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Are the knives coming out for Goldman Sachs CEO David Solomon? With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Steve Grasso, Guy Adami and Jeff Mills.
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Tag: Wall Street
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Philadelphia Eagles’ Ndamukong Suh on balancing an investment career
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Philadelphia Eagle Ndamukong Suh discusses his forays into the investment world. With CNBC’s Melissa Lee and the Fast Money traders, Tim Seymour, Steve Grasso, Guy Adami and Jeff Mills.
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Barclays posts 19% slide in annual net profit after costly U.S. trading blunder; shares down 8%
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Barclays Bank building
Chris Ratcliffe | Bloomberg | Getty Images
LONDON — Barclays on Wednesday reported a full-year net profit of £5.023 billion ($6.07 billion) for 2022, beating consensus expectations of £4.95 billion but suffering a 19% fall from the previous year’s restated £6.2 billion in part due to a costly trading blunder in the U.S.
Fourth-quarter attributable profit was £1.04 billion, above analyst projections of £833.29 million but down 4% from the £1.08 billion posted in the fourth quarter of 2021.
Here are the other financial highlights:
- Common equity tier one capital (CET1) ratio was 13.9%, compared to 13.8% in the previous quarter and 15.1% for the final quarter of 2021.
- Return on tangible equity (ROTE) was 8.9% for the fourth quarter, compared to 12.5% in the third quarter and 13.4% for the fourth quarter of 2021. ROTE for the full year was 10.4%.
- Net interest margin (NIM) was 2.86% for the full year, compared to 2.52% at the end of 2021.
- The bank booked £1.2 billion in credit impairment provisions, versus a £700 million charge in 2021.
The British lender took a substantial hit from an over-issuance of securities in the U.S., which resulted in litigation and conduct charges totaling £1.6 billion over the course of 2022.
The British bank announced early last year that it had sold $15.2 billion more in U.S. investment products — known as structured notes — than it was permitted to.
Barclays recognized a net attributable loss of around £600 million relating to the matter over the course of 2022, including a monetary penalty of $200 million following an investigation by the U.S. Securities and Exchange Commission.
On Wednesday, Barclays CEO C.S. Venkatakrishnan said the group performed “strongly” in 2022.
“Each business delivered income growth, with Group income up 14%. We achieved our RoTE target of over 10%, maintained a strong Common Equity Tier 1 (CET1) capital ratio of 13.9%, and returned capital to shareholders,” he said.
“We are cautious about global economic conditions, but continue to see growth opportunities across our businesses through 2023.”
The international unit, which includes Barclays’ investment bank, saw return on equity fall to 10.2% for the full year from 14.4% in 2021, and to 6.4% in the fourth quarter from 9.9% in the same quarter of the previous year. Profits also tumbled in the corporate and investment banking division.
Barclays declared a total dividend for 2022 of 7.25 pence per share, up from 6 pence in 2021, including a 5 pence per share full-year dividend. The bank also intends to initiate a share buyback of £500 million, bringing the total buybacks announced in relation to 2022 to £1 billion, and total capital return equivalent to around 13.4 pence per share.
Barclays shares fell more than 8% shortly after markets opened in London.
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‘Fed is not your friend’: Wells Fargo delivers warning ahead of key inflation report
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As Wall Street gears up for key inflation data, Wells Fargo Securities’ Michael Schumacher believes one thing is clear: “The Fed is not your friend.”
He warns Federal Reserve chair Jerome Powell will likely hold interest rates higher for longer, and it could leave investors on the wrong side of the trade.
“You think about the history over the last 15 years. Whenever there was weakness, the Fed rides to the rescue. Not this time. The Fed cares about inflation, and that’s just about it,” the firm’s head of macro strategy told CNBC’s “Fast Money” on Monday. “So, the idea of lots of easing — forget it.”
The Labor Department will release its January consumer price index, which reflects prices for good and services, on Tuesday. The producer price index takes the spotlight on Thursday.
“Inflation could come off a fair bit. But we still don’t know exactly what the destination is,” said Schumacher. “[That] makes a big difference to the Fed – if that’s 3%, 3.25%, 2.75%. At this point, that’s up in the air.“
He warns the year’s early momentum cannot coexist with a Fed that’s adamant about battling inflation.
“Higher yields… doesn’t sound good to stocks,” added Schumacher, who thinks market optimism will ultimately fade. So far this year, the tech-heavy Nasdaq is up almost 14% while the broader S&P 500 is up about 8%.
Schumacher also expects risks tied to the China spy balloon fallout and Russia tensions to create extra volatility.
For relative safety and some upside, Schumacher still likes the 2-year Treasury Note. He recommended it during a “Fast Money” interview in Sept. 2022, saying it’s a good place to hide out. The note is now yielding 4.5% — a 15% jump since that interview.
