Sen. Elizabeth Warren grilled Jamie Dimon over Chase charging nearly $1.5 billion in overdraft fees during the pandemic

Jamie Dimon
  • The four major Wall Street banks collected a combined $4 billion in overdraft fees during the pandemic.
  • Sen. Warren said Chase was “the star of the overdraft show,” charging customers nearly $1.5 billion.
  • Warren asked the four banks’ CEOs if they would refund the fees. All said no.
  • See more stories on Insider’s business page.

Senator Elizabeth Warren singled out JPMorgan CEO Jamie Dimon during a banking committee hearing, grilling him over Chase’s decision to continue collecting nearly $1.5 billion in overdraft charges from customers during the pandemic.

Joining Dimon were the CEOs of Citibank, Bank of America, and Wells Fargo, which took in a combined $4 billion in fees from checking customers who had no money in their accounts during the pandemic, against the recommendations of bank regulators.

At the start of the pandemic, Warren explained, the bank regulators told financial institutions that they would not be charged a fee if their accounts at the Federal Reserve were overdrawn. The regulators also recommended the banks extend the same automatic protection to their customers.

Senator Elizabeth Warren asked the CEOs to raise their hands if they had followed that guidance.

“I’m not seeing anyone raise a hand, and that’s because none of you gave the same help to your customers that the bank regulators extended to you – help that the regulators recommended that you give,” Warren said.

Instead, the four leading Wall Street banks, which handle tens of millions of retail checking accounts, charged customers a combined $4 billion in fees during the pandemic when their balances hit zero.

According to the Pew Charitable Trusts, those customers were more likely to be African American or Hispanic, or be earning less than $50,000 per year. Figures from the Consumer Financial Protection Bureau show that just 8% of account holders are responsible for three-quarters of overdraft fees.

Singling out Jamie Dimon of JPMorgan, whom she called “the star of the overdraft show,” Warren asked if waiving the nearly $1.5 billion it collected in overdraft fees would have put the bank into financial trouble.

“We waived the fees every time a customer asked because of Covid,” Dimon replied.

“Your profits would have been $27.6 billion,” Warren said. “I did the math for you.”

“Mr. Dimon, will you commit right now to refund the $1.5 billion you took from consumers during the pandemic?” she continued.

“No,” he said.

The other three executives also declined Warren’s request.

“Last year, when customers said they were struggling, we waived fees on over 1 million deposit accounts, including overdraft fees – no questions asked,” Chase spokesperson Amy Bonitatibus said in a statement to Insider.

A previous study found Chase charges more than average for overdraft fees, generating more than $35 per account, compared with Citi, which charges less than $5 per account, according to Aaron Klein, a senior fellow at the Brookings Institution.

“Overdraft is an expensive fee they charge only on those people who run out of money that goes straight to short-term profits,” Klein told the New York Times in April.

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Warren Buffett commands a $270 billion stock portfolio – and 5 holdings make up 75% of its total value

warren buffett
Warren Buffett

  • Warren Buffett has a $270 billion stock portfolio, and five stocks make up 75% of its value.
  • Berkshire Hathaway disclosed $203 billion of Apple, Bank of America, and three other stocks.
  • Buffett concentrated his portfolio last quarter by slashing and exiting several holdings.
  • See more stories on Insider’s business page.

Warren Buffett’s stock portfolio was worth $270 billion at the last count, making it more valuable than Exxon Mobil or Comcast. Around $203 billion, or 75% of that figure, was parked in just five stocks.

The investor’s Berkshire Hathaway conglomerate owned $108 billion of Apple stock as of March 31, regulatory filings show. That single holding accounted for 40% of the total value of its portfolio.

Berkshire’s increased stake in Bank of America was worth $39 billion, or 14% of the portfolio. The next-biggest holding was American Express ($21 billion or 7.9% of the total), followed by Coca-Cola ($21 billion or 7.8%) and Kraft Heinz ($13 billion or 4.8%).

“Wow is that concentrated,” Paul Lountzis, a longtime Berkshire shareholder and the president of Lountzis Asset Management, told Insider. “But that has always been his way.”

