Tag: breakingNewsGlobal

Justice Department accuses Visa of debit network monopoly that affects price of ‘nearly everything’

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The U.S. Justice Department on Tuesday sued Visa, the world’s biggest payments network, saying it propped up an illegal monopoly over debit payments by imposing “exclusionary” agreements on partners and smothering upstart firms.

Visa’s moves over the years have resulted in American consumers and merchants paying billions of dollars in additional fees, according to the DOJ, which filed a civil antitrust suit in New York for “monopolization” and other unlawful conduct.

“We allege that Visa has unlawfully amassed the power to extract fees that far exceed what it could charge in a competitive market,” Attorney General Merrick Garland said in a DOJ release.

“Merchants and banks pass along those costs to consumers, either by raising prices or reducing quality or service,” Garland said. “As a result, Visa’s unlawful conduct affects not just the price of one thing — but the price of nearly everything.”

Visa and its smaller rival Mastercard have surged over the past two decades, reaching a combined market cap of roughly $1 trillion, as consumers tapped credit and debit cards for store purchases and e-commerce instead of paper money. They are essentially toll collectors, shuffling payments between banks operating for the merchants and for cardholders.

Visa called the DOJ suit “meritless.”

“Anyone who has bought something online, or checked out at a store, knows there is an ever-expanding universe of companies offering new ways to pay for goods and services,” said Visa general counsel Julie Rottenberg.

“Today’s lawsuit ignores the reality that Visa is just one of many competitors in a debit space that is growing, with entrants who are thriving,” Rottenberg said. “We are proud of the payments network we have built, the innovation we advance, and the economic opportunity we enable.”

More than 60% of debit transactions in the U.S. run over Visa rails, helping it charge more than $7 billion annually in processing fees, according to the DOJ complaint.

The payment networks’ decades-old dominance has increasingly attracted attention from regulators and retailers.

Litany of woes

In 2020, the DOJ filed an antitrust suit to block Visa from acquiring fintech company Plaid. The companies initially said they would fight the action, but soon abandoned the $5.3 billion takeover.

In March, Visa and Mastercard agreed to limit their fees and let merchants charge customers for using credit cards, a deal retailers said was worth $30 billion in savings over a half decade. A federal judge later rejected the settlement, saying the networks could afford to pay for a “substantially greater” deal.

In its complaint, the DOJ said Visa threatens merchants and their banks with punitive rates if they route a “meaningful share” of debit transactions to competitors, helping maintain Visa’s network moat. The contracts help insulate three-quarters of Visa’s debit volume from fair competition, the DOJ said.

“Visa wields its dominance, enormous scale, and centrality to the debit ecosystem to impose a web of exclusionary agreements on merchants and banks,” the DOJ said in its release. “These agreements penalize Visa’s customers who route transactions to a different debit network or alternative payment system.”

Furthermore, when faced with threats, Visa “engaged in a deliberate and reinforcing course of conduct to cut off competition and prevent rivals from gaining the scale, share, and data necessary to compete,” the DOJ said.

Paying off competitors

The moves also tamped down innovation, according to the DOJ. Visa pays competitors hundreds of millions of dollars annually “to blunt the risk they develop innovative new technologies that could advance the industry but would otherwise threaten Visa’s monopoly profits,” according to the complaint.

Visa has agreements with tech players including Apple, PayPal and Square, turning them from potential rivals to partners in a way that hurts the public, the DOJ said.

For instance, Visa chose to sign an agreement with a predecessor to the Cash App product to ensure that the company, later rebranded Block, did not create a bigger threat to Visa’s debit rails.

A Visa manager was quoted as saying “we’ve got Square on a short leash and our deal structure was meant to protect against disintermediation,” according to the complaint.

Visa has an agreement with Apple in which the tech giant says it will not directly compete with the payment network “such as creating payment functionality that relies primarily on non-Visa payment processes,” the complaint alleged.

The DOJ asked for the courts to prevent Visa from a range of anticompetitive practices, including fee structures or service bundles that discourage new entrants.

The move comes in the waning months of President Joe Biden‘s administration, in which regulators including the Federal Trade Commission and the Consumer Financial Protection Bureau have sued middlemen for drug prices and pushed back against so-called junk fees.

In February, credit card lender Capital One announced its acquisition of Discover Financial, a $35.3 billion deal predicated in part on Capital One’s ability to bolster Discover’s also-ran payments network, a distant No. 4 behind Visa, Mastercard and American Express.

Capital One said once the deal is closed, it will switch all its debit card volume and a growing share of credit card volume to Discover over time, making it a more viable competitor to Visa and Mastercard.

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September 24, 2024
JPMorgan creates new role overseeing junior bankers as Wall Street wrestles with workload concerns

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JPMorgan Chase CEO and Chairman Jamie Dimon gestures as he speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, D.C., on Dec. 6, 2023.

Evelyn Hockstein | Reuters

JPMorgan Chase has created a new global role overseeing all junior bankers in an effort to better manage their workload after the death of a Bank of America associate in May forced Wall Street to examine how it treats its youngest employees.

The firm named Ryland McClendon its global investment banking associate and analyst leader in a memo sent this month, CNBC has learned.

Associates and analysts are on the two lowest rungs in Wall Street’s hierarchy for investment banking and trading; recent college graduates flock to the roles for the high pay and opportunities they can provide.

The memo specifically stated that McClendon, a 14-year JPMorgan veteran and former banker who was previously head of talent and career development, would support the “well-being and success” of junior bankers.

The move shows how JPMorgan, the biggest American investment bank by revenue, is responding to the latest untimely death on Wall Street. In May, Bank of America’s Leo Lukenas III died after reportedly working 100-hour weeks on a bank merger. Later that month, JPMorgan CEO Jamie Dimon said his bank was examining what it could learn from the tragedy.

Then, starting in August, JPMorgan’s senior managers instructed their investment banking teams that junior bankers should typically work no more than 80 hours, part of a renewed focus to track their workload, according to a person with knowledge of the situation.

Exceptions can be made for live deals, said the person, who declined to be identified speaking about the internal policy.

Dimon’s warning

Dimon railed against some of Wall Street’s ingrained practices at a financial conference held Tuesday at Georgetown University. Some of the hours worked by junior bankers are just a function of inefficiency or tradition, rather than need, he indicated.

“A lot of investment bankers, they’ve been traveling all week, they come home and they give you four assignments, and you’ve got to work all weekend,” Dimon said. “It’s just not right.”

Senior bankers would be held accountable if their analysts and associates routinely tripped over the policy, he said.

“You’re violating it,” Dimon warned. “You’ve got to stop, and it will be in your bonus, so that people know we actually mean it.”

