The country’s biggest banks have all released their financial results for the past year, and the data reflects the strange economic situation facing the Biden administration. Parts of the economy are booming, others are at a standstill, and the outlook is still uncertain.
On the one hand, Wall Street’s core business is thriving:
Goldman Sachs’s trading operation reported its highest annual revenue in a decade, a factor that helped the bank more than double its fourth-quarter profit.
JPMorgan Chase and Morgan Stanley also reported big jumps in their investment banking and trading units after a huge year for bond issues, initial public offerings and M.&A. deals.
But other banks with big consumer-lending arms didn’t fare as well, with Bank of America, Citigroup and Wells Fargo lagging in terms of profit growth. The low interest rates that prompted companies to raise debt have hurt banks’ net interest income on consumer loans, which fell year-on-year for most lenders in their latest results.
Few bank bosses appear to think that Wall Street-focused businesses will perform as well this year, but worries about Main Street units seem less acute than last year.
In the fourth quarter, JPMorgan Chase released nearly $3 billion worth of reserves that it had built up to guard against loan defaults, while Bank of America, Citigroup and Wells Fargo released a combined $2 billion in the same period.
Over the course of the full year, those four banks still added around $50 billion to their provisions against credit losses, a sign that they remain on guard against a potential wave of defaults. In the meantime, loan demand is low and deposits are piling up.
What do banks plan to do with all that cash? “We have so much capital, we cannot use it,” Jamie Dimon of JPMorgan told investors. The bank’s cash pile has doubled over the past year, to more than $500 billion.
It’s a similar story at other banks, and now that they’ve been cleared by regulators to resume share buybacks, “we’re going to be aggressively buying back, and consistently,” said James Gorman, Morgan Stanley’s chief executive.
Analysts polled by FactSet expect the six largest banks to buy back nearly $70 billion in shares this year, up from $18 billion last year.
You know it’s bad when James Bond still can’t get out of the house.
“No Time to Die,” the 25th film in the Bond franchise, was delayed for a third time late Thursday, the surest sign yet that Hollywood does not believe the masses will be ready to return to movie theaters anytime soon. The $250 million movie will now arrive in theaters on Oct. 8, according to Metro-Goldwyn-Mayer.
It had been scheduled to debut last April. As the coronavirus continued to surge, that plan was abandoned for a November debut. Most recently, the expected blockbuster had been set for an April 2 landing.
Studios, worried about plodding vaccination efforts in the United States, were already postponing major films (again). Universal and Amblin Entertainment, for instance, pushed “Bios,” starring Tom Hanks on a post-apocalyptic Earth, to Aug. 13 from April 16.
But the retreat of “No Time to Die” could prompt additional dominoes to fall. It had been the first mega-film scheduled for the post-vaccine era. That honor now goes to the Marvel prequel “Black Widow” (May 7), followed by Universal’s latest “Fast & Furious” installment (May 28). The problem: Nobody is particularly eager to test the market by going first — especially not after what happened to Christopher Nolan’s “Tenet.”
Warner Bros. had tried to jump-start moviegoing in September by releasing “Tenet,” even though many theaters were still closed and others were operating at limited capacity. The film collected $363 million worldwide, a very respectable total under the circumstances, but one that disappointed Hollywood nonetheless. (Mr. Nolan’s films typically collect more than double that amount.)
More recently, “Wonder Woman 1984” has taken in an anemic $143 million worldwide, with its instant availability online in the United States undercutting ticket sales, along with fear about the resurging virus.
Shortly after MGM announced the new date for “No Time to Die,” Sony Pictures shuffled its schedule, bumping “Ghostbusters: Afterlife” to Nov. 11 from June 11, and “Morbius,” starring Jared Leto as the Marvel pseudo-vampire to Jan. 21, 2022, from Oct. 8, where it would have competed with a certain British superspy.
On the eve of President Biden’s inauguration, the Federal Housing Finance Agency made a quiet announcement that speaks volumes about the changes coming to financial regulation. The agency, which oversees Fannie Mae and Freddie Mac, requested input on climate-change risk management, noting a “growing body of research” on the threat extreme weather poses to the economy.
