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  • Bank earnings kick off with JPMorgan, Wells Fargo amid concerns about rising rates, bad loans

    Bank earnings kick off with JPMorgan, Wells Fargo amid concerns about rising rates, bad loans

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    Jamie Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co., gestures as he speaks during an interview with Reuters in Miami, Florida, U.S., February 8, 2023. 

    Marco Bello | Reuters

    American banks are closing out another quarter in which interest rates surged, reviving concerns about shrinking margins and rising loan losses — though some analysts see a silver lining to the industry’s woes.

    Just as they did during the March regional banking crisis, higher rates are expected to lead to a jump in losses on banks’ bond portfolios and contribute to funding pressures as institutions are forced to pay higher rates for deposits.

    KBW analysts Christopher McGratty and David Konrad estimate banks’ per-share earnings fell 18% in the third quarter as lending margins compressed and loan demand sank on higher borrowing costs.

    “The fundamental outlook is hard near term; revenues are declining, margins are declining, growth is slowing,” McGratty said in a phone interview.

    Earnings season kicks off Friday with reports from JPMorgan Chase, Citigroup and Wells Fargo.

    Bank stocks have been intertwined closely with the path of borrowing costs this year. The S&P 500 Banks index sank 9.3% in September on concerns sparked by a surprising surge in longer-term interest rates, especially the 10-year yield, which jumped 74 basis points in the quarter.

    Rising yields mean the bonds owned by banks fall in value, creating unrealized losses that pressure capital levels. The dynamic caught midsized institutions including Silicon Valley Bank and First Republic off guard earlier this year, which — combined with deposit runs — led to government seizure of those banks.

    Big banks have largely dodged concerns tied to underwater bonds, with the notable exception of Bank of America. The bank piled into low-yielding securities during the pandemic and had more than $100 billion in paper losses on bonds at midyear. The issue constrains the bank’s interest revenue and has made the lender the worst stock performer this year among the top six U.S. institutions.

    Expectations on the impact of higher rates on banks’ balance sheets varied. Morgan Stanley analysts led by Betsy Graseck said in an October 2 note that the “estimated impact from the bond rout in 3Q is more than double” losses in the second quarter.

    Hardest-hit banks

    Bond losses will have the deepest impact on regional lenders including Comerica, Fifth Third Bank and KeyBank, the Morgan Stanley analysts said.

    Still, others including KBW and UBS analysts said that other factors could soften the capital hit from higher rates for most of the industry.

    “A lot will depend on the duration of their books,” Konrad said in an interview, referring to whether banks owned shorter or longer-term bonds. “I think the bond marks will look similar to last quarter, which is still a capital headwind, but that there’ll be a smaller group of banks that are hit more because of what they own.”

    There’s also concern that higher interest rates will result in ballooning losses in commercial real estate and industrial loans.

    “We expect loan loss provisions to increase materially compared to the third quarter of 2022 as we expect banks to build up loan loss reserves,” RBC analyst Gerard Cassidy wrote in a Oct. 2 note.

    Silver linings

    Still, bank stocks are primed for a short squeeze during earnings season because hedge funds placed bets on a return of the chaos from March, when regional banks saw an exodus of deposits, UBS analyst Erika Najarian wrote in an Oct. 9 note.

    “The combination of short interest above March 2023 levels and a short thesis from macro investors that higher rates will drive another liquidity crisis makes us think the sector is set up for a potentially volatile short squeeze,” Najarian wrote.

    Banks will probably show stability in deposit levels in the quarter, according to Goldman Sachs analysts led by Richard Ramsden. That, and guidance on net interest income in the fourth quarter and beyond, could support some banks, said the analysts, who are bullish on JPMorgan and Wells Fargo.

    Perhaps because bank stocks have been so beaten down and expectations are low, the industry is due for a relief rally, said McGratty.

    “People are looking ahead to, where is the trough in revenue?” McGratty said. “If you think about the last nine months, the first quarter was really hard. The second quarter was challenging, but not as bad, and the third will be still tough, but again, not getting worse.”

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  • These regional banks are at risk of being booted from the S&P 500

    These regional banks are at risk of being booted from the S&P 500

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    A customer enters Comerica Inc. Bank headquarters in Dallas, Texas.

    Cooper Neill | Bloomberg | Getty Images

    The stock sell-off that hit regional banks this year has exposed lenders including Zions and Comerica to the risk of being delisted from the Standard & Poor’s 500 index.

    The banks, each with market capitalizations of around $5 billion, were the fourth- and sixth-smallest members of the 500 company listing as of this week, according to FactSet.

    That leaves the companies in a similar position to Lincoln National, which got shunted from the S&P 500 last month and placed into a small-cap index. Blackstone, the world’s largest alternative asset manager, took Lincoln National’s spot.

    This year’s regional banking crisis has already caused changes in the composition of the S&P 500, the most popular broad measure of large American companies in the investing world. Silicon Valley Bank and First Republic were removed from the benchmark after deposit runs led to their government seizure. More changes may be coming, especially if the industry faces a protracted slump, according to analysts.

    “It’s absolutely a risk,” Chris Marinac, research director at Janney Montgomery Scott, said in an interview. “If the market were to further change the valuation of these companies, especially if we have higher rates, I wouldn’t rule it out.”

    Banks begin disclosing third-quarter results Friday, led by JPMorgan Chase. Investors are keen to hear how rising interest rates affected bond holdings and deposits in the period.

    Companies that no longer qualify as large-cap stocks are at heightened risk of demotion from the S&P 500. There were seven members valued at $6 billion or less at the end of August. Two of them were removed the following month: insurer Lincoln National and consumer firm Newell Brands.

    Those that join the benchmark often celebrate the milestone. The popularity of mutual funds and ETFs based on the index means that new members typically see an immediate boost to their stock price. Those that get demoted can suffer declines as fewer money managers need to own shares in the companies.

    S&P guidelines

    To be considered for inclusion in the S&P 500, companies need to have a market capitalization of at least $14.5 billion and meet profitability and trading standards.

    Members that violate “one or more of the eligibility criteria for the S&P Composite 1500 may be deleted from the respective component index at the Index Committee’s discretion,” according to S&P Dow Jones Indices’ methodology.

    Still, that doesn’t mean Zions or Comerica are on the cusp of a delisting. The committee that decides the composition of the S&P 500 looks to minimize churn and accurately represent reference sectors, making changes only when “ongoing conditions warrant an index change,” according to S&P.

    Stock Chart IconStock chart icon

    Shares of regional banks ZIons and Comerica have tumbled this year.

    For instance, after the onset of the Covid pandemic in March 2020, many retail S&P 500 companies temporarily violated the profitability rule, but that didn’t result in widespread demotions, according to a person who has studied the S&P 500 index.

    S&P Dow Jones Indices declined to comment for this article, as did Comerica. Zion’s didn’t immediately return a message seeking comment.

    Besides Zions and Comerica, KeyCorp and Citizens Financial are the only other S&P 500 banks with market caps below the threshold for inclusion in the index, according to an Aug. 31 Piper Sandler note. KeyCorp and Citizens, however, each have market caps of greater than $10 billion, making them less likely to be impacted than smaller banks.