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September 18, 2024
Apple is in talks with JPMorgan for bank to take over card from Goldman Sachs

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Apple CEO Tim Cook introduces the Apple Card during a launch event at Apple headquarters in Cupertino, California, on March 25, 2019.

Noah Berger | AFP | Getty Images

Apple is in discussions with JPMorgan Chase for the bank to take over the tech giant’s flagship credit card program from Goldman Sachs, a person with knowledge of the negotiations said.

The discussions are still early and key elements of a deal — such as price and whether JPMorgan would continue certain features of the Apple Card — are yet to be decided, said the person, who requested anonymity to discuss the nature of the potential deal. The talks could fall apart over these or other matters in the coming months, this person said.

But the move shows the extent to which Apple’s choices were limited when Goldman Sachs decided to pivot from its ill-fated retail banking strategy. There are only a few card issuers in the U.S. with the scale and appetite to take over the Apple Card program, which had saddled Goldman with losses and regulatory scrutiny.

JPMorgan is the country’s biggest credit card issuer by purchase volume, according to the Nilson Report, an industry newsletter.

The bank is seeking to pay less than face value for the roughly $17 billion in loans on the Apple Card because of elevated losses on the cards, the person familiar with the matter said. Sources close to Goldman argued that higher-than-average delinquencies and defaults on the Apple Card portfolio were mostly because the users were new accounts. Those losses were supposed to ease over time.

But questions around credit quality have made the portfolio less attractive to issuers at a time when there are concerns the U.S. economy could be headed for a slowdown.

JPMorgan is also seeking to do away with a key Apple Card feature known as calendar-based billing, which means that all customers get statements at the start of the month rather than staggered throughout the period, the person familiar with the matter said. The feature, while appealing to customers, means service personnel are flooded with calls at the same time every month.

Apple and JPMorgan declined to comment on the negotiations, which were reported earlier by The Wall Street Journal.

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September 17, 2024
FDIC unveils rule forcing banks to keep fintech customer data in aftermath of Synapse debacle

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Tsingha25 | Istock | Getty Images

The Federal Deposit Insurance Corp. on Tuesday proposed a new rule forcing banks to keep detailed records for customers of fintech apps after the failure of tech firm Synapse resulted in thousands of Americans being locked out of their accounts.

The rule, aimed at accounts opened by fintech firms that partner with banks, would make the institution maintain records of who owns it and the daily balances attributed to the owner, according to an FDIC memo.

Fintech apps often lean on a practice where many customers’ funds are pooled into a single large account at a bank, which relies on either the fintech or a third party to maintain ledgers of transactions and ownership.

That situation exposed customers to the risk that the nonbanks involved would keep shoddy or incomplete records, making it hard to determine who to pay out in the event of a failure. That’s what happened in the Synapse collapse, which impacted more than 100,000 users of fintech apps including Yotta and Juno. Customers with funds in these “for benefit of” accounts have been unable to access their money since May.

“In many cases, it was advertised that the funds were FDIC-insured, and consumers may have believed that their funds would remain safe and accessible due to representations made regarding placement of those funds in” FDIC-member banks, the regulator said in its memo.

Keeping better records would allow the FDIC to quickly pay depositors in the event of a bank failure by helping to satisfy conditions needed for “pass-through insurance,” FDIC officials said Tuesday in a briefing.

While FDIC insurance doesn’t get paid out in the event the fintech provider fails, like in the Synapse situation, enhanced records would help a bankruptcy court determine who is owed what, the officials added.

If approved by the FDIC board of governors in a vote Tuesday, the rule will get published in the Federal Register for a 60-day comment period.

Separately, the FDIC also released a statement on its policy on bank mergers, which would heighten scrutiny of the impacts of consolidation, especially for deals creating banks with more than $100 billion in assets.

Bank mergers slowed under the Biden administration, drawing criticism from industry analysts who say that consolidation would create more robust competitors for the likes of megabanks including JPMorgan Chase.

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September 17, 2024
JPMorgan Chase shares drop 5% after bank tempers guidance on interest income and expenses

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Daniel Pinto, president and chief operating officer of JPMorgan Chase, speaks during the Semafor 2024 World Economy Summit in Washington, DC, on April 18, 2024.

Saul Loeb | AFP | Getty Images

JPMorgan Chase shares fell 5% on Tuesday after the bank’s president told analysts that expectations for net interest income and expenses in 2025 were too optimistic.

While the bank expects to be in the “ballpark” of the 2024 target for NII of about $91.5 billion, the current estimate for next year of about $90 billion “is not very reasonable” because the Federal Reserve will cut interest rates, JPMorgan President Daniel Pinto said at a financial conference.

“I think that that number will be lower,” Pinto said. He declined to give a specific figure.

Shares of the New York-based bank dropped more than 7% earlier in the session for the worst decline since June 2020, according to FactSet.

JPMorgan, the biggest U.S. bank by assets, has been a winner among lenders in recent years, benefiting from better-than-expected growth in NII as the bank gathered more deposits and made more loans than expected. But skittish investors are now concerned about the outlook for a bellwether banking stock, along with broader concerns about slowing U.S. economic growth.

NII, one of the main ways banks make money, is the difference in the cost of a bank’s deposits and what it earns by lending money or investing it in securities. When interest rates decline, new loans made by the bank and new bonds it purchases will yield less.

Falling rates can help banks in the sense that customers will slow the rotation out of checking accounts and into higher-yielding instruments like CDs or money market funds. But they also make new assets lower yielding, which complicates the picture.

“Clearly, as rates go lower, you have less pressure on repricing of deposits,” Pinto said. “But as you know, we are quite asset sensitive.”

When it comes to expenses, the analyst estimate for next year of roughly $94 billion “is also a bit too optimistic” because of lingering inflation and new investments the firm is making, Pinto said.

“There are a bunch of components that tell us that probably the number on expenses will be a bit higher than what is expected at the moment,” Pinto said.

When it comes to trading, JPMorgan said it expects third-quarter revenue to be flat to up about 2% from a year ago, while investment banking fees are headed for a 15% jump.

The trading slowdown tracks with Goldman Sachs, which said Monday that trading revenue for the quarter was headed for a 10% drop because of a tough year-over-year comparison and difficult trading conditions in August.

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September 10, 2024
Federal Reserve unveils toned-down banking regulations in victory for Wall Street

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A top Federal Reserve official on Tuesday unveiled changes to a proposed set of U.S. banking regulations that roughly cuts in half the extra capital that the largest institutions will be forced to hold.

Introduced in July 2023, the regulatory overhaul known as the Basel Endgame would have boosted capital requirements for the world’s largest banks by roughly 19%.

