testimony is Powell’s last scheduled public appearance before the next Fed meeting on March 19-20.

    Read more
    Powell reinforces position that the Fed is not ready to start cutting interest rates
    Key Fed inflation measure rose 0.4% in January as expected, up 2.8% from a year ago
    Fed’s Waller wants more evidence inflation is cooling before cutting interest rates

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  • NYCB says it lost 7% of deposits in the past month, slashes dividend to 1 cent

    NYCB says it lost 7% of deposits in the past month, slashes dividend to 1 cent

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    New York Community Bank said Thursday it lost 7% of its deposits in the turbulent month before announcing a $1 billion-plus capital injection from investors led by former Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital.

    The bank had $77.2 billion in deposits as of March 5, NYCB said in an investor presentation tied to the capital raise. That was down from $83 billion it had as of Feb. 5, the day before Moody’s Investors Service cut the bank’s credit ratings to junk.

    NYCB also said it’s slashing its quarterly dividend for the second time this year, to 1 cent per share from 5 cents, an 80% drop. The bank paid a 17-cent dividend until reporting a surprise fourth-quarter loss that kicked off a negative news cycle for the Long Island-based lender.

    Before announcing a crucial lifeline Wednesday from a group of private equity investors led by Mnuchin’s Liberty Strategic Capital, NYCB’s stock was in a tailspin over concerns about the bank’s loan book and deposit base. In a little more than a month, the bank changed its CEO twice, saw two rounds of rating agency downgrades and announced deepening losses.

    At its nadir, NYCB’s stock sank below $2 per share Wednesday, down more than 40%, before ultimately rebounding and ending the day higher. The shares climbed 10% in Thursday morning trading.

    The capital injection announced Wednesday has raised hopes that the bank now has enough time to resolve lingering questions about its exposure to New York-area multifamily apartment loans, as well as the “material weaknesses” around loan review that the bank disclosed last week.

    ‘Very attractive’ bank

    Mnuchin told CNBC in an interview Thursday that he started looking at NYCB “a long time ago.”

    “The issue was really around perceived risks in the loans, and with putting billion dollars of capital into the balance sheet, it really strengthens the franchise and whatever issues there are in the loans we’ll be able to work through,” Mnuchin told CNBC’s “Squawk on the Street.”

    “I think there’s a great opportunity to turn this into a very attractive regional commercial bank,” he added.

    Mnuchin said that he did “extensive diligence” on NYCB’s loan portfolio and that the “biggest problem” he found was its New York office loans, though he expected the bank to build reserves over time.

    “I don’t see the New York office working out or getting better in the future,” Mnuchin said.

    Shrinking lender?

    Incoming CEO Joseph Otting, a former comptroller of the currency, told analysts Thursday that the bank would look to strengthen its capital and liquidity levels and reduce its concentration in commercial real estate loans.

    NYCB will likely have to sell assets as well as build reserves and take write-downs, according to Piper Sander analysts led by Mark Fitzgibbon.

    The bank, which has $116 billion in assets, is evaluating whether it should reduce assets to below the key $100 billion threshold that brings added regulatory scrutiny on capital and risk management, executives said Thursday.

    When asked by an analyst about the feared exit of deposits after ratings agency downgrades, NYCB Chairman Alessandro DiNello said the bank got “waivers” that allowed it to keep custodial accounts that otherwise may have fled.

    “Now I think given this capital raise, we’re hopeful that that relationship continues to be the way it is,” DiNello said.

    While news of the Mnuchin investment is good for regional banks overall, Wells Fargo analyst Mike Mayo cautioned that the cycle for commercial real estate losses was just beginning as loans come due this year and next, which will probably cause more problems for lenders.

    — CNBC’s Laya Neelakandan and Ritika Shah contributed to this report.

    Correction: New York Community Bank announced an investment from a group of private equity investors on Wednesday. An earlier version of this story misstated the day.

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  • NYCB shares rebound after troubled regional bank announces $1 billion capital raise

    NYCB shares rebound after troubled regional bank announces $1 billion capital raise

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    CNBC's Leslie Picker joins 'Squawk Box' with the latest news from New York Community Bancorp.

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  • Why private equity has been involved in every recent bank deal

    Why private equity has been involved in every recent bank deal

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    Federal Reserve Chair Jerome Powell fist-bumps former Treasury Secretary Steven Mnuchin after a House Financial Services Committee hearing on “Oversight of the Treasury Department’s and Federal Reserve’s Pandemic Response” in the Rayburn House Office Building in Washington, D.C., on Dec. 2, 2020.

