Robinhood, whose stock trading app has surged in popularity among retail investors, sold shares in its IPO at $38 a piece, according to a person familiar with the matter. That values the company at about $32 billion.
Ahead of its Nasdaq debut on Thursday, Robinhood priced shares at the low end of the $38 and $42 range. The company — expected to trade under ticker HOOD — said it planned to raise over $2 billion. The Wall Street Journal was first to report the IPO price.
Robinhood has become a central gateway to the markets for young and first-time investors. The app, which offers equity, cryptocurrency and options trading, as well as cash management accounts, experienced record trading levels during the pandemic and amid the meme stock craze of early 2021.
Robinhood estimates it has 22.5 million funded accounts (those tied to a bank account) as of the second quarter. That’s up from 18 million in the first quarter of 2021, which was an increase of 151% from a year earlier. The company was last valued in the private markets at $11.7 billion in September.
Goldman Sachs and JPMorgan Chase are the lead underwriters on the deal.
In its updated prospectus, Robinhood estimated second quarter revenue of $546 million to $574 million, up from $244 million in the second quarter of 2020. Revenue jumped 309% in the first quarter to $522 million from $128 million a year prior.
However, Robinhood expects to swing to a net loss of $487 million to $537 million in the second quarter after turning a profit in the same quarter last year.
Robinhood collected $331 million in payment for order flow – the money brokerage firms receive for directing clients’ trades to market makers – in the first quarter. Payment for order flow has received scrutiny from regulators in 2021.
Options trading accounts for about 38% of revenue while equities and crypto are 25% and 17% of revenues, respectively. But Robinhood warned that the brokerage could see a slowdown in its trading revenue and account growth as the retail trading boom cools.
Competitors of Robinhood include Fidelity, Charles Schwab, Interactive Brokers and newer services like Webull and SoFi. Charles Schwab has a market capitalization of $130 billion and Interactive Brokers has a market valuation of $26 billion.
Robinhood co-founders Vlad Tenev and Baiju Bhatt each planned to sell about $50 million worth of shares in the IPO. DST Global, Index Ventures, NEA and Ribbit Capital are some of Robinhood’s biggest venture capital investors.
WATCH: Here’s why short selling does more harm than good for U.S. economy
Bank of America shares dropped after posting second-quarter revenue below analysts’ expectations.
Here’s how the bank did:
Earnings: $1.03 a share, including a one-time $2 billion tax benefit. It wasn’t immediately clear how that figure is comparable to the 77 cents estimate of analysts surveyed by Refinitiv.
Revenue: $21.6 billion, just under the $21.8 billion estimate.
Bank of America said that revenue declined from a year earlier because of a 6% drop in net interest income due to lower interest rates. Lower trading revenue and the absence of a $704 million gain a year earlier also hit revenue, the bank said.
Shares dropped 2.3% in premarket trading.
Like other lenders, Bank of America set aside billions of dollars for credit losses last year, when the industry anticipated a wave of defaults tied to the coronavirus pandemic. Instead, government stimulus programs appear to have prevented most of the feared losses, and banks have begun to release reserves this year.
The lender said that it had a $1.6 billion boost in the second quarter as it released reserves amid an improved U.S. economic outlook.
Still, given the industry’s sluggish loan growth this year, analysts will want to hear CEO Brian Moynihan’s outlook for loans in the second half. The bank said Wednesday that its book of loans grew in the second quarter for the first time since early 2020.
On Tuesday, JPMorgan Chase and Goldman Sachs each posted results that beat expectations, helped by strong revenue from Wall Street advisory activities.
Shares of Bank of America have climbed 31% this year before Wednesday, exceeding the 16% gain of the S&P 500 Index.
This story is developing. Please check back for updates.
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Traders work on the floor of the New York Stock Exchange.
NYSE
Stock futures opened mostly flat late Sunday as earnings season kicks off this week.
Futures on the Dow Jones Industrial Average added 25 points, or 0.07%. S&P 500 futures edged 0.08% higher and Nasdaq 100 futures rose 0.17%.
The three major indexes closed at record highs on Friday after a sell-off Thursday as investors worried about a potential slowdown in U.S. economic growth. Friday’s rally brought the averages into the green for the week; the Dow added 0.24% week-to-date, while the S&P 500 and Nasdaq each rose about 0.4% in the same period.
