Nomura plays it too safe during downturn 8 May 2020 The Japanese bank posted a quarterly loss of $325 mln as slumping markets dented its asset management unit. Nor did its trading desk produce the sort of bump enjoyed by rivals like Morgan Stanley. New boss Kentaro Okuda has some work to do in restoring Nomura’s killer instincts.
China’s big banks socially distance from economy 7 May 2020 ICBC and its hulking peers grew their bottom lines even as GDP plunged. They’re paying dividends, and some even reduced loan loss buffers. Such rude health suggests they haven’t extended sufficient credit to private businesses in need, which may capture Beijing’s attention.
Restructuring gurus face embarrassment of riches 1 May 2020 While fees from advising on M&A are drying up, helping companies navigate cash crunches and bankruptcy will be a big pandemic money-spinner, probably larger than past crises. Experts like Lazard don’t break out how much they make from such activities. That’s probably wise.
SocGen hits replay button on trading horror show 30 Apr 2020 The French bank plunged into the red due to $277 mln in losses on equity bets. That contrasts with investment banking peers who reported sharp rises in trading income. CEO Frederic Oudea’s pledge of more cost cuts does little to reassure there won’t be more goofs to come.
How Goldman Sachs walked into a pay trap 29 Apr 2020 CEO David Solomon’s $27.5 million package for last year is deservedly in the crosshairs at this week’s shareholder meeting. Goldman’s problem is the method rather than the magnitude, which isn’t out of whack with rivals. Still, it might want to borrow some of their good habits.
UK picks odd time to query investment bank model 29 Apr 2020 The Financial Conduct Authority has berated banks that lend to firms weakened by Covid-19 for demanding mandates on equity offerings. But companies have long used the promise of future fees to extract cheap loans from lenders. The watchdog risks further muddling the market.
Barclays’ JPMorgan impression may fall flat 29 Apr 2020 The UK bank, like CEO Jes Staley’s former employer, is preparing for the worst with a huge bad-debt charge. Peer Deutsche is looking through the virus pain. Barclays’ move could be a sign of strength, but investors may see it as evidence of the lender’s risky mix of businesses.
Blackstone becomes Wall Street’s deals backstop 23 Apr 2020 Advisory boutiques like Evercore and Moelis are putting their faith in private-equity firms to end the virus-induced merger drought. With $150 bln to invest, Steve Schwarzman’s outfit is the biggest, and ready to pounce. The juicy fees from big buyouts are a way off yet, though.
U.S. virus bailouts portend Occupy Wall Street 2.0 20 Apr 2020 Uncle Sam is helping out everyone from Harvard to hedge fund managers to Potbelly in its emergency relief programs. A hastily structured deal and inadequate oversight are allowing room for taking advantage. That may be a necessary evil, but it will also fuel the backlash.
Wall Street pay shows early resistance to virus 16 Apr 2020 Goldman, JPMorgan and Morgan Stanley only modestly cut the compensation pool last quarter, even though pandemic costs hit shareholders hard. Unlike 2008, protecting staff makes sense. And there's plenty of time left to slash bonuses the more the Covid-19 rout eats into profit.
Slower, steadier Morgan Stanley laps Goldman 16 Apr 2020 The Wall Street firm profited less from trading in pandemic-ravaged markets than its rival and paid more tax. It also has a bigger – though now useful – capital buffer, crimping returns. Yet boss James Gorman, in Covid-19 recovery himself, managed to muster better returns.
Citi leads Wall Street trading-floor opportunists 15 Apr 2020 Mike Corbat’s traders hiked revenue by 39% in the latest quarter, the biggest jump in eight years. Rivals including Goldman Sachs also reported large gains. Market chaos helps those who profit from volatility. This may be as good as it gets until Covid-19 lifts – or returns.
Banks’ love of plastic gets a bit less fantastic 15 Apr 2020 U.S. credit cards have delivered years of high returns and low delinquencies. JPMorgan is the biggest issuer; at Citi cards make up one-quarter of revenue. Now lenders are preparing for losses, and consumers aren’t spending. Covid-19 is taking the shine off a nice earner.
A Chinese investment megabank looks big, not bad 15 Apr 2020 State-backed Citic Securities and CSC could merge in a $70 bln deal. The resulting giant could fend off encroaching foreign rivals like Goldman, plus consolidate a fragmented local industry. The trick will be generating synergies despite inevitable turf wars and culture clashes.
JPMorgan adds turret to its fortress balance sheet 14 Apr 2020 Jamie Dimon’s mega-bank has set aside $8.3 bln for bad assets in case of a “fairly severe recession.” The lender is now better padded than in more than six years. Rivals will be under pressure to follow suit, but most can’t match JPMorgan’s ability to still squeeze out a profit.
Earnings forecasts are rosy and reliably wrong 13 Apr 2020 Analysts expect earnings to fall 10.2% in this quarter and twice as much in the next, but recover briskly. That would be a vote of confidence, if it weren’t for the fact that analysts habitually start way off, and slowly gravitate to too-modest figures that companies easily beat.
Bailouts put Wall St between a rock and hard place 13 Apr 2020 Banks are under pressure to quickly provide loans to keep businesses afloat. It makes fraud checks trickier, exposing them to liability. The Fed can share responsibility by providing a due diligence guide. Then banks have something to point to when inevitable failings happen.
Banks lay out an earnings-season assault course 9 Apr 2020 Until recently, quarterly earnings were fairly predictable, aside from minor drama around trading revenue. Covid-19 has turned that on its head. JPMorgan already gave a teaser on how to asses pandemic risks, but Breakingviews walks through some of the big things to look out for.
Morgan Stanley gives Covid-19 a materiality test 9 Apr 2020 Boss James Gorman has recovered from the virus investors didn’t know he had. Companies have huge leeway when it comes to disclosing the boss’s ill health; Warren Buffett and Steve Jobs show extremes. Privacy is important, but there are advantages to radical transparency.
Viewsroom: Vices and more 9 Apr 2020 Breakingviews columnists in Ireland, New York and Lantau check in with Editor Rob Cox to discuss Jamie Dimon’s annual letter and coming earnings onslaught, fraud at Luckin Coffee and, everybody’s favorite coronavirus obsession: a boom in sales of porn, weed, booze and junk food.