Indeed, Buffett has repeatedly trumpeted the power of a concentrated portfolio, and warned investors against spreading their bets too much.

“Diversification is a protection against ignorance,” he said at Berkshire’s annual shareholder meeting in 1996. “It makes very little sense for those who know what they’re doing.”

Buffett added that if someone can analyze and value businesses, it would be “madness” for them to own scores of stocks and put money into their 35th-favorite business instead of their top pick. Diversifying to that extent would most likely hurt their results and increase their risks, he cautioned in his 1993 shareholder letter.

Berkshire’s top five holdings accounted for 74% of its portfolio’s total value at the end of December. That proportion climbed to 75% last quarter after the company slashed its Wells Fargo and Chevron stakes, trimmed its pharmaceutical and financial bets, and exited a couple of positions.

Buffett might concentrate his portfolio even more in the coming months. “He is going back to making very large commitments to stocks he likes the most,” Lountzis told Insider.

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Stock market bullishness is at a 13-year high, but euphoric sentiment also means it may soon be time to sell, Bank of America says

NYSE Trader
  • Bank of America said bullishness in the stock market is the highest in 13 years.
  • But its contrarian Sell Side Indicator is very close to tilting into an area that will signal to investors that it’s time to sell.
  • BofA said it still prefers cyclical stocks.
  • See more stories on Insider’s business page.

Investors are the most enthusiastic about stocks since the global financial crisis more than 10 years ago but the market is edging closer to indicating that it’s time to sell, Bank of America said Monday.

Wall Street’s bullishness on stocks is a reliable contrarian indicator, BofA said in a note showing that its Sell Side Indicator rose to a 13-year high of 59.8% in April from 59.4% in March. The indicator is based on the average recommended equity allocation of Wall Street strategists.

The indicator is also 50 basis points away – at 60.3% – from the contrarian ‘sell’ threshold.

“Increasingly euphoric sentiment is a driver of our more cautious outlook as we believe that vaccine deployment, economic reopening, stimulus, etc. are largely priced in,” said equity strategists led by Savita Subramanian. “We have not seen a 5% pullback in six months … nor have we experienced a 10% correction in 14 months.”

Pullbacks in stocks occur on average 3 times per year and corrections historically are a once-per-year phenomenon, BofA said. A correction is widely considered a decline of 10% or more in an index or an asset from its most recent high.

The signal to sell stocks is at its closest since May 2007, after which the S&P 500 dropped by 7% in the subsequent 12 months, said BofA. The indicator is currently pointing to 12-month returns of 6%, a “much weaker outlook” compared with an average 12-month forecast of 14% since the end of the global financial crisis.

Bullishness among investors was on display through Wall Street’s three widely watched indexes which in April hit record highs. April proved to be a good month for US equities, with the S&P 500 index climbing by 5.2% and the Nasdaq Composite gaining 5.4%. The Dow Jones Industrial Average rose 2.7% and crossed above 34,000 for the first time. Investors pushed stocks up as corporate earnings have come in ahead of analyst expectations and more economic data point to further recovery in the world’s largest economy from the COVID-19 pandemic.

Equity allocations since March 2020 have risen more than 3.5 times faster than they typically do following bear markets, the strategists said. Stocks crashed in March of last year as the coronavirus health crisis accelerated.

“Lofty valuations, juxtaposed against the potential for bad inflation, rising rates, and higher taxes on corporates and consumers. But we are bullish on economic / profits / capex growth, driving our preference for cyclical stocks,” wrote Subramanian.

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Stimulus and COVID fears are keeping millions of Americans from rejoining the labor market, BofA says

hiring sign coronavirus
  • Some 2.5 million Americans won’t rejoin the labor force until late 2021, Bank of America said.
  • Virus fears and boosted unemployment benefits are keeping them from seeking work, the bank added.
  • Retirements and COVID-19 deaths will leave a more permanent drag on participation, BofA said.
  • See more stories on Insider’s business page.

The rapidly accelerating economic recovery is running up against labor shortages. The snags are temporary, but they hint at permanent changes to the US job market because of the coronavirus pandemic, according to Bank of America economists.