His latest forecast calls for three more quarter point rate hikes this year. So, that should support higher yields. However, Schumacher notes there’s still a chance the Fed chief Powell could shift course.
“A number of folks in the committee lean fairly dovish,” Schumacher said. “If the economy does look a bit weaker, if the jobs picture does darken a fair bit, they may talk to Jay Powell and say ‘Look, we can’t go along with additional rate hikes. We probably need a cut or two fairly soon.’ He may lose that argument.”
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Credit Suisse CEO says ‘completely unacceptable’ numbers show why overhaul is needed
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Credit Suisse CEO Ulrich Koerner discusses the bank’s fourth-quarter and 2022 full-year earnings, along with the embattled Swiss bank’s ongoing transformation project.
03:35
Thu, Feb 9 20232:54 AM EST
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Credit Suisse posts massive annual loss, CEO describes results as ‘completely unacceptable’
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Credit Suisse on Thursday reported a fourth-quarter and annual net loss that missed expectations, as the Swiss bank continued with its huge strategic overhaul.
The lender’s fourth-quarter net loss attributable to shareholders came in at 1.4 billion Swiss francs ($1.51 billion), worse than analyst projections of a loss 1.32 billion Swiss francs, according to Eikon.
It took the embattled Swiss lender’s full-year loss to 7.3 billion Swiss francs, worse than the 6.53 billion Swiss franc loss expectation by analysts. Shares were down 14% on Thursday afternoon.
Credit Suisse is telegraphing another “substantial” full-year loss in 2023 before returning to profitability in 2024.
CEO Ulrich Koerner told CNBC on Thursday that the full results were “completely unacceptable,” but underscored the need for the ongoing multi-year transformation program.
Under pressure from investors, the bank in October announced a plan to simplify and transform its business in an effort to return to stable profitability following chronic underperformance in its investment bank and a litany of risk and compliance failures.
Koerner in a statement accompanying results that 2022 was a “crucial year for Credit Suisse” and that it had been “executing at pace” on its strategic plan to create a “simpler, more focused bank.”
“We successfully raised CHF ~4 billion in equity capital, accelerated the delivery of our ambitious cost targets, and are making strong progress on the radical restructuring of our Investment Bank,” he said in the statement.
“We have a clear plan to create a new Credit Suisse and intend to continue to deliver on our three-year strategic transformation by reshaping our portfolio, reallocating capital, right-sizing our cost base, and building on our leading franchises.”
In November, the bank projected a 1.5 billion Swiss franc loss for the fourth quarter amid large-scale restructuring costs, while Credit Suisse shareholders greenlit a $4.2 billion capital raise aimed at financing the overhaul.
The capital raise included the sale of 9.9% of Credit Suisse shares to the Saudi National Bank, making it the bank’s largest shareholder. The Qatar Investment Authority became the second-largest shareholder in Credit Suisse after doubling its stake late last year.
The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021.
Arnd Wiegmann | Reuters
Reports of liquidity concerns led Credit Suisse to experience significant outflows of assets under management in late 2022, but Koerner told CNBC at the World Economic Forum in January that the bank had seen a sharp reduction in outflows, and that money was now coming back to some areas of the business.
Despite this, net outflows hit 110.5 billion Swiss francs in the fourth quarter, taking the annual asset outflows for 2022 to 123.2 billion Swiss francs, compared to 30.9 billion inflows for 2021.
The bank’s wealth management division alone saw net asset outflows of 95.7 billion in 2022, concentrated heavily in the fourth quarter.
Credit Suisse revealed that around two thirds of the broader net asset outflows in the quarter occurred in October, and “reduced substantially for the rest of the quarter.”
Koerner told CNBC that 60% of the total outflows came in October. Since then, the bank has embarked on an outreach program, speaking to 10,000 global wealth management clients and 50,000 clients in Switzerland.
“That has created tremendous momentum, and I expect that momentum traveling with us throughout 2023 but you can see it if you look into January,” Koerner told CNBC’s Geoff Cutmore.
“The group is net positive on deposits, wealth management globally net positive on deposits, Asia Pac net positive on deposits, Asia Pac positive on net new assets and also Switzerland positive on net new assets, so I think if you look at that situation which we experienced since January, I would say the situation has changed completely,” Koerner said.
He also expressed confidence that the outreach program and “tremendous” levels of client loyalty would help the bank retain and build on returning inflows.
In its report, the bank said its results were “significantly affected by the challenging macro and geopolitical environment with market uncertainty and client risk aversion.”
“This environment has had an adverse impact on client activity across all our divisions. While we would expect these market conditions to continue in the coming months, we have taken comprehensive measures to further increase our client engagement, regain deposits as well as AuM and improve cost efficiencies,” the bank said.