Instead, officials at the Fed, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have agreed to resubmit the massive proposal with a more modest 9% increase to big bank capital, according to prepared remarks from Fed Vice Chair for Supervision Michael Barr.

The change comes after banks, business groups, lawmakers and others weighed in on the possible impact of the original proposal, Barr told an audience at the Brookings Institution.

“This process has led us to conclude that broad and material changes to the proposals are warranted,” Barr said in the remarks. “There are benefits and costs to increasing capital requirements. The changes we intend to make will bring these two important objectives into better balance.”

The original proposal, a long-in-the-works response to the 2008 global financial crisis, sought to boost safety and tighten oversight of risky activities including lending and trading. But by raising the capital that banks are required to hold as a cushion against losses, the plan could’ve also made loans more expensive or harder to obtain, pushing more activity to nonbank providers, according to trade organizations.

The earlier version brought howls of protest from industry executives including JPMorgan Chase CEO Jamie Dimon, who helped lead the industry’s efforts to push back against the demands. Now, it looks like those efforts have paid off.

But big banks aren’t the only ones to benefit. Regional banks with between $100 billion and $250 billion in assets are excluded from the latest proposal, except for a requirement that they recognize unrealized gains and losses on securities in their regulatory capital.

That part will likely boost capital requirements by 3% to 4% over time, Barr said. It’s an apparent response to the failures last year of midsized banks caused by deposit runs tied to unrealized losses on bonds and loans amid sharply higher interest rates.

Mortgages, retail loans

Key parts of the proposal that apply to big banks bring several measures of risk more in line with international standards, while the original draft was more onerous for things such as mortgages and retail loans, Barr said.

It also cuts the risk weighting for tax credit equity funding structures, often used to finance green energy projects; tempers a surcharge proposed for firms with a history of operational failures; and recognizes the relatively lower-risk nature of investment management operations.

Barr said he will push to resubmit the proposed Basel Endgame regulations, as well as a separate set of capital surcharge rules for the biggest global institutions, which starts anew a public review process that has already taken longer than a year.

That means it won’t be finalized until well after the November election, which creates the risk that if Republican candidate Donald Trump wins, the rules could be further weakened or never implemented, a situation that some regulators and lawmakers hoped to avoid.

It’s unclear if the changes appease the industry and their constituents; banks and their trade groups have threatened to litigate to prevent the original draft’s implementation.

“The journey to improve capital requirements since the Global Financial Crisis has been a long one, and Basel III Endgame is an important element of this effort,” Barr said. “The broad and material changes to both proposals that I’ve outlined today would better balance the benefits and costs of capital.”

Reaction to Barr’s proposal was swift and predictable; Sen. Elizabeth Warren, D-Mass., called it a gift to Wall Street.

“The revised bank capital standards are a Wall Street giveaway, increasing the risk of a future financial crisis and keeping taxpayers on the hook for bailouts,” Warren said in an emailed statement. “After years of needless delay, rather than bolster the security of the financial system, the Fed caved to the lobbying of big bank executives.”

The American Bankers Association, a trade group, said it welcomed Barr’s announcement but stopped short of giving its approval to the latest version of the regulation.

“We will carefully review this new proposal with our members, recognizing that America’s banks are already well-capitalized and … any increase in capital requirements will still carry a cost for the economy and must be appropriately tailored,” said ABA President Rob Nichols.

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September 10, 2024
JPMorgan Chase is giving its employees an AI assistant powered by ChatGPT maker OpenAI

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JPMorgan Chase has rolled out a generative artificial intelligence assistant to tens of thousands of its employees in recent weeks, the initial phase of a broader plan to inject the technology throughout the sprawling financial giant.

The program, called LLM Suite, is already available to more than 60,000 employees, helping them with tasks like writing emails and reports. The software is expected to eventually be as ubiquitous within the bank as the videoconferencing program Zoom, people with knowledge of the plans told CNBC.

Rather than developing its own AI models, JPMorgan designed LLM Suite to be a portal that allows users to tap external large language models — the complex programs underpinning generative AI tools — and launched it with ChatGPT maker OpenAI’s LLM, said the people.

“Ultimately, we’d like to be able to move pretty fluidly across models depending on the use cases,” Teresa Heitsenrether, JPMorgan’s chief data and analytics officer, said in an interview. “The plan is not to be beholden to any one model provider.”

Teresa Heitsenrether is the firm’s chief data and analytics officer.

Courtesy: Joe Vericker | PhotoBureau

The move by JPMorgan, the largest U.S. bank by assets, shows how quickly generative AI has swept through American corporations since the arrival of ChatGPT in late 2022. Rival bank Morgan Stanley has already released a pair of OpenAI-powered tools for its financial advisors. And consumer tech giant Apple said in June that it was integrating OpenAI models into the operating system of hundreds of millions of its consumer devices, vastly expanding its reach.

The technology — hailed by some as the “Cognitive Revolution” in which tasks formerly done by knowledge workers will be automated — could be as important as the advent of electricity, the printing press and the internet, JPMorgan CEO Jamie Dimon said in April.

It will likely “augment virtually every job” at the bank, Dimon said. JPMorgan had about 313,000 employees as of June.

ChatGPT ban

The bank is giving employees what is essentially OpenAI’s ChatGPT in a JPMorgan-approved wrapper more than a year after it restricted employees from using ChatGPT. That’s because JPMorgan didn’t want to expose its data to external providers, Heitsenrether said.

“Since our data is a key differentiator, we don’t want it being used to train the model,” she said. “We’ve implemented it in a way that we can leverage the model while still keeping our data protected.”

The bank has introduced LLM Suite broadly across the company, with groups using it in JPMorgan’s consumer division, investment bank, and asset and wealth management business, the people said. It can help employees with writing, summarizing lengthy documents, problem solving using Excel, and generating ideas.

But getting it on employees’ desktops is just the first step, according to Heitsenrether, who was promoted in 2023 to lead the bank’s adoption of the red-hot technology.

“You have to teach people how to do prompt engineering that is relevant for their domain to show them what it can actually do,” Heitsenrether said. “The more people get deep into it and unlock what it’s good at and what it’s not, the more we’re starting to see the ideas really flourishing.”

The bank’s engineers can also use LLM Suite to incorporate functions from external AI models directly into their programs, she said.

‘Exponentially bigger’

JPMorgan has been working on traditional AI and machine learning for more than a decade, but the arrival of ChatGPT forced it to pivot.

Traditional, or narrow, AI performs specific tasks involving pattern recognition, like making predictions based on historical data. Generative AI is more advanced, however, and trains models on vast data sets with the goal of pattern creation, which is how human-sounding text or realistic images are formed.