The timing looks suspicious, but is fortuitous, agency representatives told DealBook. It may seem like an about-face from the agency run by Mark Calabria, a libertarian economist appointed by a president who dismissed climate science. But the move was not intended to please a new, green administration, they insisted. Extreme weather is an obvious problem for the housing market, as Fannie and Freddie found with mortgage defaults following Hurricane Harvey in Texas in 2017. Mr. Calabria has long been building up a research and data team, soon to include an environmental economist, they said.
The change in the White House could bring powerful new partners. The Treasury secretary nominee Janet Yellen said that she would appoint “someone at a very senior level” to create a hub in the Treasury focused on climate change and financial system risks. Many of Mr. Biden’s other nominees come with green credentials, forming “the largest team of climate change experts ever assembled in the White House.”
The move is “consistent with a sea change in how financial regulators will be thinking about risk,” said Mark Zandi, Moody’s chief economist. The Commodity Futures Trading Commission and the Federal Reserve addressed climate risks in recent reports. Agencies can act quickly on climate initiatives now, given the new administration’s priorities.
“We have one of those rare moments of hope,” said Tim Mohin of the carbon accounting start-up Persefoni, who has seen climate risks go from a fringe notion to mainstream over 30 years working on sustainability in government and at companies like Apple and Intel. “There is no reason to go slow.”
Stocks dropped on Friday, with Wall Street coming off a record, as data showed a weakening economy in Europe because of pandemic restrictions.
The S&P 500 fell about half a percent in early trading. In Europe, the benchmark Stoxx Europe 600 fell 1 percent, heading for a second consecutive weekly decline while the FTSE 100 in Britain fell 0.6 percent. Most indexes in Asia also declined.
New data showed a persistent slowdown in Europe’s economies. According to the IHS Markit purchasing managers’ indexes, the British services industry suffered a steep contraction in January, while Germany’s manufacturing sector and France’s services industry also shrank more than economists’ forecast.
Shares in Cineworld, the parent company of Regal Cinemas, the second largest movie theater chain in the United States, dropped in London trading after the release date of “No Time to Die,” the 25th film in the James Bond franchise, was delayed for third time late Thursday. Shares of AMC Entertainment, the largest U.S. theater chain, dropped more than 3 percent in U.S. trading.
Intel tumbled more than 4 percent after the incoming chief executive, Patrick Gelsinger, said on Thursday that the company would keep manufacturing its chips internally. He also said he wanted the company to regain its position as the “unquestioned leader in process technology.” Some analysts have suggested that Intel should spin off its manufacturing business amid stronger competition. Shares of AMD, a competitor, rose more than 3 percent.
IBM fell nearly 10 percent after the company said revenue dropped across all its business units, including cloud software.
Siemens, the large German manufacturing and engineering company, rose more than 5 percent after the company reported better-than-expected earnings, aided by the economic recovery in China.
Loon, a prominent subsidiary of Google’s parent company, Alphabet, that aimed to use hot-air balloons to bring cellular connectivity to remote parts of the world, is shutting down.
Nearly a decade after it began the project, Alphabet said on Thursday that it pulled the plug on Loon because it did not see a way to reduce costs to create a sustainable business, reports The New York Times’s Daisuke Wakabayashi. Loon was one of the most hyped “moonshot” technology projects to emerge from Alphabet’s research lab, X.
The idea behind Loon was to bring cellular connectivity to remote parts of the world where building a traditional mobile network would be too difficult and too costly. Alphabet promoted the technology as a potentially promising way to bring internet connectivity to not just the “next billion” consumers but the “last billion.”
Google started working on Loon in 2011 and began a public test in 2013. Loon became a stand-alone subsidiary in 2018, a few years after Google became a holding company called Alphabet. In April 2019, it accepted a $125 million investment from a SoftBank unit called HAPSMobile to advance the use of “high-altitude vehicles” to deliver internet connectivity.
Last year, it announced the first commercial deployment of the technology with Telkom Kenya to provide a 4G LTE network connection to a nearly 31,000-square-mile area across central and western Kenya, including the capital, Nairobi. Before then, the balloons had been used only in emergency situations, such as after Hurricane Maria knocked out Puerto Rico’s cellular network.
However, Loon was starting to run out of money and had turned to Alphabet to keep its business solvent while it sought another investor in the project, according to a November report in The Information.