[ad_1]
Gerard Cassidy, RBC Capital Markets, joins ‘Closing Bell Overtime’ to talk bank stocks, the bond market and more.
05:16
36 minutes ago
[ad_2]
Tag: Citigroup Inc
-
Citigroup CEO Jane Fraser sees ‘cracks’ emerging among some consumers as savings dry up
[ad_1]
Lower-end consumers have shifted buying patterns to save money as their bank accounts dwindle in size, according to Citigroup CEO Jane Fraser.
The third-largest U.S. bank by assets has been monitoring its credit card customers for signs of distress, Fraser told CNBC’s Sara Eisen on Friday in an interview.
“We are paying attention to the lower FICO consumer, where there are cracks” forming, Fraser said, referring to the widely-used credit scoring system from Fair Isaac Corp. “I think some of the excess savings from the Covid years are getting close to depletion.”
The U.S. government injected trillions of dollars into households and businesses during the Covid pandemic to avert disaster, money that has helped keep the economy humming for longer than many forecasters expected. At the same time, the Federal Reserve’s most aggressive interest rate hiking cycle in four decades has made credit card, mortgage and auto debt more expensive, and late payments and defaults have been climbing.
When asked what other CEOs are telling her about the state of the economy, Fraser said that besides comments on AI and labor tightness, corporate leaders have told her that demand is softening, she said.
“Particularly [for] the bottom end of the consumer, that’s the one that we’re starting to see cracks, you’re seeing some shift in the buying patterns to lower categories in the spend,” Fraser said. “It’s a resilient consumer but it’s a softer one.”
Softening demand may help the Fed in its battle with inflation, the CEO noted. While employment and gross domestic product figures suggest the economy will achieve a “soft landing,” if it does tip into recession, it will likely be a “manageable” one, Fraser said.
In the wide-ranging interview, Fraser also said that her latest overhaul of the bank was a move away from the “financial supermarket” model of the past into a more streamlined operation.
The scope of job cuts and expense savings triggered by the reorganization will be disclosed with fourth quarter earnings, Fraser said.
[ad_2]
-
Eight big U.S. bank CEOs to face Senate Banking Committee grilling in December
[ad_1]
Chairman Sherrod Brown (D-OH) questions Treasury Secretary Janet Yellen and Federal Reserve Chairman Powell during a Senate Banking, Housing and Urban Affairs Committee hearing on the CARES Act, at the Hart Senate Office Building in Washington, DC, September 28, 2021.
Kevin Dietsch | Pool | Reuters
Eight CEOs of the largest U.S. banks will face questioning at a Senate Banking Committee hearing in December, according to an announcement obtained by CNBC.
The Dec. 6 session will feature chief executive officers from JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, Bank of New York Mellon, Morgan Stanley, State Street and Wells Fargo.
The meeting is the third time that Banking Committee Chair Sherrod Brown, D-Ohio, will hold an oversight hearing with the heads of the nation’s biggest banks.
Brown set a combative tone in the hearing announcement, calling out banks for continuing to “make record profits and to reward corporations that raise prices on Americans.”
“My commitment as chair of this committee is to always put the Main Street economy – and the workers who power it – at the center of everything we do,” Brown said.
“Part of that commitment is to hear directly from the biggest banks that hold too much power in the economy,” he said. “It’s our job to hold them accountable to their workers, to their customers, and to the American people.”
Brown and other Banking Committee members have ramped up oversight efforts in 2023, particularly regarding three banks that failed earlier in the year, Silicon Valley Bank, Signature Bank and First Republic.
The failure of First Republic in May was the biggest bank failure in the United States since the 2008 financial crisis. JPMorgan acquired First Republic’s deposits and a substantial majority of its assets.
In June, the committee advanced legislation authorizing the Federal Deposit Insurance Corp. to claw back compensation from senior executives of failed banks.
The bill, known as the RECOUP Act, sailed through committee with a 21-2 vote.
Senate Majority Leader Chuck Schumer, D-N.Y., said he plans to bring the bill to a vote by the full Senate., However, the current debate over a federal funding measure that would avoid a government shutdown has left little time for other bills.
The high-profile hearing could have political implications for Brown, who is set to run for reelection in 2024 from Ohio, a state that since he last was elected has seen voters increasingly swing Republican.
[ad_2]
-
Citi debuts deposit and trade services on blockchains for institutional clients
[ad_1]
Citi’s bank branch in the central business district of Singapore on Feb. 12, 2018.
Ore Huiying | Bloomberg | Getty Images
Citi is upgrading some of its services for institutional clients using blockchain technology.
The banking giant introduced Citi Token Services on Monday, which will tokenize clients’ deposits so they can be sent anywhere in the world instantly.
“[If] you’re a large multinational client where you have multiple bank accounts in multiple different regions across borders and you keep buffers of cash in each of these regions, it’s really an inefficient use of cash,” Ryan Rugg, global head of digital assets for Citi’s Treasury and Trade Solutions business, said. With the new service, “if it’s … 5:00 p.m. in the U.S. and 5:00 a.m. in Singapore, but you need to get money there, you can send that immediately, within seconds.”
The bank is also now using smart contracts to automate the trade process. Smart contracts are self-executing programs that run automatically when the conditions of an agreement or contract are met.
Citi tested the smart contract capability with shipping and logistics giant Maersk, a client of the bank. Rugg explained how the company prefunded a smart contract with digitized tokens. Once the company had received agreed-upon services from a canal authority, the token was automatically paid out. Citi’s service could reduce transaction processing times from days to minutes, Rugg said.