The number of uses for generative AI are “exponentially bigger” than previous technology because of how flexible LLMs are, Heitsenrether said.

The bank is testing many cases for both forms of AI and has already put a few into production.

JPMorgan is using generative AI to create marketing content for social media channels, map out itineraries for clients of the travel agency it acquired in 2022 and summarize meetings for financial advisors, she said.

The consumer bank uses AI to determine where to place new branches and ATMs by ingesting satellite images and in call centers to help service personnel quickly find answers, Heitsenrether said.

In the firm’s global-payments business, which moves more than $8 trillion around the world daily, AI helps prevent hundreds of millions of dollars in fraud, she said.

But the bank is being more cautious with generative AI that directly touches upon the individual customer because of the risk that a chatbot gives bad information, Heitsenrether said.

Ultimately, the generative AI field may develop into “five or six big foundational models” that dominate the market, she said.

The bank is testing LLMs from U.S. tech giants as well as open source models to onboard to its portal next, said the people, who declined to be identified speaking about the bank’s AI strategy.

Friend or foe?

Heitsenrether charted out three stages for the evolution of generative AI at JPMorgan.

The first is simply making the models available to workers; the second involves adding proprietary JPMorgan data to help boost employee productivity, which is the stage that has just begun at the company.

The third is a larger leap that would unlock far greater productivity gains, which is when generative AI is powerful enough to operate as autonomous agents that perform complex multistep tasks. That would make rank-and-file employees more like managers with AI assistants at their command.

The technology will likely empower some workers while displacing others, changing the composition of the industry in ways that are hard to predict.

Banking jobs are the most prone to automation of all industries, including technology, health care and retail, according to consulting firm Accenture. AI could boost the sector’s profits by $170 billion in just four years, Citigroup analysts said.

People should consider generative AI “like an assistant that takes away the more mundane things that we would all like to not do, where it can just give you the answer without grinding through the spreadsheets,” Heitsenrether said.

“You can focus on the higher-value work,” she said.

— CNBC’s Leslie Picker contributed to this report.

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August 9, 2024
Jamie Dimon says he still sees a recession on the horizon

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JPMorgan Chase CEO Jamie Dimon said Wednesday he still believes that the odds of a “soft landing” for the U.S. economy are around 35% to 40%, making recession the most likely scenario in his mind.

When CNBC’s Leslie Picker asked Dimon if he had changed his view from February that markets were too optimistic on recession risks, he said the odds were “about the same” as his earlier call.

“There’s a lot of uncertainty out there,” Dimon said. “I’ve always pointed to geopolitics, housing, the deficits, the spending, the quantitative tightening, the elections, all these things cause some consternation in markets.”

Dimon, leader of the biggest U.S. bank by assets and one of the most respected voices on Wall Street, has warned of an economic “hurricane” since 2022. But the economy has held up better than he expected, and Dimon said Wednesday that while credit-card borrower defaults are rising, America is not in a recession right now.

Dimon added he is “a little bit of a skeptic” that the Federal Reserve can bring inflation down to its 2% target because of future spending on the green economy and military.

“There’s always a large range of outcomes,” Dimon said. “I’m fully optimistic that if we have a mild recession, even a harder one, we would be okay. Of course, I’m very sympathetic to people who lose their jobs. You don’t want a hard landing.”

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August 7, 2024
JPMorgan and Morgan Stanley boost buybacks and dividends, while Citigroup and BofA take smaller steps

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(L-R) Brian Moynihan, Chairman and CEO of Bank of America; Jamie Dimon, Chairman and CEO of JPMorgan Chase; and Jane Fraser, CEO of Citigroup; testify during a Senate Banking Committee hearing at the Hart Senate Office Building in Washington, D.C., on Dec. 6, 2023.

Saul Loeb | Afp | Getty Images

JPMorgan Chase and Morgan Stanley said Friday that they were boosting both dividend payouts and share repurchases, while rivals Citigroup and Bank of America made more modest announcements.

JPMorgan, the biggest U.S. bank by assets, said it was raising its quarterly dividend 8.7% to $1.25 per share and that it authorized a new $30 billion share repurchase program.

Morgan Stanley, a dominant player in wealth management, said it was boosting its dividend 8.8% to 92.5 cents per share and authorized a $20 billion repurchase plan.

Citigroup said it was raising its dividend 5.7% to 56 cents per share and that it would “continue to assess share repurchases” on a quarterly basis.

Bank of America said it was increasing its dividend 8% to 26 cents per share. Its release made no mention of share repurchases.

The big banks announced their plans to boost capital return to shareholders after passing the annual stress test administered by the Federal Reserve this week. While all 31 banks in this year’s exam showed regulators they could withstand a severe hypothetical recession, JPMorgan said Wednesday that it could have higher losses than the Fed initially found.

Still, that would not affect its capital-return plan, the New York-based bank said Friday.

“The strength of our company allows us to continually invest in building our businesses for the future, pay a sustainable dividend, and return any remaining excess capital to our shareholders as we see fit,” JPMorgan CEO Jamie Dimon said in his company’s release.

JPMorgan’s dividend increase was its second this year, Dimon noted.

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June 28, 2024
Regulators hit Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America over living will plans

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Jane Fraser, CEO of Citigroup, testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing titled Annual Oversight of the Nations Largest Banks, in Hart Building on Thursday, September 22, 2022.

Tom Williams | CQ-Roll Call, Inc. | Getty Images

Banking regulators on Friday disclosed that they found weaknesses in the resolution plans of four of the eight largest American lenders.

The Federal Reserve and the Federal Deposit Insurance Corp. said the so-called living wills — plans for unwinding huge institutions in the event of distress or failure — of Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America filed in 2023 were inadequate.

Regulators found fault with the way each of the banks planned to unwind their massive derivatives portfolios. Derivatives are Wall Street contracts tied to stocks, bonds, currencies or interest rates.

For example, when asked to quickly test Citigroup’s ability to unwind its contracts using different inputs than those chosen by the bank, the firm came up short, according to the regulators. That part of the exercise appears to have snared all the banks that struggled with the exam.

“An assessment of the covered company’s capability to unwind its derivatives portfolio under conditions that differ from those specified in the 2023 plan revealed that the firm’s capabilities have material limitations,” regulators said of Citigroup.

The living wills are a key regulatory exercise mandated in the aftermath of the 2008 global financial crisis. Every other year, the largest US. banks must submit their plans to credibly unwind themselves in the event of catastrophe. Banks with weaknesses have to address them in the next wave of living will submissions due in 2025.

While JPMorgan, Goldman and Bank of America’s plans were each deemed to have a “shortcoming” by both regulators, Citigroup was considered by the FDIC to have a more serious “deficiency,” meaning the plan wouldn’t allow for an orderly resolution under U.S. bankruptcy code.

