JPM - JPMorgan Chase & Co.

NYSE - NYSE Delayed price. Currency in USD
106.44
+2.17 (+2.08%)
At close: 4:00PM EDT
Stock chart is not supported by your current browser
Previous close104.27
Open103.82
Bid0.00 x 1200
Ask106.88 x 800
Day's range102.79 - 106.61
52-week range76.91 - 141.10
Volume25,872,956
Avg. volume27,618,312
Market cap324.325B
Beta (5Y monthly)1.22
PE ratio (TTM)10.51
EPS (TTM)10.13
Earnings date14 Jul 2020
Forward dividend & yield3.60 (3.45%)
Ex-dividend date02 Jul 2020
1y target est106.65
  • Bloomberg

    NetEase Guides Price Hong Kong Listing at HK$123

    (Bloomberg) -- NetEase Inc. raised about HK$21 billion ($2.7 billion) in its Hong Kong stock offering, people with knowledge of the matter said, as Chinese companies grapple with rising tensions between Beijing and Washington.China’s second-largest gaming company priced 171 million new shares at HK$123 each, equivalent to a 2% discount to its Thursday closing price on Nasdaq, said the people, who asked not to be identified as the information is private. That comes after investors subscribed for many times more than the total stock offered. The company earlier set a maximum price of HK$126. The shares are expected to start trading in Hong Kong on June 11.The U.S.-listed internet giant makes its debut in Hong Kong as tensions between Washington and Beijing threaten to curtail Chinese companies’ access to U.S. capital markets, particularly after once high-flying Luckin Coffee Inc. crashed amid an accounting scandal. It’s also a victory for Hong Kong, coming on the heels of Alibaba Group Holding Ltd.’s $13 billion share sale and the passing of a national security law that critics fear could jeopardize its status as a financial hub. No. 2 Chinese online retailer JD.com Inc. plans to start taking orders on Friday for its listing in the city .NetEase is a distant second to Tencent Holdings Ltd. in the world’s largest video game market. The creator of popular franchises like Fantasy Westward Journey and Onmyoji reported a 14% rise in online games revenue for the coronavirus-stricken March quarter, less than half of the pace Tencent’s gaming division managed during the same period.Much like Tencent, NetEase is looking globally for the next chapter of growth, teaming up with Japan’s Studio Ghibli and investing in Canadian game creator Behaviour Interactive. After selling its cross-border e-commerce platform Kaola to Alibaba, the 22-year-old company has shifted its focus to music streaming and online learning, despite worsening competition in these areas. NetEase company representatives didn’t immediately respond to a request for comment.China International Capital Corp., Credit Suisse Group AG and JPMorgan Chase and Co. are joint sponsors.(Updates throughout as the deal is priced. An earlier version corrected the currency denomination in first paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • ECB Goes All Out With 600 Billion Euro Increase in Bond Buying
    Bloomberg

    ECB Goes All Out With 600 Billion Euro Increase in Bond Buying

    (Bloomberg) -- The European Central Bank intensified its response to the “unprecedented contraction” facing the euro area with a bigger-than-anticipated increase to its emergency bond-buying program.President Christine Lagarde and her colleagues decided to expand purchases by 600 billion euros ($675 billion) to 1.35 trillion euros, and extended them until at least the end of June 2021. Italian bonds rallied, with the yield on 10-year debt compared with the German equivalent set to narrow the most since mid-May. The euro reversed losses.“Action had to be taken,” Lagarde said in a press conference. While there are nascent signs of the downturn bottoming out, “the improvement has so far been tepid.”The vast majority of economists surveyed by Bloomberg last week had predicted a boost of 500 billion euros. Still, some said after the decision that the ECB will have to act again, perhaps as soon as September.Lagarde revealed sweeping downward revisions to the ECB’s projections for growth and inflation in the region. In 2020, the bloc will likely see a contraction of 8.7% before rebounding by 5.2% in 2021. Under a more severe scenario with a strong resurgence of infections, output could shrink by as much as 12.6% this year.Inflation, which she said is the ultimate justification for the stimulus, will accelerate only slowly, and is seen averaging 1.3% by 2022 -- far below the goal of just under 2%.The ECB action reflects how Europe is finally stepping up with powerful plans to drag the economy out of its worst recession in living memory. Germany announced a new 130 billion-euro fiscal package late Wednesday, the latest in a raft of national programs, and the European Union has proposed a 750 billion-euro joint recovery fund that leaders will discuss later this month.It also shows Lagarde is determined to act preemptively -- only about a third of the pandemic program had been spent before Thursday’s increase -- to keep markets stable, building on the strategy of her predecessor Mario Draghi. She got off to a shaky start in the pandemic when she inadvertently suggested she might not step in to calm bond volatility in stressed economies such as Italy.“This is a bit of an economics-policy fireworks -- last night the German government with an enormous fiscal stimulus package, and now the ECB,” Carsten Brzeski, chief euro-region economist at ING, told Bloomberg Television. “This is huge.”With so much debt being issued by governments, economists at ABN Amro, JPMorgan, Banque Pictet & Cie and Nordea said the ECB will have to expand its bond purchases again later this year to soak it all up.Read more: ECB’s 600 Billion-Euro Stimulus Hasn’t Stopped Calls for MoreFor now though, the central bank’s actions should keep a lid on borrowing costs for governments though. The central bank said buying will be conducted in a “flexible manner over time, across asset classes and among jurisdictions.” The proceeds from maturing bonds will be reinvested at least until the end of 2022.What Bloomberg’s Economists Say“The large expansion of the Pandemic Emergency Purchase Programme creates a huge reserve of fire power to stimulate the economy and prevent any countries in the euro area from being engulfed by a sovereign debt crisis.”-David Powell and Maeva Cousin. read their ECB REACTThe central bank had already sweetened the terms of its liquidity operations in April so that lenders keep extending credit to companies, many of which have seen their revenues eroded by the shutdowns to limit the spread of the virus. Policy makers have refrained from cutting interest rates further below zero amid opposition to negative rates from banks and some politicians.Lagarde said policy makers didn’t discuss whether to include junk-rated debt in its asset purchases, aside from the exceptions currently being granted to Greek government bonds. She said the decision to act was unanimous, but the exact parameters ultimately decided were the result of a “broad consensus.”She pushed back against concerns that scope for action could be limited after a German court ruling last month questioned the legality of an older, still-active bond-buying program, saying she’s “confident that a good solution will be found.”(Updates with economist predictions for more purchases from fifth paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • JPMorgan, Barclays to Pay $20.7M to Settle Bond-Rigging Claims
    Zacks

    JPMorgan, Barclays to Pay $20.7M to Settle Bond-Rigging Claims

    JPMorgan (JPM) and Barclays PLC (BCS) will pay $15 million and $5.7 million, respectively, to settle claims by investors that they tried to rig the Mexican bond market.

  • Financial Times

    Dealmaking: how’s virtual due diligence working out?