While crypto remains in regulatory limbo and prices have been almost stagnant this year, renewed excitement about tokenizing real-world assets using blockchain technology has emerged as one of the hottest topics of the year. Bernstein has said financial incumbents who want to be part of the modernization of financial markets need to be using blockchain technology, and that it sees about $5 trillion of real-world financial assets being tokenized on blockchains over the next five years.
Citi’s announcement is one of the most significant among financial institutions dipping their toes in digital assets. Investment manager Hamilton Lane has launched three tokenized funds. Meanwhile, KKR has tokenized a part of an equity fund through a partnership with Securitize. Franklin Templeton launched a mutual fund that settles transactions and records ownership data over different blockchains. Additionally, JPMorgan Chase has a bank-led blockchain platform called Onyx that focuses on international trade.
Citi is using a private blockchain for its new services. Whether Citi or a company like it will ever have use for public blockchains in the future will depend on how regulations play out, Rugg said.
“If regulation changes and regulators get comfortable with the public, we will definitely go down that route, but right now, from a regulatory standpoint, we’re sticking with permissioned.”
[ad_2]
-
CNBC Daily Open: Don’t worry about August’s hotter-than-expected CPI
[ad_1]
[ad_2]Gasoline prices for full serve and self serve are displayed at the Union 76 gas station ahead of the Labor Day weekend on August 28, 2023 in Beverly Hills, California.
Mario Tama | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Biggest monthly jump this year
The U.S. consumer price index for August rose 3.7% from a year ago and a seasonally adjusted 0.6% for the month, mostly in line with the expected 3.6% and 0.6%, respectively. Though expected, it’s still the biggest month-on-month increase in prices this year. Energy prices, which soared on the month, were mostly to blame. Core inflation, which excludes food and energy prices, was up 4.3% on the year and 0.3% on the month.Optimistic markets
U.S. markets were mixed Wednesday, with the Dow Jones Industrial Average the only major index to fall. Asia-Pacific stocks mostly rose Thursday. Japan’s Nikkei 225 climbed 1.47% even as shares of Softbank slipped slightly. Australia’s S&P/ASX 200 added around 0.55% as data showed unemployment rate in the country holding steady at 3.7% in August.The risks of shadow banks in China
The difficulties faced by China’s real estate sector recently have highlighted, once again, the risks of shadow banking — a term that refers to financial services offered outside the highly regulated banking system. Chinese developers “were able to borrow liberally from shadow banks,” a researcher said, which pushed up land prices and housing costs. That contributed to the developers’ huge debt today.Taiwan is ‘not for sale’
At the All-In Summit, a conference on technology and markets, Elon Musk commented that China probably views Taiwan as “analogous to Hawaii or something like that, like an integral part of China that is arbitrarily not part of China.” It drew a swift rebuke from Taiwan’s Ministry of Foreign Affairs, which said Taiwan is “not part of the PRC and certainly not for sale!”[PRO] An Arm and a leg
Arm is pricing its initial public offering at $51 per share, the top of its expected price range. That values the company at over $54 billion, giving it a price-to-earnings multiple of about 104. It’s a lofty multiple, comparable to Nvidia’s 110 for the previous 12 months. Read what four analysts have to say about the risks and benefits of buying Arm shares.The bottom line
At first glance, August’s CPI report seems bad news. The month-over-month jump in prices is the highest in a year. And even core inflation came in hotter than expected. But look more closely and you’ll find things aren’t as terrifying as they seem.
The headline number was pushed up by rising oil prices, which have been steadily increasing in recent weeks, as we’ve talked about. Gasoline prices soared 10.6% in August, the largest contributor to inflation last month, according to the U.S. Bureau of Labor Statistics.
But it’s likely gasoline prices will fall after a month or two, according to Andrew Hunter, deputy chief U.S. economist at Capital Economics. And gasoline prices have actually retreated 3.3% from a year ago, suggesting that they’re still on a downward trend in the long run.
Excluding volatile energy prices, monthly core inflation was up 0.3% against the expected 0.2%. Here, shelter costs were the main culprit for the hotter-than-expected increase. “Housing continues to contribute an outsized share to the inflation measures,” said Lisa Sturtevant, chief economist at Bright MLS.
But, Sturtevant added, “rent growth has slowed considerably and median rents nationally fell year-over-year in August.” That slowdown in prices will show up in future reports, meaning that August’s core CPI numbers is just “a little bump in the road,” as Kayla Bruun, senior economist at Morning Consult, put it.
“It doesn’t mean it’s turning around and going in the other direction,” Bruun said. “Overall, most of the pieces are headed in the right direction.” Indeed, the annual measure of core CPI still dropped from 4.7% in July to 4.3% in August.
Markets took the numbers in their stride. The Dow was the only major index to fall, losing 0.2% as shares of 3M and Caterpillar sank. The S&P 500 added 0.12% and the Nasdaq Composite rose 0.29%, helped by gains in Tesla and Amazon. And traders are still betting the Federal Reserve won’t raise rates next week, according to the CME FedWatch Tool.
Markets can act in irrational ways sometimes. But sometimes, the crowd psychology of markets manifests as collective wisdom.
— CNBC’s Jeff Cox and Greg Iacurci contributed to this report
Source link -
CNBC Daily Open: August’s CPI report isn’t as bad as it seems
[ad_1]
[ad_2]A view of a gas station as gas prices are at the highest level from last year in Virginia, on August 16, 2023.