Stocks tied to the economic recovery that fell during Thursday’s session logged gains on Friday. Financial names rebounded, with Bank of America and Goldman Sachs both jumping more than 3%. Travel-related stocks also rose; Royal Caribbean popped 3.6%, Wynn Resorts gained close to 2%, and American Airlines and United Airlines both added more than 2%.
The major averages’ record highs come ahead of the start of quarterly earnings reports. S&P 500 companies’ profits are expected to be up 65% from the same quarter a year ago, according to Refinitiv, bouncing back from the worst of the pandemic. The expected surge in profits would be the strongest earnings growth since the fourth quarter of 2009, as stocks recovered from the financial crisis.
“The second quarter could be as good as it gets for economic growth,” Callie Bost, senior investment strategist at Ally Invest, said. “Earnings growth may slow, but analysts still expect S&P profits to grow by double digits in the next two quarters. It’s crucial not to lose faith in the market just because the economy’s strongest growth may be behind us.”
JPMorgan Chase, Goldman Sachs and PepsiCo kick off earnings season with results due out before the bell on Tuesday. Bank of America, Citigroup, Wells Fargo, Delta Air Lines and BlackRock report on Wednesday, and Morgan Stanley, Truist and UnitedHealth post results on Thursday.
Investors also anticipate important data to be released this week, including key readings on inflation on Tuesday and Wednesday, and June retail sales on Friday.
Jamie Dimon is bullish on the U.S. economy – at least for the next few years.
Dimon, the long-serving JPMorgan Chase CEO and chairman, sees strong growth ahead for the world’s biggest economy, thanks to the U.S. government’s response to the coronavirus pandemic that has left many consumers flush with savings, according to his annual shareholder letter.
“I have little doubt that with excess savings, new stimulus savings, huge deficit spending, more QE, a new potential infrastructure bill, a successful vaccine and euphoria around the end of the pandemic, the U.S. economy will likely boom,” Dimon said in the letter. “This boom could easily run into 2023 because all the spending could extend well into 2023.”
Dimon, who managed JPMorgan through the 2008 financial crisis, helping create the biggest U.S. bank by assets, pointed out that the magnitude of government spending during the pandemic far exceeds the response to that previous crisis. The longer-term impact of the reopening boom won’t be known until years into the future, he said, because it will take time to ascertain the quality of government spending, including President Joe Biden’s proposed $2 trillion infrastructure bill.
“Spent wisely, it will create more economic opportunity for everyone,” he said.
Dimon, 65, weighed in on a range of topics familiar to watchers of the country’s most prominent banker: He promoted JPMorgan’s efforts to create economic opportunities for Americans who have been left behind, highlighted threats to U.S. banks’ dominance from fintech and Big Tech players, and opined on public policy and the role of corporations to help bring about change.
While Dimon called stock market valuations “quite high,” he said that a multi-year boom may justify current levels, because markets are pricing in economic growth and excess savings that make their way into equities. He said there was “some froth and speculation” in parts of the market, but didn’t say where exactly.
“Conversely, in this boom scenario it’s hard to justify the price of U.S. debt (most people consider the 10-year bond as the key reference point for U.S. debt),” Dimon said. “This is because of two factors: first, the huge supply of debt that needs to be absorbed; and second, the not-unreasonable possibility that an increase in inflation will not be just temporary.”
While he is bullish for the economy’s immediate future, there are serious challenges ahead for the U.S., Dimon said. The country has been tested before – though conflicts starting with the Civil War, the Great Depression and the societal upheaval of the 1960s and 1970s, he said.
“In each case, America’s might and resiliency strengthened our position in the world, particularly in relation to our major international competitors,” Dimon said. “This time may be different.”
The past year highlighted challenges for U.S. institutions, elected officials and families, as our country’s rivals see a “nation torn and crippled by politics, as well as racial and income inequality – and a country unable to coordinate government policies (fiscal, monetary, industrial, regulatory) in any coherent way to accomplish national goals.”
The country ultimately needs to “move beyond our differences and self-interest and act for the greater good,” Dimon said. “The good news is that this is fixable.”
This story is developing. Please check back for updates.
Credit Suisse Group AG leaders are discussing replacing chief risk officer Lara Warner while sparing Chief Executive Officer Thomas Gottstein as they tally losses that could reach into the billions from the collapse of Archegos Capital Management, according to people briefed on the matter.
The bank is set to give investors an update on the Archegos fallout, including the fate of top executives such as investment bank chief Brian Chin, two of the people said. They also said the Swiss firm is planning a review of its prime brokerage business, which is housed in the investment bank.
