Tag Archives: banks

Forget bitcoin — fintech is the ‘real Covid-19 story,’ JPMorgan says

A woman uses a Bitcoin ATM machine placed within a safety cage on January 29, 2021 in Barcelona, Spain.

Cesc Maymo | Getty Images

Bitcoin is an “economic side show” and fintech innovation is the story that will dominate financial services, according to JPMorgan.

Analysts at the bank said that, despite bitcoin’s monster rally, the cryptocurrency is still beset by a number of issues that may prevent it from becoming a mainstream asset.

“Bitcoin prices have continued their meteoric rise with Tesla, BNY Mellon and Mastercard’s announcements of greater acceptance of cryptocurrencies,” JPMorgan said in a research note last week.

“But fintech innovation and increased demand for digital services are the real Covid-19 story with the rise of online start-ups and expansion of digital platforms into credit and payments.”

Bitcoin has gained traction with major Wall Street banks and Fortune 500 companies, a development which has boosted its price and saw it hit $1 trillion in market value last week.

Investors have drawn comparisons between bitcoin and gold, viewing the former as a new digital store of value thanks to its limited supply — the total number of bitcoins that will ever exist is capped at 21 million.

JPMorgan’s own strategists say that bitcoin could rally as high as $146,000 as it competes with gold as a potential hedge against inflation in the coronavirus crisis.

Still, skeptics remain unconvinced. Economists like Nouriel Roubini say that bitcoin and other cryptocurrencies have no intrinsic value. And a recent Deutsche Bank survey said investors view bitcoin as the most extreme bubble in financial markets.

Digital gold?

JPMorgan’s strategists said current bitcoin prices appear to be “unsustainable” unless the cryptocurrency becomes less volatile. They added their $146,000 price target hinged on bitcoin’s volatility “converging to that of gold,” which would likely take years to happen.

Meanwhile, cryptocurrencies have “questionable diversification benefits” and rank as the “poorest hedge” against significant drops in stock prices, JPMorgan’s analysts said.

JPMorgan has been making a push into blockchain technology with its own cryptocurrency called JPM Coin and a new business unit called Onyx.

The rise of digital finance and demand for fintech alternatives is the “real financial transformation story of the Covid-19 era,” according to JPMorgan.

“Competition between banks and fintech is intensifying, with Big Tech possessing the most potent digital platforms due to their access to customer data,” the bank said.

“‘Co-opetition’ between ‘Fin’ and ‘Tech’ players lies ahead, with banks stepping up investment to narrow the technology gap, and the battle between US banks and non-bank fintech is also playing out on the regulatory front.”

Major tech firms like Apple and Google have shown increased interest in financial services lately. Apple launched its own credit card in partnership with Goldman Sachs, while Google is letting its users open checking accounts following a tie-up with Citigroup.

“Traditional banks could emerge as endgame winners in the digital age of banking due to their advantage from deposit franchise, risk management and regulation,” JPMorgan said.

Digital banking has boomed in the coronavirus era, with large lenders and fintechs alike seeing a surge in adoption as people are spending more time at home due to public health restrictions.

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‘Longest week of our lives’: Texas food banks in crisis as storm disrupts supplies | Texas

Food banks in Texas have gone into disaster mode as they ramp up operations to tackle a surge in hunger after unprecedented freezing conditions disrupted almost every part of the food supply chain in the state.

Grocery stores are empty, school meal programs suspended, and deliveries disrupted by untreated treacherous roads that have left millions of Texans trapped in precarious living conditions with dwindling food supplies.

Even those who did stockpile before the Arctic conditions swept in have lost refrigerated groceries due to lengthy power cuts and cannot cook what food they do have without electricity or gas.

In the worst-affected areas, food banks and pantries were forced to close for several days this week as it was impossible for staff and vehicles to get to the distribution sites. Relief was limited to disaster boxes sent to people seeking refuge in warming shelters.

On Thursday, the disruption to energy and safe water supplies had food banks scrambling to procure large quantities of bottled water and ready meals and snacks that do not require cooking.

“This is a disaster. We are doing rapid needs assessments so we can get appropriate food to those people quickly. When everything thaws, we’re preparing for a massive spike in demand,” said Valerie Hawthorne, director of government relations at the North Texas Food Bank, based in Dallas. “This has been the longest week of all our lives.”

A woman carries bottled water she received from a warming center and shelter in Galveston. Photograph: Adrees Latif/Reuters

Before the big freeze, this food bank ran two drive-through food distribution sites every day, serving between 300 and 1,500 families at each pop-up location. This week they were all were cancelled, though one is planned for Saturday, leaving thousands of families without enough food or reliant on relatives, neighbors, and mutual aid groups.

In addition to the regulars, advocates expect a rise in low-paid service industry workers – who are often just one or two paychecks away from hunger and will not be paid this week as many restaurants and bars were forced to close.