Celal Gunes | Anadolu Agency | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Biggest monthly jump this year
The U.S. consumer price index for August rose 3.7% from a year ago and a seasonally adjusted 0.6% for the month, mostly in line with the expected 3.6% and 0.6%, respectively. Though expected, it’s still the biggest month-on-month increase in prices this year. Energy prices, which soared on the month, were mostly to blame. Core inflation, which excludes food and energy prices, was up 4.3% on the year and 0.3% on the month.Markets shrugged
U.S. markets were mixed Wednesday, with the Dow Jones Industrial Average the only major index to fall. The pan-European Stoxx 600 fell 0.32% as European dealmaking sentiment remains cautious, according to a new report from law firm CMS and Mergermarket. Meanwhile, the U.K.’s economy shrank 0.5% month on month in July, more than the 0.2% expected.An Arm and a leg
Arm is pricing its initial public offering at $51 per share, the top of its expected price range. That values the company at over $54 billion, giving it a price-to-earnings multiple of about 104. By comparison, Apple’s multiple is around 30, Tesla’s is 77 and Nvidia’s is 110 for the previous 12 months. Softbank, Arm’s current towner, will control about 90% of the company’s outstanding shares.Rebuilding Citi
Citigroup CEO Jane Fraser reorganized the firm, dividing it into five main business lines that report directly to her. Previously, the bank had only two main divisions. The corporate shuffling will include job cuts, though the number is yet to be decided. Shares of Citigroup have declined about 40% since Fraser assumed the top job in March 2021, and trades for the lowest valuation among U.S. big banks.[PRO] Joining the Tesla party
On Monday, Morgan Stanley published a note asserting Tesla could rally 60%. But that’s nothing compared to the call made by Ron Baron, the billionaire investor who founded Baron Capital in 1982. Baron thinks Tesla could grow to as much as five times its current stock market capitalization — here’s what he has to say about the electric vehicle manufacturer and Elon Musk’s other companies.The bottom line
At first glance, August’s CPI report seems bad news. The month-over-month jump in prices is the highest in a year. And even core inflation came in hotter than expected. But look more closely and you’ll find things aren’t as terrifying as they seem.
The headline number was pushed up by rising oil prices, which have been steadily increasing in recent weeks, as we’ve talked about. Gasoline prices soared 10.6% in August, the largest contributor to inflation last month, according to the U.S. Bureau of Labor Statistics.
But it’s likely gasoline prices will fall after a month or two, according to Andrew Hunter, deputy chief U.S. economist at Capital Economics. And gasoline prices have actually retreated 3.3% from a year ago, suggesting that they’re still on a downward trend in the long run.
Excluding volatile energy prices, monthly core inflation was up 0.3% against the expected 0.2%. Here, shelter costs were the main culprit for the hotter-than-expected increase. “Housing continues to contribute an outsized share to the inflation measures,” said Lisa Sturtevant, chief economist at Bright MLS.
But, Sturtevant added, “rent growth has slowed considerably and median rents nationally fell year-over-year in August.” That slowdown in prices will show up in future reports, meaning that August’s core CPI numbers is just “a little bump in the road,” as Kayla Bruun, senior economist at Morning Consult, put it.
“It doesn’t mean it’s turning around and going in the other direction,” Bruun said. “Overall, most of the pieces are headed in the right direction.” Indeed, the annual measure of core CPI still dropped from 4.7% in July to 4.3% in August.
Markets took the numbers in their stride. The Dow was the only major index to fall, losing 0.2% as shares of 3M and Caterpillar sank. The S&P 500 added 0.12% and the Nasdaq Composite rose 0.29%, helped by gains in Tesla and Amazon. And traders are still betting the Federal Reserve won’t raise rates next week, according to the CME FedWatch Tool.
Markets can act in irrational ways sometimes. But sometimes, the crowd psychology of markets manifests as collective wisdom.
— CNBC’s Jeff Cox and Greg Iacurci contributed to this report
Source link -
CNBC Daily Open: Jackson Hole fears overshadow Nvidia
[ad_1]
[ad_2]Jerome Powell, chairman of the U.S. Federal Reserve, right, walks the grounds at the Jackson Hole economic symposium in Moran, Wyoming, US, on Thursday, Aug. 24, 2023.
David Paul Morris | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Rally fizzles out
U.S. stocks closed lower Thursday as an earlier Nvidia-sparked rally fizzled out, while Treasury yields climbed higher. The pan-European Stoxx 600 tumbled 0.4%, ending three consecutive days of gains. Separately, Turkey hiked interest rates from 17.5% to 25%, more than the expected 20%. The lira jumped on the news.Muted response to Nvidia
Nvidia shares inched up just 0.1% Thursday, paring earlier gains of as much as 8% when it touched a record high of $502. That’s despite the company reporting an astounding earnings beat after the bell Wednesday. Nvidia’s results scared investors away from competitors as well: Shares of AMD slumped 7%, while that of Intel sank 4.1%.Dog days of August
August is living up to its reputation as a horrid month for stocks. The S&P 500 is down more than 3% so far, on pace to snap a five-month winning streak, while the Nasdaq Composite is headed for its biggest one-month loss since December. Low trading volumes, economic weakness in China and high Treasury yields are all contributing to the August sell-off, writes CNBC’s Fred Imbert.Building BRICS
The BRICS coalition — which comprises Brazil, Russia, India, China and South Africa — extended invitations to six nations. Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates will join BRICS on Jan. 1, 2024. A total of 23 countries, including the six set to join the coalition, have formally applied for membership.[PRO] A single-stock ETF play
Exchange-traded funds typically track a basket of stocks belonging to a specific sector, like banks or semiconductors. This ETF, however, consists of just one stock — and aims to deliver a 1.5-times return on a daily basis. What’s more, it’s had a return of more than 400% year to date.The bottom line
Even Nvidia’s blockbuster earnings couldn’t quell investor anxiety over Jackson Hole.