“I think it is unfair at this stage to put this on Mr. Gottstein,” David Herro from Harris Associates, one of the bank’s top shareholders, said in a Bloomberg TV interview last week. “He attempted and has been attempting to reorganize Credit Suisse, but Rome wasn’t built in a day. Unless we see evidence to the contrary, I think he is the right person to continue to lead the organization.”
A Credit Suisse spokesperson declined to comment.
Read more: How Credit Suisse is bracing for a stunning losses likely to run into the billions
The No. 2 Swiss bank stands as one of the biggest potential losers in the meltdown at Archegos, which could cost banks a collective $10 billion, JPMorgan Chase & Co. analysts have estimated. That came just weeks after the collapse of Greensill Capital, a lender that ran funds Credit Suisse offered to its asset-management clients.
The one-two punch has made Credit Suisse the worst-performing major bank stock in the world so far this year as a strong start for its investment bank business was overshadowed by the bank’s exposure to Greensill and Archegos, a New York-based family office.
The bank’s 1.5 billion Swiss franc ($1.6 billion) share buyback program is at risk of being paused for the second time — after first being stopped at the onset of the pandemic last year — and losses could put pressure on dividend payouts. S&P Global Ratings downgraded its outlook for the bank to negative from stable pointing to risk management concerns.
A hit to profit exceeding $5 billion would start to pressure on Credit Suisse’s capital position, according to JPMorgan. The Swiss regulator FINMA increased Credit Suisse’s requirements under its Pillar 2 buffer, after the bank warned it could incur a loss from winding down of the supply-chain finance funds linked to Greensill.
Here are the Credit Suisse leaders who will be at the center of the action in coming days and weeks:
Thomas Gottstein, chief executive officer
Thomas Gottstein
Source: Credit Suisse AG
The surprise choice to take over in February 2020, following a spying scandal that drove out Tidjane Thiam, Gottstein previously led the bank’s business in Switzerland. When he got the job, he declared that it was “time to look forward,” But Credit Suisse’s troubles have only metastisized since then.
First came a $450 million writedown on the bank’s stake in hedge fund York Capital and costs related to a longstanding legal case into residential mortgage-backed securities.
Then, Greensill’s supply-chain finance business blew up. The board of directors and regulators are looking into how Credit Suisse’s supply-chain finance funds, linked to the Greensill business, were sold to investors, including to its own wealth-management clients, and how the bank managed conflicts of interest and its business relationship with Greensill, Bloomberg News has reported.
The Archegos episode raises questions about his handle on risk management, particularly since one of his first major initiatives was merging the risk and compliance divisions to streamline and improve risk decision making.
“Risk controls still are not where they should be,” Herro said. “Hopefully this is a wake-up call to expedite the cultural change that is needed in this company.”
Lara Warner, chief risk and compliance officer
Lara Warner
Source: Credit Suisse AG
With dual Australian-U.S. nationality and a career that’s ranged from equity analyst to investment bank chief financial officer, Warner has taken a less traditional route than many of her peers to the highest echelons of risk management and Credit Suisse’s executive board. She was the highest-profile member of Thiam’s inner circle to win a spot in Gottstein’s top ranks. Her promotion to risk and compliance chief came in the reshuffle that saw the two units combined.
She’s facing some of the same tough questions as Gottstein about risk-management practices and culture following her personal involvement in signing off on a loan to Lex Greensill in October.
In an area of banking run mostly by men steeped in risk models, her more business-focused approach hasn’t always gone down well, according to conversations with about half a dozen current and former employees who spoke on condition of anonymity. Several left after she took over, while those who stayed were challenged to engage more with the business, according to people who worked with her.
“In order for the good bits of Credit Suisse to blossom, you need to get rid of bad bits and that is the risk control which has plagued this company for the better part of a decade,” said Herro.
Brian Chin, CEO of the investment bank
Brian Chin
Source: Credit Suisse AG
Along with Warner, Chin was a big winner in Gottstein’s shakeup last summer, when the trading head also won control of the investment bank after a merger of the two units.
His promotion — at least in part — was due to a turnaround in fortunes in global markets during the latter part of Thiam’s era. Now, his business is under intense pressure because of the Archegos losses.
Emissaries from several of the world’s biggest prime brokerages tried to head off the chaos before the drama spilled into public view last Friday. Credit Suisse’s idea was to reach some sort of standstill to figure out how to unwind positions without sparking panic, according to people with knowledge of the matter.
