Tag: JPMorgan

Wall Street banks beat earnings estimates, see a boom ahead, BFSI News, ET BFSI

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From just a year ago when they provisioned for billions of dollars anticipating huge loan defaults due to pandemic, Wall Street banks are now an ebullient lot.

On Wednesday, executives at Goldman Sachs, JPMorgan Chase and Wells Fargo posted a huge jump in earnings in the January-March quarter and delivered a bullish economic forecast.

Goldman and JPMorgan reported profits roughly five times as high as in the first three months of 2020, thanks to a combination of strong business results and a reduction in the amount of money they had put aside to cover losses on loans. Wells Fargo reported profits that were seven times as high.

JPMorgan

JPMorgan earnings skyrocketed 477% to $4.50 a share. Revenue climbed to $33.12 billion. But earnings got a big boost from JPMorgan releasing $5.2 billion from credit loss reserves.

Consumer banking revenue fell 10% to $6.7 billion. Investment banking revenue more than tripled to $2.9 billion. Fixed income trading revenue grew 15% to $5.8 billion, and equities trading revenue jumped 47% to $3.3 billion. Commercial banking rose 11% to $2.4 billion. Asset management revenue swelled 20% to $4.1 billion.

Goldman Sachs

EPS of $18.60 on revenue of $17.7 billion. Investment banking revenue jumped 73% to $3.77 billion. Fixed income trading revenue climbed 31% to $3.89 billion, and equities trading revenue surged 68% to $3.69 billion. Asset management revenue shot up to $4.61 billion vs. a negative $96 million a year ago. Wealth management revenue grew 16% to $1.74 billion.

Provision for credit losses was a net benefit of $70 million, compared with net provisions of $937 million a year ago.

Wells Fargo

EPS of $1.05 on revenue of $18.06 billion. Provision for credit losses decreased $5.1 billion. Consumer banking revenue was flat at $8.65 billion. Commercial banking revenue fell 12% to $2.2 billion. Corporate and investment banking revenue grew 7% to $3.6 billion. Wealth management revenue rose 8% to $3.5 billion.

The boom ahead

Wall Street banks now see consumers tanked up on stimulus money spending huge and companies rushing to expand by buying or building new businesses, as the US emerges from the Covid-19 pandemic

“It is clear to me that the U.S. is poised for a strong recovery this year, led by consumer spending that is rebounding to pre-Covid levels,” David M Solomon, chief executive of Goldman Sachs, told analysts.

Jamie Dimon, his counterpart at JPMorgan Chase, the country’s largest bank by assets, took a similar view. “We believe that the economy has the potential to have extremely robust, multiyear growth,” Dimon said in a statement. He attributed his outlook to government spending on stimulus and infrastructure, supportive policies from the Federal Reserve and high hopes for the end of the pandemic.

According to an executive, bank earnings reveal a dramatic shift from an unprecedented downdraft in growth to a V-shaped recovery in the economy.

Provisioning

The three banks are set to reduce the cushion they had set aside at the start of the pandemic to withstand continued losses from credit cards, mortgages and other loans they had made.

JPMorgan released $5.2 billion of that credit cushion, and Wells reduced its cushion by $1.6 billion. Wells also noted provisioning for bad loans was at a historic low. Goldman also reduced what it had set aside by about $200 million.



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Bitcoin volatility decline paves way for banks, JPMorgan says, BFSI News, ET BFSI

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By Vildana Hajric

The recent pullback in Bitcoin’s volatility is setting the stage for a trend that could encourage institutions to dive in, according to JPMorgan Chase & Co.

“These tentative signs of Bitcoin volatility normalization are encouraging,” strategists including Nikolaos Panigirtzoglou wrote in report emailed Thursday. “In our opinion, a potential normalization of Bitcoin volatility from here would likely help to reinvigorate the institutional interest going forward.”

Three-month realized volatility for the cryptocurrency has fallen to 86% after rising above 90% in February, they wrote. The six-month measure appears to be stabilizing at around 73%. As volatility subsides, a greater number of institutions could warm to the crypto space, the strategists said.

The coin’s volatility has kept institutions away, something that’s been a key consideration for risk management — the higher the volatility of an asset, the higher the risk capital consumed by it, according to the strategists. None of the biggest U.S. banks right now provide direct access to Bitcoin and its counterparts.