Other highlights from Thursday’s earnings:
- CET 1 (common equity tier one capital) ratio, a measure of bank solvency, reached 14.1% from 14.4% a year ago.
- Fourth-quarter net revenues stood at 3.06 billion Swiss francs, from 4.58 billion Swiss francs a year earlier.
- Total fourth-quarter operating expenses were 4.33 billion Swiss francs, versus 6.27 billion a year ago.
Credit Suisse’s restructuring plans include the sale of part of the bank’s securitized products group (SPG) to U.S. investment houses PIMCO and Apollo Global Management, as well as a downsizing of its struggling investment bank through a spin-off of the capital markets and advisory unit, which will be rebranded as CS First Boston.
The planned carve-out of the investment bank to form U.S.-headquartered CS First Boston moved ahead in the fourth quarter. Credit Suisse on Thursday announced that it had acquired The Klein Group for $175 million.
The bank also confirmed the appointment of Michael Klein as CEO of banking and the Americas, as well as CEO designate of CS First Boston.
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Charlie Munger says the U.S. should follow in China’s footsteps and ban cryptocurrencies
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Charlie Munger at the Berkshire Hathaway press conference, April 30, 2022.
CNBC
Berkshire Hathaway Vice Chairman Charlie Munger urged the U.S. government to ban cryptocurrencies like China, saying a lack of regulation enabled wretched excess and a gambling mentality.
“A cryptocurrency is not a currency, not a commodity, and not a security,” the 99-year-old Munger said in an op-ed published in the Wall Street Journal Wednesday evening.
“Instead, it’s a gambling contract with a nearly 100% edge for the house, entered into in a country where gambling contracts are traditionally regulated only by states that compete in laxity,” Munger said. “Obviously the U.S. should now enact a new federal law that prevents this from happening.”
Munger, along with his business partner Warren Buffett, have been longtime cryptocurrency skeptics, arguing that they are not tangible or productive assets. Munger’s latest comments came as the crypto industry was plagued with problems from failed projects to a liquidity crunch, exacerbated by the fall of FTX, once one of the world’s largest exchanges.
The cryptocurrency market lost more than $2 trillion in value last year. The price of bitcoin, the world’ largest cryptocurrency, plunged 65% in 2022 and it has rebounded about 40% to trade around $23,824, according to Coin Metrics.
The renowned investor said in recent years, privately owned companies have issued thousands of new cryptocurrencies, and they have become publicly traded without any governmental pre-approval of disclosures. Some has been sold to a promoter for almost nothing, after which the public buys in at much higher prices without fully understanding the “pre-dilution in favor of the promoter,” Munger said.
Munger listed two “interesting precedents” that may guide the U.S. into sound action. Firstly, China has strictly prohibited services offering trading, order matching, token issuance and derivatives for virtual currencies. Secondly, from the early 1700s, the English Parliament banned all public trading in new common stocks and kept this ban in place for about 100 years, Munger said.
“What should the U.S. do after a ban of cryptocurrencies is in place? Well, one more action might make sense: Thank the Chinese communist leader for his splendid example of uncommon sense,” Munger said.
(Read the full piece in the WSJ here.)
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Deutsche Bank smashes profit expectations in fourth quarter as higher interest rates bolster revenue
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A statue is pictured next to the logo of Germany’s Deutsche Bank in Frankfurt, Germany, September 30, 2016.
Kai Pfaffenbach | Reuter
Deutsche Bank on Thursday reported its 10th straight quarter of profit, receiving a boost from higher interest rates and favorable market conditions.
Deutsche Bank reported a 1.8 billion euro ($1.98 billion) net profit attributable to shareholders for the fourth quarter, bringing its annual net income for 2022 to 5 billion euros, a 159% increase from the previous year.
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The German lender almost doubled a consensus estimate among analysts polled by Reuters of 910.93 million euro net profit for the fourth quarter, and exceeded a projection of 4.29 billion euros on the year.
In 2019, Deutsche Bank launched a sweeping restructuring plan to reduce costs and improve profitability, which involved exiting its global equities sales and trading operations, scaling back its investment banking and slashing around 18,000 jobs by the end of 2022.
The annual result marks a significant improvement from the 1.9 billion euros reported in 2021, and CEO Christian Sewing said the the bank had been “successfully transformed” over the last three and a half years.
“By refocusing our business around core strengths we have become significantly more profitable, better balanced and more cost-efficient. In 2022, we demonstrated this by delivering our best results for fifteen years,” Sewing said in a statement Thursday.
“Thanks to disciplined execution of our strategy, we have been able to support our clients through highly challenging conditions, proving our resilience with strong risk discipline and sound capital management.”