That strategy failed, prompting banks to start selling. Credit Suisse and Nomura issued profit warnings on Monday. Later in the day, Gottstein and Chin held a call with shellshocked managing directors and other executives where they said the lender was still working to figure out the size of the hit and told bankers this was a time to pull together and not focus on the potential impact on pay.
Paul Galietto, equities trading head
Galietto joined Credit Suisse in 2017 after a stint at UBS Group AG and a two-decade run at Merrill Lynch & Co. He ran Credit Suisse’s prime brokerage unit before rising to lead the equities trading division two years ago.
Galietto has been tasked with helping the investment bank in its strategy of delivering more stable results while using less capital than the trading business historically has. While revenue has stabilized after a significant decline before Galietto’s arrival, the firm ranks well behind U.S. rivals it used to surpass.
The equities business posted a 6% increase in revenue last year as clients were active in response to the pandemic, but that paled in comparison to jumps of more than 30% at some major rivals. The bank told investors in December that it still ranked fifth in cash trading and its prime brokerage, led by John Dabbs and Ryan Nelson, was in the top four in each major region.
Urs Rohner, chairman
Tidjane Thiam and Urs Rohner
Photographer: Alessandro Della Bella/Bloomberg
The Credit Suisse chairman, who has presided over one of the most tumultuous periods in Credit Suisse’s recent history during his 10-year tenure, steps down April 30, when Lloyds Banking Group Plc CEO Antonio Horta-Osorio takes over.
Herro of Harris Associates, who called for him to resign in his standoff with Thiam over the spying scandal, has already singled him out in the wake of the Archegos disclosures.
Antonio Horta-Osorio, incoming chairman
The outgoing CEO of the U.K.’s Lloyd’s Banking Group Plc, he led the bank back to private hands following a 2008 nationalization. The Portuguese national transformed Lloyds in his decade-long tenure, turning it into one of the most efficient lenders in Europe amid thousands of job cuts.
— With assistance by Marion Halftermeyer, Dale Crofts, Stefania Spezzati, Michael J Moore, and Jonathan Ferro
Major banks around the world are still financing fossil fuel companies to the tune of trillions of dollars.
A new report, published Wednesday from a collection of climate organizations and titled Banking on Climate Chaos 2021, finds 60 of the world’s largest commercial and investment banks have collectively put $3.8 trillion into fossil fuels from 2016 to 2020, the five after The Paris Agreement was signed.
“This report serves as a reality check for banks that think that vague ‘net-zero’ goals are enough to stop the climate crisis,” says Lorne Stockman, a Senior Research Analyst at Oil Change International, one of the organizations authoring the report, in a statement released with the report. “Our future goes where the money flows, and in 2020 these banks have ploughed billions into locking us into further climate chaos.”
On an annual basis, total fossil fuel financing dropped 9% in 2020. But the report attributes that to Covid-19-related restrictions on demand.
The report also found that “fossil fuel financing … from the world’s 60 largest commercial and investment banks was higher in 2020 than it was in 2016,” the first full year the Paris climate greement was in effect. It is worth noting that President Donald Trump withdrew from the international agreement in 2017. President Joe Biden rejoined The Paris Agreement on his first day in office.
The three banks that did the most fossil fuel financing in 2020, according to the report, were JPMorgan Chase at $51.3 billion; Citi at $48.4 billion; and Bank of America with $42.1 billion.
A representative of JPMorgan Chase told CNBC Make It that the bank could not comment on a third party report. But the bank did direct CNBC Make It to its initiatives addressing climate change, including “adopting a financing commitment that is aligned to the goals of the Paris Agreement” and facilitating $200 billion in clean, sustainable financing by 2025.
Citi directed CNBC Make It to a blog post published Tuesday from Val Smith, the bank’s Chief Sustainability Officer. In the post, Citi said it will work with existing fossil fuel banking clients to transition first to a public reporting of greenhouse gas emissions and then to a gradual phase out of financing offered to companies that don’t comply in adhering to carbon reduction standards.
“As the world’s most global bank, we acknowledge that we are connected with many carbon-intensive sectors that have driven global economic development for decades,” Smith wrote. “Our work to achieve net zero emissions by 2050 therefore makes it imperative that we work with our clients, including our fossil fuel clients, to help them and the energy systems that we all rely on to transition to a net-zero economy.”
Bank of America did not immediately respond to CNBC Make It’s request for comment.
The Banking on Climate Chaos 2021 report comes as indicators show global economies are not currently on track to meet the emissions reductions established as part of The Paris Agreement in 2015.