Still, traditional Wall Street firms have been taking a greater interest in the coin, especially after it doubled this year on the heels of a 300% jump in 2020.

Goldman Sachs Group Inc. said this week it’s close to offering investment vehicles for Bitcoin and other digital assets to private wealth clients. Morgan Stanley plans to give rich clients access to three funds that will enable ownership of crypto and Bank of New York Mellon Corp. is developing a platform for traditional and digital assets.

Some of the attention on Bitcoin over the past two quarters has come at the expense of gold, JPMorgan’s strategists said, citing $7 billion of inflows into Bitcoin funds and $20 billion of outflows from exchange-traded funds tracking the precious metal.

Bitcoin volatility decline paves way for banks, JPMorgan says
Meanwhile, an additional boost to future adoption by institutions could arise from recent changes in Bitcoin’s correlation structure relative to other, traditional assets, according to JPMorgan strategists. These correlations have shifted lower in recent months, “making Bitcoin a more attractive option for multi-asset portfolios for diversification point of view and less vulnerable to any further appreciation in the dollar,” they wrote.



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Bank lending to get a boost if Indian bonds are included in FTSE index, BFSI News, ET BFSI

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New York: FTSE Russell placed Indian government bonds on the watchlist for possible inclusion in its debt index, a move that may bring the nation closer to its aim of joining a global bond gauge after several false starts.

Rupee securities will be considered for addition to the FTSE Emerging Markets Government Bond Index, FTSE said as part of its semi-annual review. In the coming weeks, it’ll start an index that tracks securities issued under the Fully Accessible Route after investors expressed an interest in the notes.

India has been trying to gain entry into a global debt index since 2019, but talks with index compilers have made little headway. A report this month said India’s efforts have been stymied by demands from global bond funds including a request that the government doesn’t change tax rules to the disadvantage of investors.

“The attractiveness of IGBs as an ongoing investment will not solely depend on index inclusion,” said Arthur Lau, head of Asia ex-Japan indexed income at PineBridge Investments Asia. “Other factors including expected returns based on the prevailing economic conditions, government policies, and relative value to other local bond markets should be taken into account.”

$10 billion inflows

Inclusion in FTSE’s index may attract about $10 billion of inflows into rupee securities, said Dariusz Kowalczyk, a senior emerging-market strategist at Credit Agricole CIB in Hong Kong, adding that this was an initial estimate.

At its September review, JPMorgan said Indian bonds remain off index and were still under review for inclusion, although about $115 billion in notional value of current and upcoming government debt have been marked for accessibility.

How will India benefit?

If India becomes part of the EMGBI, foreign portfolio investors could step up investments in the Government Securities (G-Sec) market, say market players.

The move will aid the massive government borrowing of Rs 12 lakh crore planned for fiscal 2022. Bond traders are demanding higher rates of G-Secs, forcing RBI to devolve a significant portion of the auction on primary dealers

Inclusion in FTSE will bring in new investors and reduce pressure on banks to invest in government bonds and free resources relatively for lending.

IF G-Sec yields go down, it will benefit corporates too as corporate bond yields mirror government securities.

However, the quantum of flows will depend on the percentage allocation to India. Also, FTSE is a smaller index when compared to Bloomberg Barclays and JP Morgan Emerging Market Government Bond Index (GBI-EM).

China inclusion

Index provider FTSE Russell has given its final approval for Chinese sovereign bonds to be included in its flagship bond index from later this year, setting the stage for billions of dollars of inflows into the world’s second-largest economy.

But a longer-than-expected inclusion period – of 36 months, rather than one year, as FTSE had previously announced – reflects persistent concerns among some global investors about investing in the world’s second-largest bond market.

Chinese government bonds (CGBs) will be added to the FTSE World Government Bond Index (WGBI) over three years from the end of October, FTSE Russell said in a statement.



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JPMorgan goes ‘out of this world’ to test blockchain tech; may set stage for payments between IoT devices

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Along with Amazon and SpaceX, companies such as OneWeb, Facebook, India’s Pixxel have reportedly been working on sending their own satellites to space.