Stimulus, COVID-19 vaccinations, and reopening all helped hiring rebound in recent months. March job additions were the strongest since August, and consumer spending gauges suggest healthy demand will keep payroll growth robust into the summer. Yet as businesses rehire in preparation for a pickup in demand, some are reporting difficulties in finding workers.

While some 9.7 million Americans are officially tallied in the government’s unemployment gauges, another 4.6 million workers exited the labor force during the pandemic, the team led by Joseph Song said in a note to clients. More than half of those workers will likely rejoin the labor force by the end of the year, but face a few obstacles before they do so.

For one, fears of catching COVID-19 and its more contagious variants still loom large. Those concerns are likely playing a role inkeeping Americans from rejoining the workforce and looking for jobs, the economists said.

Low-income Americans might also hold off on seeking work because of stimulus’s disincentive effects, the bank added. The Biden administration’s $1.9 trillion support package included a $300-per-week expansion to unemployment insurance through September. While smaller than the CARES Act benefit, the latest boost could be leading some Americans to stay on the sidelines for now, Bank of America said.

“Our estimates suggest that those who previously made less than $32,000 would be better off in the near term to collect UI benefits than work,” the team added.

Still, Bank of America expects those 2.5 million Americans will rejoin the workforce by the fall as vaccination continues and the stimulus benefit fades. The remaining 2.1 million will take much longer to join the job market, or may not rejoin at all.

About 700,000 Americans are expected to have left the workforce due to a mismatch between their skills and available job openings. Training programs can help close the gap but bringing those workers back will take some time, the economists said.

Separately, 1.2 million workers retired during the health crisis and are unlikely to seek work once the country fully reopens. Another 140,000 workers have been lost due to COVID-19 deaths, the team estimated.

These longer-term worker shortfalls will influence economic data in two ways. At first, accelerated hiring will see the unemployment rate fall throughout the year. Tighter labor-market conditions will then lead to faster wage growth as businesses pay more to fill their openings.

BofA
Source: Bank of America Global Research

Yet those encouraging readings will rest on a less optimistic foundation. The millions of Americans that are unlikely to rejoin the workforce until the fall will leave the labor force participation rate well below its pre-pandemic level.

There is a “high risk” the participation rate doesn’t fully recover, and demographic trends could drag participation steadily lower over the next decade, the economists said.

Bank of America reiterated its forecast for the unemployment rate to fall to 4.2% by the end of the year. The benchmark will then return to its pre-pandemic low of 3.5% by the end of 2022, the team said.

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American companies are struggling to hire workers, but BofA sees that fading by early 2022

kohls now hiring
  • Many US businesses are facing worker shortages as the economy starts to reopen.
  • The unusual dynamic will fade by early 2022 as the labor market rebounds, BofA economists said.
  • Expanded unemployment benefits and COVID-19 fears are likely keeping many from seeking work, they added.
  • See more stories on Insider’s business page.

A McDonald’s paying people to interview for jobs. Uber drivers holding off on rides in hopes of higher pay. Millions of payrolls possibly vanishing altogether.

The US economy is still down roughly 8.4 million jobs since the pandemic first fueled massive layoffs. That suggests hiring would quickly bounce back as the country reopens and Americans get back to spending as usual. But the opposite effect is taking place. Instead of an oversupply of workers meeting weaker demand, businesses looking to hire are coming up against a shortage of Americans seeking employment.

That shortfall is presenting an unusual and unexpected challenge to the broader recovery. Without a return to pre-pandemic employment, consumer spending will trend below its potential and leave less money flowing through the economy.

Bank of America economists aren’t particularly concerned. The shortage is likely driven by expanded unemployment benefits included in the latest stimulus package, concern around catching the coronavirus, and home-schooling demands for working couples, the team led by Michelle Meyer said in a Friday note. The bank expects that dynamic to fade by early 2022 as stimulus expires and more Americans are vaccinated.

“Therefore by early next year, COVID-related labor shortages will likely be replaced by ‘traditional’ shortages because of a hot labor market,” the economists added.