Nvidia shares rose just 0.1% despite reporting a 422% year-over-year surge in net income. Perhaps investors, bursting with enthusiasm over the chipmaker, had already priced in the record revenue. Perhaps investors wanted to cash out early after Nvidia’s shares hit a record high earlier in the day — investors have been bracing for a bad August, and an even worse September, which is historically the worst month for stocks. Or perhaps investors were worried about Federal Reserve Chair Jerome Powell’s speech at Jackson Hole.
(To be clear, analysts still think Nvidia’s shares will pop in the long run. Rosenblatt increased its price target from $800 to $1,100, a new high among Wall Street analysts and an implied 133% upside from Thursday’s close. Big Wall Street banks like Goldman Sachs, Citi and Bank of America were more conservative than that, but still hiked their targets for Nvidia.)
Last year, the S&P 500 lost 2% in the five trading days before Powell’s Jackson Hole speech, and stumbled 5.5% in the five after, according to DataTrek Research. This time, investors are “worried about what [Powell] might say around r-star and embracing, high new normal rates,” said Krishna Guha, head of global policy and central bank strategy for Evercore ISI. R-star is the value at which interest rates neither stimulate nor restrict the economy. In other words, investors are concerned the Fed might not cut interest rates that much even after inflation subsides.
History, then, repeated itself. One day before Powell’s speech, stocks fell sharply. The S&P retreated 1.5% and the Nasdaq shed 1.87%, the biggest one-day loss since Aug. 2 for both indexes. The Dow Jones Industrial Average slipped 1.08%, its worst day since March. Technology stocks, because of their sensitivity to interest rates, were the biggest losers of the day: Amazon lost 2.7% and Apple dropped 2.6%. With just one week left before August draws to a close, it seems market sentiment isn’t likely to change soon, even with earth-shattering reports like Nvidia’s.
— CNBC’s Jeff Cox contributed to this report
Source link -
U.S. banks and regional lenders slide across the board as S&P is latest to downgrade ratings
[ad_1]
U.S. banks and regional banks fell across the board on Tuesday, after S&P Global Ratings downgraded five smaller players after a review of risk related to funding, liquidity and asset quality with a focus on office commercial real estate.
Adding to the gloom, Republic First Bancorp. Inc.’s stock
FRBK,
-41.90%
tanked by 39%, after Nasdaq told the company that its stock would be delisted on Wednesday, after it failed to file its annual report in time.S&P’s move comes just days after Fitch Ratings analyst Christopher Wolfe reduced his operating environment score for U.S. banks to aa- from aa due to the unknown path of interest rate hikes and regulatory changes facing the sector.
And Moody’s Investors Service just two weeks ago upset investors when it downgraded some lenders and said it was reviewing ratings on bigger banks, including Bank of New York Mellon
BK,
-1.71% ,
State Street
STT,
-1.59%
and Northern Trust
NTRS,
-1.73% .For more, see: Bank asset quality, weaker profits spark Moody’s reviews and downgrades as it weighs potential 2024 recession
The S&P 500 Financials Sector has fallen for seven consecutive days, and is on pace for its longest losing streak since April 7, 2022, when it also fell for seven straight trading days.
Individual bank names are also performing poorly, with Goldman Sachs Group Inc.
GS,
-0.94%
and Citigroup Inc.
C,
-1.68%
down for 10 of the past 11 days and Charles Schwab Corp.
SCHW,
-4.84%
down 11 straight days.Goldman alone has fallen for seven straight days for a total loss of 6.3%. It’s the longest losing streak since Feb. 28, 2020, when it also fell for seven straight days as the pandemic was taking hold.
The KBW Nasdaq Regional Banking Index
KBWR
is down for 11 straight days. and the KBW Nasdaq Bank Index
BKX
is down for seven straight days.S&P downgraded Associated Banc. Corp.
ASB,
-4.20% ,
Comerica Inc.
CMA,
-3.82% ,
KeyCorp
KEY,
-3.58% ,
UMB Financial Corp.
UMBF,
-2.42%
% and Valley National Bancorp.
VLY,
-4.19%
by one notch and said the outlook on all five is stable.Read also: More challenges await U.S. banks but analysts think the worst may be over for the year
The rating agency affirmed ratings on Zions Bancorp
ZION,
-4.17%
and maintained a negative outlook, meaning it could downgrade them again in the near-term. And it affirmed ratings and a stable outlook on Synovus Financial Corp.
SNV,
-3.37%
and Truist Financial Corp.
TFC,
-1.36% “We reviewed these 10 banks because we identified them as having potential risks in multiple areas that could make them less resilient than similarly rated peers ,” S&P said in a statement.
“For instance, some that have seen greater deterioration in funding—-as indicated by sharply higher costs or substantial dependence on wholesale funding and brokered deposits—-may also have below-peer profitability, high unrealized losses on their assets, or meaningful exposure to CRE.”
The steep rise in interest rates orchestrated by the Federal Reserve over the past year has raised deposit costs as banks are now competing for savers seeking higher returns and that’s forced some to pay up on deposits and discourage their clients from heading to other institutions and instruments.
The sector has been skittish this year following the collapse of Silicon Valley Bank and other lenders that led to a run on deposits at a number of regional lenders.
However, S&P said about 90% of the banks it rates have stable outlooks and just 10% have negative ones. None have positive outlooks.
The widespread stable outlooks shows that stability in the U.S. banking sector has improved significantly in recent months.