Hunger was a serious problem in Texas even before the pandemic and the latest weather disaster, with about 4.3 million Texans struggling with hunger in 2019, including one in every five children.

Covid triggered an economic crisis that led to a demand for food aid doubling in many parts of Texas amid record unemployment and underemployment levels.

The extraordinary freeze has once again exposed existing deep inequalities that will make it much harder for low-income households to recover, according to Brian Greene, CEO of the Houston Food Bank. “The aftermath of every disaster is much harder on low-income families, who are going to be in more trouble even after the power and water comes back on,” he said.

Almost two-fifths of Americans do not have enough cash or savings to cope with an unexpected $400 expense such as burst pipes or a collapsed roof, according to research by the Federal Reserve,

Empty shelves are seen at a store in Austin. Photograph: Kolby Lee/Reuters

In rural Brazoria county, south of Houston, the pantry reopened on Thursday and served 140 families in just two hours – compared with 170 families usually seen over the course of an ordinary week. About 75% were first-timers desperate for food and water and were given enough for three days, as that’s all the pantry had available.

“It’s crazy. People are out of options. They’ve gone into survival mode to get what they can,” said Terri Willis, executive director of the Brazoria County Dream Center, which operates the pantry. “We are all in disaster mode.”

Long lines extend outside grocery stores with empty shelves, and water supplies have been disrupted by boil advisories and burst pipes; electricity is needed for those in rural areas with private wells.

Willis is particularly concerned about the district’s vulnerable children, as her organization usually provides a backpack of weekend meals for 620 kids who would otherwise go hungry. The schools are closed, so those children will go without. “It’s heart-wrenching. I’ve been one of those kids who goes hungry over the weekend. I’m praying that their parents can get here,” Willis said.

In Dallas, youngsters are also a huge concern: citywide, 87% of school children live in low-income households. Thousands depend on free school meals, with some receiving four meals a day – breakfast, lunch, a snack and dinner – but many schools were unable to offer any this week due to power cuts, burst pipes, water advisories and shortages.

Advocates are also worried about the city’s senior residents who rely on food aid to get enough to eat and may have been cut off from all services for several days. “It’s the elderly that have kept most of us up this week. They truly are the most vulnerable population, and we just don’t know how many have been unable to ask for help,” said Hawthorne.

At the other end of the food chain, fruit and vegetable crops in the Rio Grande Valley have been ruined by the extreme cold, while dairy farmers across the state are pouring millions of dollars of milk down the drain because they cannot get it to dairies. The drop in production could have short- and medium-term consequences on availability and prices.

Scientists have long warned that global heating is causing extreme weather events to become more frequent and intense – and to strike in places unaccustomed to and ill-equipped to deal with extreme heat or freezing temperatures.

The disruption to food supplies in Texas shows how poorly prepared the US is to deal with the climate crisis, according to Molly Anderson, director of the food studies program at Middlebury College in Vermont.

“What we see in Texas demonstrates a lack of planning for resilience and a failure to recognize that climate weirding is here and that it’s already impacting the food chain,” she said.

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Credit Suisse earnings q4 2021

Credit Suisse bank.

NurPhoto | NurPhoto | Getty Images

LONDON — Credit Suisse swung to a better-than-expected loss in the fourth quarter of 2020, on the back of higher provisions for legal disputes.

The Swiss bank reported Thursday a net loss of 353 million Swiss francs ($392.8 million) for the fourth quarter of 2020. This was better than market expectations. According to Refinitiv, analysts had forecast a net loss of 558.5 million Swiss francs for the quarter and a net income of 2.8 billion Swiss francs for the year. Credit Suisse ended 2020 with a net income of 2.7 billion Swiss francs.

The Swiss bank had notified the markets in January that it would be sinking to a higher-than-expected loss in the final quarter of 2020 after setting aside $850 million for a legal dispute over property debt in the United States. Credit Suisse then agreed to a $600 million settlement last week.

Thomas Gottstein, chief executive officer of Credit Suisse, said a in a statement: “Despite a challenging environment for societies and economies in 2020, we saw a strong underlying performance across Wealth Management and Investment Banking, while addressing historic issues.”

Speaking to CNBC’s Geoff Cutmore Thursday, he said he was “very satisfied” with the results and that 2021 will be “the year where can look forward to growth.” “We had an excellent start, all five divisions are up,” Gottstein said.

Other highlights for the quarter:

  • CET 1 ratio, a measure of bank solvency, reached 12.9% from 12.7% a year ago.
  • Revenues stood at 5.2 billion Swiss francs, from 6.2 billion Swiss francs a year ago.
  • Total operating expenses were 5.2 billion Swiss francs, versus 4.8 billion at the end of 2019.

