Tag Archives: Investment Banking

Business

Scott Minerd, Guggenheim Partners’ Investment Chief, Dies at Age 63

Leave a comment

Scott Minerd,

an outspoken and influential fund manager who was chief investment officer of Guggenheim Partners, died Wednesday of a heart attack.

Mr. Minerd, 63 years old and a committed weightlifter known to bench press more than 400 pounds, died during his daily workout, the firm said.

Mr. Minerd joined Guggenheim shortly after the firm was founded in 1998.

Guggenheim Chief Executive

Mark Walter

credited him with designing the organization, systems and procedures that helped Guggenheim rise from a startup to a manager of more than $218 billion in total assets and 900 employees.

Mr. Minerd served as the public face of Guggenheim. In that role, he was among Wall Street’s more prominent personalities, making frequent appearances on television and maintaining an active presence on social media to discuss markets and investments, often in blunt terms.

“That sound you hear is the Fed breaking something,” he wrote in October in a message to clients, warning that the central bank’s campaign to raise interest rates was causing dislocations in fixed-income and foreign-exchange markets.

Mr. Minerd was a member of the Federal Reserve Bank of New York’s Investor Advisory Committee on Financial Markets and an adviser to the Organization for Economic Cooperation and Development.

Mr. Minerd is survived by his husband Eloy Mendez.

“As an asset manager, I’ve come to view conventional wisdom as the surest path to investment underperformance,” Mr. Minerd wrote in a biographical summary.

Mr. Minerd grew up in western Pennsylvania and studied economics at the University of Pennsylvania’s Wharton School. He also took courses at the University of Chicago and described himself as a monetarist.

He worked as a dealer in currencies, bonds and structured securities at Merrill Lynch,

Morgan Stanley

and CS First Boston in the 1980s and 1990s.

At age 37, feeling burned out, he left Wall Street and moved to Los Angeles. “I walked away from extremely large offers on Wall Street,” he told Bloomberg in 2017. “I realized this wasn’t a dress rehearsal for life, this was it.” After joining what became Guggenheim Partners, he worked in a Santa Monica, Calif., office overlooking the ocean.

Mr. Minerd was a conservative willing to embrace some ideas from the left and seek middle ground.

In a 2020 interview with the Los Angeles Times, he took aim at elite universities, including the University of Pennsylvania. “These schools have huge endowments, and why are they not focusing their endowment on advancing a cause of essentially free education or at least education that provides complete support for people below certain income levels?” he asked. Mr. Minerd said he wouldn’t make donations going to “bricks and mortar and making the place look better when people who would be qualified to come there can’t afford to do it. And, of course, if we had more equal access to education, it would help address some of the issues around race and poverty.”

Referring to his bulky bodybuilder’s physique, he once told a Wall Street Journal reporter that when people asked about “key man” risk at Guggenheim and wondered what would happen if Mr. Minerd was hit by a truck, his staff members would respond, “Do you mean what would happen to the truck?”

One of his favorite charities was Union Rescue Mission, which provides food, shelter, training and other services to homeless people in Los Angeles County.

Andy Bales,

chief executive of Union Rescue Mission, recalled meeting Mr. Minerd around 2008, when the mission was in poor financial shape and in danger of having to sell one of its sites. “He told me that God was tapping him on the shoulder, telling him to do more for others,” the Rev. Bales said. Mr. Minerd ended up donating more than $5 million to the mission to allow it to expand services.

Mr. Minerd was often seen with a rescue dog he called Grace, who accompanied him to the office and on trips.

His work schedule was punishing. “He was up early for East Coast customers and went late for his West Coast customers,” the Rev. Bales said.

Write to Charley Grant at charles.grant@wsj.com and James R. Hagerty at bob.hagerty@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Wall Street to Pay $1.8 Billion in Fines Over Traders’ Use of Banned Messaging Apps

Leave a comment

WASHINGTON—Eleven of the world’s largest banks and brokerages will collectively pay $1.8 billion in fines to resolve regulatory investigations over their employees’ use of messaging applications that broke record-keeping rules, regulators said Tuesday.

The fines, which many of the banks had already disclosed to shareholders, underscore the market regulators’ stern approach to civil enforcement. Fines of $200 million, which many of the banks will pay under the agreements, have typically been seen only in fraud cases or investigations that alleged harm to investors.

But the SEC, in particular, has during the Biden administration pushed for fines that are higher than precedents, saying it wants to levy fines that punish wrongdoing and effectively deter future potential harm. The SEC’s focus on record-keeping is likely to be extended next to money managers, who also have a duty to maintain written communications related to investment advice.

Last month, the SEC alleged that hedge-fund manager Deccan Value Investors LP and its chief investment officer failed to maintain messages sent over

Apple

iMessage and WhatsApp. In some cases, the chief investment officer directed an officer of the company to delete their text messages, the SEC said. The claims were included in a broader enforcement action, which Deccan settled without admitting or denying wrongdoing.