S&P is expecting FDIC-backed banks in aggregate to earn a relatively healthy ROE of about 11% in 2023.
KeyCorp. and Comerica both fell more than 3% on the news. Of the two, KeyCorp. has more outstanding debt and its 10-year bonds widened by about 5 to 10 basis points, according to data solutions provider BondCliq Media Services.
As the following chart shows, the bonds have seen better selling on Wednesday with buyers emerging around midmorning.
KeyBank net customer flow (intraday). Source: BondCliQ Media Services
The next chart shows customer flow over the last 10 days.
Most active KeyBank issues with net customer flow (last 10 days). Source: BondCliQ Media Services
The next chart shows the outstanding debt of the downgraded banks, with KeyCorp. clearly the leader with almost $16 billion of bonds.
Outstanding S&P downgraded banks debt USD by maturity bucket. Source: BondCliQ Media Services
Don’t miss: Capital One confirms roughly $900 million sale of office loans as property sector wobbles
[ad_2]
-
House Republicans subpoena Citibank over info shared with FBI after Jan. 6
[ad_1]
Chairman Jim Jordan, R-Ohio, conducts the House Judiciary Committee hearing on the “Report of Special Counsel John Durham,” in Rayburn Building on Wednesday, June 21, 2023.
Tom Williams | CQ-Roll Call, Inc. | Getty Images
WASHINGTON — House Judiciary Committee Chairman Jim Jordan issued a subpoena to Citibank on Thursday, demanding information about whether the bank gave law enforcement information about customer transactions in the days surrounding the attack on the U.S. Capitol on Jan. 6, 2021.
The subpoena, obtained exclusively by CNBC, came after Jordan previously requested that several financial institutions, including Citibank, provide the information voluntarily. They include Bank of America, J.P. Morgan, PNC, Truist, U.S. Bank and Wells Fargo.
Citibank was the only bank that had not voluntarily complied with the committee’s request, according to a source familiar with the investigation.
The bank’s lawyers told the committee it would only do under a subpoena, according to Jordan. A Citibank spokesperson did not immediately respond to a request for comment from CNBC.
The wider probe into whether banks turned over data to the government to assist in the investigation and prosecution of Jan. 6 rioters was sparked by an FBI whistleblower, who disclosed that Bank of America had voluntarily provided a list of people who made transactions with a BofA credit or debit card in the Washington area between Jan. 5 and Jan. 7, 2021.
BofA did not deny the whistleblower’s allegation, telling Fox News earlier this year that that the bank “follows all applicable laws” to “narrowly respond to law enforcement requests.”
Now the committee wants to know if other banks did the same.
WATCH: House committee investigating Jan. 6 riots release never-before-seen footage of insurrection
[ad_2]
-
Banks hit with $549 million in fines for use of Signal, WhatsApp to evade regulators’ reach
[ad_1]
U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler, testifies before the Senate Banking, Housing and Urban Affairs Committee during an oversight hearing on Capitol Hill in Washington, September 15, 2022.
Evelyn Hockstein | Reuters
U.S. regulators on Tuesday announced a combined $549 million in penalties against Wells Fargo and a raft of smaller or non-U.S. firms that failed to maintain electronic records of employee communications.
The Securities and Exchange Commission disclosed charges and $289 million in fines against 11 firms for “widespread and longstanding failures” in record-keeping, while the Commodity Futures Trading Commission also said it fined four banks a total of $260 million for failing to maintain records required by the agency.
It was regulators’ latest effort to stamp out the pervasive use of secure messaging apps like Signal, Meta‘s WhatsApp or Apple‘s iMessage by Wall Street employees and managers. Starting in late 2021, the watchdogs secured settlements with bigger players including JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup. Fines related to the issue total more than $2 billion, according to the SEC and CFTC.
“Today’s actions stem from our continuing sweep to ensure that regulated entities, including broker-dealers and investment advisers, comply with their recordkeeping requirements, which are essential for us to monitor and enforce compliance with the federal securities laws,” Sanjay Wadhwa, deputy director of enforcement at the SEC, said in the release.
The firms admitted that from at least 2019, employees used side channels like WhatsApp to discuss company business, failing to preserve records “in violation of federal securities laws,” the SEC said Tuesday.
Wells Fargo biggest offender
Wells Fargo, the fourth-biggest U.S. bank by assets and a relatively small player on Wall Street, racked up the most fines on Tuesday, with $200 million in penalties.
“We are pleased to resolve this matter,” said Wells Fargo spokeswoman Laurie Kight.
French banks BNP Paribas and Societe Generale were fined $110 million each, while the Bank of Montreal was fined $60 million. The SEC also fined Japanese firms Mizuho Securities and SMBC Nikko Securities and boutique U.S. investment banks including Houlihan Lokey, Moelis and Wedbush Securities.
Bank of Montreal has “made significant enhancements to our compliance procedures in recent years” and is pleased to have the matter behind it, said spokesman Jeff Roman.
The other banks penalized Tuesday declined to comment.
Apart from the fines, banks were ordered to “cease and desist” from future violations and hire consultants to review bank policies, the SEC said.
On Wall Street, company records of emails and other communications via official channels are often automatically generated to adhere to requirements that clients are treated fairly. But after some of the industry’s biggest scandals of the past decade hinged on incriminating messages preserved in chatrooms, workers often leaned on side channels to conduct business.
A widespread practice
Encrypted messages sent on third-party platforms like Signal make it impossible for banks to record and retain logs of interactions. At Wells Fargo and other banks, the practice was pervasive and happening at all levels; even the managers responsible for enforcing the rules were guilty of the practice, regulators said Tuesday.