    After Blackstone became the first major alternative asset manager to join the S&P 500 last month, analysts said that peers including KKR and Apollo Global may be next, and they would likely replace other financial names. KKR and Apollo each have market capitalizations of greater than $50 billion.

    “Perhaps more demotions of low-market cap financials are to come,” Wells Fargo analyst Finian O’Shea said in a Sept. 5 research note.

    – CNBC’s Gabriel Cortes contributed to this article.

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  • The pain for all bank stocks is ‘overdone’, says RBC’s Gerard Cassidy

    The pain for all bank stocks is ‘overdone’, says RBC’s Gerard Cassidy

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    Closing Bell: Overtime

    Gerard Cassidy, RBC Capital Markets, joins ‘Closing Bell Overtime’ to talk bank stocks, the bond market and more.

    05:16

    36 minutes ago

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  • Eight big U.S. bank CEOs to face Senate Banking Committee grilling in December

    Eight big U.S. bank CEOs to face Senate Banking Committee grilling in December

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    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.”

    CNBC Politics

    Read more of CNBC’s politics coverage:

    “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.

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  • Coinbase CEO slams JPMorgan for banning crypto payments in UK, suggests government should act

    Coinbase CEO slams JPMorgan for banning crypto payments in UK, suggests government should act

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    Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.

    Michael Nagle | Bloomberg | Getty Images

    Coinbase CEO Brian Armstrong is unhappy with JPMorgan Chase’s decision to block crypto-related transactions at its U.K. digital banking subsidiary, Chase UK.

    Chase UK earlier this week put out a notice to customers saying it will no longer allow its customers to purchase cryptocurrencies using its debit cards or through bank transfers, citing concerns over the risk of fraud to users from digital tokens.

    The bank, which has operated as a standalone entity in the U.K. since 2021, said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”

    “Once in a while we see a bank in the world that decides they want to de-platform this whole industry,” Armstrong said in an interview with CNBC’s “Squawk Box” on Thursday.

    “I don’t think that’s OK. I don’t think that’s the rule of things in our society. I think the government should decide what is allowed and what’s not.”

    The move from Chase UK has not happened in a vacuum. Other British lenders have taken similar steps to bar crypto transactions, citing the risk of fraud.

    Examples include NatWest, which placed limits on the amount of cash that can be sent to crypto exchanges, and HSBC, which banned crypto purchases altogether.

    Crypto fraud concerns

    In its note to customers Tuesday, Chase UK said that it was blocking the use of crypto by its customers due to concerns over a rise in fraud.

    Data from Action Fraud, the U.K. fraud reporting agency, shows that U.K. consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.

    Bitcoin, ether, XRP and other cryptocurrencies are not legal currency.

    Originally created as an alternative, online form of money meant to bypass the need for bank accounts and other financial middlemen, they have increasingly been embraced by mainstream financial institutions such as PayPal, Visa, and Mastercard.

    But they have long been associated with illicit activities such as money laundering, terrorist financing and illegal gambling, not least due to their pseudonymous nature.

    The people transacting in bitcoin and other digital currencies don’t disclose their real identity, making it harder for banks to trace them for suspicious payments versus digital fiat currency transactions.

    Legitimizing crypto

    Nevertheless, crypto’s proponents say that the industry has matured a great deal in the wake of the collapse of FTX and numerous other scandals. They say it can become part of everyday payments and trading in a way that is legitimate.

    For its part, the U.K. has been working to develop legislation that would regulate retail trading in crypto assets.

    The Financial Services and Markets Bill is one example of legislation that already includes some provisions on cryptocurrency. That specific law aims to bring crypto assets into the regulatory fold. But it is not a comprehensive law addressing crypto through tailored laws.

    In an interview with CNBC’s Arjun Kharpal, Economic Secretary to the Treasury Andrew Griffith said the U.K. could pass a crypto-specific law by April 2024.

    Jurisdictions around the world from Dubai to Singapore have been trying to position themselves as crypto-friendly places to encourage firms to set up shop there.

    The U.S., meanwhile, has taken a hard line on cryptocurrency firms with its regulators stepping up enforcement action against companies.

    Armstrong suggested that the U.K. government should take heed of Chase UK’s move to ban crypto payments — though he acknowledged the country’s ambition to become a “Web3 and crypto hub.”

    “The government in the U.K. through [U.K. PM] Rishi Sunak and Andrew Griffith the city minister in London have it made clear they want to make the U.K. a Web3 and crypto hub,” Armstrong said.

    “They are trying to attract businesses there. I was disappointed to see Chase UK’s stance on that. I hope that was a misunderstanding that will be clarified in the coming weeks.”

    WATCH: Coinbase CEO joins entrepreneurs on Capitol Hill to push for clear crypto rules: CNBC Crypto World

    Coinbase CEO joins entrepreneurs on Capitol Hill to push for clear crypto rules: CNBC Crypto World

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  • What a stressed commercial real estate market means for these exposed bank stocks

    What a stressed commercial real estate market means for these exposed bank stocks

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    Collin Madden, founding partner of GEM Real Estate Partners, walks through empty office space in a building they own that is up for sale in the South Lake Union neighborhood in Seattle, Washington, May 14, 2021.

    Karen Ducey | Reuters

    Banks are facing mounting uncertainty as the commercial real estate (CRE) sector continues to struggle. But, tailwinds in our financial names should help safeguard their bottom lines.

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  • JPMorgan’s UK digital bank blocks customers from buying crypto

    JPMorgan’s UK digital bank blocks customers from buying crypto

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    Signage outside a Chase bank branch in San Francisco, California, on Monday, July 12, 2021.

    David Paul Morris | Bloomberg | Getty Images

    Chase UK, the British challenger bank brand of JPMorgan, has blocked customers in the U.K. from purchasing crypto assets.

    The company said in a statement Tuesday that, starting Oct. 16, Chase UK customers would “no longer be able to make crypto transactions via debit card or by outgoing bank transfer.”

    “Customers will receive a declined transaction notification if they do attempt to make a crypto-related transaction,” the bank said in an email to clients.

    “This has been done to protect our customers and keep their money safe.”

    The company said it was taking the step because “fraudsters are increasingly using crypto assets to steal large sums of money from people.”

    Chase UK cited data from Action Fraud, Britain’s fraud reporting agency, that showed U.K consumer losses to crypto fraud increased by over 40% in the last year, surpassing £300 million for the first time.

    Crypto scams accounted for more than 40% of all reported crimes in England and Wales last year, according to the Office for National Statistics, Chase UK said in the customer email.

    Chase UK is the latest bank in the country to take steps to limit the ability of their customers to purchase cryptocurrencies.

    NatWest imposed limits on its customers which meant they could only send a maximum of £1,000 per day and £5,000 over a 30-day period to crypto exchanges, in an effort to tackle the rise in fraud attempts involving crypto.

    HSBC and Nationwide have announced similar restrictions on crypto-linked purchases.