The team reiterated its expectation for the unemployment rate to fall to 4% by the end of 2021. The rate currently sits at 6%, but the government’s latest payrolls report suggests monthly job additions will average about 1 million in the near term.

Still, the “traditional” labor shortages expected to emerge next year will present new constraints, according to the bank. The red-hot labor market could “make it difficult” for ports to reach pre-pandemic employment levels even after the health crisis ends, the team said. Such setbacks could further increase factory backorders, which already swelled in recent months due to supply chain disruptions.

The amount of time Americans spend disengaged from the labor force could also slow the recovery. The post-pandemic economy won’t be the same as the one seen before the outbreak, and those changes will make the return to work difficult for millions of Americans, Federal Reserve Chair Jerome Powell said in March.

“The real concern is that longer-term unemployment can allow people’s skills to atrophy, their connections to the labor market to dwindle, and they have a hard time getting back to work,” he said, adding the central bank needs to “keep supporting them” as the labor market creeps toward a full recovery.

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3 reasons to be bearish on Intel despite a new CEO and a $20 billion semiconductor production plan, according to Bank of America

Intel employees
Intel employees.

  • BofA analysts reiterated their “underperform” rating and $62 price target for Intel on Friday.
  • Intel turned in earnings results on Thursday and BofA analysts weren’t impressed by the lack of sales growth and falling margins.
  • BofA says investors would be better off buying shares of Intel rival Advanced Micro Devices.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Bank of America gave three reasons for investors to be bearish about Intel despite the addition of Pat Gelsinger as CEO and a $20 billion move into the semiconductor production business on Friday.

In a note to clients, analysts led by Vivek Arya reiterated their “underperform” rating and $62 price target on shares of Intel.

The analysts said that the Santa Clara, California-based company has been hurt by rising competition from Advanced Micro Devices (AMD) and others. The team expects “muted” earnings growth over the next three years.

Arya and his team highlighted three specific reasons investors might want to consider alternatives to Intel shares moving forward.

Lack of sales growth

The first reason BofA believes Intel could struggle moving forward is that the firm was unable to grow sales in “a year when PC units and cloud Capex are growing 14-15%.”

Intel reported revenues of $19.7 billion for the first quarter of 2021, a 0.7% drop year-over-year, in Pat Gelsinger’s first earnings report as CEO on Thursday.

BofA’s analysts said that much of the quarterly drop in revenues was due to rising competition from AMD as well as a move to “insourcing” from Apple and Amazon.

Falling gross margins

Intel’s gross margins fell to 55.2% in the first quarter of 2021 compared to 60.6% in the same quarter last year. According to BofA’s analysts, that’s the lowest the firm’s margins have been since 2009.

Arya and his team said that they believe gross margins in the second half of 2021 will be even lower as well, at 55%-55.5%, due to rising depreciation expenses and incremental structural headwinds.

A potentially unprofitable move into semiconductor production

Finally, BofA said that Intel’s move into the foundry business (semiconductor production) is likely to be an expensive and unprofitable transition.

The foundry business is known for having lower margins, and BofA says the company’s limited experience and potential conflicts of interest could lead to poor results.

Intel has also been forced to lower buybacks in order to build infrastructure for its future foundry volumes, creating another headwind to EPS.

The BofA analysts concluded by saying they prefer Intel’s competitor AMD for investors in the coming years.

“We continue to prefer Buy-rated Advanced Micro Devices, which should grow 37% this year and can capitalize on INTC’s process technology missteps and foundry distraction, especially as AMD continues to gain customer share with its own consistent execution and solid pipeline,” the BofA team wrote.

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Fisker could jump another 116% due to rising reservations and an EV boom, BofA says

Fisker Ocean
The Fisker Ocean.

Fisker is “standing out even with plenty of fish in the ocean of new EV automakers,” Bank of America says.

In a note to clients on Tuesday, Bank of America initiated coverage on shares of Fisker with a “buy” rating and a $31 price target.

The price target implies a potential ~116% rise from Tuesday’s intraday high of $14.45 per share.

Analysts led by John Murphy, CFA, said they believe rising reservations and a boom for the EV industry as a whole will help boost Fisker moving forward.