The Wall Street Journal reported last month that the settlements announced Tuesday were likely to top $1 billion and would be announced before the end of September.

Eight of the largest entities, including Goldman Sachs and Morgan Stanley, agreed to pay $125 million to the SEC and at least $75 million to the CFTC. Jefferies will pay a total of $80 million to the two market regulators, and

Nomura

NMR -1.20%

agreed to pay $100 million. Cantor agreed to pay $16 million.

The SEC said it found “pervasive off-channel communications.” In some cases, supervisors at the banks were aware of and even encouraged employees to use unauthorized messaging apps instead of communicating over company email or other approved platforms.

“Today’s actions—both in terms of the firms involved and the size of the penalties ordered—underscore the importance of recordkeeping requirements: they’re sacrosanct. If there are allegations of wrongdoing or misconduct, we must be able to examine a firm’s books and records to determine what happened,” said SEC Enforcement Director

Gurbir Grewal.

Bank of America, which faced the highest fine from the CFTC, had a “widespread and long-standing use of unapproved methods to engage in business-related communications,” according to the CFTC’s settlement order. One trader wrote in a 2020 message to a colleague: “We use WhatsApp all the time, but we delete convos regularly,” according to the CFTC.

One head of a trading desk at Bank of America told subordinates to delete messages from their personal devices and to communicate through the encrypted messaging app Signal, the CFTC said. The head of that trading desk resigned this year, although the bank was aware of his conduct in 2021, the CFTC said.

At Nomura, one trader deleted messages on his personal device in 2019 after being told the CFTC wanted them for an investigation, the agency said. The trader made false statements to the CFTC about his compliance with the records request, the regulator said.

Broker-dealers have to follow strict record-keeping rules intended to ensure regulators can access documents for oversight purposes. The firms settling with the SEC and CFTC admitted their employees’ conduct violated those regulations.

JPMorgan Chase

& Co.’s brokerage arm was the first to settle with the two market regulators over its failure to maintain required electronic records. JPMorgan paid $200 million last year and admitted some employees used WhatsApp and other messaging tools to do business, which also broke the bank’s own policies.

Regulators discovered that some JPMorgan communications, which should have been turned over for separate enforcement investigations, weren’t collected because they were sent on employees’ personal devices or apps that the bank didn’t supervise.

Write to Dave Michaels at dave.michaels@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Madcap Markets Push Goldman Sachs To Higher Trading Revenue, but Profit Falls

Leave a comment

Goldman Sachs Group Inc.

GS 2.51%

said Monday that second-quarter earnings fell 47%, capping an earnings season where weak and volatile markets crimped investment banking revenue across the industry but boosted trading.

But what was bad for investment bankers was good for traders. Widespread volatility meant investors placed more trades across a variety of asset classes, and banks took advantage. At Goldman, second-quarter trading revenue rose 32% to $6.5 billion. The other banks also reported big increases in trading revenue.

However, all the major U.S. banks reported double-digit declines in profit, and most of them missed analysts’ expectations. Year-ago results were juiced by reserve releases across the industry, when the banks let go of some of the money they had socked away for pandemic losses.

This year so far has marked a comedown from what had been near-perfect conditions for Wall Street at the height of the pandemic. The stimulus from governments and central bankers in response to Covid led to a swift recovery from a recession and ebullient capital markets. The effects of the pandemic also led to changes in how customers and businesses operate, which sent corporate chieftains on a deal making spree.

The current environment is far less friendly. The highest inflation in decades, sharply higher interest rates, and significant geopolitical concerns have sent markets for a loop, with the S&P 500 recently finishing its worst first half in more than 50 years. That uncertainty has given corporate executives pause about taking their companies public or selling additional stock.

Likewise, the U.S. economy has been flashing disparate signals about its health. The finances of U.S. consumers and businesses remain relatively strong. Executives at Bank of America, which also reported second-quarter results on Monday, said their customers were spending and borrowing at a strong clip.

But higher costs for groceries, gas and rent are hurting many consumers, and U.S. households have started spending some of the savings they accumulated during the pandemic. Bank executives across the industry are concerned about a possible recession, although they haven’t seen clear evidence of one just yet.

Goldman CEO David Solomon noted conflicting signals on the inflation outlook.



Photo:

patrick t. fallon/Agence France-Presse/Getty Images

Goldman CEO

David Solomon

pointed to conflicting signals on the inflation outlook Monday. He said the bank’s corporate clients continue to experience persistent inflation in their own supply chains, but added that the firm’s economists expect inflation to slow in the rest of the year.

Goldman’s second-quarter profit fell to $2.9 billion from $5.5 billion a year ago. Revenue fell 23% to $11.9 billion, though both beat the expectations of analysts polled by FactSet.