    One thing to start: This Saturday, DD launches a new edition of the newsletter called Scoreboard in collaboration with the FT’s sports editor Murad Ahmed. In the pre-coronavirus era, the due diligence process involved a lot of travelling and in-person meetings that allowed investors or buyers to get a feel for where their money was going. Here’s a look at how some venture capitalist groups are getting creative.

  • Bloomberg

    If You Can’t Bag an M&A Bargain, Go for a Trophy

    (Bloomberg Opinion) -- A crisis should be an opportune time for M&A bargain hunters. In reality, buyers probably won’t be getting deals done on the cheap. It’s not just that markets are rallying. Even companies whose fallen shares aren’t recovering may not make easy targets for lowball takeovers. Bidders should think about pricey deals becoming available rather than available deals becoming cheap.Dealmakers at JPMorgan Chase & Co. recently looked into the dynamics of 17 significant deals done during the crisis of 2008-2009. One conclusion was that the takeover target’s 52-week share-price high was a stubborn benchmark for the acceptable price of a deal. Boards and investors were wary of taking low cash offers that crystallized the value of the company at a sunken level — never mind that there might have been valid reasons for the shares taking a dive.The study found that the fixation with historic share-price highs does wane over time. Investors get used to markets being at lower levels. For example, Schering-Plough agreed to be bought by pharmaceutical peer Merck & Co. Inc. when the financial crisis was well advanced in March 2009. The price represented a conventional one-third takeover premium (the top-up required to win support for a deal). At that point, this was in line with its 12-month high, but well below its pre-crisis peak.All the same, it can take many months for the managers and shareholders of bid targets to lower their expectations. Until that happens, bidders may just have to be generous to get deals done.What if the buyer offers to pay in its own stock? That way the target company’s shareholders might be persuaded they are getting remunerated in a currency with some recovery potential. The tactic might work if both sides’ share prices fell in tandem as the crisis took hold. But for the buyer, paying in depressed stock means issuing more shares than it would otherwise need to do. That means giving away more value to the target’s stockholders. Again, the chance of a bargain evaporates.No wonder that only in about half of the deals looked at by JPMorgan was the bidder’s share price outperforming the market a year later.It’s not entirely discouraging. Where buyers are willing to pay up, they should find the boards of the targets are less able to rebuff a takeover approach. A bid made at a historic high in a crisis will likely contain a much bigger premium to the current share price than it would have just a few months earlier. Imagine a bid for a stock made at its 12-month high of $100 per share. If the stock was $85 in mid-February, just before markets woke up to the impending pandemic, the premium at that time would have been about 18%. Assume the stock is now 20% lower, and the premium approaches 50% against the current share price. That's very hard to reject.True, it’s always easier for a bidder and its advisers to get a deal done by simply overpaying. Nevertheless, the implication is clear. You can rarely get a good asset on the cheap. But you may be able to get a good asset without a big fight.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    JPMorgan’s Bond Chief Has No Time for Fed Haters