An analysis of 13 Wells Fargo employees, for instance, found that all had violated the bank’s communications policies by using text messages to communicate with co-workers and market participants. They used the side channels to communicate with more than 100 other employees, including senior supervisors, over thousands of messages, according to the CFTC complaint.
“Employees’ use of unapproved communication methods was not hidden within the firm,” the CFTC said. “To the contrary, certain supervisors—the very people responsible for supervising employees to prevent this misconduct—routinely communicated using unapproved methods on their personal devices.”
— CNBC’s Jim Forkin contributed to this report
[ad_2]
-
Goldman Sachs misses on profit after hits from GreenSky, real estate
[ad_1]
Goldman Sachs on Wednesday posted profit below analysts’ expectations amid write-downs tied to commercial real estate and the sale of its GreenSky lending unit.
Here’s what the company reported:
- Earnings: $3.08 a share vs. $3.18 a share Refinitiv estimate
- Revenue: $10.9 billion, vs. $10.84 billion estimate
Second-quarter profit fell 58% to $1.22 billion, or $3.08 a share, on steep declines in trading and investment banking and losses related to GreenSky and legacy investments, which sapped about $3.95 from per share earnings. Revenue fell 8% to $10.9 billion.
The company disclosed a $504 million impairment tied to GreenSky and $485 million in real estate write-downs. Those charges flowed through its operating expenses line, which grew 12% to $8.54 billion.
Shares of the bank climbed less than 1%.
Goldman CEO David Solomon faces a tough environment for his most important businesses as a slump in investment banking and trading activity drags on. On top of that, Goldman had warned investors of write-downs on commercial real estate and impairments tied to its planned sale of fintech unit GreenSky.
Unlike more diversified rivals, Goldman gets the majority of its revenue from volatile Wall Street activities, including trading and investment banking. That can lead to outsized returns during boom times and underperformance when markets don’t cooperate.
Exacerbating the situation, Solomon has spent the past few quarters retrenching from his ill-fated push into consumer banking, which has triggered expenses tied to shrinking the business.
“This quarter reflects continued strategic execution of our goals,” Solomon said in the earnings release. “I remain fully confident that continued execution will enable us to deliver on our through-the-cycle return targets and create significant value for shareholders.”
The bank put up a paltry 4.4% return on average tangible common shareholder equity in the quarter, a key performance metric. That is far below both its own target of at least 15% and competitors’ results including JPMorgan Chase and Morgan Stanley, which put up returns of 25% and 12.1% respectively.
Trading and investment banking have been weak lately because of subdued activity and IPOs amid the Federal Reserve’s interest rate increases. But rival JPMorgan posted better-than-expected trading and banking results last week, saying that activity improved late in the quarter, and that raised hopes that Goldman might exceed expectations.
Goldman’s results “reflect the limitations of a business mix that relies more heavily on investment banking and principal investments,” David Fanger of Moody’s Investors Service said in an e-mailed statement. “When client activity remains weak and higher interest rates are pressuring valuations, earnings decline more than at a bank with higher recurring revenues.”
Fixed income trading revenue fell 26% to $2.71 billion, just under the $2.78 billion estimate of analysts surveyed by FactSet. Equities trading revenue was essentially unchanged from a year earlier at $2.97 billion, topping the $2.42 billion estimate.
Investment banking fees fell 20% to $1.43 billion, just below the $1.49 billion estimate.
Asset and wealth management revenue fell 4% to $3.05 billion as the firm booked losses in equity investments and lower incentive fees.
Analysts will likely ask Solomon about updates to his plan to exit consumer banking. Goldman has reportedly been in discussions to offload its Apple Card business to American Express, but it’s unclear how far those talks have advanced.
Goldman shares have dipped nearly 2% this year before Wednesday, compared with the approximately 18% decline of the KBW Bank Index.
On Friday, JPMorgan, Citigroup and Wells Fargo each posted earnings that topped analysts’ expectations amid higher interest rates. Tuesday, Bank of America and Morgan Stanley also reported results that exceeded forecasts.
[ad_2]
-
Bank of America tops analysts’ expectations amid higher interest rates
[ad_1]
Brian Moynihan, CEO of Bank of America Corp., during a Senate Banking, Housing and Urban Affairs Committee hearing in Washington, D.C., Sept. 22, 2022.
Al Drago | Bloomberg | Getty Images
Bank of America on Tuesday posted second-quarter profit and revenue that edged out expectations as the company reaped more interest income amid higher rates.
Here’s what Bank of America reported:
- Earnings: 88 cents a share vs. 84 cents a share Refinitiv estimate
- Revenue: $25.33 billion vs. expected $25.05 billion
related investing news
The bank said earnings rose 19% to $7.41 billion, or 88 cents a share, from $6.25 billion, or 73 cents a share, a year earlier. Revenue climbed 11% to $25.33 billion, fueled by a 14% jump in net interest income to $14.2 billion, essentially matching the expectation of analysts surveyed by FactSet.
“We continue to see a healthy U.S. economy that is growing at a slower pace, with a resilient job market,” CEO Brian Moynihan said in the release. “Continued organic client growth and client activity across our businesses complemented beneficial impacts of higher interest rates.”
Bank of America shares climbed more than 4%.
The company’s Wall Street operations helped it top revenue expectations in the quarter. Fixed income trading revenue jumped 18% to $2.8 billion, edging out the $2.77 billion estimate, and equities trading slipped 2% to $1.6 billion, topping the $1.48 billion estimate.