    “We’re committed to helping keep our customers’ money safe and secure,” a Chase spokesperson told CNBC via email Tuesday.

    “We’ve seen an increase in the number of crypto scams targeting U.K. consumers, so we have taken the decision to prevent the purchase of crypto assets on a Chase debit card or by transferring money to a crypto site from a Chase account.” 

    WATCH: Crypto enthusiasts want to reshape the internet with ‘Web3.’ Here’s what that means

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  • JPMorgan Chase settles Jeffrey Epstein sex trafficking suit by U.S. Virgin Islands for $75 million

    JPMorgan Chase settles Jeffrey Epstein sex trafficking suit by U.S. Virgin Islands for $75 million

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    JPMorgan Chase said Tuesday it will pay $75 million to settle a lawsuit by the U.S. Virgin Islands alleging that the huge American bank facilitated and benefited from sex trafficking of young women by its longtime customer Jeffrey Epstein.

    JPMorgan did not admit any wrongdoing in the settlement, which will give $55 million to Virgin Islands charities and the American territory’s anti-trafficking efforts.

    The remaining $20 million will cover attorneys’ fees incurred by the Virgin Islands as part of the litigation in federal court in New York.

    The Virgin Islands said the deal “includes several substantial commitments by JPMorgan Chase to identify, report, and cut off support for potential human trafficking, including establishing and implementing comprehensive policies and procedures.”

    Jeffrey Epstein and Ghislaine Maxwell attend de Grisogono Sponsors The 2005 Wall Street Concert Series Benefitting Wall Street Rising, with a Performance by Rod Stewart at Cipriani Wall Street on March 15, 2005 in New York City.

    Joe Schildhorn | Patrick McMullan | Getty Images

    The territory said that $10 million of the money received would be used to create a fund to provide mental health services for Epstein’s victims.

    JPMorgan also said Tuesday that it had reached a settlement with Jes Staley, a former executive at the bank who had been friends with Epstein, to resolve claims by JPMorgan that he was responsible for any civil damages and costs associated with Epstein-related litigation.

    The terms of the agreement with Staley are confidential.

    JPMorgan said that it “deeply regrets” its association with Epstein, who was a client from 1998 until 2013.

    Virgin Islands Attorney General Ariel Smith said the agreement settles what was the first enforcement action against a bank for facilitating and profiting from human trafficking.

    “As part of the settlement, JPMorgan has agreed to implement and maintain meaningful anti-trafficking measures, which will help prevent human trafficking in the future,” Smith said in a statement.

    “This settlement is an historic victory for survivors and for state enforcement, and it should sound the alarm on Wall Street about banks’ responsibilities under the law to detect and prevent human trafficking.”

    Jes Staley, former chief executive officer of Barclays Plc, arrives at the offices of Boies Schiller Flexner LLP in New York, US, on Sunday, June 11, 2023. Staley has faced his first day of testimony about his relationship with Jeffrey Epstein as part of lawsuits alleging the bank enabled the late financier’s sex-trafficking. Photographer: Stephanie Keith/Bloomberg via Getty Images

    Bloomberg | Bloomberg | Getty Images

    The deals come months after a separate $290 million settlement by JPMorgan with victims of the now-dead predator. That earlier deal ended a similar lawsuit by one of those victims in U.S. District Court in Manhattan.

    As with that prior agreement, the new pacts let the bank avoid a trial on the Virgin Islands’ allegations in that same court, which was due to start Oct. 23.

    The territory had said it would ask jurors at that trial to award it at least $190 million in damages from JPMorgan.

    The Virgin Islands previously obtained a $105 million settlement from Epstein’s estate, and another $62.5 million from billionaire investor Leon Black to resolve potential claims related to Epstein.

    CNBC Politics

    Read more of CNBC’s politics coverage:

    JPMorgan CEO Jamie Dimon and other top bank executives had been questioned by lawyers for the Virgin Islands as part of its suit against the firm.

    Related court filings and hearings have led to a stream of embarrassing headlines about the bank since the case was filed in late 2022, more than three years after Epstein killed himself in a Manhattan jail following his arrest on federal child sex trafficking charges.

    The Virgin Islands claimed JPMorgan effectively ignored repeated red flags that Epstein was trafficking women to his private island in the territory because it wanted to retain his business and that of his wealthy and powerful friends.

    Among those red flags was Epstein’s 2008 guilty plea in Florida to a state charge of soliciting sex from an underage girl, a conviction that led to a 13-month jail stint.

    In late August, a JPMorgan attorney told Judge Jed Rakoff that after Epstein died, the bank notified the Treasury Department that it since had identified more than $1 billion in transactions related to “human trafficking” by him dating back 16 years.

    But the bank also had alleged in court filings that the Virgin Islands was complicit in Epstein’s crimes, saying he gave high-ranking territory officials money, advice, and favors in exchange for their allowing him to traffick women there unhindered.

    NBC archive footage shows Trump partying with Jeffrey Epstein in 1992

    In a press release announcing the new agreement with the Virgin Islands, JPMorgan said it “believes this settlement is in the best interest of all parties, particularly for those who can benefit from efforts to combat human trafficking, and for survivors who suffer unimaginable abuse at the hands of these criminals.”

    “While the settlement does not involve admissions of liability, the firm deeply regrets any association with this man, and would never have continued doing business with him if it believed he was using the bank in any way to commit his heinous crimes,” the statement said.

    “The firm will continue to work with law enforcement to combat human trafficking and help to identify improper money movement into the global payments systems.”

    JPMorgan said that under the deal a large portion of the money will got to the Virgin Islands “to enhance the infrastructure and capabilities of law enforcement to prevent and combat human trafficking and other crimes in their territories.”

    The bank said it will pay millions more”to support USVI charitable organizations whose work is aimed at addressing social ills, including fighting human trafficking and other sex crimes, and to support survivors on their paths to healing.”

    With the remaining money going to attorneys’ fees, JPMorgan is paying the same amount, $75 million, that Deutsche Bank agreed to pay Epstein victims to settle a third Manhattan federal court lawsuit that alleged that bank facilitated his sex trafficking when he was a customer from 2013 through 2018.

    Deutsche Bank had taken on Epstein as a customer after JPMorgan ended its relationship with him when Staley left the bank.

    Epstein for years socialized with high-profile people such as former President Donald Trump and Bill Clinton, Britain’s Prince Andrew, and had business relationships with billionaires such as Black and former L. Brands CEO Les Wexner.

    Ghislaine Maxwell, a British socialite who once was Epstein’s girlfriend, was convicted at a federal criminal trial in Manhattan in December 2021 of procuring underage girls to be sexually abused by him.

    Maxwell later was sentenced to 20 years in prison.

    Staley, the former JPMorgan executive has denied claims of wrongdoing, including an allegation that he sexually assaulted a woman identified as “Jane Doe,” whose class action suit led to the prior settlement with the bank.

    In November 2021, Staley stepped down as CEO of Barclays after an investigation by British bank regulators into how he had characterized his relationship with Epstein.

    This is breaking news. Check back for updates.