    (Bloomberg Opinion) -- The Federal Reserve has always been a popular villain to some investors. The U.S. central bank, the argument goes, consistently bends to the whims of financial markets, keeping interest rates artificially suppressed to force savers into ever-riskier assets at ever-higher prices.The coronavirus pandemic and the Fed’s kitchen-sink response have only amplified these feelings. Oaktree Capital Group’s Howard Marks and Berkshire Hathaway’s Warren Buffett are among those who have said they couldn’t make deals because the central bank kept prices too high. I’ve argued that the Fed buying high-yield exchange-traded funds defies explanation, while my Bloomberg Opinion colleague Mohamed El-Erian this week implored the central bank to resist market pressure to do more. More broadly, the V-shaped rebound of nearly 40% in U.S. stocks when the unemployment rate is likely close to 20% just doesn’t sit well with some people.Bob Michele, global head of fixed income at J.P. Morgan Asset Management, shared some no-nonsense advice: “It’s a return to financial repression — deal with it.”As someone who oversees $615 billion across debt markets for the asset manager and got his start just as U.S. Treasury yields peaked in the early 1980s, Michele has had a bird’s-eye view of the long-running bond bull market and has seen global central banks take increasingly novel measures to support their economies. I spoke with Michele by phone last week. This is a lightly edited transcript:Brian Chappatta: You wrote, “It’s a return to financial repression — deal with it.” Other high-profile investors haven’t taken the central bank’s actions in stride. Has the Fed done anything up to this point that they shouldn’t have?Bob Michele: They’re doing everything they needed to do. I know the markets have recovered a lot, and a lot of investors are frustrated they didn’t get a chance to put money in the markets at the bottom. But people forget what those first couple of weeks in March looked like as the pandemic was gaining traction. There was this flight to quality, and as risk assets started selling off, Treasuries started to sell off as well. The markets had trouble clearing and weren’t functioning properly.If you’re at the Fed, you step back and you see the trillions of dollars of issuance that’s coming. You see several trillion being added to the federal rolls through Treasury issuance to fund the CARES Act and other programs, you see corporate issuance which already this year is over $1 trillion, and you think about the amount of funding that state and local governments have to do to just survive the shutdown. You begin to realize — the market cannot absorb it on its own. If you rely on the markets on their own to absorb the trillions of dollars of issuance, not just in the U.S., but globally, prices are going to go down a lot, or yields are going to go up a lot. That certainly doesn’t help a recovery.BC: You mention a strategy of co-investing with central banks, including buying U.S. investment-grade corporate bonds. Analysts for years were warning that corporate America was too overleveraged. Why is taking on more debt an answer? BM: We saw what happens when that backstop isn’t there. Yields just rise indiscriminately and suddenly it becomes unaffordable for companies and municipalities to take on leverage and work their way through.My biggest concern is that the decision-making tree will be something like Hertz. Which is, you have some access to credit — Avis funded itself a month ago at 11.3% — you could get funding through the CARES Act, but it comes with strings attached. Even still, you think, adding one or two more turns of leverage to our balance sheet, is it worth it? Or at some point do you realize you’ll never be able to pay back that debt, so might as well start the restructuring process now? I think access to credit is one thing, but the affordability of credit is probably more important.BC: So far, the Fed has just purchased ETFs through its credit facilities. Do you expect it will ultimately buy individual company bonds?BM: They’ve done some decorative amounts of ETFs, mostly to ensure that the plumbing is working and just show the market that they are serious about buying credit. But I think with the amount of issuance coming and with the data we’re yet to see that will rattle investors, we’ll need the backstop from the Fed.BC: What kind of upside is there with investment-grade yields near all-time lows?BM: You end up looking at both the investment-grade market and the Treasury market as your anchor in the storm. At some point, they’ll be maintained at a pretty expensive level. It all goes back to what you think is the ultimate endgame here. I think whether implicitly or explicitly, the Fed is fixing the rate of funding across the economy. The reality is their signal that the markets weren’t functioning properly was that yields went up and prices went down. How we got there — because broker-dealer balance sheets were clogged or there was risk-aversion — it doesn’t really matter. Restoring functionality to the market means that you diminish the liquidity premium that’s priced into the market, first and foremost, and also any sort of volatility premium. If you remove those things, then the price of bonds goes up. I know they talk in circles around market functionality, but it is implicitly reducing the cost of credit.BC: Do you expect the Fed to implement some form of yield-curve control?BM: I think it’s inevitable. I think by the way the Fed is doing it implicitly anyway.If the yield curve ever steepened a lot and the cost to the federal government for the next couple trillion of issuance is too high, they’ll step in and bring it down. I see an environment where the front end of the curve is going to be fixed pretty much around 0% to 0.25%. When you get out to the 10-year, I think 0.5% to 0.75% gets them pretty comfortable. Then you leave the 30-year for pension funds and insurance companies.The same thing is happening with investment-grade credit. I think credit spreads will come in to a point where the average cost of funding for an investment-grade borrower in the U.S. will be no greater than 2%. Then you start playing that through the municipal market, and again, just them backstopping the market and removing that uncertainty lowers the cost of funding for all of these borrowers.BC: Inflation is always a concern for bond investors, especially with yields so low across the world. Where do you come down on the inflation versus deflation debate?BM: This is probably the most emotional conversation I have with clients currently. Our view is the amount of debt being ladened on top of not only the U.S. economy, but the global economy, is deflationary, and it’s creating such a large output gap that it will take about 10 years to close that output gap and return inflation to something that looks normal. Clients just push back, think I’m nuts, think that the amount of stimulus being poured onto the economy, and the amount of borrowing and money printing is all very inflationary. That amount of debt is just outright disinflationary, if not deflationary, because a lot of the output of the economy going forward has to be used to service that debt and start to pay it down. It doesn’t get used more productively through cap-ex or investment. We’re absolutely firm that we’re going to be in a very low inflation environment for a long period of time.BC: Do you see the Fed resorting to  negative interest rates?BM: I completely agree with the Fed that negative interest rate policy is just a bridge too far. It creates structural problems that are difficult to extract yourself from.Could I see the 10-year Treasury go down to zero or slightly negative? Sure. It won’t be driven by the Fed, it will be driven by the next risk-off environment, where the money that’s in the negative-yielding markets will come flooding into the U.S. because they’ll see a positive yield, they won’t care about hedging the currency back because they’ll want the safety of the dollar, and they’ll see some capital appreciation. But I don’t see this Fed ever bringing rates down to negative territory. If a couple years from now, Jay Powell gets replaced, depending on who replaces him, they may open the door to that. But for now I just don’t see the Fed going to negative yields.BC: To circle back to where we started — financial repression. Is there any way out?BM: The trillions of dollars of borrowing, we view it as aid and assistance and support, not stimulus. I know it’s semantics, but it’s very different. There’s lost economic activity, and this debt is being used to replace lost income to households and to businesses. It’s just helping to fill in the hole. I struggle with aid and assistance being called stimulus. What would get me more optimistic is if on the other side of this, you did see borrowing that was actual stimulus. In the first year or so of this administration, there was talk of a trillion-dollar infrastructure spend, spread out over 10 years, and people got excited. What if that happens this time, and it’s spent over three to five years, not 10? That’s actual stimulus. It’s creating jobs and aggregate final demand and helping support household income.If the government is willing to borrow more to invest in things like infrastructure and companies are willing to borrow more to invest in cap-ex, that is what would be different than the great financial crisis, when everyone was focused on austerity and trying to re-strengthen their balance sheet.At this point, the debt burden is so high, what’s another trillion on top of the federal deficit? And if you’re a company and you have a chance to borrow at record-low rates, especially somewhat subsidized by the Fed, why not do it and think about the future? Perhaps we’ve all learned that the economy needs to be retooled to better suit a work-from-home model. Maybe parts of the healthcare system need to be retooled. There are things that need to be addressed that create some spending and aggregate final demand. And for me, that hasn’t been fully discussed yet.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • NetEase Seeks Up to $2.8 Billion in Hong Kong Stock Offering
    Bloomberg

    NetEase Seeks Up to $2.8 Billion in Hong Kong Stock Offering

    (Bloomberg) -- NetEase Inc. has started taking investor orders for a listing in Hong Kong that could raise as much as $2.8 billion, which could be the world’s second-largest initial share sale this year.The company plans to sell 171 million new shares in its second listing before exercising the over-allotment option, according to terms for the deal seen by Bloomberg. The offering by the Nasdaq-listed Chinese internet company is already oversubscribed, people familiar with the matter said. It has set the maximum offer price at HK$126 ($16.25) a share, meaning it could raise as much as $2.8 billion.NetEase’s listing is set to overtake coffee giant JDE Peet’s BV’s $2.5 billion initial public offering in Europe as the second-largest initial share sale this year. Only Beijing-Shanghai High Speed Railway Co. has raised more with its $4.3 billion IPO in January, according to data compiled by Bloomberg.The offering comes as tensions between the U.S. and China are intensifying. Late last month, the Senate passed a bipartisan bill that could force major Chinese companies to stop trading their shares on U.S. exchanges. On Friday, President Donald Trump announced measures including that American financial regulators would examine Chinese firms listed on U.S. stock markets with an eye toward limiting American investment in the companies.NetEase follows Alibaba Group Holding Ltd., which raised $13 billion in a homecoming listing last year while JD.com Inc. won approval from Hong Kong Exchanges & Clearing Ltd. last week for a $2 billion offering, Bloomberg has reported.NetEase’s Hong Kong share sale represents about 5% of its total shares outstanding after the completion of the deal. The company is taking orders from institutional investors from Monday through June 4 and retail ones from June 2 to June 5, terms for the deal show.It aims to price the offering on June 5 before the U.S. market opens and to begin trading on June 11. NetEase plans to use the proceeds for global strategies and opportunities, to fund innovation and general corporate purposes.China International Capital Corporation Ltd., Credit Suisse Group AG and JPMorgan Chase and Co. are joint sponsors.A representative for NetEase declined to comment on the subscription of the offering.(Updates first, second and third paragraphs with details of share offering.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    JPMorgan’s Traders Race Ahead in the Pandemic