Since the Fed didn’t concur with the FDIC on its assessment of Citigroup, the bank did receive the less-serious “shortcoming” grade.

“We are fully committed to addressing the issues identified by our regulators,” New York-based Citigroup said in a statement.

“While we’ve made substantial progress on our transformation, we’ve acknowledged that we have had to accelerate our work in certain areas,” the bank said. “More broadly, we continue to have confidence that Citi could be resolved without an adverse systemic impact or the need for taxpayer funds.”

JPMorgan, Goldman and Bank of America declined a request to comment from CNBC.

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June 21, 2024
Nearly $109 million in deposits held for fintech Yotta’s customers vanished in Synapse collapse, bank says

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Tsingha25 | Istock | Getty Images

Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved.

A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday.

About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said. It added that neither customers nor Evolve received funds in that time period.

“These irregularities in Synapse’s ledgering of Yotta end user funds are just one example of the many discrepancies that Evolve has observed,” the bank said. “A detailed investigation of what happened to these funds, or alternatively, why the Synapse-provided ledger reflected money movement that did not actually occur, must be undertaken.”

Evolve, one of the key players in a deepening predicament that has left more than 100,000 fintech customers locked out of their bank accounts since May 11, has been attempting to piece together with other banks a record of who is owed what. Its former partner Synapse, which connected customer-facing fintech apps to FDIC-backed banks, filed for bankruptcy in April amid disputes about customer balances.

But Evolve itself was reprimanded by the Federal Reserve last week for failing to properly manage its fintech partnerships. The regulator noted that Evolve “engaged in unsafe and unsound banking practices” and forced the bank to improve oversight of its fintech program. The Fed said the enforcement action was separate from the Synapse bankruptcy.

Evolve has been trying to separate itself from Synapse since late 2022 because of ledger problems it has found, a spokesman for the Memphis, Tennessee-based bank said, declining to comment further.

Yotta CEO and co-founder Adam Moelis said in response to this article that Synapse has said in court filings that Evolve held nearly all Yotta customers deposits. Evolve and Synapse disagree over who holds the funds and who is responsible for the frozen accounts.

“According to the Synapse trial balance report provided on May 17, there are $112 million of customer funds held at Evolve,” Moelis said.

Unclear timeline

Despite mounting pressure on the banks involved to unfreeze all the locked accounts, the messy records and a dearth of funds to pay for an outside forensic analysis has created uncertainty over when that will happen.

Evolve maintains that because of discrepancies in the ledgers, it is hesitant to allow payments to be made to many customers until a full reconciliation of the mismatched ledgers is complete, in particular related to a group of banks used in the Synapse brokerage program.

Synapse moved most of the fintech customer funds held at Evolve to a group of banks affiliated with its brokerage program in late 2023, Evolve has said in court filings.

Last week, the court-appointed trustee, former FDIC Chairman Jelena McWilliams, noted that a “full reconciliation to the last dollar with the Synapse ledger” may not be possible.

Even the total shortfall in funds owed to all impacted depositors isn’t known. Earlier this month, McWilliams pegged the amount at $85 million; but in subsequent reports stated that it was between $65 million and $96 million.

Pleading with regulators

Meanwhile, the disruption to thousands of fintech customers has stretched into its sixth week. Many Yotta customers contacted by CNBC said they used the service as their primary checking account, and have had their lives turned upside down by the situation.

In a letter sent Thursday, McWilliams pleaded with five U.S. regulators to get more involved in the Synapse collapse, asking for resources to help impacted customers understand where their funds are held and to aid communication with banks.

“The impact of Synapse’s bankruptcy on end-users has been devastating,” McWilliams wrote to the regulators. “Many end-users are unable to pay for basic living expenses and food. I appreciate your prompt attention to this request and respectfully request that your agencies act on it as quickly as possible.”

McWilliams is scheduled to present her latest status report in the bankruptcy case during a hearing starting 1 p.m. E.T. Friday.

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June 21, 2024
Synapse bankruptcy trustee says $85 million of customer savings is missing in fintech meltdown

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Jelena McWilliams, chair of the Federal Deposit Insurance Corporation (FDIC), during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., U.S., on Tuesday, Aug. 3, 2021.

Al Drago | Bloomberg | Getty Images

There is an $85 million shortfall between what partner banks of fintech middleman Synapse are holding and what depositors are owed, according to the court-appointed trustee in the Synapse bankruptcy.

Customers of fintech firms that used Synapse to link up with banks had $265 million in balances. But the banks themselves only had $180 million associated with those accounts, trustee Jelena McWilliams said in a report filed late Thursday.

The missing funds explain what is at the heart of the worst meltdown in the U.S. fintech sector since its emergence in the years after the 2008 financial crisis. More than 100,000 customers of a diverse set of fintech companies have been locked out of their savings accounts for nearly a month after the failure of Synapse, an Andreessen Horowitz-backed startup, amid disagreements over user balances.

While Synapse and its partners, including Evolve Bank & Trust, have lobbed accusations of improperly moving balances or keeping incorrect ledgers at each other in court filings, McWilliams’ report is the first outside attempt to determine the scope of missing funds in this mess.

Much unknown

Since being named trustee on May 24, McWilliams has worked with four banks — Evolve, American Bank, AMG National Trust and Lineage Bank — to reconcile their various ledgers so customers could regain access to their funds.

But the banks need much more information to complete the project, including understanding how a Synapse brokerage and lending business may have impacted fund flows, said McWilliams. She said Synapse apparently commingled funds among several institutions, using multiple banks to serve the same companies.

What’s worse, it’s still unclear what happened to the missing funds, she said.

“The source of the shortfall, including whether end-user funds and negative balance accounts were moved among Partner Banks in a way that increased or decreased the respective shortfalls that may have existed at each Partner Bank at an earlier time, is not known at this time,” McWilliams wrote.

McWilliams, former chair of the Federal Deposit Insurance Corporation and current partner at the law firm Cravath, didn’t respond to requests for comment.

Spreading the pain

McWilliams’ task has been made harder because there are no funds to pay external forensics firms or even former Synapse employees to help, she said in her report. Synapse fired the last of its employees on May 24.

Still, some customers whose funds were held at banks in what’s called demand deposit accounts have already begun getting access to accounts, she said.

But users whose funds were pooled in a communal way known as for benefit of, or FBO, accounts, will have a harder time getting their money. A full reconciliation will take weeks more to complete, she said.

In her report, McWilliams presented several options for Judge Martin Barash to consider at a Friday hearing that will allow at least some FBO customers to regain access to their funds.