Investment bank JPMorgan recently tested blockchain’s decentralised network to see if two machines could transact autonomously. And it was literally out of this world. The experiment involved carrying out blockchain-based payments between satellites in space “which validated the approach towards a decentralized network where communication with the earth is not necessary,” according to a statement by the Nasdaq-listed manufacturer and supplier of nanosatellites for customers in the academic, government, and commercial markets – GomSpace. The transaction was made utilising the company’s GOMX-4 satellites instead of JPMorgan sending its own satellites in space. The in-orbit demonstration between satellites was the “world’s first bank-led tokenized value transfer in space, executed via smart contracts on a blockchain network established between satellites orbiting the earth.”

“JPM: First bank with space-based payments using multiple satellites, enabling machine-to-machine payments, programmable value transfer, perhaps an intergalactic currency backed by H2O/O,” Christine Moy, Global Head of JPMorgan’s blockchain network Liink tweeted recently. According to GomSpace, such space-based payments have opened the door to a potential peer-to-peer DvP (data versus payment) satellite marketplace in the long term, as private companies prepare to launch their own constellations.

“I strongly believe that JPMorgan could have done this payment test without involving outer space and the satellites. They chose outer space because it is possibly the highest level of decentralized environment. A blockchain network created between the satellites and token transfer was done without any sort of communication with earth, it is similar to doing a P2P transaction on earth within a blockchain network without the use of any formal payment platform. This will enable payments between connected smart devices/IoT devices without any human intervention,” Shivam Thakral, CEO of cryptocurrency exchange BuyUcoin told Financial Express Online.

Also read: Autos, bikes continue to drive e-mobility’s post-Covid recovery even as cab booking sees lowest recovery rate

“The idea was to explore IoT payments in a fully decentralised way,” Reuters reported quoting JPMorgan’s blockchain business Onyx CEO Umar Farooq. “Nowhere is more decentralised and detached from the earth than space,” he added. Moreover, according to Tyrone Lobban, Head of Onyx’s blockchain innovation accelerator Blockchain Launch, the test also showed that it could be possible to create a marketplace where satellites send each other data in exchange for payments, as more private companies launch their own devices into space.

Along with Amazon and SpaceX, companies such as OneWeb, Facebook, India’s Pixxel have reportedly been working on sending their own satellites to space. “We are proud to have supported J.P. Morgan as they explored this novel use case of a space-based payment infrastructure utilizing blockchain technology,” Niels Buus, CEO, GomSpace said in a statement. GomSpace’s GOMX-4 satellites would further allow the company to provide rapid in orbit demonstrations, such as JPMorgan’s project, as a service to its customers to explore new uses of space technology.

Back on earth, examples of IoT payments that could become a reality sooner include a smart fridge ordering and paying for milk on an e-commerce site, or a self-driving car paying for gas, according to Farooq. “As far as the future of payments is concerned, this will bring ultimate decentralization in the financial system where even the internet won’t be required to execute payments. This will help in making blockchain technology mainstream and global banking giants will move towards blockchain technology for providing new-age banking services,” added Thakral.

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State Bank of India joins JPMorgan’s blockchain-based payment network, BFSI News, ET BFSI

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State Bank of India has tied up with JPMorgan to use the US bank’s blockchain technology to speed up overseas transactions.

The tie up is expected to reduce SBI customers’ transaction costs and time taken for payments, sources said. Time taken to resolve cross-border payments-related inquiries can be reduced to a few hours from up to a fortnight, they said. This will help cross-border payments reach beneficiaries faster and using limited steps.

“We have undergone significant digital transformation in recent years and continue to add new technologies to create real value to daily operations,” said Venkat Nageswar, deputy MD – international banking group, SBI.

“We are excited to be the first bank in India to go live on the network and look forward to closer partnership with JP Morgan on implementation and exploring application as part of the network to better serve our clients,” he told ET.

A spokesperson said JPMorgan said it will expand its blockchain presence in India.

“We continue to actively explore how emerging technologies can enhance our clients’ experience,” said P D Singh, managing director and head – corporates and FI, JPMorgan Chase Bank, India.

The global bank’s blockchain technology — Liink — is meant for a peer-to-peer network, with financial institutions, corporates and fintech companies subscribing to it internationally. This enables users to make secure as well as peer-to-peer data transfers with greater speed and control. It also mitigates risks involved in cross-border transactions.

SBI has integrated Liink into its operations to exchange payments-related information with other financial institutions.

Globally, about 100 banks are now live on the network. Many other large local lenders, both government and private, are said to be in talks with JPMorgan on the same.