    (Bloomberg Opinion) -- The rising tide of pandemic relief money that’s oiling the wheels of finance has been a boon for those in the business of securities trading. Even as the wild market swings have subsided, activity has been buoyant as central banks and governments pumped trillions into economies. This may turn out to be one of the best environments for investment bankers generally, especially those who are buying and selling shares and bonds, but a standout company is emerging.After a record trading performance in first three months of 2020, JPMorgan Chase & Co. is on course to post a 50% jump in trading revenue in the second quarter, when compared with the same period a year ago, the New York giant’s co-president, Daniel Pinto, said last week. The reserved Argentine banker, who has helped JPMorgan move to the top of Wall Street’s rankings, was “very pleased” by the performance. That tells you how well things are going.Other trading firms are doing well too, although not as handsomely as Pinto’s employer. Bank of America Corp. expects bond- and stock-trading revenue to rise close to 10% in the period; Citigroup Inc. is seeing “very good momentum” in the fixed-income business after a 40% jump in the first quarter. Citi is still playing catch-up with its rivals in equities trading.JPMorgan might also be edging further ahead of its European rivals on their home patch. The bank is the favored dealer in Europe for both interest-rate and credit trading, ahead of Goldman Sachs Group Inc. and Citi, according to a poll of bond investors by Greenwich Associates at the end of April. European banks barely made it into the top three in some of Greenwich’s subcategories on fixed-income trading.“It’s a balance sheet, scale and electronification game now, and the bigger you are, the better you do,” Greenwich Associates said when the report was published. That’s propelling JPMorgan — which spends more than $11 billion a year on technology — ahead of its competitors.America’s biggest bank added 2.5 percentage points to its share of trading revenue among its top peers between 2015 and 2019. It has a 12% share of trading in fixed-income, currencies and commodities, an 11% share of equity trading, and a lead in derivatives. That places it at the center of the world’s financial markets. Its ability to move large volumes of inventory is unrivaled, competitors and clients say.Last year, JPMorgan added 25% to its hedge-fund balances, bringing them to $500 billion, and it has been targeting $1 trillion. This growth in hedge fund clients has allowed it to build its stock-trading business, with equity derivatives powering a surge in revenue. It helps too that borrowers have been tapping the bond markets at a record pace.Crucially, it’s the bank’s market dominance — which lets it take on more risk relative to its size — that appears to have become self-perpetuating. “We don't need to take a huge amount of risk for the franchise to be profitable,” Pinto told a conference last week. “At our scale, the franchise is perfectly profitable. So, the only thing we need to do is to always be in a position where we can monetize the franchise.”For Chief Executive Officer Jamie Dimon, a roaring trading division is just what he needs to make up for the inevitable problems in the lending business caused by the Covid-19 pandemic, with companies and households struggling to repay their loans amid the worst recession in decades. Credit losses will pile up and the decline in U.S. interest rates will erode profit margins in the business over time. JPMorgan’s profitable consumer business won’t be such a cash cow.But when the wave recedes, the Wall Street trading titan could be in a league of its own. The question then becomes: Is that healthy for the banking system? This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    Pinto Endured Lonely Weeks Co-Running JPMorgan as World Lurched

    (Bloomberg) -- Daniel Pinto checked into a hotel in midtown Manhattan around 2 a.m. on a Friday in early March, hoping to get a little rest after an epically hard day. Things were about to get much worse.His slog that day had begun in London with a routine call with his boss, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon. But just a few hours later Dimon was rushed into emergency heart surgery, and the board named Pinto -- who oversees the firm’s Wall Street operations -- to temporarily run the bank alongside Gordon Smith, the head of its consumer business.Pinto flew to New York for what he thought would be a brief stay. Then markets began panicking over the coronavirus pandemic. He didn’t check out until a month later.“I’ve seen crises my whole life,” Pinto said in an interview. Yet “we haven’t seen a crisis of this magnitude. It’s probably short-lived but very deep, and it’s everywhere around the world.”Pinto and Smith’s stint atop JPMorgan through the worst financial turmoil in decades has answered a question that’s long loomed over the largest U.S. bank: Could anyone other than Dimon ever run it? Created with Dimon’s uncanny knack for melding financial behemoths, JPMorgan has leading franchises in everything from complex trading and corporate lending to bank accounts and credit cards. The anxiety among shareholders has long been that its dominance and record-setting profits might not last under anyone else.And then suddenly, Dimon was sidelined for a month, just as deadly infections exploded across Europe and the U.S., upending economies and sending markets into free fall. The plunge began getting momentum just as Dimon headed to the operating room. Yet by almost any account, Pinto and Smith managed to fill his shoes. Though JPMorgan’s shares are down this year, they’re faring better than all three of its main rivals.Pinto’s account is half that story. Together, he and Smith had to figure out how to run a giant bank with most of its employees home. As Smith focused on JPMorgan’s vast network of branches and call centers, and flew to the White House to meet with President Donald Trump, Pinto focused on markets and propping up corporate clients. Companies, suddenly short of cash and unable to tap markets, were drawing hard on credit lines, putting their bankers in the awkward position of potentially saying no.For Pinto, those weeks were both nerve-wracking and lonely. He ended up stranded at an empty hotel in New York thousands of miles from his wife and his three kids. Even at the office, he was isolated.Most days, Pinto didn’t see anyone but the hotel receptionist, his driver and a security guard at JPMorgan’s tower at 383 Madison Ave., which was virtually empty as employees and executives -- including the entire operating committee -- worked remotely.The industry strained under the selloff. At peak moments, Pinto later wrote in a staff memo, JPMorgan’s foreign-exchange desk executed 730 trades per second while the bank’s payments arm processed a daily deluge of $9 trillion. A senior manager on the corporate bond desk traded $750 million of high-grade debt in a single day in March, according to people familiar with the matter.In some ways, Pinto had been preparing for decades for the role of crisis CEO. A native of Argentina, he embarked on his career almost by accident, taking a job at one of JPMorgan’s predecessors in 1983 to help pay for a degree in public accounting and business administration. He never left. Starting as a currency trader in Buenos Aires, he worked his way up through emerging-market desks, navigating financial blow-ups in places from Brazil to Russia.Tall but softer spoken than his boss, Pinto has spent the past 24 years based in London, climbing the rungs of JPMorgan’s corporate and investment bank, catering to companies and institutional investors. He became sole head of the division in 2014 and has been splitting his time between his office there and the bank’s New York headquarters.“This time it was different because New York was an empty town,” Pinto said. “It was tough. I talked to my family, wife and kids every day -- video-called them -- and I was interacting with the people that worked for me and my partners through video. I still went to the gym and exercised every day to keep up my energy.”It helped that JPMorgan essentially anointed Pinto, 57, and Smith, 61, as Dimon’s emergency stand-ins back in 2018 by elevating them to co-presidents. They honed their rapport and took more active roles in the firm’s control and support functions, while still overseeing businesses that together contribute 80% of revenue. Because of their ages, they aren’t widely seen as the likely longer-term successors if Dimon stays on for several more years. But Pinto said the experience helped them reach big decisions quickly.“Gordon and I really like to work together,” he said. “We know how each of us operates, his strengths and my strengths. It felt extremely natural.”Even while recuperating from surgery, Dimon would check in regularly.“He did challenge us, and gave his opinion on many matters,” Pinto said. “He was 100% supportive.”It also helped that Dimon had been cutting costs and adjusting the bank’s footing for the possibility that the aging bull market could end. Last year he publicly assured investors JPMorgan was “prepared for a recession” even if it wasn’t predicting one. He had also been warning for years that a downturn could be bumpy if stiffer regulations prevented banks from stepping in quickly.“You had a long cycle in the economy where asset managers had been accumulating assets, the banking sector was capitalized but we thought a lack of liquidity could lead to massive volatility,” Pinto said. “And that’s pretty much what happened.”‘Zillions of Requests’Two of the hardest things he and Smith dealt with were figuring out how to move the vast majority of employees home, while still serving desperate clients in ways that wouldn’t endanger the bank’s balance sheet.“When the markets are behaving that way, you have zillions of requests for funding and liquidity,” he said. There were “plenty of requests to draw on existing credit lines and for new funding facilities.” Pinto thinks they got it right.As markets stabilized, Pinto’s division moved from that defensive stance to a more active one, advising companies on tapping markets to ride out the storm. Even takeover talks have resumed.Looking forward, Pinto envisions JPMorgan’s staff working in rotations with about a third logged on remotely at any time, reducing real estate costs, fulfilling sustainability goals and helping prevent overcrowding of public transportation. He worries about not being able to fully measure productivity, so it’s unlikely anyone will always work remotely.The crisis also proved bankers might not need to visit clients as often, though there could be more regular check-ins. He predicts travel and expense budgets will decline.“We still have people working from home but we know the technology works, volumes have normalized,” Pinto said. Yet the strategic agenda “hasn’t changed at all. It’s just been put aside a month or two.”For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Older Crowd Embraces Online Banking, Rewards Firms’ Digital Push
    Bloomberg

