Receiving Wide Coverage ...
Blow to earnings
The largest U.S. banks this week are “expected to release some of the rainy-day money they set aside after the coronavirus pandemic hit. That will offer a jolt to their income in the first three months of the year.” JPMorgan Chase, Wells Fargo and Goldman Sachs report first-quarter earnings on Wednesday, followed by Bank of America and Citigroup on Thursday and Morgan Stanley on Friday. Financial Times
Differences on digital
“There is a growing sense that a bitcoin ETF might finally arrive in the U.S. in the not-too-distant future,” The Wall Street Journal reports. “The nominated chairman of the Securities and Exchange Commission, Gary Gensler, has taught courses on cryptocurrency. The bitcoin market has experienced huge growth in recent months and now has the involvement of some big institutions. VanEck, Fidelity and others are again seeking regulatory approval for bitcoin ETFs.”
But at least one major bank has not bought into bitcoin. “HSBC has banned customers of its online share-trading platform from buying or moving into their accounts MicroStrategy stock, calling it a ‘virtual currency product,’ ” Reuters reports. MicroStrategy, a business analytics firm, “is led by bitcoin proponent Michael Saylor and owns bitcoin worth billions of dollars. While HSBC will allow the holding, sale and outgoing transfer of MicroStrategy shares, it will forbid new purchases or incoming transfers.”
“HSBC has no appetite for direct exposure to virtual currencies and limited appetite to facilitate products or securities that derive their value from VCs (virtual currencies),” the bank said. “The move comes amid a growing embrace of cryptocurrencies by large financial firms, companies and investors seeking yield in a world of ultra-low interest rates.”
Ant cut down
to size Ant Group, the giant Chinese fintech controlled by Alibaba founder Jack Ma, “will apply to become a financial holding company overseen by China’s central bank, overhauling its business to adapt to a new era of tighter regulation for internet companies,” the Journal reported. “Ant, which owns the ubiquitous mobile payment and lifestyle app Alipay, will have to correct what regulators called unfair competition in its payments business and improve its corporate governance. The company will have to reduce the liquidity risks of its investment products and shrink the assets under management of Yu’e Bao, its giant money-market mutual fund. Ant will also be required to break an ‘information monopoly’ on the vast and detailed consumer data it has collected, the central bank said.”
“The move could strip Ant down to a mobile payments platform, and severely weaken its credit businesses,” the Financial Times said. “Only 36% of Ant’s revenues at present come from its payment services, with the remainder coming from digital finance.”
The announcement “comes days after Alibaba, the Chinese technology group that owns a 33% stake in Ant, was fined a record $2.8 billion by Chinese antitrust regulators over restrictions it placed on merchants on its ecommerce platform.”
Becoming a financial holding company “would bring closer supervision and requirements that [Ant] hold on to more money that it might otherwise lend or put to profitable use,” The New York Times said.
Wall Street Journal
Moving on
Barclays is taking over Gap’s private-label and co-branded credit card business from Synchrony Financial, where the retail chain has been for the past 22 years, one of the company’s “longest-running card partnerships and one of its five largest retail card partners. The portfolio includes some 11 million open card accounts with total balances of roughly $3.8 billion at the end of March. Its Gap contract is scheduled to end in April 2022.”
Workhorse
“The pandemic threatened to clobber Stripe, which processes payments for e-commerce companies. When stay-at-home orders early in the pandemic caused spending to plunge and refund requests to skyrocket, the outlook wasn’t great. Instead, it turbocharged the company, when everything moved online.”
“Stripe’s revenue last year rose nearly 70%, to about $7.4 billion, according to people with knowledge of the company’s finances. Other startups might have flashier apps or more recognized brands, but Stripe showed that it is better to be a workhorse than a show pony.”
Financial Times
Bonus cuts
Credit Suisse “has cut bonuses for its staff by hundreds of millions of dollars after the Swiss lender lost $4.7 billion from the collapse of family office Archegos Capital. The $4.7 billion of losses Credit Suisse has revealed so far are the equivalent of 18 months of average net profits for the bank and come shortly after another crisis involving its funds linked to collapsed supply-chain finance company Greensill Capital. The Archegos and Greensill debacles have led to several internal and external probes, a swath of executives being ousted and questions raised over Credit Suisse’s risk management systems.”
Pick of the litter
“Not so long ago, Deutsche Bank was the ‘sick bank of Europe’ — it was racked by scandal, trading losses and management infighting that at times looked existential. Now, with an accident-prone Credit Suisse having taken on that mantle, Deutsche has emerged as the surprise best of a bad bunch.”
Tech hub
Goldman Sachs “is opening its biggest office in the U.K. outside London, creating hundreds of technology jobs in Birmingham. The U.S. investment bank’s decision to open a technology center in the Midlands city is a sign of growing interest among blue-chip employers in cheaper regional cities with a plentiful supply of graduates. Goldman will hire software engineers, data analysts and data scientists to work on new ways of delivering financial services at the Birmingham base, which will open by the end of the year.”
Quotable
“We feel like we’re at a place where the economy’s about to start growing much more quickly and job creation coming much more quickly.” — Federal Reserve Chair Jerome Powell, in an interview with CBS’s “60 Minutes” on Sunday.
“The principal risk to our economy right now really is that the disease would spread again more quickly," Powell added, as The New York Times noted. "And that’s troubling. It’s going to be smart if people can continue to socially distance and wear masks.”