According to blockchain experts, banks around the world – including lenders from China and Africa – are taking to blockchain-based clearance systems for cross-border transactions. This is to get a first-movers’ advantage and to make such payments faster and cheaper.

“The World Bank confirmed that bank-led remittances cost an average of 10% globally, which is really high. Projects like Ripple or various bank consortia have argued that a distributed ledger (or a new blockchain) shared between banks directly removes the need for correspondent banking and can thus reinvent cross-border remittances or trade cash flows for the new age.” said Nitin Sharma, partner at Antler Global and previously the founder of Incrypt Blockchain.

“At least two Mumbai-headquartered private sector lenders and a large state-owned bank are in talks with JPMorgan,” said a banking source.

Going forward, Liink will also be able to allow participating banks to pre-validate an account even before making payments, and check message formatting for adherence to regulatory norms at beneficiary location. This process helps mitigate transaction rejection/frauds, a move that will garner more customer satisfaction.



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Aditya Puri backs corporates in banking, says no harm in trying it, BFSI News, ET BFSI

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Former HDFC Bank chief executive Aditya Puri on Tuesday backed the proposal to allow deep-pocketed corporates into banking in India.

Puri, the founder chief executive of what has become the largest private sector lender who retired recently, said the country needs more banks to fuel its economic growth ambitions and capital will have to come from somewhere.

Late last year, an internal working group of RBI had proposed to re-allow corporates into banking, leading to a huge controversy on concerns over potential conflicts of interest.

“Giving (banking licences) to individuals didn’t work, public ownership didn’t work either. There is no harm trying it,” Puri said during an online event.

He named Yes Bank, started by two individuals, and also infra lender IL&FS which faced troubles over governance as cases which did not work and underlined the need to try something new.

In order to become a $5 trillion economy, India needs to have more banks and a corporate with a good set of ethics and a strong brand might just be the right candidate, Puri argued.

Puri, who has taken up an advisory role at a private equity fund and also a corporate directorship since retirement, however, did not favour the idea of having a bad bank to house dud debt and also that of a development finance institution (DFI).

Rather than bad bank, Indian banks can follow the remedial banking unit approach which has been successfully used to resolve bad debt issues in the US by the likes of Citibank and JPMorgan, he said, adding the RBI and the ministry of finance can supervise and oversee functioning of such a platform.

For the DFI, he said mistakes which were committed in the past should be avoided.

Puri further said the banking system has sufficient capital to see through the asset quality reverses and is sitting on excess liquidity of over Rs 6 lakh crore to take care of lending needs of the economy at present.

For the 8.5 per cent in non-performing assets, the system is carrying provisions of 7 per cent, he said and added that from a net NPA perspective, the Indian system is at par with any other in the world.

The challenges facing Indian banking are solvable, he emphasised.

On the future of state-run lenders, Puri said the government’s approach to have five large banks is a welcome one, but warned that there are a few more whose fates continue to be undecided and some choices will have to be made.

Terming it a sad eventuality, he said over the next few years the state-run banks, which currently possess over 65 per cent of the loans, will see a faster depletion in their market share than they have seen in the last two decades.

Puri said over 40 per cent of the payment volumes handled by banks are of third-party service providers like Amazon Pay, Google Pay or PhonePe, and demanded that the banks should be allowed to charge for rendering such services.

He justified the demand saying banks are the entities making upfront investments in the infrastructure and need to be compensated.

After cashbacks, none of the payment platforms are making profits, he added.

On the pandemic, he said the world underestimated India’s capabilities, pointing out that the recovery is faster in the country and it has come out better than most others.



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JPMorgan’s profits jump as economy, investment bank recovers, BFSI News, ET BFSI

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JPMorgan Chase & Co, the nation’s largest bank by assets, said its fourth quarter profits jumped by 42 per cent from a year earlier, as the firm’s investment banking division had a stellar quarter and its balance sheet improved despite the pandemic.

The New York-based bank said it earned a profit of USD 12.14 billion, or USD 3.79 per share, up from a profit of USD 8.52 billion, or USD 2.57 per share, in the same period a year ago. Excluding one-time items, the bank earned USD 3.07 a share, which is well above the USD 2.62 per share forecast analysts had for the bank.

The one-time item was JPMorgan “releasing” some of the funds it had set aside last year to cover potential loan losses caused by the coronavirus pandemic and subsequent recession. Banks had set aside tens of billions of dollars to cover potentially bad loans, and JPMorgan had been particularly aggressive in setting aside funds early in the pandemic.