Post-tax return on average tangible shareholders’ equity (RoTE), a key metric identified in Sewing’s transformation efforts, was 9.4% for the full year, up from 3.8% in 2021.
Deutsche also recommended a shareholder dividend of 30 cents per share, up from 20 cents per share in 2021, but did not announce a share buyback at this stage.
“On the share repurchases, given the uncertainty of the environment today that we see, also some regulatory changes that we’d like to see both the timing and the extent of, we’re holding back for now. We think that’s the prudent action to take, but we intend to revisit that,” CFO James von Moltke told CNBC on Thursday.
He added that the bank would likely reassess the outlook in the second half of this year, and reaffirmed Deutsche’s target for 8 billion euros in capital distributions to shareholders through to the year 2025.
Here are the other quarterly highlights:
- Loan loss provisions stood at 351 million euros, compared to 254 million euros in the fourth quarter of 2021.
- Common equity tier 1 (CET1) ratio — a measure of bank solvency — came in at 13.4%, compared to 13.2% at the end of the previous year.
- Total net revenue was 6.3 billion euros, up 7% from 5.9 billion euros for the same period in 2021 but slightly below consensus estimates, bringing the annual total to 27.2 billion euros in 2022.
Deutsche’s corporate banking unit posted a 39% growth in net interest income, aided by “higher interest rates, strong operating performance, business growth and favorable FX movements.”
Some of the tailwinds were offset by a slump in dealmaking that has affected the wider industry in recent months.
“The fourth quarter tailed off a little bit for us in November and December, but still was a record quarter in our FIC (fixed income and currencies) business for a fourth quarter, 8.9 billion [euros] for the full-year,” the CFO von Moltke told CNBC’s Annettee Weisbach.
“We’re thrilled with that performance but…it came a little bit short of analyst expectations and our guidance late in the year.”
He said that January had been a month of strong performance for the bank’s trading divisions, as market volatility persisted.
“That gives us some encouragement that our general view, which was that volatility and conditions in the macro businesses would taper off over time, but would be replaced if you like from a revenue perspective with increasing activity in micro areas like credit, M&A, equity and also debt issuance,” he said.
“We see that still intact as a thesis of what ’23 will look like.”
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Bond king Jeffrey Gundlach says he expects one more Fed rate hike
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DoubleLine Capital CEO Jeffrey Gundlach said he sees one additional rate hike from the Federal Reserve before the central bank ends its tightening cycle.
“I think one more,” Gundlach said Wednesday on CNBC’s “Closing Bell: Overtime.” “I think it’s tough to make the statement ‘ongoing increases’ with an ‘s’ at the end of the word ‘increase’ and do zero unless you had very substantial change in economic conditions.”
The Fed on Wednesday raised its benchmark interest rate by a quarter percentage point, taking its target range to 4.5%-4.75%, the highest since October 2007. The Fed’s statement included language noting that the central bank still sees the need for “ongoing increases in the target range.”
The so-called bond king said Fed Chairman Jerome Powell had a “clarifying” statement at the press conference Wednesday, saying the real yields are positive across the curve. Gundlach said he was referring to the Treasury Inflation-Protected Securities (TIPS), whose yields have stopped their ascent.
“He’s looking at the TIPS market, which had a huge increase in yields last year. That was a major headwind for risk assets in the stock market,” Gundlach said. “They’ve stopped going up and I have a feeling that real yields are going to not go up in the first part of this year. So that keeps a little bit of runway, I think.”
Stocks staged a big comeback in January, led by beaten-down technology names. The S&P 500 rallied 6.2% in January, notching its best start of the year since 2019. The tech-heavy Nasdaq Composite jumped 10.7% last month for its best monthly performance since July.
In Powell’s press conference, the Fed chief said the central bank could conduct a few more rate hikes to bring inflation down to its target.
“We’ve raised rates four and a half percentage points, and we’re talking about a couple of more rate hikes to get to that level we think is appropriately restrictive,” Powell said. “Why do we think that’s probably necessary? We think because inflation is still running very hot.”
Asked if Gundlach sees the Fed cutting rates this year, he said it’s a coin flip, depending on the incoming inflation data.
“I kind of think that they’ll cut rates in the second half of the year, but I’m not really committed to that idea firmly at all,” Gundlach said.
The widely followed investor also said he believes the odds for a recession this year have decreased, but they are still above 50%.
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CEO pay cuts could be just the start | CNN Business
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New York
CNN Business
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Corporate boards are slashing the pay of some leading CEOs in a new trend that could just be getting started.
The pay cuts are hitting some of America’s best-known and highest-paid bosses, including Apple CEO Tim Cook, Morgan Stanley CEO James Gorman and Goldman Sachs CEO David Solomon.