    Older Crowd Embraces Online Banking, Rewards Firms’ Digital Push

    (Bloomberg) -- It took a global pandemic to get many baby boomers to bank online. Lenders have taken notice.Over the past two months, Americans flocked to websites and apps to manage their finances as the coronavirus limited access to branches, according industry executives. For JPMorgan Chase & Co., existing online clients are using the offerings more frequently, while Bank of America Corp. found that older customers are seeking out its digital services.“We may have opened some people’s eyes to the future,” Bank of America Chief Executive Officer Brian Moynihan told investors at a conference last week. “We’re just on a relentless push.”The coronavirus has given a boost to digital banking, which entails less paper, greater use of electronic services and fewer in-person meetings. Tech has been viewed by banks as both an offensive and defensive tool. Online services have the potential to bring in customers, help cut costly branches and pare workforces, while also making it harder for new competitors to poach clients with the allure of better technology.In April, 23% of new logins to Bank of America’s online and mobile products were by seniors and boomers, Moynihan said. They also accounted for about 20% of customers who deposited checks using mobile phones for the first time. In its business catering to wealthy people, the use of technology has risen over the last six weeks to levels that the bank projected would take six years, according to Andy Sieg, president of Merrill Lynch Wealth Management.One in four people surveyed by Boston Consulting Group said they plan to use branches less or stop visiting altogether when the crisis is over, according to a global poll from April 13 to April 27. The pandemic sparked 12% of the people polled to enroll in online or mobile banking.“We’ve seen tremendous increases in the frequency of use,” said Mindy Hauptman, a BCG partner based in Philadelphia. “If you talked to someone a year ago, they would have said digital was critical to their future. I think that’s been reinforced and accelerated.”Customers were steered toward online banking for a multitude of reasons, Hauptman said. Many stayed home to comply with government orders, while others weren’t able to visit branches because of closures or limited services. As clients flooded call centers to request payment deferrals and inquire about government relief programs, others opted to go online.“This crisis is accelerating the trend toward digital banking,” Goldman Sachs Group Inc. President John Waldron told the conference last week. That’s translated to a 25% jump in active users on the bank’s institutional platform, while its retail arm, Marcus, has seen a 300% surge in visits for financial articles and videos.But the bank’s move to boost online services hasn’t always been smooth -- it delayed until next year the digital offering for its wealth-management unit.The pace of digital adoption remains uneven. In the April survey, only 16% of respondents in the U.S. said they would use branches less often after the crisis, the lowest of any nation in the survey.“We’re a little surprised of seeing in the consumer business that the folks who are already digital are doing more of it,” said JPMorgan CEO Jamie Dimon. “The folks who aren’t digital aren’t exactly picking it up. And I wish we could find a way to incent them to do that better.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Wall Street Has Billions to Lose in China From Rising Strain
    Bloomberg