Bank of America was expected to be one of the top beneficiaries of rising interest rates this year, but it hasn’t played out that way. The company’s net interest income, one of the main drivers of a bank’s revenue, has been questioned lately as loan and deposit growth has slowed. Last week, rival JPMorgan Chase posted a far stronger jump in net interest income that helped fuel a 67% surge in quarterly profit.
Still, CFO Alistair Borthwick told analysts Tuesday that net interest income would be slightly above $57 billion for the year, reaffirming the bank’s previous guidance.
BofA shares declined about 11% this year before Tuesday, compared with the approximately 20% decline of the KBW Bank Index.
This month, the Consumer Financial Protection Bureau said it fined the Charlotte, North Carolina-based bank for customer abuses including fake accounts and bogus fees. Analysts may ask Moynihan if the problems have been resolved.
On Friday, JPMorgan, Citigroup and Wells Fargo each posted earnings that topped analysts’ expectations amid higher interest rates. Morgan Stanley also reported earnings Tuesday. Goldman Sachs wraps up big bank earnings Wednesday.
[ad_2]
-
Encouraging earnings from banks just starting, RBC’S top bank analyst suggests
[ad_1]
Gerard Cassidy, RBC Capital Markets Head of U.S. Equity Bank Strategy and Large Cap Bank Analyst, joins ‘Fast Money’ to talk bank earnings, top bank plays in the current market and more.
[ad_2]
-
Large banks with government backing are more resilient to rate hikes, says Wells Fargo’s Mark Smith
[ad_1]
Mark Smith, Wells Fargo Advisors senior vice president and portfolio manager, joins ‘The Exchange’ to discuss soft landing the bullish case for semiconductors, investment opportunities in banks, and trimming names that are moving up with the rally.
[ad_2]
-
CNBC Daily Open: For banks, big profits don’t mean stock gains
[ad_1]
[ad_2]A person enters the JPMorgan Chase headquarters in New York, June 30, 2022.
Andrew Kelly | Reuters
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Lackluster markets
U.S. stocks traded mixed Friday, with the Dow Jones Industrial Average the only major index to rise, though all big indexes ended in the green for the week. Asia-Pacific markets fell Monday. China’s Shanghai Composite retreated around 1.2%, leading losses in the region, after disappointing economic data.The Chinese economy slows
China’s second-quarter gross domestic product grew 6.3% from a year ago, falling short of the 7.3% increase analysts had expected. Moreover, the number looks impressive on a year-on-year basis only because Shanghai was in lockdown this time last year. When tabulated month over month, GDP grew only 0.8%, much slower than the 2.2% increase in the first quarter.Caged bird
Twitter’s experiencing negative cash flow because of an approximately 50% drop in advertising revenue and “heavy debt,” Elon Musk said Saturday morning. Musk, who is Twitter’s CTO and executive chairman, told a BBC reporter in April that the company’s “roughly breakeven” and expected to have positive cash flow within the next quarter.Thawing Activision Blizzard deal
Microsoft’s one step closer to acquiring Activision Blizzard. The U.S. Appeals Court on Friday denied the Federal Trade Commission’s motion to stop the $68.7 billion deal, while Britain’s competition regulator said it would consider Microsoft’s proposals to “restructure the transaction.” Meanwhile, Sony’s signed a 10-year agreement with Microsoft to keep Activision’s Call of Duty on the PlayStation console.[PRO] Retail therapy
China’s economy may be slowing, but the country’s “premium” spenders are still splashing out on goods, according to Bernstein. The private wealth management firm estimates there are 263 million people in that category, who are spending on products from these companies and potentially boosting their shares.The bottom line
Despite big banks posting solid earnings for their second quarter, they didn’t reap rewards in stock markets Friday.
Citigroup’s earnings and revenue beat expectations. Its shares sank 4.05%. Likewise, Wells Fargo reported better-than-expected earnings and revenue, and raised its guidance for full-year net interest income. Still, market response was muted. Shares of Wells Fargo slipped 0.34%
Even JPMorgan, the grand dame of U.S. banks, didn’t manage to rouse investor interest. Its net income soared 67% year over year; its stock inched up 0.6%.
Why aren’t investors more excited about banks?
The memory of March’s banking turmoil, I think, still lingers. Higher interest rates may benefit big banks because their deposits are relatively sticky compared with those at regional banks — such as the ill-fated Silicon Valley Bank.
But high rates are also deepening commercial real estate debt, impeding dealmaking and lowering loan demand — all headwinds for banks, regardless of their size. It’s hard, in other words, to muster enthusiasm over banks when rates are still at historically high levels.
Another reason for the disinterest in the banking sector, I think, is because stocks are essentially promises of future earnings. And there’s nothing new or exciting that banks can do, really, to generate income.
In fact, I’d argue that banks are supposed to be boring. No one wants the place where they entrust their money to be exciting. The banks that collapsed this year were all, loosely speaking, deviating from boring banking business: Focusing on tech startups, the crypto industry, or — in the case of Credit Suisse — just straightforwardly plagued by scandals.
It’s maybe not a bad thing, then, that investors aren’t piling into big banks.
Source link -
CNBC Daily Open: For banks, big profits don’t mean market gains
[ad_1]
[ad_2]People walk outside of the JPMorgan Chase & Co. Headquarters on June 12, 2023. in New York.