The moves follow a dreadful year in the stock market – 2022 was the S&P 500’s worst year since 2008 – and come as a growing number of corporations lay off rank-and-file workers to brace for a potential recession.
For example, Goldman Sachs laid off 3,200 employees earlier this month amid a downturn in Wall Street dealmaking. The bank then disclosed on Friday that Solomon’s 2022 pay is being cut by nearly 30%. Goldman Sachs’ profit dropped 49% last year as the slowdown in dealmaking curbed advisory fees.
“This is a show of solidarity. CEOs need to share the pain,” said Nell Minow, vice chair of ValueEdge Advisors, which advises institutional investors on corporate governance matters.
A similar pay cut could be coming for Sundar Pichai, the CEO of Google parent Alphabet
(GOOGL).After Alphabet announced 12,000 job cuts this month, Pichai told employees that top executives would take a “very significant” pay cut, Business Insider reported. Google did not respond to a request for comment.
But don’t feel too badly for these top execs. They’re still raking in serious cash and stock awards, just not quite as much as in the past.
Apple, for example, said it is cutting the target pay package of Cook by 40%. But that still leaves him with a massive $49 million in total compensation.
“They are still overpaid. Let me super clear about that,” said Minow.
Among the 500 largest public companies by revenue, the median CEO made $14.2 million in fiscal 2021, up 18.9% from the year before, according to the latest research from Equilar.
Tech bosses have received the biggest pay hikes, with the median CEO pay surging by 42.1% in 2021 to $19.1 million, Equilar said.
Earlier this month, Morgan Stanley announced Gorman made $31.5 million in total compensation for 2022, down 10% from the year before. The Wall Street bank said its compensation committee took into consideration the fact that “in a challenging economic and market environment firm performance for 2022 was not as strong as the prior year” when it enjoyed record results.
Minow is relieved that some boards are imposing pain on CEOs.
“That’s exactly the way pay is supposed to work,” Minow said. “The problem with pay traditionally is it’s been all upside and no downside. CEOs would often get all the credit and money for good times and then blame El Nino or some extraneous force for the downside. Now they are being forced to accept more responsibility.”
Of course, some of that responsibility is coming because the rules have changed.
After the 2010 Dodd-Frank law, regulators have required public companies to give shareholders a voice on compensation issues. So-called “Say on Pay” votes are advisory, meaning companies can still go forward even if 100% of shareholders vote no. Still, having shareholders reject pay packages is an embarrassment companies try to avoid.
Last year, JPMorgan Chase suffered a blow when its shareholders voted down a massive $52.6 million retention bonus that was planned for CEO Jamie Dimon.
This month, JPMorgan announced Dimon’s pay will be unchanged at $34.5 million – even though wages are rising for average workers. The bank also said it decided not to give Dimon a special award for the year.
That means Dimon’s pay isn’t budging even as wages go up for many employees.
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Here’s why you should always wait for the earnings call | CNN Business
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A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.
New York
CNN
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Investors are pretty bad at living in the moment. We’re currently in the thick of fourth quarter earnings reports, but traders don’t seem to care about how companies fared during the final months of 2022. They’re more focused on what’s going to happen in the future.
Case-in-point: Earnings calls, where top execs pontificate about their economic outlook, have been moving markets more than earnings-per-share and revenue reports.
What’s happening: The mantra on Wall Street has become, as Ritholtz Wealth Management CEO Josh Brown puts it, “ignore the numbers, wait for the call.”
Microsoft reported great fourth quarter earnings last Tuesday that beat Wall Street’s expectations, but the stock dropped 4% the next day. That’s because CEO Satya Nadella got on an earnings call with investors and warned of a slowdown in the company’s cloud business and software sales. His negative outlook came just as the company announced it was letting go of 10,000 employees, further spooking investors.
Other tech companies are following suit — while things are fine for the time being, they’re reporting that the future is foggy.
IBM stock sank 4.5% last Thursday even as the tech titan beat Wall Street’s Q4 expectations. The reason for the drop might be because Jim Kavanaugh, IBM’s finance chief, warned on the conference call that it would be wise to expect the company’s total 2023 revenue growth to be on the low end. IBM also announced layoffs – the company said it plans to cut around 3,900 jobs or 1.5% of its total workforce.
The economic environment is rapidly changing. CEOs on earnings calls are talking more about recession than inflation now, according to an analysis by Purpose Investments.
Wall Street is also beginning to fear an economic downturn more than painful rate hikes and as a result investors are putting more weight on CEO and CFO forecasts.
And they’re looking bleak. As of Friday, 19 companies in the S&P 500 had issued forward earnings-per-share guidance for the first quarter of 2023, according to FactSet data. Of these 19 companies, 17, or 89%, issued negative guidance. That’s well above the 5-year average of 59%.