“Our Buy rating on Fisker is predicated on our view that the company is a beneficiary of, although still one of many participants within, the automotive industry evolution towards electrification,” Murphy wrote.

Murphy’s team said their latest estimates for Fisker’s Ocean SUV reservations hit more than 14,000 recently and that they expect production for the vehicle to start by the end of 2022.

Fisker will follow its new, all-electric SUV with three more EV models through 2025.

The Ocean SUV is expected to have a range of between 250 and 300 miles, accelerate to 60 mph in 2.9 secs (in its quickest version), and start at $37,499.

Fisker also offers lease-like subscription plans which are expected to cost $379 per month for 30,000 miles each year, including maintenance and service.

The Bank of America team highlighted the Fisker-Flexible Platform Adaptive Design (FF-PAD) in their note to clients on Tuesday as well. The FF-PAD is a proprietary design that allows Fisker to utilize third-party EV platforms and outsource its manufacturing to the likes of Foxconn and Magna.

Murphy and his team said the flexible leading program and FF-PAD design method of Fisker are “compelling,” but the firm’s business model may be “overly complicated.”

The Bank of America analysts also noted Fisker faces some serious competition in the now-crowded EV industry, and that Autotech entrants are “riskier investments than auto incumbents.”

Fisker went public in October 2020 through a reverse merger with a special purpose acquisition company (SPAC) called Spartan Energy.

Shares of the EV maker have slumped more than 50% over the past six months amid competition in the now-crowded industry.

Despite its recent slump, Fisker holds five “buy” ratings, three “neutral” ratings, and just one “sell” rating from analysts.

The firm’s stock traded up 3.60% as of 1:14 p.m. ET on Tuesday.

Fisker chart 2
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Bank of America smashes forecasts to double profits in 1st-quarter earnings as the US rebound boosts Wall Street

Bank of America trader NYSE
Bank of America’s trading division increased its revenue sharply.

Bank of America’s first-quarter earnings smashed analysts’ estimates on Thursday, with profits more than doubling year on year to $8.1 billion as the bank released reserves set aside to cover coronavirus loan losses.

BofA’s $8.1 billion of net income was far higher than analysts’ forecasts of $6.25 billion and was up from $4 billion a year earlier, when the pandemic weighed on banks. It pushed earnings per share to $0.86, well above the consensus estimate of $0.66.

The rapidly recovering US economy helped the bank release $2.7 billion from the reserves it had built up as a buffer against potential loan losses, boosting profit.

And like its peers Goldman Sachs and JPMorgan, Bank of America benefited from a boom in trading revenue during a period of stock market volatility. Revenue from sales and trading jumped 17% to $5.1 billion, the bank said.

Bank of America shares were up 1.18% in pre-market trading to $40.35 after the first-quarter earnings were released.

Here are the key numbers:

  • Net income: $8.1 billion, versus Bloomberg consensus estimate of $6.25 billion
  • Earnings per share: $0.86, versus consensus estimate of $0.66
  • Revenue: $22.8 billion, versus consensus estimate of $21.97 billion

“Our team produced exceptional results this quarter,” Bank of America chairman and chief executive Brian Moynihan said in a statement. He said the bank had achieved “record or near-record levels of deposits, investment flows, investment banking revenue, digital users and client engagement.”

However, Moynihan said that ultra-low interest rates continued to pose a challenge to revenue, with increased just 0.2% year on year to $22.8 billion. Net interest income fell 16% to $10.2 billion.

Both Goldman and JPMorgan also smashed Wall Street estimates on Wednesday, with the banking giants benefiting from a recovering economy, government stimulus and frothy markets. Wells Fargo similarly beat predictions as a turnaround effort showed early results.

“The US earnings season kicked off… with the largest US banks proving once again they can top analysts’ expectations by wide margins,” said Hussein Sayed, chief market strategist at trading platform FXTM.

“Growth in investment banking, capital markets and paring back loan loss reserves were major factors contributing to the bottom lines.”