Eduardo Munoz Alvarez | View Press | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Lackluster markets
U.S. stocks traded mixed Friday, with the Dow Jones Industrial Average the only major index to rise, though all big indexes ended in the green for the week. European markets closed lower after five positive sessions. The benchmark Stoxx 600 index retreated 0.11%, dragged down by telecom stocks after downbeat news from Nokia and Ericsson.Biggest bank gets bigger
JPMorgan Chase’s second-quarter net income surged 67% to $14.5 billion, or $4.75 per share. When excluding its acquisition of First Republic, earnings were $4.37 per share. Revenue grew 34% to hit $42.4 billion, boosted by a 44% jump in net interest income. All figures beat Wall Street’s estimates — and the bank’s own, causing it to raise its expectations for the full year’s net interest income.Caged bird
Twitter’s experiencing negative cash flow because of an approximately 50% drop in advertising revenue and “heavy debt,” Elon Musk said Saturday morning. Musk, who is Twitter’s CTO and executive chairman, told a BBC reporter in April that the company’s “roughly breakeven” and expected to have positive cash flow within the next quarter.Thawing Activision Blizzard deal
Microsoft’s one step closer to acquiring Activision Blizzard. The U.S. Appeals Court on Friday denied the Federal Trade Commission’s motion to stop the $68.7 billion deal, while Britain’s competition regulator said it would consider Microsoft’s proposals to “restructure the transaction.” Meanwhile, Sony’s signed a 10-year agreement with Microsoft to keep Activision’s Call of Duty on the PlayStation console.[PRO] Ripple effects
A judge in the Southern District of New York ruled Thursday that Ripple’s XRP token is “not necessarily a security on its face.” That’s a win not just for Ripple, a crypto company, but the wider industry. CNBC Pro’s Tanaya Macheel explains what the case means for crypto companies like Coinbase.The bottom line
Despite big banks posting solid earnings for their second quarter, they didn’t reap rewards in stock markets Friday.
Citigroup’s earnings and revenue beat expectations. Its shares sank 4.05%. Likewise, Wells Fargo reported better-than-expected earnings and revenue, and raised its guidance for full-year net interest income. Still, market response was muted. Shares of Wells Fargo slipped 0.34%
Even JPMorgan, the grand dame of U.S. banks, didn’t manage to rouse investor interest. Its net income soared 67% year over year; its stock inched up 0.6%.
Why aren’t investors more excited about banks?
The memory of March’s banking turmoil, I think, still lingers. Higher interest rates may benefit big banks because their deposits are relatively sticky compared with those at regional banks — such as the ill-fated Silicon Valley Bank.
But high rates are also deepening commercial real estate debt, impeding dealmaking and lowering loan demand — all headwinds for banks, regardless of their size. It’s hard, in other words, to muster enthusiasm over banks when rates are still at historically high levels.
Another reason for the disinterest in the banking sector, I think, is because stocks are essentially promises of future earnings. And there’s nothing new or exciting that banks can do, really, to generate income.
In fact, I’d argue that banks are supposed to be boring. No one wants the place where they entrust their money to be exciting. The banks that collapsed this year were all, loosely speaking, deviating from boring banking business: Focusing on tech startups, the crypto industry, or — in the case of Credit Suisse — just straightforwardly plagued by scandals.
It’s maybe not a bad thing, then, that investors aren’t piling into big banks.
Source link -
Watch CNBC’s full interview with Victoria Greene and Scott Wren
[ad_1]
Victoria Greene, G Squared Private Wealth and Scott Wren, Wells Fargo Investment Institute Senior Global Market Strategist, join CNBC’s Leslie Picker and ‘Closing Bell Overtime’ to talk the day’s market action.
[ad_2]
-
Moody’s Ana Arsov breaks down today’s bank earnings
[ad_1]
Ana Arsov, Moody managing director, joins 'Closing Bell' to discuss the three banks that reported earnings Friday.
[ad_2]
-
Citigroup posts better-than-expected earnings and revenue
[ad_1]
Citigroup on Friday reported second-quarter earnings and revenue that topped expectations.
Despite the beat, Citi’s revenue fell 1% from a year ago as the decline in markets and investment banking businesses weighed on its results. Citi said the uncertain macroenvironment and low volatility impacted client activity and market performance.
“Amid a challenging macroeconomic backdrop, we continued to see the benefits of our diversified business model and strong balance sheet,” CEO Jane Fraser said in a statement.
Here’s how the New York-based lender fared in the quarter compared with what analysts polled by Refinitiv expected from the banking giant.
- Earnings per share: $1.33 vs. $1.30
- Revenue: $19.44 billion vs. $19.29 billion
Citigroup’s net income fell 36% to $2.9 billion, or $1.33 per share, from $4.5 billion, or $2.19 per share, last year, pressured by higher expenses, high cost of credit and lower revenue.
“Markets revenues were down from a strong second quarter last year, as clients stood on the sidelines starting in April while the U.S. debt limit played out,” Fraser said. “In Banking, the long-awaited rebound in Investment Banking has yet to materialize, making for a disappointing quarter.”
On the bright side, revenue from personal banking and wealth management increased 6% in the quarter to $6.4 billion driven by strong loan growth.
Citi returned a total of $2 billion to shareholders through common dividends and share buybacks in the second quarter.
Shares of Citigroup dipped 4% on Friday. The stock is up more than 1% year to date, outperforming the SPDR S&P Bank ETF (KBE), which is down about 12%.
Read the earnings release here.
Correction: Citigroup’s net income fell 36% year over year. A previous version misstated the percentage.
[ad_2]
-
UBS analyst Erika Najarian: There’s still a lot of ‘PTSD’ from the latest bank failures
[ad_1]
Erika Najarian, UBS equity research analyst, joins ‘Squawk on the Street’ to discuss the bank stocks as JPMorgan, Wells Fargo and Citigroup posted better-than-expected second-quarter earnings.
[ad_2]
