DAILY UPDATE: Republic First Bank Seized and Sold to Fulton Bank

Posted on April 28, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

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Republic First Bank. The FDIC said regulators seized the troubled Philadelphia-based bank and agreed to sell it to Fulton Bank. While news of a regional bank failure might take you back to March 2023 when Silicon Valley Bank bit the dust, Republic First was much smaller than SVB (and much smaller than the similarly named First Republic, which ultimately got absorbed by JPMorgan Chase as regional banks struggled). And, because there’s already a buyer, there are no lingering questions about the safety of deposits.

So, while the first bank failure of the year is a sign that regional banks are still in a bad way, it’s unlikely to spur a larger crisis.

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BANKS: JPMorgan Chase, BoA, Wells Fargo and CitiGroup Report

Posted on January 12, 2024 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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JPMorgan Chase’s profit fell in the fourth quarter as the lender set aside nearly $3 billion to help refill a government deposit insurance fund. JPMorgan and several major banks are required to pay a bulk of the $16 billion to replenish the Federal Deposit Insurance Corporation’s deposit insurance fund (DIF), which was drained after Silicon Valley Bank and Signature Bank failed last year.

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Bank of America’s fourth-quarter profit shrank as the lender took $3.7 billion in combined charges to refill a government deposit insurance fund and phase out a loan index. Its net interest income (NII) – the difference between what banks earn from loans and pay to depositors – fell 5% to $13.9 billion as the company spent more to keep customer deposits and demand for loans stayed subdued amid high interest rates.

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Wells Fargo press release (NYSE:WFC): Q4 Non-GAAP EPS of $1.29 beats by $0.20. Revenue of $20.48B (+2.2% Y/Y) beats by $100M. Shares -1% PM. Fourth quarter 2023 results included: ◦ $(1.9) billion, or ($0.40) per share, of expense from an FDIC special assessment ◦ $(969) million, or ($0.20) per share, of severance expense for planned actions ◦ $621 million or $0.17 per share, of discrete tax benefits related to the resolution of prior period tax matters ◦ Provision for credit losses in fourth quarter 2023 included an increase in the allowance for credit losses driven by credit card and commercial real estate loans, partially offset by a lower allowance for auto loans. The change in allowance for credit losses also included higher net loan charge-offs for commercial real estate office and credit card loans

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Citigroup (C) is in the middle of a complicated restructuring. It made it clear Wednesday that its fourth quarter earnings report Friday will be complicated, too.

The giant New York-based bank said in a regulatory document it will take more than $3 billion in one-time reserves and expenses as part of those fourth quarter results. They include everything from a $1.3 billion reserve build for currency exposure in Argentina and Russia to $780 million in charges related to severance costs and other aspects of a wide-ranging restructuring of the bank led by CEO Jane Fraser.

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BANK: Types

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DAILY UPDATE: T-Market Crash, Amazon Healthcare Launches as the Markets Take a Breather

Posted on November 9, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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  • Big banks are sitting on $650 billion of unrealized losses, Moody’s has estimated.
  • It’s a sign even Wall Street’s best-known names are feeling the heat from the Treasury-market rout.
  • Crashing bond prices sank Silicon Valley Bank earlier this year, and there may be more chaos to come.

CITE: https://www.r2library.com/Resource

Yet, the billionaire Larry Fink says investors should be 100% in equities right now if they can handle it? Can you?

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Amazon.com is turning to Prime members to bolster its healthcare business, an industry where the company has sought to expand for years. The tech giant just revealed plans to offer its millions of Amazon Prime subscribers a low-cost annual membership to One Medical, the primary-care business Amazon purchased for $3.9 billion earlier this year. Amazon says Prime subscribers can now become One Medical members for $9 a month, or $99 a year. The typical cost to become a One Medical member is $199 annually.

RxPass: https://medicalexecutivepost.com/2023/01/27/amazon-launches-rxpass-generic-drug-subscription-program/

Clinic: https://medicalexecutivepost.com/2022/12/01/amazon-healthcare-act-ii/

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The S&P 500 continued to an eighth positive day, building on its longest hot streak in two years, while the Dow inched downward, ending its best run since July. Warner Bros. Discovery suffered its worst day since March 2021 after reporting that although Barbie raked in $1.5 billion for the company, it still lost money last quarter.

Here is where the major benchmarks ended:

  • The S&P 500 Index was up 4.40 points (0.1%) at 4,382.78; the Dow Jones Industrial Average was down 40.33 points (0.1%) at 34,112.27; the NASDAQ Composite was up 10.56 points (0.1%) at 13,650.41.
  • The 10-year Treasury note yield (TNX) was down about 6 basis points at 4.511%.
  • CBOE’s Volatility Index (VIX) was down 0.36 at 14.45.