The bank’s wealth management division saw revenues down by 24% year-on-year in the fourth quarter. Global Investment Banking, on the other hand, reported a 19% year-on-year jump in revenues.

Pandemic caution

Back in January, Credit Suisse also announced it would start buying between 1 billion and 1.5 billion Swiss francs of its own shares from Jan. 12. The bank has now added that it will pay a dividend of 0.2926 Swiss francs per share in relation to its 2020 results.

Going forward, Credit Suisse sounded cautious on the back of the pandemic. “We would caution that the COVID-19 pandemic is not yet behind us and, notwithstanding the continued fiscal and monetary stimuli, the pace of recovery remains uncertain,” the lender said in a statement.

The share price is up about 12% since the start of the year.

More SPACs in 2021

SPACs (special purpose acquisitions company) have gathered a lot of interest in the United States as a way to raise capital. In broad terms, it is a shell company set up by investors who will raise money by going public and then use the funds to acquire another firm.

In 2020, there were about 200 SPACs that went public. Virgin Galactic and Nikola Motor are just two examples of companies that have gone public by merging with SPACs.

“SPAC business has been very strong overall in the market in 2020 and continues actually even stronger now in Asia and Europe,” Credit Suisse’s Gottstein told CNBC, describing the process as a “clear alternative to traditional IPOs,”

“We do see definitely a pick up in interest in Europe in SPACs and we will see more in 2021 than we saw in (20)20, but there are some structural disadvantages compared to the U.S. dollar, because of the negative rates,” Gottstein added.

In the euro zone, interest rates are still in negative territory, largely due to the Covid-19 crisis. In the United States, however, the federal funds rate, though close to zero, is still in positive ground.

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Societe General earnings q4 2020

This photo, taken on October 28, 2019, shows the logo of the Societe Generale bank, in Ouistreham, Normandy, France.

SAMEER AL-DOUMY | AFP | Getty Images

LONDON — Societe Generale beat analyst expectations on Wednesday with what it described as a “significant improvement” in the business during the second half of 2020, despite the coronavirus pandemic.

The French bank reported a net profit of 470 million euros ($569 million) for the fourth quarter. Analysts were expecting a net income of 252 million euros for the quarter and a loss of 822 million for the year. The French lender ended 2020 with a net loss of 258 million euros.

Frédéric Oudéa, the group’s chief executive officer, said in a statement: “The fourth quarter results provide further confirmation of the rebound in our businesses observed in the third quarter after a beginning of the year marked by the impacts of the Covid crisis.”

The lender saw a 1.26 billion euro loss during the second quarter while Europe struggled with the first wave of the coronavirus. However, Societe Generale returned to profit in the following two quarters.

Here are other highlights for the final quarter of 2020:

  • Revenues hit 5.8 billion euros, a 6% drop from a year ago.
  • Operating expenses dropped by 3.4% from the fourth quarter of 2019.
  • The CET 1 ratio, a measure of bank solvency, stood at 13.4% from 12.7% a year ago.

Dividend and share buyback

The French bank said it will pay a cash dividend of 0.55 euros per share, in accordance with European rules. The European Central Bank has asked lenders to be cautious with dividend payouts and share buybacks given the ongoing economic crisis, at least until September.

In this context, Societe Generale announced it will buy around 470 million euros in shares during the fourth quarter of 2021, provided that the ECB’s recommendation does not get extended.

The French bank has also said its costs of risk will fall in 2021.

The stock is down over 43% in the past 12 months.

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BNP Paribas q4 2020 earnings

LONDON — BNP Paribas beat analyst expectations when it reported earnings Friday, as its CFO spoke of a “gradual pickup” for the economy looking ahead.

The French bank reported net income of 1.59 billion euros ($ 1.90 billion) for the fourth quarter of 2020, beating analyst expectations of 1.2 billion euros, according to Refinitiv. It marked a 15.9% drop in profit from the previous three-month period.

Annual profit reached 7 billion euros, down 13.5% from December 2019. Analysts polled by Refinitiv had forecast net income for 2020 of 6.5 billion euros.

The French lender also said its cost of risk had increased as a result of the Covid pandemic, and set aside a further 1.4 billion euros in loan loss provisions.

“The revenues are stable compared to the year before at 44 billion (euros), the costs are down by 1.1 billion (euros). So the gross operating income, the difference between the two, is up in a very material way,” Lars Machenil, CFO of BNP Paribas, told CNBC’s Charlotte Reed after the results were published.

Here are other highlights:

  • Revenues came in at 10.8 billion euros for the fourth quarter, a drop of 4.5% from a year ago.
  • For the fiscal year, revenues stood at 44.2 billion euros, marginally lower than in 2019.
  • Gross operating income rose by 6.2% from the previous year.
  • CET 1 ratio — a measure of bank solvency — stood at 12.8%, up by 70 basis points from a year ago.