The 2020 report is the 12th annual, though the scope of the report has expanded in that time. The report was a collaboration by seven non-profits: Rainforest Action Network, Bank Track, Indigenous Environmental Network, Oil Change International, Reclaim Finance, and Sierra Club.
The report authors aggregate bank lending and underwriting data using Bloomberg’s league credit methodology, meaning credit is divided between banks playing a leading role in a given transaction, and uses data from Bloomberg Finance L.P. and the Global Coal Exit List.
Also, banks are given the opportunity to weigh in on the findings. “Draft report findings are shared with banks in advance, and they are given an opportunity to comment on financing and policy assessments,” the report says.
See also:
Here’s what you need to know about ‘the social cost of greenhouse gases’—a key climate metric
This Google X spin-off is offering a pathway to heat and cool your home with clean energy
Bill Gates: Nuclear power will ‘absolutely’ be politically acceptable again
New York state Gov. Andrew Cuomo speaks at a news conference on September 08, 2020 in New York City.
Spencer Platt | Getty Images
A group of 250 CEOs and business leaders sent a letter to New York’s governor and legislators expressing “alarm” at what they say could become the largest spending and tax increase in the state’s history.
The letter, delivered to Gov. Andrew Cuomo and Democratic members of the state Assembly and Senate, urged politicians to postpone any tax increases until after the state and New York City have more fully recovered from the pandemic and workers return. As employers of over 1.5 million people, the executives said many of their workers have moved out of the city and if taxes increase “they will vote with their feet.”
“Only about 10% of our colleagues are in the office and prospects for the future of a dense urban workplace are uncertain,” the letter said. “Many members of our workforce have resettled their families in other locations, generally with far lower taxes than New York, and the proposed tax increases will make it harder to get them to return.”
Signers of the letters include JPMorgan Chase CEO Jamie Dimon, BlackRock Inc. Chairman and CEO Larry Fink, Pfizer Chairman and CEO Albert Bourla, Citigroup CEO Jane Fraser and JetBlue CEO Robin Hayes. The group said “significant corporate and individual tax increases will make it far more difficult to restart the economic engine and reassemble the deep and diverse talent pool that makes New York the greatest city in the world.”
“This is not about companies threatening to leave the state; this is simply about our people voting with their feet,” the letter said. “Ultimately, these new taxes may trigger a major loss of economic activity and revenues as companies are pressured to relocate operations to where the talent wants to live and work. This is what happened to New York during the 1970s, when we lost half our Fortune 500 companies, and it took thirty years to recover. “
Gov. Cuomo’s office did not immediately respond to a request for comment.
Democratic members of the state Assembly and Senate have proposed a series of tax increases on companies and high earners that could top $6 billion a year. They say the pandemic increased inequality in New York and higher taxes on companies and high earners are needed to fund social programs and reduce the wealth gap.
Yet New York’s budget picture has improved recently. The state is set to receive $12.5 billion in unrestricted funds from the federal stimulus bill and New York State Director Robert Mujica said the stimulus funds and stronger-than-expected tax revenues would allow the state to avoid planned budget cuts.
The group said it understands the “urgent human needs” and inequities exposed by the pandemic but that proposed tax increases or changes in policy should come after New York’s recovery.
“Once we are on a path toward restoring more than one million jobs and thousands of small businesses that New York has lost in the past twelve months, there may well be need to raise new revenues to fill the gaps in our education, health and social welfare systems,” the letter stated.
Rebecca Bailin, Campaign Manager for Invest in Our New York, an effort to fund social programs by taxing the wealthy, said the letter was “250 wealthy people in their homes pleading for status quo.”
Tech stocks climbed Friday to end the week on a high note, but CNBC’s Jim Cramer expects more downside in the tech cohort as investors continue to rotate out of high-growth names.
“Like it or not, stocks are joined at the hip with the bond market right now,” the “Mad Money” host said.
As bond rates rise amid early signs of an economic recovery, investors are fleeing from riskier growth stocks to cyclical ones, particularly bank and industrial stocks that have underperformed, Cramer said.
The tech-heavy Nasdaq Composite has fallen in recent weeks and remains down 7% from its high about a month ago. The rotation from tech to value stocks, however, won’t last forever, Cramer said.
“Either tech stocks get too low … or long-term interest rates get too high. Until that happens, the rotation will just continue to play out,” he said. “We aren’t there yet, but I’m confident that we’ll get there eventually because that’s what always ends these vicious kinds of rotations.”