Retailers and banks were among the weakest performers Wednesday. Energy stocks also slipped in step with WTI crude oil futures, which touched a 3½-month low of under $75 a barrel on escalating concern over global demand. Real estate was one of the few sectors to rise Wednesday.

The U.S. dollar index (DXY) rose to a seven-week high earlier in the day before fading.

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BANKS: New Federal Reserve Rules?

Posted on May 1, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

Detailing Oversight Lapses

By Staff Reporters

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The Fed says it’s time for new bank rules

Just in time for a new looming bank failure, the Federal Reserve issued a 102-page report dissecting the corpse of Silicon Valley Bank. Meanwhile, FRB [First Republic Bank] FRB was just sold to JPMorgan Chase.

LINK: https://medicalexecutivepost.com/2023/05/01/daily-update-frb-bidding-sold-to-jpmorgan-chase/

The Fed pointed the finger at both its own inadequate supervision and the bank’s management.

CITE: https://www.r2library.com/Resource

And in an accompanying letter, Michael Barr, the Fed’s vice chair for supervision, called for stricter rules to be applied to more financial institutions and for more tools to be given to regulators to bring firms with poor capital planning and risk management into line.

MORE: https://www.wsj.com/articles/jpmorgan-pnc-bid-to-buy-first-republic-as-part-of-fdic-takeover-aeb936a0?mod=RSSMSN

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SVB: Grew from the Business Start-Up Ecosystem

Posted on April 26, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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DEFINITION: Startups are young companies or ventures that are founded to develop a unique or innovative product, service, or platform, and bring it to market. They are typically in the early stages of their development and face high uncertainty and failure rates. They are usually self-funded by the founders or seek external funding from investors or loans. They aim to grow large beyond the solo founder and disrupt existing industries or create new one.

CITE: https://www.r2library.com/Resource/Title/0826102549

SVB rooted in the startup ecosystem

SVB was relatively small—it had 40,000 customers compared to JPMorgan Chase’s 66 million—but it claimed to bank nearly half of all US tech and life sciences startups last year, including household names like Etsy, Roblox, and Roku. The cultural cachet of having a relationship with SVB as a venture-backed startup was like sporting a New Yorker tote at Whole Foods.

But the reason its loss will leave such a gaping hole in the startup community isn’t that it was cool to name-drop at a networking event. Because the bank was created in 1983 specifically to cater to venture-backed startups, it helped them in ways that most banks can’t—or won’t.

SVB chill loans: According to the MorningBrew, SVB would offer loans to startups more readily than large banks, basing the loans on a company’s ability to raise venture capital funds, not to turn a profit. SVB was also known for being flexible—even if startups breached their loan terms. “They were the easiest money for an unprofitable, early stage to mid-stage tech company,” Irving Investors founder Jeremy Abelson told The Information. And, even small startups received hand-holding services, such as guidance on how to set up their financial infrastructure. Its bankers personally called startups when they secured their first rounds of funding, according to The Information.

Startups now have to deal with big banks

Several founders who previously banked with SVB told Bloomberg that they’re moving their money to Chase and Bank of America, banks considered “too big to fail.”

Startups’ experience at big banks won’t be like their time at SVB. Not only is Jamie Dimon unlikely to call a startup to congratulate them on their Series A, but big banks are also expected to be more tight-fisted with their loans. The Office of the Comptroller of the Currency, a regulator that oversees large US banks, disapproves of loans to companies that are further out than one year from profitability, according to Crunchbase.

The loss of SVB is therefore expected to have a chilling effect on loans to venture-backed startups, aka “venture debt,” which SVB handed out more of than any other bank.

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What to Expect After the Silicon Valley Bank [SVB] Collapse

Posted on March 26, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

By Vitaliy Katsenelson CFA

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Over the past decade, the Federal Reserve has manipulated asset prices by interfering with free markets by deciding what both short-term and long-term interest rates should be. This resulted in an increase in risk-taking behavior among investors.

CITE: https://www.r2library.com/Resource/Title/08

Risk became a four-letter word uttered only by curmudgeons; the only thing investors feared was being left out. The more risk you took, the more money you made – until you lost it all.

RISK: https://www.routledge.com/Risk-Management-Liability-Insurance-and-Asset-Protection-Strategies-for/Marcinko-Hetico/p/book/9781498725989

READ: Silicon Valley Bank’s Downfall: A Cautionary Tale of What’s to Come

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First Republic and Silicon Valley Banks are NOT Microsoft!