The options include paying some customers out fully, while delaying payments to others, depending on whether the individual FBO accounts have been reconciled. Another option would be spreading the shortfall evenly among all customers to make limited funds available sooner.

During the hearing Friday, McWilliams told Barash that her recommendation was that all FBO customers receive partial payments, which “will partially alleviate the effects to end users who are currently waiting locked out of access to their funds” while keeping a reserve for later payments.

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June 7, 2024
Bank of America CEO says U.S. consumers and businesses have turned cautious on spending

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Bank of America Chairman and CEO Brian Thomas Moynihan 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

U.S. consumers and businesses alike have turned cautious about spending this year because of elevated inflation and interest rates, according to Bank of America CEO Brian Moynihan.

Whether it’s households or small- to medium-sized businesses, Bank of America clients are slowing down the rate of purchases made for everything from hard goods to software, Moynihan said Thursday at a financial conference held in New York.

Consumer spending via card payments, checks and ATM withdrawals has grown about 3.5% this year to roughly $4 trillion, Moynihan said. That’s a sharp slowdown from the nearly 10% growth rate seen in May 2023, he said.

“Both of our customer bases that have a lot to do with how the American economy runs are saying, ‘You know what? I’m being careful, slowing things down,’” Moynihan said, referring to consumers and businesses.

The slowdown began last summer and is consistent with the “very low growth” environment of the period from 2016 through 2018, he said.

Nearly a year after the last Federal Reserve rate increase, consumers and businesses are wrestling with inflation and borrowing costs that remain higher than they are accustomed to. The Fed began efforts to tame inflation by hiking its benchmark rate starting in March 2022, hoping it could slow the economy without tipping it into recession.

Many economists believe the Fed is on track to pull off that feat, which has helped the stock market reach new highs this year. But consumers are still grappling with higher prices for goods and services, and that has impacted U.S. companies from McDonald’s to discount retailers as Americans adjust their behavior.

Food shoppers are hitting up more store locations in search of deals, according to Moynihan. “They’re going to three grocery stores instead of two, is one of the stats we see,” he said.

The now-tepid growth in overall spending is being propped up by travel and entertainment, while “other things have moderated, except for insurance payments,” Moynihan said. Growth in rent payments has slowed, he noted.

“We’ve got to keep the consumer in the game in the U.S. economy, because [they’re] such a big part of it,” Moynihan said. “They’re getting a little more tenuous, and that is due to everything going on around them.”

The same is true for small- and medium-sized businesses, the Bank of America CEO said. His company is the second-largest U.S. bank by assets, after JPMorgan Chase. Moynihan and other bank CEOs have a bird’s-eye view of the economy, given their coast-to-coast coverage of households and companies.

Business owners are saying, “‘I still feel good about my overall business, but I’m not hiring as much. I’m not buying equipment as fast. I’m not making software purchases as fast,’” Moynihan said.

The bank’s economists believe that inflation will take until the end of next year to get under control and that the Fed will begin cutting interest rates later this year, Moynihan said. The U.S. economy will probably grow at around a 2% level, avoiding recession, he added.

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May 30, 2024
Jamie Dimon says JPMorgan stock is too expensive: ‘We’re not going to buy back a lot’

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Jamie Dimon, CEO of JPMorgan Chase, testifies during the Senate Banking, Housing and Urban Affairs Committee hearing titled Annual Oversight of Wall Street Firms, in the Hart Building on Dec. 6, 2023.

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

Jamie Dimon thinks shares of JPMorgan Chase are expensive.

That was the message the bank’s longtime CEO gave analysts Monday during JPMorgan’s annual investor meeting. When pressed about the timing of a potential boost to the bank’s share repurchase program, Dimon did not mince words.

“I want to make it really clear, OK? We’re not going to buy back a lot of stock at these prices,” Dimon said.

JPMorgan, the biggest U.S. bank by assets, has seen its shares surge 40% over the past year, reaching a 52-week high of $205.88 on Monday before Dimon’s comments dinged the stock. That 12-month performance beats other banks, especially smaller firms recovering from the 2023 regional banking crisis.

It also makes the stock relatively pricey as measured by price to tangible book value, a commonly used industry metric. JPMorgan shares traded recently for around 2.4 times book value.

‘A mistake’

“Buying back stock of a financial company greatly in excess of two times tangible book is a mistake,” Dimon said. “We aren’t going to do it.”

Dimon’s comments about his company’s stock, as well as an acknowledgement that he may be nearing retirement, sent the bank’s shares down 4.5% Monday.

To be clear, JPMorgan has been repurchasing its stock under a previously authorized buyback plan. The bank resumed buybacks early last year after taking a pause to build up capital under new expected guidelines.

Dimon’s guidance simply means it is unlikely the program will be boosted anytime soon. JPMorgan is likely to purchase shares at a $2 billion to $2.5 billion quarterly clip, Portales Partners analyst Charles Peabody wrote in a March research note.

The JPMorgan CEO has often resisted pressure from investors and analysts that he deemed short-sighted. When interest rates were low, Dimon kept relatively high levels of cash, rather than plowing funds into low-yielding, long-term bonds. That helped JPMorgan outperform other lenders, including Bank of America, when interest rates jumped higher.

Underappreciated risks

Dimon’s desire to hoard cash is not just because of impending capital rules. On multiple occasions Monday, he said he was “cautiously pessimistic” about economic risks, including those tied to inflation, interest rates, geopolitics and the reversal of the Federal Reserve’s bond-buying programs.

Markets are currently underappreciating those risks, Dimon said. For instance, prices of high-quality corporate bonds do not adequately reflect the potential for financial stress, Dimon said.

“The investment grade credit spread, which is almost the lowest it’s ever been, will be dead wrong,” Dimon said. “It’s just a matter of time.”

Since 2022, Dimon has warned of an economic “hurricane” set off by geopolitical risks and quantitative tightening. While the continued strength of the economy has surprised many on Wall Street, including Dimon, his concerns have informed his decision-making process ever since.

“We’ve been very, very consistent — if the stock goes up, we’ll buy less,” he said Monday. “When it comes down, we’ll buy more.”

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May 20, 2024
JPMorgan CEO Jamie Dimon signals retirement is closer than ever

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Jamie Dimon, chief executive officer of JPMorgan Chase & Co., at the UK Global Investment Summit at Hampton Court Palace in London, UK, on Monday, Nov. 27, 2023.

Bloomberg | Bloomberg | Getty Images

Jamie Dimon‘s days as CEO of JPMorgan Chase are numbered — though its unclear by how much.

In a response to a question Monday about the bank’s succession planning, Dimon indicated that his expected tenure is less than five more years. That’s a key change from Dimon’s previous responses to succession questions, in which his standard answer had been that retirement was perpetually five years away.