“My best guess is that cautious tones on conference calls will be the norm, not the exception,” wrote Brown in a recent post. These slowdowns have been partially factored into stock prices, he said, “but not necessarily in full.”
The upside: Market reaction appears to go both ways. American Express missed on earnings last week but said that credit card spending was hitting new records and that the future looks bright. The stock shot up more than 10%.
Prices at the pump typically fall during the coldest months as wintry weather keeps Americans off the roads. But something unusual is happening this year, reports my colleague Matt Egan. Gas prices are rocketing higher.
The national average for regular gas jumped to $3.51 a gallon on Friday and remained there through the weekend, according to AAA. Although that’s a far cry from the record of $5.02 a gallon last June, gas prices have increased by 12 cents in the past week and 41 cents in the past month.
All told, the national average has climbed by more than 9% since the end of last year – the biggest increase to start a year since 2009, according to Bespoke Investment Group.
Why are gas prices jumping? It’s not because of demand, which remains weak, even for this time of the year. Instead, the problem is supply.
The extreme weather in much of the United States near the end of last year caused a series of outages at the refineries that produce the gasoline, jet fuel and diesel that keep the economy humming. US refineries are operating at just 86% of capacity, down from the mid-90% range at the start of December, according to Bespoke.
Beyond the refinery problems, oil prices have crept higher, helping to drive prices at the pump northward. US oil prices have jumped about 16% since December partially due to expectations of higher worldwide demand as China relaxes its Covid-19 policies and also because oil markets are no longer receiving massive injections of emergency barrels from the Strategic Petroleum Reserve.
What’s next: Expect more pain at the pump. Patrick De Haan, head of petroleum analysis at GasBuddy, worries the typical springtime jump in prices will be pulled forward.
“Instead of $4 a gallon happening in May, it could happen as early as March,” De Haan told CNN. “There is more upside risk than downside risk.”
A return of $4 gas would be painful to drivers and could dent consumer confidence. Moreover, pain at the pump would complicate the inflation picture as the Federal Reserve debates whether to slow its interest rate hiking campaign.
Goldman Sachs had a rough time in 2022, and the investment bank’s CEO, David Solomon, is being punished for it. Well, kind of.
The investment banking giant said in a Securities and Exchange Commission filing Friday that Solomon received $25 million in annual compensation last year. While that is still a very large amount of money, it’s down nearly 30% from the $35 million that Solomon raked in during 2021, reports my colleague Paul R. La Monica.
Solomon’s $2 million annual salary is unchanged. But the company said that his “annual variable compensation,” paid in a mix of performance-based restricted stock units and cash, was well below 2021 levels.
Goldman Sachs (GS) shares fell more than 10% in 2022. The company also reported a 16% drop in revenue in the fourth quarter and profit plunge of 66% earlier this month, mainly due to the lack of merger activity and initial public offerings.
Maybe Solomon can make that extra $10 million with payouts from his burgeoning DJ career.
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We finally know whom FTX owes money to: Wall Street elite, Big Tech, airlines, and many more | CNN Business
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New York
CNN
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Newly unsealed bankruptcy documents revealed thousands of creditors to whom FTX owes money after the once-mighty crypto exchange collapsed in November.
Wall Street heavyweights including Goldman Sachs and JPMorgan were named in the creditor list, which includes businesses, charities, individuals and other entities in a 116-page document filed late Wednesday. FTX is now at the center of a massive fraud investigation.
Also included in the creditors list are media companies, such as the New York Times and Wall Street Journal, commercial airliners, including American, United, Southwest and Spirit, as well as several Big Tech players, including Netflix, Apple and Meta.
On Thursday, lawyers for FTX filed an additional document advising the court that the list — known as a creditor matrix — is “intended to be very broad” and “includes parties who may appear in the Debtors books and records for any number of reasons.” Being on the list does not “necessarily indicate that the party is a creditor” of FTX or its affiliates, they wrote.
Goldman Sachs, for one, is named in the creditor matrix but doesn’t appear to be a creditor. In a statement to CNN on Wednesday, the bank said it had not filed a claim against FTX.
“This type of creditor matrix is prepared by the debtors for the purpose of providing notice to interested parties in a bankruptcy proceeding and is not necessarily evidence of a creditor relationship,” a spokesperson said.
The document doesn’t disclose the amount or nature of the debt, and names of individual creditors — mostly customers who deposited funds on FTX — remain redacted at FTX’s request. Inclusion on the creditor list doesn’t necessarily mean the parties had an FTX account.
FTX is believed to have more than a million creditors, the top 50 of whom are collectively owed more than $3 billion.