    Wall Street Has Billions to Lose in China From Rising Strain

    (Bloomberg) -- Wall Street giants such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. have tens of billions of dollars at stake in China as political tension risks derailing the nation’s opening of its $45 trillion financial market.Five big U.S. banks had a combined $70.8 billion of exposure to China in 2019, with JPMorgan alone plowing $19.2 billion into lending, trading and investing. That’s a 10% increase from 2018.While their assets in the country are comparatively small, they have big expansion plans there that may come undone if financial services firms are dragged into the tit-for-tat between the two countries. Not only would that cloud their growth plans, it would also threaten the income they have generated over the years from advising Chinese companies such as Alibaba Group Holding Ltd.Profits in China’s brokerage industry could hit $47 billion by 2026, Goldman estimates, with foreign firms gunning for a considerable chunk. There are $8 billion in estimated commercial banking profits as well as a projected $30 trillion in overall assets to go after, also being pursued by fund giants such as Blackrock Inc. and Vanguard Group Inc.“If you’re an American financial institution and you have an approved plan to expand into China, you’re going to continue that plan to the extent that the U.S. government allows you to because you see great future profits,” said James Stent, a former banker who’s spent more than a decade on the boards of two Chinese lenders. “A U.S.-China cold war is not good for your plans to build business in China.”After years of trade war turmoil, U.S. policy makers are now starting to take aim at the financial industry amid growing skepticism over American firms plowing money into a country perceived as a big geopolitical foe. Policy makers and lawmakers are looking at restricting U.S. pension fund investments in Chinese companies and limiting the ability of Chinese companies to raise capital in the U.S.A body advising the U.S. Congress this week questioned Wall Street’s push, saying lawmakers need to “evaluate the desirability of greater U.S. participation in a financial market that remains warped by the political priorities of a strategic competitor.” Add to that potential sanctions against China and even its banks over the crackdown on Hong Kong, and the situation could further escalate.President Donald Trump said he’s “not happy with China” after the country passed a new security law on Hong Kong and will announce new U.S. policies on Friday. His top economic adviser said Beijing would be held accountable by the U.S.Here’s a run down on the biggest U.S. banks’ presence in China right now and their plans.GoldmanGoldman, which has spent years lobbying for control of its onshore business, won approval this year. Chief Executive Officer David Solomon has pledged to infuse its mainland business with hundreds of millions of dollars in new capital as the bank plans to embark on a hiring spree to double its workforce to 600 and ramp up a wide variety of businesses.Goldman put its “cross-border outstandings” to China at $13.2 billion at the end of last year. But its two onshore operations had capital of just 1.8 billion yuan ($251 million), making a profit of almost 300 million yuan.A spokesman for Goldman declined to comment.Morgan StanleyHosting an annual summit in Beijing with 1,900 investors and 600 companies last year, Morgan Stanley Chief Executive Officer James Gorman said in a Bloomberg Television interview that the bank is in China “for the long run.” He highlighted its presence there for 25 years and its handling of hundreds of billions of dollars in equity and merger deals for Chinese businesses.Morgan Stanley won a nod to take majority control of its securities venture this year, and last year had a net exposure of $4.1 billion to Chinese clients. Its local securities unit, however, has revenue of just 132 million yuan, posting a loss of 109 million yuan last year.The bank has been overhauling senior management of the venture, installing its staff in key roles. It plans to apply for additional licenses to broaden its products and invest in new businesses, build market-making capability and expand its asset management partnership and ultimately take control.“It’s a natural evolution to bring the global investment banks into this market,” Gorman said in May last year.A Morgan Stanley spokesman declined to comment.JPMorganThe biggest U.S. bank has been doing business in China since 1921. Chief Executive Officer Jamie Dimon has said that his firm is committed to bringing its “full force” to the country. This year it applied for full control of an asset management firm as well as a securities venture, and is expanding its office space in China’s tallest skyscraper in downtown Shanghai.JPMorgan’s China total exposure in 2019 was $19.2 billion, including $11.3 billion in lending and deposits and $6.5 billion in trading and investing.JPMorgan China’s banking unit had 47 billion yuan in assets last year and made a profit of 276 million yuan, while its newly started securities firm had capital of 800 million yuan.A JPMorgan spokeswoman declined to comment.CitigroupCitigroup Inc., which has been doing business in China since 1902, had total exposure to the country of $18.7 billion at the end of last year. Its local banking arm had total assets of 178 billion yuan, making a profit of 2.1 billion yuan.Citigroup, which is setting up a new securities venture in China, is the only U.S. lender that has a consumer banking business in the country with footprint in 12 cities including Beijing, Changsha and Chengdu.New York-based Citigroup said last month that it has doubled its overall revenue from China to more than $1 billion over the past decade.China represents 1.1% of Citi’s total global exposure and includes local top tier corporate loans and loans to US and other global companies with operations in China, a bank spokesman said.Bank of AmericaBank of America Corp., the only major bank to decide against pursuing a securities joint venture, is continuing to expand into the world’s second-largest economy. The Charlotte, North Carolina-based lender is looking to provide a fuller range of fixed income services in the country.Its largest emerging market country exposure in 2019 was China, with net of $15.6 billion, concentrated in loans to large state-owned companies, subsidiaries of multinational corporations and commercial banks. It followed only the U.S., U.K., Germany, Canada and France in terms of exposure for the bank.A spokeswoman for the bank declined to comment.(Adds Trump comments in eighth paragraph.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • An Italian Bank Deal Still Makes Perfect Sense
    Bloomberg

    An Italian Bank Deal Still Makes Perfect Sense

    (Bloomberg Opinion) -- It took years for Italy’s banks to cleanse their books of the bad debt they built up after the financial and sovereign debt crises. After a few months of the coronavirus, they may be staring at another wall of soured loans.Among the countries worst hit by Covid-19, Italy’s strict lockdowns have crippled its economy and its small and medium-sized companies in particular. The nation’s banks are heavily exposed to the SME sector and government-backed loans and grants can only soften the probable blow from credit losses.While Italy’s biggest banks have capital cushions that should see them through the crisis without needing to tap investors, regulators say some smaller, less profitable lenders might not make it on their own. Under these market conditions, one would think that consolidation in the Italian banking sector makes perfect sense. But Unione di Banche Italiane SpA, a mid-sized commercial lender based in Bergamo — a hot spot of Italy’s virus outbreak — has ideas of its own. UBI, as the bank is known, is so keen to thwart an unsolicited takeover by its bigger rival Intesa Sanpaolo SpA that it’s making an unusual claim: The coronavirus is a material adverse change and should invalidate the bid. This attempted rejection of Intesa might make sense if UBI were trying to squeeze out a better price for its investors, but that doesn’t appear to be the case. It just seems to want to pursue its own plans, a strategy shareholders might end up regretting.Days before the stock markets peaked in February, Intesa made an all-stock offer for UBI that valued the country’s fifth-largest bank at about a 25% premium. Intesa Chief Executive Officer Carlo Messina didn’t endear himself to his UBI counterparts: His hostile bid, a big no-no in banking, came hours after UBI’s CEO Victor Massiah had presented a new strategic plan. Nonetheless, the rationale for a combination is as compelling now as it was before the coronavirus hit — if not more so.Under UBI’s pre-pandemic strategy, the lender was trying to repair its measly profitability by improving efficiency, focusing on higher-margin corporate investment banking and getting rid of more of its bad debt. Massiah also sees UBI as a potential aggregator of smaller Italian banks. An alternative deal with Banco BPM SpA has been mooted.It’s unclear why Massiah’s approach is more appealing than a takeover by Intesa. The suitor may have to dial back its lofty dividend expectations for the merged company as the pandemic wrecks the economy, but if it achieves two-thirds control of UBI, it should be able to deliver chunky cost cuts by combining the two businesses.A tie-up between UBI and Banco BPM, by contrast, would leave little room for maneuver should credit losses spiral and the revenue outlook weaken, as expected. Analysts at JPMorgan Chase & Co. predict that non-performing loans in Italy could surge by 162 billion euros ($178 billion), under its worst-case scenario. While UBI has slightly better credit quality than its peers, 23% of its loan book is to SMEs, compared to Intesa’s 20%. The figure stands at 34% at Banco BPM.There is an argument that Italy could do with a third strong lender to rival Intesa and UniCredit SpA, and that UBI could team up with somebody else to deliver that. Italy’s antitrust authority is reviewing the deal. But with the economic damage caused by Covid-19, the Intesa-UBI deal has become more attractive. UBI’s shareholders should at least have their say on whether they support the idea.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Jamie Dimon Captures the Stock Market Moment
    Bloomberg