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A sharp rise in bond yields is a bigger concern for fund managers than COVID-19 – and most believe crypto is in a bubble, but stocks aren’t even close, BofA said

Happy Stock Market Investor
  • A so-called ‘taper-tantrum’ is now worrying investors more than Covid-19 and inflation, according to Bank of America.
  • Almost 75% of people believe crypto is in a bubble, while less than 10% believe equities are, BofA said.
  • Expectations for a V-shaped recovery are at 50%, up from 10%, BofA said.
  • Sign up here for our daily newsletter, 10 Things Before the Opening Bell.

Fund managers are now more worried about a so-called “taper tantrum” in the bond market than Covid-19 or inflation, according to a Bank of America global survey of fund managers. Wider macroeconomic and market-specific optimism however remained high.

Government bond yields have risen sharply over the past few months, as evidence of recovery has fed optimism over the economic outlook, prompting some to consider the possibility of the Federal Reserve withdrawing monetary policy support more quickly than expected.

The result is a so-called “taper-tantrum”, where concern over a prompt tapering in Fed support for the economy sparks an aggressive sell-off in government bonds, thereby pushing up yields.

According to Bank of America’s monthly global fund manager survey, a taper tantrum is the biggest tail risk as far as investors are concerned, trumping both Covid-19 and inflation.

“A year ago, COVID-19 was named a global pandemic on March 11th. Now in April 2021, a mere 15% cite COVID-19 risk as the biggest tail risk, lower than even “higher taxes” at 15%. Taper Tantrum is now first at 32%, followed by inflation at 27%,” the bank said.

The yield on the benchmark 10-year Treasury note is currently around 1.6%, up from around 0.75% just six months ago. The yield hit its highest since last January in late March, trading around 1.77%.

Between February 2020 and March this year, the pandemic ranked as the main worry, but the long-term impact of economic policies related to Covid-19 have now taken over. Covid-19 itself is now the fourth biggest risk factor. “Risks (are) now associated with boom, not recession,” BofA said.

One of the side-effects of the Fed’s policy of pumping as much extra cash into the financial system as possible has been to send asset prices for stocks, cryptocurrencies and some commodities to multi-year, and even, record highs.

The monthly survey found 74% of survey respondents believe cryptocurrencies are in a bubble. Bitcoin hit a record high above $63,000 on Tuesday, having more than doubled in value since the start of the year, while other digital assets, such as non-fungible tokens, or NFTs, have surged in price and popularity in recent months.

US benchmark stock indices have reached record highs this month. The S&P 500 has gained 10% so far in 2021 and around 45% in the last 12 months. But only a minority of respondents believe equities are in a bubble. Just 7% said this was the case.

Instead, 66% of investors think stocks are in a late-stage bull market, boosted by economic and monetary stimulus, including President Joe Biden’s $1.9 trillion infrastructure spending plan.

The wider macroeconomic picture appears to be positive for investors, as the “past year expectations for “V-shaped” recovery have picked up to 50% from 10% previously, the survey showed.

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Big-money investors have dumped stocks for 4 straight weeks, even as major indexes hover near record highs

2021 03 05T123827Z_3_LYNXMPEH240MQ_RTROPTP_4_GLOBAL MARKETS.JPG

US stocks have hit record highs in the past weeks – with the S&P 500 breaching 4,000 for the first time – as President Biden’s unprecedented stimulus plan has spurred renewed economic optimism.

Yet Bank of America revealed in a recent note that its institutional clients have been net sellers of shares over the past four weeks.

Communication-services stocks have been at the center of the trend, seeing several weeks of near-record outflows from all BofA client funds as the 10-year Treasury yield has climbed to more than one-year highs. The sector does, however, remain overweighted by actively managed funds.

Only two sectors saw inflows from BofA client portfolios overall: industrials and materials.

Meanwhile, private clients were buyers for the sixth week, though inflows have recently decelerated.

Buybacks by corporate clients have also slowed. The bank did note that the resurgence in buybacks in the first quarter could imply a new record for S&P 500 gross buybacks in 2021.

As for exchange-traded funds, the bank saw big buyers of equity ETFs year-to-date, especially broad market ETFs, which have seen inflows slow down every week for a month.

Growth ETFs saw outflows for the first time in four weeks.

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