The crypto platform was once of the most popular crypto exchanges on the planet, fueled by celebrity endorsements and high-profile partnerships with sports teams. It marketed itself as a beginner-friendly crypto platform, allowing customers to deposit fiat currency and trade it for digital assets. But FTX came unraveled in November as speculation about its balance sheet sparked investor panic. In the midst of a liquidity crisis, the company filed for bankruptcy, leaving customers in limbo.
Federal prosecutors investigating FTX say that its founder and former CEO, Sam Bankman-Fried, orchestrated a massive fraud by stealing customer funds to cover losses at his hedge fund, Alameda Research. They also accuse him of using stolen money to buy luxury real estate and contribute to US poltical campaigns.
Bankman-Fried, who was indicted in December and remains under house arrest at his parents’ California home, pleaded not guilty to eight criminal counts earlier this month. He has repeatedly denied committing fraud, and is scheduled to go to trial in October.
Two of his former business partners have pleaded guilty to fraud and conspiracy charges and are cooperating with prosecutors from the Southern District of New York. Both associates have implicated Bankman-Fried in the alleged crimes.
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Attributing the rising costs of groceries to “price gouging” is not accurate
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Fact Check By:
Craig Jones, NewswiseTruthfulness: Mostly False
Claim:
Grocery stores need to be brought to heel over food prices. This isn’t ‘inflation’ because it isn’t caused by monetary oversupply. It’s just price gouging and we know that because we can literally see that they’re all reporting surplus profits.
Claim Publisher and Date: Twitter user emmy rākete among others on 2023-01-21
On social media, complaints regarding the rising costs of groceries are trending. It’s no surprise after all, the price of groceries has gone up around 13% compared to last year. According to the data from the Labor Department, the price of fruits and vegetables increased by 10.4 percent annually, while milk rose 15.2 percent and eggs soared 30.5 percent. Like other sectors of the economy, food prices are susceptible to supply chain complications and geopolitical unrest including the war in Ukraine. But some people have expressed their disdain for grocery store companies, accusing them of “price gouging” to increase their profits, which have been reaching exorbitant heights (corporate profits are at their highest levels in nearly 50 years, according to CBS MoneyWatch).
For example, this tweet shared by thousands blames the rising prices of groceries on retailers engaged in price gouging: “Grocery stores need to be brought to heel over food prices. This isn’t ‘inflation’ because it isn’t caused by monetary oversupply. It’s just price gouging and we know that because we can literally see that they’re all reporting surplus profits.”
Is putting the blame on grocery store managers for your rising costs of orange juice accurate? It’s not quite that simple. The claim of “price gouging” at the grocery store is misleading because of the complex nature of the grocery business. Professor Lisa Jack, School of Accounting, Economics and Finance and lead of the Food Cultures in Transition (FoodCiTi) research group at the University of Portsmouth explains…
Supermarket profits are complex and care should be taken with attributing them to any one cause. There are three main factors:
- Commercial income, also known as suppliers payments or back margin, contributes heavily to supermarket profits. These payments and support from suppliers to the supermarket include volume discounts and marketing fees. These can represent as much as 7% of a supermarket’s income: bottom line profits can average around 1-2% of income. Primary producers are seeing rapidly increasing costs for all inputs and having been squeezed to breaking point over the last 20 years, have no choice but to increase the prices of their output. Similarly for processors, packagers, distributors and every other business supplying supermarkets. The supermarkets themselves claim to be fighting on behalf of consumers to be keeping prices down and there is evidence that they are refusing price increase requests, which implies that commercial income is still being maintained.
- In the last few years, supermarkets have been increasing profits by cutting overhead costs at head offices and in support services. Counterintuitively, the only economy of scale they have is bargaining power – see above. All their activities, including large stores, increase the overhead costs which can be as much as 75% of their spend. A significant amount of recent ‘soaring profits’ come from job losses, which are not sustainable in the long run.
- Since their emergence in the 1920s, the business model for supermarkets has been to sell basics at little or no profit relying on high volumes to break even. Profits come from enticing customers to buy at least one impulse, premium item of food and non-grocery items. 8 of the 10 best sellers in supermarkets are the cheaper (but still higher profit margin) alcohol, confectionery and snacks. Since the pandemic and the cost of living crisis hit, more of us are exchanging going out for buying in ready-meals, alcohol and other treats, and buying more of our non-grocery items from supermarkets. These are where the profits come from, and they are being taken away from other sectors. Unsurprisingly, the food businesses that have the highest margins are those that produce brands of alcohol, confectionery etc – ‘Big Food’.
Note to Journalists/Editors: The expert quotes are free to use in your relevant articles on this topic. Please attribute them to their proper sources.