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  • Jamie Dimon says India optimism is ‘completely justified’

    Jamie Dimon says India optimism is ‘completely justified’

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    Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co.

    Emily Elconin | Bloomberg | Getty Images

    LONDON — JPMorgan Chase Chairman and CEO Jamie Dimon struck a bullish tone at the India Investor Summit, saying the optimism surrounding the country at the moment is “completely justified.”

    “Look at this conference. I remember eight years ago or nine years ago we started with 50 or 75 clients. Now it’s 700 investors around the world, 100 companies presenting. I think the optimism of India is actually completely justified,” Dimon told CNBC-TV18’s Shereen Bhan at the conference Monday .

    India’s prominence on the global economic stage has steadily increased over recent years, particularly as Western countries look to diversify away from China.

    It has led to a renewed interest in the country from investors; the NIFTY 50 benchmark Indian stock market index is up over 15% over the last year.

    Dimon praised Indian Prime Minister Narendra Modi for jumpstarting the country’s business climate, highlighting policies that enable Indian citizens to get bank accounts more easily, simplifying taxes and boosting foreign investment.

    The bank has increased its employee numbers in India from around 6,000 in 2005 to 60,000 today, Dimon added.

    “The universe is [in India]. We’re not the only bank here, there are large other banks with a lot of people, but so is Accenture, McKinsey and obviously you have your local Tata, etc., so those things are driving optimism,” he said.

    India became the world’s most populous country in April, with a total of 1.4 billion citizens, according to the United Nations. It’s expected to overtake Japan and Germany to become the world’s third-largest economy by 2030, according to S&P Global and Morgan Stanley forecasts, and Goldman Sachs expects it to be the world’s second-largest economy by 2075.

    The U.S. is hoping to work more closely with India on manufacturing as it looks to shift away from China, while German Chancellor Olaf Scholz said in February that he was committed to securing a free trade deal between India and the European Union. “It’s an important topic and I’ll get personally involved,” Scholz said after meeting with Modi in New Delhi.

    In his interview with CNBC-TV18, Dimon emphasized that it wasn’t just a lack of confidence in China that was turning businesses towards India.

    “It’s not just because of the complications with China, I think that’s an opportunity but some of this optimism would have been there anyway,” he said.

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  • ‘We have dealt with recessions before’: Jamie Dimon says geopolitics is the world’s biggest risk

    ‘We have dealt with recessions before’: Jamie Dimon says geopolitics is the world’s biggest risk

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    Jamie Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co., gestures as he speaks during an interview with Reuters in Miami, Florida, U.S., February 8, 2023. 

    Marco Bello | Reuters

    JPMorgan Chase CEO Jamie Dimon says geopolitics after Russia’s invasion in Ukraine is the biggest risk, larger than high inflation or a U.S. recession.

    Global markets have taken a hit over the past week, as the U.S. Federal Reserve signaled that interest rates will likely remain higher for longer, in order to bring inflation sustainably back down to its 2% target.

    Speaking to CNBC TV-18 in India on Tuesday, Dimon said people should “be prepared for higher oil and gas prices, higher rates, as a matter of just being prepared,” but that the U.S. economy will likely get through any turbulence. However, the war in Ukraine has polarized global powers and shows no sign of abating.

    “I think the geopolitical situation is the thing that most concerns me, and we don’t know the effect of that in the economy,” he added.

    “I think that the humanitarian part is far more important. I think it’s also very important for the future of the free democratic world. We may be at an inflection point for the free democratic world. That’s how seriously I take it.”

    Further negative pressure on markets in recent months has come from a slowdown in the Chinese economy, driven in large part by weakness in its massive property market.

    Asked about the potential impact of this slump on the long-term prospects for China and the global economy, Dimon again suggested that Eastern Europe was the actual epicenter of risk, with the war in Ukraine straining relationships between economic superpowers.

    “Far more important to me is the Ukraine war, oil, gas, food migration — it’s affecting all global relationships — very importantly, the one between America and China,” Dimon said.

    “I think America takes this very seriously, I’m not quite sure how the rest of the world does. You have a European democratic nation invaded under the threat of nuclear blackmail. I think it’s been a good response, but it’s going to affect all of our relationships until somehow the war is resolved.”

    China and India have attempted to maintain a neutral stance on the war and position themselves as potential peacemakers, utilizing the closer ties with Russia demonstrated by the BRICS alliance. Beijing has submitted a peace plan proposal to resolve the conflict in Ukraine, which has so far failed to gain traction.

    This placed the world’s two most populous countries somewhat at odds with the U.S. and Europe, which have supplied Ukraine with weapons and financial support in the belief that only a Ukrainian victory will restore international order.

    “India is going its own way. They’ve made their priorities quite clear about national security and what that means,” Dimon said.

    “I’m an American patriot, so governments are going to set foreign policy, not JPMorgan, but I think Americans should stop thinking that China is a 10-foot giant. Our GDP per person is $80,000, we have all the food, water and energy we need, we’ve got the unbelievable benefits of free enterprise and freedom.”

    Europe and US have number of geopolitical issues in common, says NEWEST CEO Fernando Napolitano

    The Wall Street titan added that renewed U.S. engagement with China on issues such as trade and national security was positive, and that he would like to see more of it to rebalance the trade and investment relationship between Washington and Beijing, even if that caused a “little bit of unravelling.”

    “But it’s not just America, every country is relooking at its net. What is national security? Do I have reliant energy lines? Do I need semiconductors from China? Where do I get my rare earths from? Ukraine woke everyone up to that and that’s a permanent state of affairs now,” Dimon said.

    Asked if geopolitics was the No. 1 risk facing the world today, Dimon responded, “absolutely.”

    “We have dealt with inflation before, we dealt with deficits before, we have dealt with recessions before, and we haven’t really seen something like this pretty much since World War II,” he added.

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  • JPMorgan legal fees in Jeffrey Epstein sex traffic cases near $14 million, former exec reveals

    JPMorgan legal fees in Jeffrey Epstein sex traffic cases near $14 million, former exec reveals

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    Jeffrey Epstein in Cambridge, MA in 1984.

    Rick Friedman | Corbis News | Getty Images

    JPMorgan Chase has racked up nearly $14 million in legal fees defending itself against two lawsuits alleging it abetted the sex trafficking by its longtime customer Jeffrey Epstein, according to lawyers for a former top executive who says he is being scapegoated by the huge bank.

    Attorneys for former JPMorgan executive Jes Staley revealed the fee total in a filing late Wednesday in U.S. District Court in Manhattan.

    Staley’s filing was later removed from public view on the court docket.

    On Thursday, his lawyers filed a new version of the document that redacted the reference to the bank’s legal fees.

    The filing challenges JPMorgan’s use of three financial experts to support its legal claims that Staley, a former friend of Epstein, should be responsible for paying the bank hundreds of millions of dollars to cover costs related to the lawsuits.

    Staley’s lawyers did not immediately reply to a request for comment.

    JP Morgan spokeswoman Patricia Wexler declined to comment on the bank’s purported legal costs from the suit.