    Jamie Dimon Captures the Stock Market Moment

    (Bloomberg Opinion) -- Don’t fight the U.S. Federal Reserve — repeat that mantra until it sticks.Jamie Dimon, the boss of JPMorgan Chase & Co., put it well this week. “This wasn’t the bazooka,” he said, referring to Jay Powell’s response to the coronavirus crisis. “The Fed took out the whole military and applied it. Just announcing these programs reduced spreads (the difference between corporate bond yields and their benchmarks) in the market. It’s going to save a lot of small businesses.” In the past month, the equity market’s glass has gone from pretty much empty to at least half full and that’s down to the coordinated fiscal and monetary effort from authorities far and wide. You want some quantitative easing? Please, have some more and take some for the journey home. Even those foot draggers at the European Union are talking about radical fiscal action. We won’t really see a V-shaped economic recovery, but it seems like we’ve stopped the L.Nonetheless, this is a recovery based so far on asset-price inflation rather than any economic data. Central bank and government action may have restored financial valuations but real incomes will still suffer dramatically for a long while to come. Unemployment and diminished consumption cannot be magicked away.The stock market is looking even further into the distance than usual to justify its valuations, which is sometimes hard to square away against a constant stream of dire economic statistics and evaporating company earnings. Since QE came to life during the global financial crisis, it has paid for investors to cast aside their usual forward-earnings analysis and focus instead on the rising tide of money. The central banks have learned their post-2008 lessons and have barely put a foot wrong this time. This is having uneven effects, however. The bulk of the stimulus is coming into investment-grade assets because that’s where central banks feel more comfortable. Credit spreads have recovered most in BBB and A-rated bonds. High-yield yield assets improved sharply at first, but this has abated. The spread between the yields on investment-grade debt and those of junk bonds is still nearly double the levels seen in February. Similarly, new debt issuance is motoring again but only for the better-quality names. While U.S. banks such as Citigroup Inc. and Wells Fargo & Co. are returning for the fifth or sixth time this year to replenish capital, the junk sector has been restricted to one-off selective deals — often with eye-watering yields.The change in stock market sentiment isn’t just about QE. The oil price collapse has come and gone and fears of a devastating second wave of Covid-19 are easing. Short-selling bans have quietly been lifted in several European countries too, and some of the recent improvement may be explained by that. The sound of economies cranking back into life can just about be made out over the whirring of the monetary printing presses, allowing even bombed-out old economy stocks to recover, not just the new technology darlings.Notably, some of the recent action has been in high-dividend stocks, which had been forced to skip shareholder payouts at the height of the crisis. Investors had feared that the dividend bans might last several years; now they think it may be a quarter or two. Many investment funds work off a dividend-yield model.Investment managers may be doing the natural thing right now and chasing the rising stock market indexes, but that doesn’t mean they’re brimful of confidence. The Bank of America fund manager survey for May shows extreme bearishness pervades, with only 10% expecting a V-shaped recovery and 68% expecting stock prices to fall. Given the recent positive news on the virus and the gradual ending of lockdowns, the June survey might be different.The fiscal response will determine how the economy recovers over the long term but the monetary triage has worked better than anyone could have expected in those ugly days of March. For that we should be grateful, and for the stock market’s semi-rational exuberance.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Marcus Ashworth is a Bloomberg Opinion columnist covering European markets. He spent three decades in the banking industry, most recently as chief markets strategist at Haitong Securities in London.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • Bloomberg

    Leveraged Loans Dodge Existential Threat In New York Court

    (Bloomberg) -- The $1.2 trillion leveraged loan market’s biggest players can breathe a collective sigh of relief -- at least for now.A New York judge last week dismissed a claim that a leveraged loan JPMorgan Chase & Co. and other Wall Street banks sold in 2014 could be considered a security and, as such, be subject to the same disclosure requirements as stock and bond offerings.The suit was one of the most consequential threats faced by the market for risky corporate loans during its decades-long emergence from an arcane corner of bank lending into a major asset class whose size now rivals junk bonds.The market’s main industry group and some practitioners had warned of dire consequences if loans were to be considered securities, including for collateralized loan obligations, which have become the largest buyers of the debt. They said issuing the debt would become more cumbersome and expensive, potentially depriving borrowers of needed capital.“Declaring syndicated term loans to be securities would have upended the expectations of borrowers and lenders and wreaked havoc in the large, and vitally important, market for those loans,” Elliot Ganz, general counsel for the Loan Syndications and Trading Association, said in a statement on Tuesday.Bond SimilaritiesLoans typically require lighter disclosure than bond offerings and can be arranged more quickly. They have become one of private equity firms’ favorite avenues to finance leveraged buyouts and are widely used by mid-sized companies, often as their only type of borrowing aside from bank debt.The standardization of terms across borrowers, a gradual weakening of investor protections and the growth in secondary trading of loans, however, have increasingly likened the debt to bonds over the past several years.QuickTake: How Leveraged Loans Are (and Aren’t) Like Junk BondsCritics say the loan market has grown riskier amid little oversight. Concerns have centered around the lack of public disclosures on financial information and other material events, which typically can only be accessed by pre-approved lenders. Some worry this information asymmetry makes loans less liquid during sell-offs.In its ruling, the court said that the investors who purchased the loan from JPMorgan and the other banks were sophisticated enough to know the debt would not be covered by securities laws.“It would have been reasonable for these sophisticated institutional buyers to believe that they were lending money, with all of the risks that may entail, and without the disclosure and other protections associated with the issuance of securities,” District Judge Paul G. Gardephe wrote.The suit stems from a $1.8 billion loan that JPMorgan and others arranged for Millennium Health LLC -- then owned by private-equity firm TA Associates -- and sold to investors in 2014. Within a matter of months, lenders saw the value of their loan plunge as the company disclosed that federal authorities were investigating their sales, marketing and billing practices. Millennium Health ultimately filed for bankruptcy.Investors in the loan later claimed through their trustee that the banks had misled them at the time the loan was syndicated by omitting information they had about the investigation. The defendants argued that loans aren’t securities, a loan syndication is not a securities distribution, and asked the court to dismiss the suit.The plaintiffs have the right to appeal the dismissal of the securities claims to the 2nd Circuit Court of Appeals, according to the LSTA.For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • JPMorgan (JPM) CEO Expects Economic Rebound to Start in Q3
    Zacks

    JPMorgan (JPM) CEO Expects Economic Rebound to Start in Q3

    JPMorgan (JPM) CEO, Jamie Dimon, is of the opinion that there might be a good chance of a fast economic recovery starting from the third quarter of 2020.

  • JPMorgan Chase to Again Book Heavy Credit Provisions in Q2
    Motley Fool

    JPMorgan Chase to Again Book Heavy Credit Provisions in Q2

    JPMorgan Chase (NYSE: JPM), for one, will see a relatively weak bottom line in the company's current Q2 of fiscal 2020. In an industry conference on Tuesday in New York, in answer to an analyst's question on credit-loss provisioning, the bank's CEO Jamie Dimon said this could easily be "roughly equivalent" to the steeply increased level of Q1. For banks, that quarter was marked by heavier provisioning nearly across the board.

  • 'This is a kitchen sink quarter': Strategist
    Yahoo Finance

    'This is a kitchen sink quarter': Strategist

    On Tuesday the S&P 500 traded above the 3,000 level for most of the session and the Dow crossed 25,000 for the first time since early March. But one strategist warns a pause and digestion in the markets is likely.