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Qatar doubles Credit Suisse stake as embattled lender forges ahead with strategic overhaul
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The logo of Credit Suisse Group in Davos, Switzerland, on Monday, Jan. 16, 2023.
Bloomberg | Bloomberg | Getty Images
The Qatar Investment Authority is the second-largest shareholder in Credit Suisse after doubling its stake in the embattled Swiss lender late last year, according to a filing with the U.S. Securities and Exchange Commission.
The QIA — Qatar’s sovereign wealth fund — initially began investing in Credit Suisse around the time of the financial crisis. Now, it owns 6.8% of the bank’s shares, according to the filing Friday, second only to the 9.9% stake purchased by the Saudi National Bank last year as part of a $4.2 billion capital raise to fund a massive strategic overhaul.
Combined with the 3.15% owned by Saudi-based family firm Olayan Financing Company, around a fifth of the company’s stock is now owned by Middle Eastern investors, Eikon data indicates.
Credit Suisse will report its fourth-quarter and full-year earnings on Feb. 9, and has already projected a 1.5 billion Swiss franc ($1.6 billion) loss for the fourth quarter as a result of the ongoing restructuring. The shake-up is designed to address persistent underperformance in the investment bank and a series of risk and compliance failures.
CEO Ulrich Koerner told CNBC at the World Economic Forum in Davos last week that the bank is making progress on the transformation and has seen a notable reduction in client outflows.
The injection of investment from the Middle East comes as major U.S. investors Harris Associates and Artisan Partners sell down their shares in Credit Suisse. Harris remains the third-largest shareholder at 5%, but has cut its stake significantly over the past year, while Artisan has sold its position entirely.
‘Final pivot’
Earlier this month, Deutsche Bank resumed its coverage of Credit Suisse with a “hold” rating, noting that the strategy update announced in October and subsequent rights issue in December were the start of the group’s “final pivot towards more stable, higher growth, higher return, higher multiple businesses.”
“While strategically largely the right measures have been announced in our view, the execution of the group’s transformation requires time to lower costs, regain operational momentum as well as reduce complexity funding costs. Hence, we expect subdued profitability, below its potential, even by 2025,” said Benjamin Goy, head of European financials research at Deutsche Bank.
As such, he said that Credit Suisse’s valuation was “not cheap based on earnings anytime soon.”
‘More art than science’
Central to Credit Suisse’s new strategy is the spin-off of its investment bank to form CS First Boston, which will be headed by former Credit Suisse board member Michael Klein.
In a note earlier this month, Barclays Co-Head of European Banks Equity Research Amit Goel characterized Credit Suisse’s earnings estimates as “more art than science,” arguing that details remain limited on the earnings contribution from the businesses being exited.
“For Q422, we will be focused on what is driving the losses (we found it quite hard to get to c.CHF1.1bn of underlying losses in the quarter), whether there are any signs of stabilisation in the business, and if there is more detail on the restructuring,” he added.
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Jamie Dimon says rates will rise above 5% because there is still ‘a lot of underlying inflation’
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JPMorgan Chase CEO Jamie Dimon believes interest rates could go higher than what the Federal Reserve currently projects as inflation remains stubbornly elevated.
“I actually think rates are probably going to go higher than 5% … because I think there’s a lot of underlying inflation, which won’t go away so quick,” Dimon said Thursday on CNBC’s “Squawk Box” from the World Economic Forum in Davos, Switzerland.
To battle soaring prices, the Fed has raised its benchmark interest rate to a targeted range between 4.25% and 4.5%, the highest level in 15 years. The anticipated “terminal rate,” or point where officials expect to end the rate hikes, was set at 5.1% at its December meeting.
The consumer price index, which measures the cost of a broad basket of goods and services, rose 6.5% in December from a year ago, marking the smallest annual increase since October 2021.
Dimon said the recent easing of inflation comes from temporary factors such as a pullback in oil prices and a slowdown in China due to the Covid pandemic.
Jamie Dimon, President, CEO & Chairman of JP Morgan Chase, speaking on Squawk Box at the WEF in Davos, Switzerland on Jan. 19th, 2023.
Adam Galica | CNBC
“We’ve had the benefit of China’s slowing down, the benefit of oil prices dropping a little bit,” Dimon said. “I think oil gas prices probably go up the next 10 years … China isn’t going to be deflationary anymore.”
The series of aggressive rate hikes have fueled worries of a recession in the U.S. Central bankers still feel they have leeway to raise rates as the labor market and the consumer remain strong.
The JPMorgan chief said if the U.S. suffers a mild recession, interest rates will rise to 6%. He added that it’s hard for anyone to predict economic downturns.
“I know there are going to be recessions, ups and downs. I really don’t spend that much time worrying about it. I do worry that poor public policy damages American growth,” Dimon said.
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