    But in a statement to CNBC, Wexler noted, “Both plaintiffs have accused Jes of unspeakable acts that had nothing to do with his job or responsibilities at our firm.”

    “Indeed, Jane Doe herself has directly accused him of horrific sexual misconduct. If these allegations are true, he must be held accountable,” said Wexler, using the pseudonym for the plaintiff in one of the suits.

    JPMorgan was sued last year by “Doe” in a would-be class action case on behalf of herself and other young women who were trafficked by the late money manager Epstein.

    The bank separately was sued by the government of the U.S. Virgin Islands, where Epstein had maintained a residence on a private island, where he sexually abused women.

    CNBC Politics

    Read more of CNBC’s politics coverage:

    Both suits claim that the bank facilitated and profited Epstein’s trafficking of women when he was a customer from 1998 through 2013.

    A lawyer for the Virgin Islands during a court hearing this month said that after Epstein killed himself in 2019, JPMorgan notified the Treasury Department of more than $1 billion in transactions related to “human trafficking” by Epstein dating back 16 years.

    JPMorgan in July agreed to pay $290 million to victims of Epstein to settle the first lawsuit.

    But the bank, which denies any wrongdoing is continuing to fight the suit by the Virgin Islands. That case is set to begin trial in late October.

    Source: Court filings by attorneys for former JPMorgan executive Jes Staley

    In March, JPMorgan sued Staley, its former chief of investment banking, alleging that he is legally responsible for “the entire amount” of any damages it incurs from both lawsuits. The bank also is seeking to claw back more than $80 million in compensation it paid Staley over the years.

    Staley, 66, is opposing the bank’s claim. He also has denied an allegation Doe that he sexually assaulted her.

    In their filing Wednesday, Staley’s lawyers wrote, “The one constant in these related cases has been JPMorgan’s attempt to pin the entirety of its problems with Jeffrey Epstein on its former executive Jes Staley.”

    “Consistent with this theme, the three experts whom the bank has retained to support its third-party claims against Mr. Staley are focused on a single question: How much should Mr. Staley have to pay?” the filing said.

    One expert, the accountant Edith Wong, has said JPMorgan’s $290 settlement was “reasonable,” the filing said.

    And “Shelley Chapman, a retired bankruptcy judge, opines that JPMorgan’s $13.8 million in legal fees in the Jane Doe and USVI cases was ‘reasonable,’ ” according to Staley’s filing.

    The third expert, an accountant named Carlyn Irwin, added up how much Staley earned at JPMorgan to assess how much might be clawed back by the bank if it wins its suit against Staley.

    Staley’s lawyers wrote that “none of these experts’ opinions meets” a standard for the admissibility of expert opinions in federal court.

    JPMorgan is being represented by attorneys from the law firm Wilmer Hale, including partner Felicia Ellsworth, who in 2020 co-edited an updated legal guide on human trafficking for attorneys “to represent victims and continue to make a difference.”

    The firm’s website includes a statement on “modern slavery,” declaring, “We do not tolerate slavery, human trafficking or abusive or unfair treatment in any part of our business or in any part of our supply chain.”

    Epstein, a former friend of Donald Trump and Bill Clinton, killed himself in a New York jail at age 66 in August 2019, a month after he was arrested on federal child sex trafficking charges.

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  • Instacart prices IPO at $30 a share, valuing grocery delivery company at about $10 billion

    Instacart prices IPO at $30 a share, valuing grocery delivery company at about $10 billion

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    Fidji Simo, chief executive officer of Instacart Inc., speaks during a Bloomberg Studio 1.0 interview in San Francisco, California, U.S., on Thursday, March 3, 2022.

    David Paul Morris | Bloomberg | Getty Images

    Instacart, the grocery delivery company that saw its business boom during the pandemic, priced its long-awaited IPO at $30 a share on Monday, and will become the first notable venture-backed tech company to hit the U.S. public market since December 2021.

    The offering came in at the top end of the expected range of $28 to $30 a share, and values Instacart at about $10 billion on a fully diluted basis. There were 22 million shares sold in the IPO, with 14.1 million coming from the company and 7.9 million from existing shareholders. The stock is set to debut on the Nasdaq on Tuesday under ticker symbol “CART.”

    The 11-year-old company, which delivers groceries from chains including Kroger, Costco and Wegmans, had to drop its stock price dramatically to make it appealing for public market investors. In early 2021, at the height of the Covid pandemic, Instacart raised money at a $39 billion valuation, or $125 a share, from prominent venture firms like Sequoia Capital and Andreessen Horowitz, along with big asset managers Fidelity and T. Rowe Price.

    The tech IPO market has been largely shuttered since December 2021, as inflationary pressures and rising interest rates pushed investors out of risk and led to a plunge in the prices of internet and software stocks. Instacart’s performance, along with the upcoming debut of cloud software vendor Klaviyo, could help determine if other billion-dollar-plus companies in the pipeline are willing to test the waters.

    Instacart has sacrificed growth for profitability, proving in the process that its business model can generate earnings. Revenue increased 15% in the second quarter to $716 million, down from growth of 40% in the year-earlier period and about 600% in the early months of the pandemic. The company reduced headcount in mid-2022 and lowered costs associated with customer and shopper support.

    Instacart started generating earnings in the second quarter of 2022, and in the latest quarter reported $114 million in net income, up from $8 million a year prior.

    At $10 billion, Instacart will be valued at about 3.5 times annual revenue. Food delivery provider DoorDash, which Instacart names as a competitor in its prospectus, trades at 4.25 times revenue. DoorDash’s revenue in the latest quarter grew faster, at 33%, but the company is still losing money. Uber’s stock trades for less than 3 times revenue. The ridesharing company’s Uber Eats business is also named as an Instacart competitor.

    The bulk of Instacart’s competition is coming from Amazon as well as big brick-and-mortar retailers, like Target and Walmart, which have their own delivery services. Target acquired Shipt in 2017 for $550 million.

    Sequoia is Instacart’s biggest investor, with a fully-diluted stake of 15%. While the Silicon Valley firm is sitting on a paper profit of over $1 billion on its total investment, the $50 million in shares it purchased in 2021 are now worth about one-quarter that amount.

    Instacart co-founder Apoorva Mehta owns shares worth over $800 million, and is selling a small portion of them in the IPO. Mehta has been executive chairman since the company appointed ex-Facebook executive Fidji Simo as his successor as CEO in 2021. Mehta is resigning from the board in conjunction with the IPO, and Simo is assuming the role of chair.

    Goldman Sachs and JPMorgan Chase are leading the deal.

    Only about 8% of Instacart’s outstanding shares were floated in the offering, with 36% of those sold coming from existing shareholders. The company said co-founders Brandon Leonardo and Maxwell Mullen are each selling 1.5 million, while Mehta is selling 700,000. Former employees, including those who were in executive roles as well as in product and engineering, are selling a combined 3.2 milion.