Bank of America’s profit fell 32% to $6.2 billion and revenue rose 6% to $22.7 billion.

Goldman shares rose 2.5%. Bank of America shares were roughly flat.

Within the investment banks, stock-selling businesses were hit especially hard. In 2021, companies raced to go public via initial public offerings and blank-check companies known as SPACs. That activity has ground to a halt so far this year.

Goldman is planning to slow its hiring pace in the second half of the year, after staffing up for the pandemic deal making boom. The bank had 47,000 employees at the end of June, up from about 41,000 a year ago. Finance chief

Denis Coleman

also said the bank would bring back annual performance reviews for its workers, a practice Goldman had mostly suspended during the pandemic.

Bank Earnings Center

More coverage and analysis on the latest financial results from Wall Street

Citigroup executives said last week they expected the slowdown to be temporary and wouldn’t change their pace of hiring more investment bankers. “You’re going to see us take a strategic look at this and a long-term look rather than just a shooting from the hip on the expenses side, because we’re building the firm for the long term here,” CEO

Jane Fraser

said.

At Bank of America, where total investment banking revenue fell 46%, Chief Financial Officer

Alastair Borthwick

said investment banking would “rise back to more normal levels in the next few quarters when economic uncertainty becomes more muted.”

Total trading revenue grew 25% at Citigroup, 21% at Morgan Stanley, 15% at JPMorgan and 11% at Bank of America. Goldman’s 32% jump was powered by a big rise in fixed income, currencies and commodities.

JPMorgan generated more trading revenue than any second quarter except during the middle of the pandemic and notched its best-ever second quarter for equities trading.

“Trading markets whipsawed with each release of economic data during the quarter,”

Daniel Pinto,

JPMorgan’s president and the head of the corporate and investment bank, told staff in a memo last week.

—Orla McCaffrey and David Benoit contributed to this article.

Write to Charley Grant at charles.grant@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here

Business

Morgan Stanley Posts Higher Profit, Capping Mixed Quarter for Big Banks

Leave a comment

A booming market for deals and brisk demand for financial advice lifted

Morgan Stanley’s

MS 1.83%

fourth-quarter earnings and helped the Wall Street firm set a full-year profit record.

The bank posted a profit of $3.7 billion, up 9%, or $2.01 a share. Analysts expected $1.94 a share, according to FactSet. Revenue rose 7% to $14.5 billion in the quarter, which fell just short of expectations.

Morgan Stanley capped off a mixed quarter for the nation’s biggest banks. Windfall trading revenues across Wall Street are slowing down as market volatility subsides. Banks are offering bigger paydays to attract and keep employees in a tight labor market.

Goldman Sachs Group Inc.,

JPMorgan Chase

& Co. and

Citigroup Inc.

all reported lower fourth-quarter profits, ending a streak of big gains. Morgan Stanley,

Bank of America Corp.

and

Wells Fargo

& Co. saw profits rise.

Morgan Stanley shares closed up 1.8% on Wednesday.

Deal making remains a bright spot. Morgan Stanley’s investment banking revenue rose 6% in the fourth quarter. Goldman, JPMorgan and Citigroup also reported gains in investment banking.

The year is off to a good start, with a healthy pipeline for new deals, Morgan Stanley Chief Financial Officer

Sharon Yeshaya

said on a conference call with analysts. “That said, a lot will depend on monetary and fiscal policy and its impact on sentiment,” she added.

Stock and bond trading revenue fell 6% in the fourth quarter. Trading revenue also fell at Goldman, JPMorgan and Citigroup.

Full-year compensation expenses at Morgan Stanley rose 18% to $24.6 billion. Banks increased salaries for junior bankers across Wall Street in 2021, and firms are also paying up to keep senior executives.

“We feel good that we’ve paid for performance,” Ms. Yeshaya said in an interview.

JPMorgan Chief Executive

Jamie Dimon

said last week that his bank would remain competitive in compensating its traders and bankers, even if it pressured profit margins.

Morgan Stanley’s wealth-management division grew fourth-quarter revenue 10% from a year earlier. The unit’s net interest income, a measure of its lending profitability, grew 16%. That growth could continue in the year ahead, as the Federal Reserve has signaled that several interest-rate increases are likely in 2022.

SHARE YOUR THOUGHTS

What do you find most interesting in Morgan Stanley’s quarterly report? Join the conversation below.

The number of retail-trading clients at Morgan Stanley was 7.4 million, in line with the third quarter total. The average daily number of retail trades the company handled for the quarter topped one million but was down 6% from a year ago.

Investment management revenue rose 59% from a year earlier. That rate was boosted by Morgan Stanley’s acquisition of Eaton Vance, which closed last March.

Write to Charley Grant at charles.grant@wsj.com

Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

Read original article here