Cramer revealed what’s circled on his calendar in the week ahead. Corporate performance projections are based on FactSet estimates:
Tuesday: GameStop, Adobe
GameStop
Q4 earnings release: after market; conference call: 5 p.m.
Projected EPS: $1.35
Projected revenue: $2.21 billion
“The bulls hope to learn on this call more about [Ryan] Cohen’s plan when the company reports, and if there’s anything good at all about these results, well I expect to see a ton of buying the next day,” Cramer said.
Adobe
Q1 2021 earnings release: after market; conference call: 5 p.m.
Projected EPS: $2.79
Projected revenue: $3.76 billion
“Unfortunately, the results are less important than the state of the Wall Street fashion show,” he said. “If Adobe reports a great quarter and rates are soaring that day, with the yield on the 10-year approaching 2%, then the earnings won’t matter at all.”
Wednesday: RH, GrowGeneration, General Mills
RH
Q4 earnings release: after market; conference call: 5 p.m.
Projected EPS: $4.73
Projected revenue: $797 million
GrowGeneration
Q4 earnings release: after market; conference call: Thursday, 9 a.m.
Projected EPS: 7 cents
Projected revenue: $61.5 million
“You rarely hear those two mentioned in the same sentence, but right now they represent the most exciting parts of retail,” Cramer said about RH and GrowGeneration.
“I suspect they’ll both report excellent quarters,” he said. “Home furnishings are the most popular part of retail purchasing right now, as we saw from the incredible quarter Williams-Sonoma just delivered, and the cannabis culture … [has] been an unstoppable force as state after state embraces legalization.”
General Mills
Q3 2021 earnings release: before market; conference call: 9 a.m.
Projected EPS: 84 cents
Projected revenue: $4.45 billion
“I like this one as a way to take the temperature of the pantry stocks,” the host said. “I think the reaction will be tepid, but then again Smucker surprised to the upside and I like Hormel very much. So let’s take a listen.”
Thursday: Darden Restaurants
Darden Restaurants
Q3 2021 earnings release: before market; conference call: 8:30 a.m.
Projected EPS: 68 cents
Projected revenue: $1.61 billion
“Do you know we have 150,000 [restaurants] that have closed? It means that the survivors should be in an incredible position, which is why I expect them to crush numbers,” Cramer said of Darden. “The stock’s had a big run, but I think the scarcity value of the stock and the last-man-standing thesis make it compelling.”
Disclosure: Cramer’s charitable trust owns shares of Facebook, Amazon, Goldman Sachs, JPM organ Chase and Wells Fargo.
Disclaimer
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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.
SINGAPORE —JPMorgan says crude prices could see further upside ahead as oil continues to see strong gains so far this year.
It comes against the backdrop of an improving global outlook as major economies press ahead with their ongoing coronavirus vaccination campaigns.
“I think there’s room for oil prices to move a little bit higher in this environment but, you know, not thinking about a price of $80 or $90 a barrel. Maybe it goes up by $5 or $10 more from here,” Kerry Craig, global market strategist at JPMorgan Asset Management, told CNBC’s “Street Signs Asia” on Friday.
In the afternoon of Asia trading hours on Friday, international benchmark Brent crude futures were at $62.91 per barrel. U.S. crude futures changed hands at $59.34 per barrel. Both Brent and West Texas Intermediate crude futures have risen more than 20% each so far in 2021.
Oil prices have moderated in recent days after surging to their highest in more than a year.
Just this week, a deadly winter storm in southern U.S. resulted in days of power outages in Texas, wrecking havoc on the state’s energy infrastructure and taking millions of barrels per day of oil production offline. Energy prices popped as a result of that development.
Key drivers for higher oil prices
There are two things that will likely drive oil prices going forward, according to Craig.
Firstly, demand for oil is expected to pick up as the global economy recovers from the hit of the coronavirus pandemic, he said. However, that will be “curtailed to a certain extent” due to the low likelihood of international travel coming back in a big way soon. Travel is an “important source of demand,” he added.
On the supply side, he said: “We’re still relying on those OPEC+ members to keep that supply relatively curtailed and I think there’s still a question about that in terms of the amount of supply coming on relative to demand.”
OPEC and its allies, known collectively as OPEC+, have sought to navigate their way through a historically tumultuous period that has included an unparalleled collapse in oil prices as well as a major fuel demand shock amid the pandemic.
— CNBC’s Sam Meredith, Jeff Cox and Pippa Stevens contributed to this report.
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