    WATCH: Klaviyo follows Instacart in tech IPO down rounds

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  • Morgan Stanley kicks off generative AI era on Wall Street with assistant for financial advisors

    Morgan Stanley kicks off generative AI era on Wall Street with assistant for financial advisors

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    Shannon Stapleton | Reuters

    Morgan Stanley has officially kicked off the generative AI era on Wall Street.

    The bank plans to announce Monday that the assistant it created with OpenAI‘s latest generative AI software is “fully live” for all financial advisors and their support staff, according to a memo obtained by CNBC.

    “Financial advisors will always be the center of Morgan Stanley wealth management’s universe,” Morgan Stanley co-President Andy Saperstein said in the memo. “We also believe that generative AI will revolutionize client interactions, bring new efficiencies to advisor practices, and ultimately help free up time to do what you do best: serve your clients.”

    Morgan Stanley, a top investment bank and wealth management juggernaut, made waves in March when it announced that it had been working on an assistant based on OpenAI’s GPT-4. Competitors including Goldman Sachs and JPMorgan Chase have announced projects based on generative AI technology. But Morgan Stanley is the first major Wall Street firm to put a bespoke solution based on GPT-4 in employees’ hands, according to Jeff McMillan, head of analytics, data and innovation at Morgan Stanley wealth management.

    Called the AI @ Morgan Stanley Assistant, the tool gives financial advisors speedy access to the bank’s “intellectual capital,” a database of about 100,000 research reports and documents, McMillan said in a recent interview.

    By saving advisors and customer service employees time when it comes to questions about markets, recommendations and internal processes, the assistant frees them to engage more with clients, he said.

    Human speech

    The tool, a simple window of text, belies the difficulty in making sure the program would produce quality responses, according to McMillan. The bank spent months curating documents and using human experts to test responses, he said.

    One adjustment for advisors is that they’ll need to phrase questions in full sentences as though they were speaking to a human, instead of leaning on keywords as they would with a search engine query, said McMillan.

    “No different than how I would ask you a question, that’s how you talk to this machine,” he said. “People are not accustomed to that.”

    It’s just the first in a series of solutions based on generative AI planned by the bank, according to McMillan. The firm is piloting a tool called Debrief that automatically summarizes the content of client meetings and generates follow-up emails.

    ‘Completely disruptive’

    Using OpenAI software required a fundamentally different approach than with previous technology efforts, he said. OpenAI’s ChatGPT uses large language models, or LLMs, to create human-sounding responses to questions.

    “The traditional way in which you would solve those things is you would write code,” McMillan said. “In the new world, you give examples of what ‘good’ looks like, and the system learns what good is. It’s actually able to ‘reason’ and apply logic that a human would apply.”

    Excitement over AI has bolstered the stock market this year and forced entire industries to contend with its implications, leading some experts to declare it the next foundational technology.

    “I’ve never seen anything like this in my career, and I’ve been doing artificial intelligence for 20 years,” McMillan said. “We saw a window of opportunity that was just completely disruptive, and I think as an organization, we didn’t want to get left behind.”

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  • CNBC Daily Open: Arm’s surge lends helping hand to banks

    CNBC Daily Open: Arm’s surge lends helping hand to banks

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    Arm Holdings CEO Rene Haas poses for a photo with members of leadership before the Nasdaq opening bell at the Nasdaq MarketSite on September 14, 2023 in New York City.

    Michael M. Santiago | Getty Images News | 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

    The long reach of Arm
    Arm shares surged almost 25% on its first day of trading on New York’s Nasdaq, and a further 6.8% in extended trading. The chip designer priced its shares at $51 a piece in its initial public offering. Shares of Arm began trading at $56.10 a share and ended the day at $63.59. That gives the company a fully diluted market cap of about $68 billion, and a price-to-earnings multiple higher than Nvidia’s.

    Markets rebound
    U.S. stocks rose Thursday, aided by Arm’s electrifying showing and promising economic data from the U.S. The Dow Jones Industrial Average, in particular, rallied 0.96% for its best day since August. Asia-Pacific markets rose Friday, cheered by China’s better-than-expected data. Japan’s Topix gained 1.25% to hit a 33-year high, as Softbank jumped around 2.7% after Arm’s impressive showing.

    China’s economy picks up
    Finally, some positive economic data from China. Retail sales in August grew 4.6% from a year ago, beating expectations for 3% growth. Industrial production rose 4.5%, also surpassing the forecast of 3.9%. However, fixed asset investment was still weighed down by the real estate sector, and came in at 3.2%, slightly below the expected growth of 3.3%.

    Screeching to a halt
    Thousands of members of the United Auto Workers went on strike after the union failed to reach a deal with General Motors, Ford Motor and Stellantis. Workers at three key U.S. assembly plants plan to cease work from Friday — those plants were targeted because they produce highly profitable vehicles that are still in high demand.

    [PRO] Cash or stocks?
    In recent weeks, U.S. Treasury yields have risen to their highest levels in decades. Meanwhile, major indexes lost ground in August. That has boosted the attractiveness of keeping cash holdings as opposed to investing in stocks. But will that trend hold true for the rest of the year? Analysts from big banks weigh in on the debate between cash and stocks.

    The bottom line

    When you have a toothache, your whole body feels the pain. In the same vein, when Arm experienced a flush of wellbeing, it radiated through markets’ entire body, giving them their best day in weeks.

    “The successful IPO of Arm … instills some confidence that perhaps the capital markets window is going to open again after virtually being closed for the last 18 months,” said Art Hogan, chief market strategist at B. Riley Financial.

    Big banks rallied on excitement that the sleepy IPO market for tech companies might finally be stirring. (More IPOs means more dealmaking — and higher revenue — for banks.) Shares of JPMorgan Chase rose almost 2%, Morgan Stanley gained 2.09% and Goldman Sachs popped 2.86%. Tech IPOs are particularly important to Goldman as the bank relies on investment banking more than its rivals. With Instacart and marketing firm Klaviyo set to list soon, Goldman — which has been struggling of late — might see a change in its fortunes.

    Goldman and JPMorgan are big components of the Dow. That helped the blue-chip index rise 0.96%, its best day since Aug. 7, giving it a closing level above its 50-day moving average for the first time since Sept. 1. The S&P 500 advanced 0.84%, its best showing in around two weeks, and the Nasdaq Composite gained 0.81%.

    Meanwhile, a tame core PPI reading for August assuaged worries after core consumer price index was higher than expected. But because CPI is a lagging indicator, while PPI is considered a leading indicator — that is, it predicts the future state of the economy — markets found solace in the idea that things aren’t as bad as consumer inflation appeared to portray.

    And August retail sales jumped 0.6% against the 0.1% expected. Taken together with the PPI report, that suggests the U.S. economy, supported by an indefatigable consumer, might skirt a recession even as inflation gradually cools.

    “You’ve got the perfect framework of inflation heading in the right direction, but the economy not falling apart,” Hogan said. “And that really paints the picture that the Fed has done the right thing and we may well be orchestrating that elusive soft landing.”

    But the economy is infamously volatile. Hence Hogan’s all-important caveat: “At least that’s the impression we get this week.” Still, after markets ended in the red last week, any reprieve, however temporary, will be welcome.