  • Bank Stocks Are Either Cheap or Signal More Pain
    Bloomberg

    Bank Stocks Are Either Cheap or Signal More Pain

    (Bloomberg Opinion) -- Something strange happened in the U.S. stock market on Tuesday.No, it wasn’t that the S&P 500 crossed 3,000 for the first time in almost three months, generating a yelp of joy from the White House and groans from Wall Street veterans who remain perplexed at the seeming disconnect between financial markets and the American economy.Rather, the most unusual part of the latest rally is that bank shares clearly led the advance. As of last week, Bloomberg’s 18-company S&P 500 Banks Index was down more than 40% in 2020, trailing the broader stock market by an almost unprecedented degree since the coronavirus pandemic shut down the world’s largest economy. However, the index soared 9% on Tuesday, far and away a bigger gain than any of the other 23 industry groups. A simple ratio of this bank index to the broad S&P 500 shows the extent to which financials have been beaten down so far in 2020 relative to other segments of the stock market. The gauge fell on May 13 to a level seen only twice before in data going back three decades, both in March 2009. The banks swiftly rebounded in the following months as the U.S. recession officially drew to a close in June of that year.As investors weigh the drastic gains on Wall Street against the backdrop of widespread unemployment and shuttered small businesses on Main Street, the performance of bank stocks may prove to be a crucial barometer of whether markets can sustain their exuberance. Few analysts dispute that shares of financial companies are cheap on a relative basis — but sometimes prices are depressed for good reasons. Inexpensiveness alone isn’t a compelling enough reason to expect banks to bounce back as they did in 2009. Instead, perhaps more than any other industry, a lasting rally will come down to investors’ conviction in a sharp and sustained economic recovery.Investors have a few obvious reasons to be wary of U.S. banks. For one, long-term interest rates are near record lows while traders have started to wager on negative short-term rates, even as Federal Reserve officials repeatedly question the policy. All this points to lower net interest income, a crucial metric that reflects the spread between what a company earns on its loans and what it pays on its deposits. Meanwhile, large banks have already halted share buybacks, and minutes from April’s Federal Open Market Committee meeting revealed that policy makers are debating whether they should also restrict their ability to pay dividends to shareholders during the pandemic.Whether those downsides merit a $1 trillion wipeout, akin to the 2008 financial crisis, is not so clear cut. As Bloomberg News’s Lu Wang and Felice Maranz reported, at that time the financial industry’s earnings worsened for eight consecutive quarters, but analysts only expect profit declines to last half as long this time around. Banks are broadly considered to be well capitalized — certainly much more than they were 12 years ago when they had to be bailed out by the government. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon expressed confidence in mid-April, when the outlook was even more uncertain than today, that the biggest U.S. bank can handle “really adverse consequences.” He said on Tuesday that the U.S. could see a “fairly rapid recovery.”“The government has been pretty responsive, large companies have the wherewithal, hopefully we’re keeping the small ones alive,” he said at a virtual conference hosted by Deutsche Bank AG.It’s far too soon to declare an “all clear” on the economy, but it’s starting to look as if actions from the Fed and Congress at least helped the U.S. clear the low bar of avoiding the worst-case scenario. The numbers are still awful, especially when it comes to unemployment, but data released Tuesday showed an unexpected increase in new-home sales in April compared with those a month earlier. Broadly, Citigroup Inc.’s economic surprise index is off its lows, indicating that recent figures aren’t quite as bad as analysts expected.“The economic data have been so darn grim lately with job losses in the tens of millions that the green shoots of optimism from better consumer confidence and new home sales are welcome,” Chris Rupkey, chief financial economist at MUFG Union Bank NA, wrote on Tuesday. “We still can’t see a V-shaped recovery, but at least this is looking like the shortest recession in history which will be measured in months not years.”If that’s the case, investors will likely look back on the past few weeks as a time when bank stocks became far too cheap compared with other parts of the market. Yet Tuesday’s seemingly huge rally still leaves financial companies worth far less than before the pandemic, and it seems reasonable to expect they’ll remain that way for a while. After all, it’s anyone’s guess just how many loans will end up going bad and saddle banks with losses. There are far more moving parts to JPMorgan’s bottom line than that of, say, Netflix Inc., which fell 3% on Tuesday, the most in almost a month.It’s never a good idea to read too much into one optimistic trading day, especially coming out of a U.S. holiday weekend in which many Americans probably got a taste of “normal” pre-pandemic activities. But on its face, Tuesday looks as if it could be something of a turning point for bank shares. The follow-through will indicate if they were just too cheap to pass up, or if the economy truly is on the mend.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

  • NYSE president: 'While we are reopening, it is not back to business as usual'
    Yahoo Finance

    NYSE president: 'While we are reopening, it is not back to business as usual'

    The iconic New York Stock Exchange floor is back open for business. Here is what New York Stock Exchange President Stacey Cunningham told Yahoo Finance.

  • BOE Isn’t Close to Implementing Negative Rates, Haldane Says
    Bloomberg

    BOE Isn’t Close to Implementing Negative Rates, Haldane Says

    (Bloomberg) -- One of the Bank of England’s key policy makers played down the possibility of an imminent cut in interest rates below zero, saying that “reviewing and doing are different things.”Andy Haldane, the BOE’s chief economist who more than a week ago said officials were assessing negative rates, added Tuesday that policy makers weren’t ruling any options out “as a matter of principle.”“Currently we are in the review phase,” he said in an webinar hosted by the Confederation of British Industry Tuesday. His comments prompted traders to push back bets on negative rates to August of next year, compared with December 2020 last week.The scale of the recession triggered by the coronavirus pandemic has fueled a debate about the possibility that the U.K. could be the next advanced economy to introduce negative rates. BOE Governor Andrew Bailey told lawmakers last week that he has changed his view “a bit” on the subject but that the policy had received “pretty mixed reviews” elsewhere.The BOE has already cut its benchmark rate twice this year to 0.1%. Economists say taking it below zero is probably last on its list of preferred measures, with many predicting an increasing in the size of the central bank’s bond-buying program next month.Haldane said that BOE would look at negative rates’ impact on the financial sector, where they would squeeze margins between lending and deposit rates, and how they would affect confidence in the economy.The central bank could opt for a partial response by cutting the borrowing rate paid for by banks for loans taken out under its Term Funding Scheme, according to Allan Monks, an economist at JPMorgan. That could be similar to the ECB’s decision to ease the terms of its bank lending facilities.Still, that probably won’t be the BOE’s next step, he said.“If the BOE were to introduce negative rates following a review, we think it would do it transparently via the policy rate,” Monks said. “It would be simpler to communicate, probably more effective, and would deliver banks with cheaper funding at the same time.”Haldane also said economic output probably won’t bounce back as quickly as it plunged and may not return to pre-virus levels until the end of next year.Prime Minister Boris Johnson said Monday England’s outdoor markets and car showrooms will be able to reopen from June 1. All other non-essential retail outlets will be expected to be able to reopen from June 15 if the government can control the spread of the virus.“There will be, understandably, a period of prolonged caution in spending by both households and companies,” he said. The government should focus on instilling confidence to get people spending, he said, as the U.K. now appears to experiencing the paradox of thrift.Going off of the BOE’s latest projections, jobs might not return to their pre-coronavirus levels until 2022 or the following year, he said. “This is a sort of V, but it’s a fairly lopsided V” with risks to the downside, he said.(Updates to add JPMorgan comments from seventh paragraph)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.