The CIB (Corporate and Institutional Banking) division saw a 1.7% drop in revenues from the previous quarter, whereas domestic markets delivered a 2.8% increase in revenues over the same period.

Dividends in May

Despite euro zone banks having restrictions on dividends given the severe economic crisis in the region, BNP Paribas will pay out a dividend of 1.11 euros per share in May, equivalent to 21% of its 2020 net income.

The French lender also said that 29% if its 2020 net income would be invested in share buybacks once the European Central Bank repeals its current recommendation on dividends and share buybacks.

Machenil said the bank is nonetheless following the ECB’s recommendation by announcing a dividend within certain parameters advised by the central bank.

Going forward the bank said the aim was to distribute 50% of its 2021 net income as well.

“When we look at the year 2021 what we have assumed is that there will be a gradual pickup,” Machenil said about the economic environment this year.

“So before the summer, there can still be a bit of ups and downs,” he said, adding that he expects the Covid-19 vaccine rollout will lead to an economic improvement in the second half of 2021.

The bank’s stock is down almost 3% since the start of the year.

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Deutsche Bank swings to annual profit, beating expectations

A Deutsche Bank AG flag flies outside the company’s office on Wall Street in New York.

Mark Kauzlarich | Bloomberg | Getty Images

Deutsche Bank on Thursday beat earnings expectations for 2020 as it emerges from the coronavirus crisis, led by a strong performance in its investment banking division.

Germany’s largest lender posted a full-year net profit of 113 million euros ($135.7 million), whereas analysts had expected a loss of 201 million euros, according to Refinitiv. Deutsche reported a 5.7 billion euro loss for 2019 as it underwent major restructuring.

The bank netted a 51 million euro profit for the fourth quarter, compared to analyst expectations of a 325 million euro loss.

The bank’s CFO, James von Moltke, told CNBC shortly after the announcement that it had hit all of its goals for the year.

Higher revenues and cost reductions helped Deutsche’s investment banking division perform well, with net revenues rising 32% to 9.8 billion euros in 2020.

This “more than offset a rise in provision for credit losses resulting from COVID-19,” the bank said in a statement.

Here are the other highlights:

  • Total fourth-quarter net revenues were 5.5 billion euros, compared to 5.35 billion euros for the same period in 2019, bringing group net revenues for the year to 24 billion euros, up 4% from 2019.
  • Common equity tier 1 (CET1) ratio — a measure of bank solvency —  came in at 13.6%, unchanged from the fourth quarter of 2019.
  • Fourth-quarter loan loss provisions were 251 million, versus 723 million in the final quarter of 2019.

“In the most important year of our transformation, we were able to more than offset transformation-related effects and elevated credit provisions – despite the global pandemic,” CEO Christian Sewing said in the earnings report.

“We have built firm foundations for sustainable profitability, and are confident that this overall positive trend will continue in 2021, despite these challenging times.”

This is a breaking story, please check back later for more.

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China central bank policymaker says fintech needs regulation just like banks

People walk past the headquarters of the People’s Bank of China (PBOC), the central bank, in Beijing, China September 28, 2018. 

Jason Lee | Reuters

BEIJING — The central Chinese government is making it clear that fintech companies like Ant Group fall under the same stringent financial regulation as banks.

Many start-ups in China and other countries are using new technology to sell cheaper and faster financial services, from money transfers to loans. Rapid consumer adoption has prompted banks to work with the start-ups, which often emphasize they are technology or fintech companies, rather than financial institutions.

“But fintech is still finance in essence, so the principle of ‘same business, same rules’ should apply,” Pan Gongsheng, deputy governor of the People’s Bank of China, wrote in an opinion piece in the Financial Times Wednesday. Pan also heads the national foreign exchange regulator, the State Administration of Foreign Exchange.

“We need regulation that emphasises the substance not the form of a company,” Pan added. “The aim is to align business rules and standards with regulation to fend off arbitrage.”

Chinese authorities have stepped up regulation on fintech companies in the last several months.

Most prominently, regulators abruptly suspended Alibaba-affiliated Ant’s listing in November just days before the company was set to hold what would have been the world’s largest initial public offering.

Pan did not mention Ant by name in the op-ed, but noted that “non-bank mobile payment business, led by Alipay and WeChat Pay” saw growth of 75% a year between 2015 and 2019 in non-bank mobile payments. Ant Group owns Alipay and WeChat Pay is run by Tencent.

He added that fintech companies pose the same risks as others in the finance industry, and might also gather “excessive” amounts of data and infringe on user privacy.

On Tuesday, the governor of China’s central bank Yi Gang indicated Ant could resume the IPO process if it could resolve legal issues.

Read the full opinion piece in the Financial Times here.

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