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  • CNBC Daily Open: Arm’s spectacular day lends helping hand to banks

    CNBC Daily Open: Arm’s spectacular day lends helping hand to banks

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    Rene Haas, chief executive officer of Arm Ltd., center, during the company’s IPO at the Nasdaq MarketSite in New York, US, on Thursday, Sept. 14, 2023.

    Michael Nagle | 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

    The long reach of Arm
    Arm shares surged almost 25% on its first day of trading on New York’s Nasdaq, and a further 6% in extended trading. The chip designer priced its shares at $51 a piece in its initial public offering. Shares of Arm began trading at $56.10 a share and ended the day at $63.59. That gives the company a fully diluted market cap of about $68 billion, and a price-to-earnings multiple higher than Nvidia’s.

    Markets rebound
    U.S. stocks rose Thursday, aided by Arm’s electrifying showing and promising economic data from the U.S. The Dow Jones Industrial Average, in particular, rallied 0.96% for its best day since August. European markets traded higher, with the regional Stoxx 600 index climbing 1.52% and other major bourses adding at least 1% following the European Central Bank’s rate decision.

    Record rates in the EU
    The ECB raised rates by 25 basis points to 4%, a record high reached after 10th consecutive hikes since June 2022 when rates were -0.5%. The good news is that the ECB indicated it may be holding off further hikes. “ECB interest rates have reached levels that … will make a substantial contribution to the timely return of inflation to the target,” the bank’s council said.

    Focus on the core
    The U.S. producer price index, which measures wholesale prices, rose a seasonally adjusted 0.7% in August — far more than the 0.4% estimate — and 1.6% from a year earlier. August was the biggest monthly jump in more than a year. However, when stripping out food and energy prices, the month-over-month PPI was 0.2%, in line with expectations, and 2.1% on an annual basis, the lowest since January 2021.

    [PRO] No secret sauce for HP
    Warren Buffett’s Berkshire Hathaway sold a portion of its stake in HP. This year hasn’t been kind to the computer and printer maker, as its fiscal third-quarter earnings missed Wall Street’s expectations. CNBC Pro’s Yun Li breaks down what Berkshire’s play in HP initially was, and whether it’ll change going forward — based on another bet the company has made in the past.

    The bottom line

    When you have a toothache, your whole body feels the pain. In the same vein, when Arm experienced a flush of wellbeing, it radiated through markets’ entire body, giving them their best day in weeks.

    “The successful IPO of Arm … instills some confidence that perhaps the capital markets window is going to open again after virtually being closed for the last 18 months,” said Art Hogan, chief market strategist at B. Riley Financial.

    Big banks rallied on excitement that the sleepy IPO market for tech companies might finally be stirring. (More IPOs means more dealmaking — and higher revenue — for banks.) Shares of JPMorgan Chase rose almost 2%, Morgan Stanley gained 2.09% and Goldman Sachs popped 2.86%. Tech IPOs are particularly important to Goldman as the bank relies on investment banking more than its rivals. With Instacart and marketing firm Klaviyo set to list soon, Goldman — which has been struggling of late — might see a change in its fortunes.

    Goldman and JPMorgan are big components of the Dow. That helped the blue-chip index rise 0.96%, its best day since Aug. 7, giving it a closing level above its 50-day moving average for the first time since Sept. 1. The S&P 500 advanced 0.84%, its best showing in around two weeks, and the Nasdaq Composite gained 0.81%.

    Meanwhile, a tame core PPI reading for August assuaged worries — somewhat — after core consumer price index was higher than expected. As PPI is considered a leading indicator, that is, it predicts the future state of the economy, while CPI is a lagging indicator, markets found solace in the idea that things aren’t as bad as the CPI appeared to portray.

    And August retail sales jumped 0.6% against the 0.1% expected. Taken together with the PPI report, that suggests the U.S. economy, supported by an indefatigable consumer, might skirt a recession even as inflation gradually cools.

    “You’ve got the perfect framework of inflation heading in the right direction, but the economy not falling apart,” Hogan said. “And that really paints the picture that the Fed has done the right thing and we may well be orchestrating that elusive soft landing.”

    But the economy is infamously volatile. Hence Hogan’s all-important caveat: “At least that’s the impression we get this week.” Still, after markets ended in the red last week, any reprieve, however temporary, will be welcome.

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  • Big banks are targeting regional banks’ customer base through Fintech

    Big banks are targeting regional banks’ customer base through Fintech

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    Hugh Son, CNBC.com reporter, joins ‘Closing Bell Overtime’ to talk more trouble for regional banks as big banks move in on their customer base.

    05:28

    Thu, Sep 14 20236:11 PM EDT

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  • JPMorgan Chase to offer online payroll services as it steps up fight with Square, PayPal

    JPMorgan Chase to offer online payroll services as it steps up fight with Square, PayPal

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    Co-founders Eddie Kim, Josh Reeves, and Tomer London of fintech startup Gusto, which handles payroll services for small businesses.

    Courtesy: Kelly Boynton | Gusto

    JPMorgan Chase is stepping up its appeal to small business customers by planning to offer digital payroll processing, CNBC has learned.

    The bank has picked San Francisco-based fintech player Gusto to provide the underlying technology for the feature, according to Gusto CEO Josh Reeves.

    “If you’re a customer of Chase payments solutions, you can go to payroll from the same exact place you do banking,” Reeves said. “It’s the same experience, with the same login and credentialing; all that stuff becomes easier when it’s in a one stop shop-type environment.”

    JPMorgan, the biggest U.S. bank by assets, has poured billions of dollars into technology in recent years. It’s part of a larger battle for the loyalty of American retail and business customers as fintech players including PayPal and Square morph into do-everything providers that threaten traditional banks. Both companies have their own payroll services.

    JPMorgan has previously rolled out fintech features, including a Square-like credit card reader for small businesses and early direct deposit for consumers.

    Everyone needs to get paid

    When it came to payroll services — a universal chore for small business owners, some of whom still use paper checks to pay workers — JPMorgan decided to partner with Gusto rather than build its own solution.

    A fintech partner like Gusto is better able to manage the complexity of offering payroll services nationally. There are nuances to individual states, cities and counties that make the sector difficult to crack, according to Reeves.

    Using Gusto will help JPMorgan to speed its time to market for this service, which will go live by the end of 2024, according to a person with knowledge of the situation. The offering will disburse salaries to employees, generate tax documents and pay stubs, and file to local and national agencies.

    JPMorgan has 5 million small business customers and more than 200,000 users of its payments-solutions offering, according to the person.

    Gusto was founded in 2011 and serves 300,000 small and medium businesses. It was last valued at $9.6 billion. The startup competes with traditional and newer providers including ADP, Intuit, Paychex and Rippling.

    –CNBC’s Jon Fortt contributed to this article.

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  • Goldman Sachs is in the spotlight as tech firms Arm and Instacart test IPO market

    Goldman Sachs is in the spotlight as tech firms Arm and Instacart test IPO market

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    David Solomon, Goldman Sachs interview with David Faber, September 7, 2023.