“The timetable isn’t five years, anymore,” Dimon said at the New York-based bank’s annual investor meeting.

The ambiguity of Dimon’s plans has made succession timing at JPMorgan one of the persistent questions for the bank’s investors and analysts. Over nearly two decades, Dimon, 68, has made his lender the largest in America by assets, market capitalization and a number of other measures.

Still, Dimon added Monday that he still has “the energy that I’ve always had” in managing the sprawling company.

The decision of when he moves on will ultimately be up to JPMorgan’s board, Dimon said, and he exhorted investors and analysts to examine the executives who could take his place.

Atop the short list of candidates is Marianne Lake, CEO of JPMorgan’s consumer bank, and Jennifer Piepszak, who co-leads its commercial and investment bank; the executives were given their latest assignments in January.

“We’re on the way, we’re moving people around,” Dimon said.

Even when he steps down as CEO, however, it’s likely he will stay on as the bank’s chairman, JPMorgan has said.

Shares of the bank dropped 3.6%.

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May 20, 2024
The rule capping credit card late fees at $8 is on hold — here’s what it means for you

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Rohit Chopra, director of the Consumer Financial Protection Bureau, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, D.C., Dec. 15, 2022.

Ting Shen | Bloomberg | Getty Images

The U.S. banking industry won a key victory in its effort to block the implementation of a Consumer Financial Protection Bureau rule that would’ve drastically limited the fees that credit card companies can charge for late payment.

A federal court on late Friday approved the industry’s last-minute legal effort to pause the implementation of a regulation that was announced in March and set to go into effect on Tuesday.

In his order, Judge Mark Pittman of the Northern District of Texas sided with plaintiffs including the U.S. Chamber of Commerce in their suit against the CFPB, saying they cleared hurdles in arguing for a preliminary injunction to freeze the rule.

The outcome preserves, at least for now, a key revenue stream for the U.S. card industry. The CFPB estimates that the rule would’ve saved American families $10 billion a year in fees paid by those who fall behind on their bills. It would’ve capped late fees that are typically $32 per incident to $8 each and limited the industry’s ability to hike the fees.

It is now unclear when, or if, the new regulation will go into effect.

“Consumers will shoulder $800 million in late fees every month that the rule is delayed — money that pads the profit margins of the largest credit card issuers,” a CFPB spokesman told CNBC on Friday.

The industry’s lawsuit is an effort to block a regulation “in order to continue making tens of billions of dollars in profits by charging borrowers late fees that far exceed their actual costs,” the spokesman said.

The CFPB has said the industry profits off borrowers with low credit scores by charging them ever higher late penalties over the past decade, while trade groups have argued that the fee caps are a misguided effort that redistributes costs to those who pay their bills on time.

The Consumer Bankers Association, which is one of the groups that sued the CFPB, said it was “pleased with the District Court’s decision to grant a preliminary injunction to stop the CFPB’s credit card late fee rule from going into effect next week.”

The CBA said it will continue to press its case in the courts on why the CFPB rule should be “thrown out entirely.”

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May 10, 2024
Citigroup CEO Jane Fraser says low-income consumers have turned far more cautious with spending

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Citigroup CEO Jane Fraser said Monday that consumer behavior has diverged as inflation for goods and services makes life harder for many Americans.

Fraser, who leads one of the largest U.S. credit card issuers, said she is seeing a “K-shaped consumer.” That means the affluent continue to spend, while lower-income Americans have become more cautious with their consumption.

“A lot of the growth in spending has been in the last few quarters with the affluent customer,” Fraser told CNBC’s Sara Eisen in an interview.

“We’re seeing a much more cautious low-income consumer,” Fraser said. “They’re feeling more of the pressure of the cost of living, which has been high and increased for them. So while there is employment for them, debt servicing levels are higher than they were before.”

The stock market has hinged on a single question this year: When will the Federal Reserve begin to ease interest rates after a run of 11 hikes? Strong employment figures and persistent inflation in some categories have complicated the picture, pushing back expectations for when easing will begin. That means Americans must live with higher rates for credit card debt, auto loans and mortgages for longer.

“I think, like everyone here, we’re hoping to see the economic conditions that will allow rates to come down sooner rather than later,” Fraser said.

“It’s hard to get a soft landing,” the CEO added, using a term for when higher rates reduce inflation without triggering an economic recession. “We’re hopeful, but it is always hard to get one.”

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May 6, 2024
Berkshire Hathaway’s big mystery stock wager could be revealed soon

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Warren Buffett tours the grounds at the Berkshire Hathaway Annual Shareholders Meeting in Omaha Nebraska.

David A. Grogan | CNBC

Berkshire Hathaway, led by legendary investor Warren Buffett, has been making a confidential wager on the financial industry since the third quarter of last year.

The identity of the stock — or stocks — that Berkshire has been snapping up could be revealed Saturday at the company’s annual shareholder meeting in Omaha, Nebraska.

That’s because unless Berkshire has been granted confidential treatment on the investment for a third quarter in a row, the stake will be disclosed in filings later this month. So the 93-year-old Berkshire CEO may decide to explain his rationale to the thousands of investors flocking to the gathering.

The bet, shrouded in mystery, has captivated Berkshire investors since it first appeared in disclosures late last year. At a time when Buffett has been a net seller of stocks and lamented a dearth of opportunities capable of “truly moving the needle at Berkshire,” he has apparently found something he likes — and in the financial realm no less.

That’s an area he has dialed back on in recent years over concerns about rising loan defaults. High interest rates have taken a toll on some financial players like regional U.S. banks, while making the yield on Berkshire’s cash pile in instruments like T-bills suddenly attractive.

“When you are the GOAT of investing, people are interested in what you think is good,” said Glenview Trust Co. Chief Investment Officer Bill Stone, using an acronym for greatest of all time. “What makes it even more exciting is that banks are in his circle of competence.”

Under Buffett, Berkshire has trounced the S&P 500 over nearly six decades with a 19.8% compounded annual gain, compared with the 10.2% yearly rise of the index.

Coverage note: The annual meeting will be exclusively broadcast on CNBC and livestreamed on CNBC.com. Our special coverage will begin Saturday at 9:30 a.m. ET.

Veiled bets

Berkshire requested anonymity for the trades because if the stock was known before the conglomerate finished building its position, others would plow into the stock as well, driving up the price, according to David Kass, a finance professor at the University of Maryland.

Buffett is said to control roughly 90% of Berkshire’s massive stock portfolio, leaving his deputies Todd Combs and Ted Weschler the rest, Kass said.

While investment disclosures give no clue as to what the stock could be, Stone, Kass and other Buffett watchers believe it is a multibillion-dollar wager on a financial name.