Releasing those funds goes straight to a bank’s bottom line when it reports its results, but it’s not money that the bank generated from loans, customers or borrowers. It’s just funds that were effectively put into escrow and are no longer in escrow.

The USD 1.9 billion release is only a fraction of what JPMorgan set aside last year, and with the pandemic raging across the globe and particularly here in the U.S., it’s uncertain how much more the bank will release in the upcoming quarter.

“While positive vaccine and stimulus developments contributed to these reserve releases this quarter, our credit reserves of over USD 30 billion continue to reflect significant near-term economic uncertainty,” said JPMorgan CEO Jamie Dimon in a statement.

The driver of JPMorgan’s profits this quarter was the investment banking business. The corporate and investment bank posted a profit of USD 5.35 billion compared with USD 2.94 billion in the same period a year earlier. JPMorgan said it saw higher investment banking fees – money banks collect to advise companies on going public or buying other companies – as well as higher fees from its trading desks.



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Wall Street drops as big banks fall after results, BFSI News, ET BFSI

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By Devik Jain and Medha Singh

– Wall Street‘s main indexes dropped on Friday, weighed down by losses in major U.S. lenders after their earnings reports, while incoming President Joe Biden’s $1.9 trillion stimulus plan also sparked fears of an increase in corporate taxes.

Shares of JPMorgan Chase & Co, Citigroup Inc and Wells Fargo & Co, which had seen a strong rally in the run-up to earnings, were all down even as the banks posted better-than-expected fourth-quarter profits.

JPMorgan fell 2.2% following a seven-day winning streak that had pushed the stock about 12% higher.

The S&P 500 banks index shed 3.3%.

Wall Street’s main indexes are set to wrap up the week lower after climbing to record highs recently on bets of a hefty fiscal package and optimism about vaccine distribution.

Also weighing on markets was a Washington Post report that said COVID-19 vaccine reserve was already exhausted when the Donald Trump administration vowed to release it this week, dashing hopes of expanded access. (https://wapo.st/2MZoiwa)

“It’s a concern of the vaccine and maybe, to a lesser extent, the Biden spending plan that he outlined last night,” said Paul Nolte, portfolio manager at Kingsview Investment Management in Chicago.

“It’s more of a healthy correction to some of the advances that we’ve seen in the market.”

Biden’s stimulus proposal, unveiled on Thursday, includes some $1 trillion in direct relief to households and has sparked fears that the government would need to hike corporate taxes to fund the spending.

“Biden’s concern is not the stock market, his concern is Main Street and that’s a good thing … but that tells you there’s going to be an increase in corporate taxes,” said Dennis Dick, proprietary trader at Bright Trading LLC in Las Vegas.

Meanwhile, data showed a further decline in U.S. retail sales in December – the latest sign the economy lost considerable speed at the end of 2020.

Nine of the 11 major S&P sectors fell, with energy, financials and industrials posting the steepest declines after leading markets higher in the recent rally.

The defensive utilities and real estate were the only sectors trading higher.

At 11:39 a.m. ET, the Dow Jones Industrial Average fell 135.21 points, or 0.44%, to 30,856.31, the S&P 500 lost 18.40 points, or 0.48%, to 3,777.14 and the Nasdaq Composite lost 60.55 points, or 0.46%, to 13,052.08.

Earnings for S&P 500 companies are expected to decline 9.5% in the final quarter of 2020 from a year ago, but are expected to rebound in 2021, with a gain of 16.4% projected for the first quarter, according to IBES data from Refinitiv.

Exxon Mobil Corp fell 3.6% after a report said the U.S. Securities and Exchange Commission launched an investigation of the oil major, following a whistleblower’s complaint that the company overvalued a key asset in the prolific Permian shale oil basin.

Spotify Technology SA dropped about 5% after Citigroup downgraded its shares to “sell”.

Hewlett Packard Enterprise Co rose 1% after J.P. Morgan upgraded the enterprise software maker’s stock to “overweight”.

Declining issues outnumbered advancers by a 2.8-to-1 ratio on the NYSE and by a 2.9-to-1 ratio on the Nasdaq.

The S&P 500 posted 5 new 52-week highs and no new lows, while the Nasdaq recorded 180 new highs and eight new lows.



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