    CNBC

    The return of large tech IPOs this week after a prolonged drought isn’t just a test of investors’ appetite for risky new offerings — it’s a key moment for Wall Street’s top advisor, Goldman Sachs.

    Chip designer Arm is expected to begin trading Thursday in the year’s biggest listing. Delivery firm Instacart and marketing automation platform Klaviyo are expected to list as soon as next week.

    While they each operate in vastly different parts of the tech universe, the companies have one important thing in common: Goldman is a key advisor.

    The stakes are high for everyone involved. Last year was the slowest for American IPOs in three decades, thanks to sharply higher interest rates, rising geopolitical tensions and the hangover from 2021 listings that fared poorly. Successful IPOs from Arm and others will boost confidence for CEOs waiting on the sidelines, and activity there would help revive other parts of finance including mergers and financing.

    That would be meaningful for Goldman, which is more dependent on investment banking than rivals JPMorgan Chase and Morgan Stanley. Amid the industry’s slump, Goldman has suffered the worst revenue decline this year among the six biggest U.S. banks, and CEO David Solomon has contended with internal dissent and departures tied to strategic errors and his leadership style.

    “This is the core of the core of what Goldman Sachs does,” Mike Mayo, Wells Fargo banking analyst, said in a phone interview. “Expectations are high, and they’re likely to meet those expectations. Should they fall short, there will be far more questions than anything we’ve seen so far.”

    Lead-left bank

    Goldman is lead-left advisor on Instacart and Klaviyo, meaning their bankers drive decisions, coordinate other banks and typically earn the biggest portion of fees. On Arm, Goldman shares top billing with JPMorgan, Barclays and Mizuho. Goldman also was named the deal’s allocation coordinator.

    But the sought-after title of lead advisor comes with added scrutiny if the deals flop.

    If shares of Arm or the other two IPOs fail to trade for a premium to the list price in coming weeks, dark clouds could form over the nascent market rebound. For Goldman, perceptions of a bungled process would feed doubts about the company under Solomon.

    Unlike the bank’s unfortunate foray into consumer finance, Goldman’s position atop Wall Street’s league tables hasn’t budged. The bank has actually gained share in advisory and trading since Solomon took over in 2018.

    But even in its traditional stronghold, there is room for cracks. Goldman is being investigated for its role advising Silicon Valley Bank in the days before its collapse.

    What’s Arm worth?

    Initial public offerings can be tricky transactions to navigate. Advisors need to properly gauge interest in shares and balance demands from clients while pricing shares so investors see upside.

    While Arm’s offering is reportedly seeing high demand, there are nagging doubts about the company’s valuation, its large exposure to China and its ability to ride the artificial intelligence wave. The SoftBank-owned company’s valuation has waxed and waned in recent weeks, from as high as $70 billion initially to the roughly $55 billion that represents the top end of a target share price of $47 to $51.

    “We believe investors should avoid this IPO, as we see very limited upside ahead,” David Trainer, CEO of research firm New Constructs, wrote Tuesday in a note. “SoftBank is wasting no time by offering Arm Holdings to the public markets, and at a valuation that is completely disconnected from the company’s fundamentals.”

    Further, Arm is selling an unusually small slice of its overall stock, about 9%, which helps drive scarcity. That small public float means new investors will have fewer rights related to voting power and corporate governance, Trainer noted.

    The IPO is expected to raise more than $5 billion for Arm and generate more than $100 million in fees for its bankers.

    There are more than 20 tech companies weighing whether to go public in the next year or so if conditions remain favorable, according to bankers with knowledge of the market. While some have begun taking steps to list in the first half of 2024, according to the bankers, the situation is fragile.

    “If those three don’t go well, it doesn’t bode well for the rest of the IPOs or M&A because people will lose confidence,” one of the bankers said.

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  • Jamie Dimon says it’s a ‘huge mistake’ to think economy will boom with so many risks out there

    Jamie Dimon says it’s a ‘huge mistake’ to think economy will boom with so many risks out there

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    Jamie Dimon, chairman and chief executive officer of JPMorgan Chase & Co., speaks during the Institute of International Finance (IIF) annual membership meeting in Washington, DC, US, on Thursday, Oct. 13, 2022.

    Ting Shen | Bloomberg | Getty Images

    JPMorgan Chase CEO Jamie Dimon said Monday that while the U.S. economy is doing well, it would be a “huge mistake” to believe that it will last for years.

    Healthy consumer balance sheets and rising wages are supporting the economy for now, but there are risks ahead, said Dimon, who was speaking at a financial conference in New York. Topping his concerns include central banks reining in liquidity programs via “quantitative tightening,” the Ukraine war, and governments around the world “spending like drunken sailors,” the executive said.

    “To say the consumer is strong today, meaning you are going to have a booming environment for years, is a huge mistake,” he said.

    The world’s largest economy has defied expectations for a downturn for the past year, including from prognosticators like Dimon, head of the biggest U.S. bank by assets. Last year, he warned that a potential economic hurricane was on the way, citing the same concerns around central banks and the Ukraine conflict. But the U.S. economy has proven resilient, leading more economists to expect that a recession might be avoided.

    “Businesses feel pretty good because they look at their current results,” Dimon said. “But those things change, and we don’t know what the full effect of all this is going to be 12 or 18 months from now.”

    While JPMorgan and other banks have been “over-earning” on lending for years because of historically low default rates, strains were emerging in parts of real estate and subprime auto lending, Dimon said.

    “If and when you have a recession, which you’re eventually going to have, you’ll have a real normal credit cycle,” Dimon said. “In a normal credit cycle, something always does worse than” expected, he added.

    Dimon on regulations, markets, China

    Dimon struck a note of caution throughout the panel discussion. JPMorgan is repurchasing stock at a “lower level” than before, a pace which might last through 2024, he said, as the bank husbands capital to adhere to upcoming rules.

    He called the new regulatory mandates “hugely disappointing” and pushed for greater transparency from regulators, saying that JPMorgan would have to hold about 30% more capital than European banks.

    “Is that what they want? Is that good, long term?” Dimon asked. “What was the goddamn point of Basel in the first place?”

    When asked about whether the IPO and merger markets were picking up given the upcoming Arm listing, Dimon said he encouraged CEOs to take action rather than waiting too long.

    “I think the uncertainties out there ahead of us are still very large, and very dangerous,” Dimon said.

    Among those risks is the deterioration in relations with China, he said. Prospects for JPMorgan operations in China went from looking bright to only “just OK” because of the rising risks, he said.

    “I don’t expect war in Taiwan, but this can go south,” Dimon said.

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  • Wall Street is concerned about what’s on bank’s balance sheets, says Eugene Profit

    Wall Street is concerned about what’s on bank’s balance sheets, says Eugene Profit

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    Victoria Greene, G Squared Private Wealth CIO and Eugene Profit, Profit Investments CEO, join ‘Closing Bell Overtime’ to talk Goldman Sachs quarterly results, the financials sector and what lies ahead for banks.

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