That’s because the cost basis of banks, insurers and finance stocks owned by the company jumped by $3.59 billion in the second half of last year, the only category to increase, according to separate Berkshire filings.

At the same time, Berkshire exited financial names by dumping insurers Markel and Globe Life, leading investors to estimate that the wager could be as large as $4 billion or $5 billion through the end of 2023. It’s unknown whether that bet was on one company or spread over multiple firms in an industry.

Schwab or Morgan Stanley?

If it were a classic Buffett bet — a big stake in a single company — that stock would have to be a large one, with perhaps a $100 billion market capitalization. Holdings of at least 5% in publicly traded American companies trigger disclosure requirements.

Investors have been speculating for months about what the stock could be. Finance covers all manner of companies, from retail lenders to Wall Street brokers, payments companies and various sectors of insurance.

Charles Schwab or Morgan Stanley could fit the bill, according to James Shanahan, an Edward Jones analyst who covers banks and Berkshire Hathaway.

“Schwab was beaten down during the regional banking crisis last year, they had an issue where retail investors were trading out of cash into higher-yielding investments,” Shanahan said. “Nobody wanted to own that name last year, so Buffett could’ve bought as much as he wanted.”

Other names that have been circulated — JPMorgan Chase or BlackRock, for example, are possible, but may make less sense given valuations or business mix. Truist and other higher-quality regional banks might also fit Buffett’s parameters, as well as insurer AIG, Shanahan said, though their market capitalizations are smaller.

Buffett & banks

Berkshire has owned financial names for decades, and Buffett has stepped in to inject capital — and confidence — into the industry on multiple occasions.

Buffett served as CEO of a scandal-stricken Salomon Brothers in the early 1990s to help turn the company around. He pumped $5 billion into Goldman Sachs in 2008 and another $5 billion into Bank of America in 2011, ultimately becoming the latter’s largest shareholder.

But after loading up on lenders in 2018, from universal banks like JPMorgan to regional lenders like PNC Financial and U.S. Bank, he deeply pared his exposure to the sector in 2020 on concerns that the coronavirus pandemic would punish the industry.

Since then, he and his deputies have mostly avoided adding to his finance stakes, besides modest positions in Citigroup and Capital One.

‘Fear is contagious’

Last May, Buffett told shareholders to expect more turbulence in banking. He said Berkshire could deploy more capital in the industry, if needed.

“The situation in banking is very similar to what it’s always been in banking, which is that fear is contagious,” Buffett said. “Historically, sometimes the fear was justified, sometimes it wasn’t.”

Wherever he placed his bet, the move will be seen as a boost to the company, perhaps even the sector, given Buffett’s track record of identifying value.

It’s unclear how long regulators will allow Berkshire to shield its moves.

“I’m hopeful he’ll reveal the name and talk about the strategy behind it,” Shanahan said. “The SEC’s patience can wear out, at some point it’ll look like Berkshire’s getting favorable treatment.”

— CNBC’s Yun Li contributed to this report.

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May 3, 2024
NYCB shares jump after new CEO gives two-year plan for “clear path to profitability”

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A New York Community Bank stands in Brooklyn, New York City, on Feb. 8, 2024.

Spencer Platt | Getty Images

New York Community Bank on Wednesday posted a quarterly loss of $335 million on a rising tide of soured commercial loans and higher expenses, but the lender’s stock surged on its new performance targets.

The first-quarter loss, equal to 45 cents per share, compared to net income of $2.0 billion, or $2.87 per share a year earlier. When adjusted for charges included merger-related items, the loss was $182 million, or 25 cents per share, deeper than the 15 cents per share loss estimate from LSEG.

“Since taking on the CEO role, my focus has been on transforming New York Community Bank into a high-performing, well-diversified regional bank,” CEO Joseph Otting said in the release. “While this year will be a transitional year for the company, we have a clear path to profitability over the following two years.”

The bank will have higher profitability and capital levels by the end of 2026, Otting said. That includes a return on average earning assets of 1% and a targeted common equity tier 1 capital level of 11% to 12%.

Otting took over at the beleaguered regional bank at the start of April after an investor group led by former Treasury Secretary Steven Mnuchin injected more than $1 billion into the lender.

Shares of the bank jumped 15% in premarket trading.

This story is developing. Please check back for updates.

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May 1, 2024
JPMorgan Chase is caught in U.S-Russia sanctions war after overseas court orders $440 million seized from bank

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JPMorgan Chase CEO and Chairman Jamie Dimon gestures as he speaks during the U.S. Senate Banking, Housing and Urban Affairs Committee oversight hearing on Wall Street firms, on Capitol Hill in Washington, D.C., on Dec. 6, 2023.

Evelyn Hockstein | Reuters

A Russian court sided with state-run lender VTB Bank in its efforts to recoup $439.5 million from JPMorgan Chase that the American lender froze in U.S. accounts after the Ukraine invasion.

The court ordered the seizure of funds in JPMorgan’s Russian accounts and “movable and immovable property,” including the bank’s stake in a Russian subsidiary, according to a court order published Wednesday.

The order came after VTB filed a suit last week in a St. Petersburg arbitration court, seeking to be made whole for funds frozen in the U.S., and asking for relief because JPMorgan has said it plans to exit Russia.

The next hearing in the Russian case is July 17.

JPMorgan declined to comment. VTB did not immediately respond to CNBC’s request for comment.

The order was the latest example of American banks getting caught between the demands of Western sanctions regimes and overseas interests. JPMorgan is the biggest U.S. bank by assets and run by veteran CEO Jamie Dimon.

Two years after Russia invaded Ukraine, the Biden administration has mounted an unprecedented set of sanctions, oil price caps and trade restrictions designed to weaken Moscow’s military machine.

On Wednesday, President Joe Biden signed into law a sweeping foreign aid bill that includes new powers for U.S. officials to locate and seize Russian assets in the U.S. It also boosted an ongoing American effort to convince European allies to release Russian state assets to assist Ukraine.

In its own lawsuit against VTB last week in the Southern District of New York, JPMorgan sought to block VTB’s effort, noting that U.S. law prohibits the bank from releasing VTB’s $439.5 million.

This leaves JPMorgan exposed to a nearly half-billion-dollar loss, for abiding by U.S. sanctions.

The American bank, seeking to block VTB’s effort, said the Russian company broke its contractual promise to seek relief in American courts, instead finding a friendlier venue in Russia.

JPMorgan said Russian courts have enabled similar efforts by Russian lenders against American or European banks at least a half dozen other times.

JPMorgan said it faced “certain and irreparable harm” from VTB’s efforts.

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April 24, 2024