    Greg Nash | Reuters

    The $1 billion-plus injection that New York Community Bank announced Wednesday is the latest example of private equity players coming to the need of a wounded American lender.

    Led by $450 million from ex-Treasury Secretary Steven Mnuchin’s Liberty Strategic Capital, a group of private investors are plowing fresh funds into NYCB. The move soothed concerns about the bank’s finances, as its shares closed higher on Wednesday after a steep decline earlier in the day.

    That cash infusion follows last year’s acquisition of PacWest by Banc of California, which was anchored by $400 million from Warburg Pincus and Centerbridge Partners. A January merger between FirstSun Capital and HomeStreet also tapped $175 million from Wellington Management.

    Speed and discretion are key to these deals, according to advisors to several recent transactions and external experts. While selling stock into public markets could theoretically be a cheaper source of capital, it’s simply not available to most banks right now.

    “Public markets are too slow for this kind of capital raise,” said Steven Kelly of the Yale Program on Financial Stability. “They’re great if you are doing an IPO and you aren’t in a sensitive environment.”

    Furthermore, if a bank is known to be actively raising capital before being able to close the deal, its stock could face intense pressure and speculation about its balance sheet. That happened to Silicon Valley Bank, whose failure to raise funding last year was effectively its death knell.

    On Wednesday, headlines around noon that NYCB was seeking capital sent its shares down 42% before trading was halted. The stock surged afterward on the news that it had successfully raised funding.

    “This is the unfortunate lesson from SVB,” said an advisor on the NYCB transaction. “With private deals, you can talk for a while, and we almost got to the finish line before there was any publicity.”

    Mnuchin’s outreach

    Mnuchin reached out to NYCB directly to offer support amid headlines about the duress it was under, according to a person with knowledge of the matter. Mnuchin isn’t just a former Treasury secretary. In 2009, he led a group that bought California bank IndyMac out of receivership. He ultimately turned the bank around and sold it to CIT Group in 2015.

    Now, with the assumption that Mnuchin and his co-investors have seen NYCB’s deposit levels and capital situation — and are comfortable with them — the bank has much more time to resolve its issues. Last week, NYCB disclosed “material weaknesses” in the way it reviewed its commercial loans and delayed the filing of a key annual report.

    “This buys them a ton of time. It means the FDIC isn’t coming to seize them on Friday,” Kelly said. “You have a billion dollars in capital and a huge endorsement from someone who has seen the books.”

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  • NYCB announces $1 billion capital raise from firms including Steve Mnuchin’s Liberty Strategic Capital

    NYCB announces $1 billion capital raise from firms including Steve Mnuchin’s Liberty Strategic Capital

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    Struggling New York Community Bancorp announced a $1 billion capital raise and a leadership shakeup on Wednesday, headlined by former Treasury Secretary Steve Mnuchin.

    Reuters and The Wall Street Journal reported earlier Wednesday that the bank was looking to outside investors for cash to shore up its balance sheet. The stock was halted for news pending when shares were down 42%.

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    Shares of NYCB fell sharply on Wednesday.

    Shares of the bank were already down sharply the day before the reports. The stock is now below $2 per share after starting the year above $10.

    A cash infusion would be the latest development in a turbulent start to the year for NYCB. The bank disclosed in late January that it was dramatically raising the allowance for potential loan losses on its balance sheet, with its exposure to commercial real estate being a potential issue. That was followed shortly by Moody’s Investors Service downgrading the bank’s credit rating to junk status, and NYCB naming former Flagstar bank CEO Alessandro DiNello as executive chairman.

    Then last week, NYCB disclosed that it had “identified material weaknesses in the company’s internal controls related to internal loan review” and announced that DiNello was taking over as CEO.

    NYCB deposits a flight risk? Here's what to know

    The questions surrounding NYCB are reminiscent of those that swirled around Silicon Valley Bank, Signature Bank and First Republic before all three failed in the spring of 2023. They were among several regional banks that struggled as higher interest rates pushed down the value of older Treasury holdings and led some depositors to move their accounts elsewhere.

    With the U.S. economy continuing to show surprising strength and inflation still above the Federal Reserve’s 2% target, traders have been dialing back expectations for interest rate cuts this year. The higher-for-longer rate environment could keep pressure on the banks themselves and on commercial real estate, which is a key business for NYCB and many other regional lenders.

    The struggles for NYCB may have caught regulators off guard as well as investors. The regional lender acquired much of Signature Bank out of receivership from the Federal Deposit Insurance Corporation last March.

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