Posted on March 24, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Wall Street’s $30 billion infusion into First Republic Bank didn’t manage to calm investors’ jitters about how banks are holding up. The regional bank’s stock tanked again Friday, dragging most of the market down with it. Moody’s Investors Service downgraded its credit rating on First Republic Bank to junk, citing a “deterioration in the bank’s financial profile.” First Republic’s debt rating was cut to B2 from Baa1, Moody’s said. Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt earlier this week.

The downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces over the medium term in light of its increased reliance on short-term and higher cost wholesale funding due to deposit outflows,” Moody’s analysts said in a release.

And, SVB’s parent company filed for Chapter 11 bankruptcy yesterday, buying it time to pay off creditors and making it easier to sell off its assets (but the bank itself, currently in the hands of the FDIC, isn’t part of the filing). Meanwhile, President Biden called on Congress to make it easier to punish bank executives if their mismanagement causes a bank to collapse, including allowing regulators to claw back their pay.

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But Big Tech stocks got a boost from investors looking to park their cash in non-bank companies, pushing Microsoft to its best weeks in almost eight years.

CITE: https://www.r2library.com/Resource/Title/0826102549

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DAILY UPDATE: The Bitcoin Boost Up!

Posted on March 19, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Bitcoin prices climbed to as high as $27,293 last week, wrapping up the cryptocurrency’s best week since January 2021. And it has Silicon Valley Bank and friends to thank for it. Crypto diehards claim bitcoin’s gains are the result of people losing faith in traditional banking after SVB and Signature imploded (though it’s worth noting that Signature was a big player in the crypto world).

However, after the second-and third-biggest bank failures in history, economists started second-guessing whether the Fed would stick to the plan to hike interest rates again or change course to protect the rest of the very fragile banking industry. That could mean the crypto market, which slid into the dreaded Crypto Winter in the first half of last year because of macroeconomic factors like the Fed’s rate hikes, might finally be approaching spring.

So, according to MorningBrew, the Fed’s interest rate decision next week will likely serve as crypto’s redeux. And despite the banking industry hoping Jerome Powell pauses the interest rate hikes, February’s inflation numbers showed that the Fed may need to stick to its original plan to keep inflation in check.

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BREAKING NEWS: Oil, Distressed Banks and Banking

Posted on March 13, 2023 by Dr. David Edward Marcinko MBA MEd CMP™

By Staff Reporters

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Saudi Aramco made what is s probably the “highest net income ever recorded in the corporate world,” Saudi Aramco’s CEO Amin Nasser just said. The state-owned oil giant brought in an astonishing $161.1 billion in net income in 2022, up 46.5% from the previous year. Rising oil prices lifted all energy companies last year, but Aramco raked in almost triple ExxonMobil’s 2022 profits (record for any Western oil company).

So, after getting mixed signals about the economy from Friday’s jobs report, the Fed will take a fine-toothed comb to the consumer price index, which drops tomorrow.

CITE: https://www.r2library.com/Resource/Title/082610254

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Banks: At the end of an extremely stressful weekend, depositors of collapsed Silicon Valley Bank were told they would be made whole. Yesterday evening, the US government informed anxious SVB depositors that they’d have access to all the money they stashed with the lender today, even if the amount exceeded the $250,000 limit insured by the FDIC. In addition to backstopping depositors, the Fed is offering additional funding to some banks to limit the contagion from spreading across the banking sector.

And, according to MorningBrew, the Fed’s aggressive action shows how the implosion of Silicon Valley Bank on Friday could have quickly turned into a full-blown banking crisis when markets open this morning.

  • Banking is a confidence game, and if people and businesses felt their uninsured deposits were at risk, they could start pulling money from other banks in a catastrophic bank run.
  • The government had a hard deadline of 9:30am ET this morning to restore confidence in the banking system, and it beat it.
  • However, in their announcement, regulators also noted the closure of a second bank, New York-based Signature Bank, over “systemic risk.” All of Signature’s depositors will be made whole, they said.

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ALERT: HSBC Holdings PLC just said that it purchased Silicon Valley Bank UK Ltd., the U.K. arm of the collapsed Silicon Valley Bank, for 1 pound ($1.20). HSBC said the acquisition will help strengthen its franchise in the U.K. As of March 10th, SVBUK had loans of around GBP5.5 billion and deposits of around GBP6.7 billion, while tangible equity is expected to be around GBP1.4 billion. The acquisition was completed immediately.

The Bank of England said it took the decision to sell SVBUK to stabilize the business, ensure continuity of banking services, minimize disruption to the country’s technology sector and support confidence in the financial system.

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