“As more top-tier banks join our initiative, we move closer to having an efficient wholesale crypto market which will ultimately lead to a more stable and mature asset class,” said Pure Digital CEO Lauren Kiley in a statement.
BNY Mellon and State Street are deliberating whether to trade on Pure Digital or just act as technology partners, according to the FT.
Wary of the risky new asset class, banks at first hesitated as crypto exchanges like Coinbase and Binance built businesses on whirlwind trading activity.
Now, as institutional interest nudges banks into crypto, different approaches are being tested. BNY Mellon and State Street both set up digital-asset units in the past few months. Goldman Sachs has announced plans to offer crypto to private wealth clients later this year.
A recent survey by Fidelity found that seven in 10 institutional investors plan to invest in crypto in the future, but are unnerved by volatility.
BNY Mellon’s announcement comes a day after bitcoin fell below the $30,000 price support threshold, though it was up above $31,000 on Wednesday.
In the UK, July 19 is being hailed as “freedom day.”
The country has maintained pandemic restrictions over the last few months such as social distancing, wearing face masks on transport, eateries, and shops, and working from home.
Prime Minister Boris Johnson is set to lift these measures on Monday, meaning pubs and clubs will reopen, and the wearing of face masks will no longer be compulsory.
But with coronavirus infections high and rising in the UK, companies are issuing their own mandates on coronavirus safety as white-collar workers return to the office.
Goldman Sachs told London staff on Thursday that the wearing of masks will be mandatory “at all times” at its European headquarters, except for when staff are sitting at their desks.
Social distancing measures will also remain, as will the bank’s on-site testing program.
The bank has not specified for how long.
Insider obtained a copy of the internal memo sent to all staff by Richard Gnodde, the CEO of Goldman Sachs international on July 15.
The memo was sent the day after an official visit by Prince Charles to the bank’s London office. The royal met summer interns, banking analysts, and executives.
Gnodde later told the BBC that the bank expects 70% of staff to have returned to the physical office over the next few months. But the bank will not insist on staff being fully vaccinated, or force them back if they feel uncomfortable.
Goldman Sachs invested £1 billion ($1.4 billion) when it opened its European headquarters on Plumtree Court in 2019. The 10-story offices come equipped with a creche and lactation pumps for breastfeeding mothers. At its peak capacity, it housed 6,000 staff.
Read the memo in full:
15 July 2021
UK Reopening: What This Means For Return to Office
As you will be aware, from Monday, 19 July, the UK government will be lifting all restrictions on social contact, including removing the guidance to work from home. This follows the positive progression of the vaccination rollout amongst the broader population.
However, the government has advised caution and a gradual return over the coming weeks. Therefore, in light of this guidance and the current levels of external community infection, the existing in-office health and safety measures will remain unchanged for now.
These include the wearing of masks at all times, apart from when seated at your desk, social distancing, and participation in the on-site testing programme, which has proved a critical safety measure in identifying non-presenting cases of COVID-19. Encouragingly, through our contact tracing process, we have not seen any cases of COVID-19 spreading within our office so far.
On a related note, thank you to all who participated in our second London vaccination survey; nearly three-quarters of you responded which has been helpful for us in understanding the vaccination uptake of our UK population. Of those that responded, the vast majority have received one dose and nearly half are fully vaccinated, showing a significant upward trajectory since our first survey in June and positive outlook for overall vaccination levels in the weeks ahead.
This has been a long and tough journey, but the resilience you have shown throughout has been outstanding. We will continue to monitor local case rates and public health safety guidance, and will update our in-office protocols as and when appropriate.
In the meantime, I hope you all manage to take some time this summer for some much-deserved rest.
“We have a lot of cash and capability and we’re going to be very patient, because I think you have a very good chance inflation will be more than transitory,” Dimon, the longest-serving CEO among the big US banks, said.
He suggested the risk of higher, more persistent inflation is growing. US inflation, or the rise in prices of goods and services, has picked up dramatically compared with last year, when the economy was in lockdown. Disruptions to the global supply chain and a burst of consumer spending have added to the increase. Higher interest rates would help ward off a more damaging pickup in inflation.
“If you look at our balance sheet, we have $500 billion in cash, we’ve actually been effectively stockpiling more and more cash waiting for opportunities to invest at higher rates,” he said. “I do expect to see higher rates and more inflation, and we’re prepared for that.”
While several Fed officials have been resolute in their view that the rise in inflation will ultimately prove transitory, other influential leaders have warned of the consequences of rising prices.
In a 1980 shareholder letter, Warren Buffett described high inflation as a “tax on capital” that dissuades corporate investment. The billionaire investor said the rise in general price levels can hurt more than income tax, and rising costs force companies to spend cash just to maintain their business – regardless of whether they’re generating profits.
JPMorgan, the largest US bank by assets, expects $52.5 billion in net-interest income in 2021, down from its previous expectation of $55 billion, partly due to a decline in credit card balances.
Separately, at Monday’s conference, Dimon said he planned to hold his position at JPMorgan for at least the next two to three years. Without giving an exact time frame, he said: “I intend to stay, which is sanctioned by the board, for a significant amount of time.”
It’s been six years since the world’s governments adopted the Paris Agreement. But in many parts of the world, including my country of Indonesia, the coal industry rampages on, aided and abetted by banks from around the world.
As important as political action is on climate change, banks must end their financing of coal too. Through their lending and investing activities, many banks are funding companies opening new coal mines and building new coal power plants, despite the UN saying that all new coal projects should be cancelled immediately to meet climate goals. If financial institutions phased out funding for coal-dependent companies, the transition from polluting power to clean would be vastly accelerated.
But one major UK bank has escaped scrutiny for its poor coal policies: Standard Chartered.
Best known for sponsoring Liverpool FC, Standard Chartered is a major bank in Asia. It’s climate policy allows them to continue pumping billions into destructive coal companies, including in Indonesia.
Despite the bank’s internal analysis showing that Adaro’s business plans are in line with 5-6°C of global warming, it has decided to support Adaro anyway. Adaro is a major supplier of coal to Europe, Asia and America. It controls at least 31,380 hectares of land, an area bigger than Birmingham, producing 54 million tonnes of coal in 2020 alone.
Adaro estimates its coal reserves at 1.1 billion tonnes. Burning all of these reserves – as Adaro intends to do – would release 2.2 billion tonnes of CO2-e, almost the equivalent of the annual emissions of India. The company has no plans to produce any less coal. And yet, Standard Chartered continues to fund Adaro, whose business plan is consistent with the Paris Agreement failing.
Adaro coal mining operations tear down forests, degrading the land. Early this year, at least 24 people were killed, and more than 113,000 people were displaced due to a massive flood in South Kalimantan, on the island of Borneo. The immense suffering from the floods has been linked to degraded land in the water catchment area. Adaro is one of the mining companies that operate its coal mines near the river catchment area.
So Standard Chartered isn’t just funding a perennial coal mining company. It’s funding a company building new dirty coal power plants. And yes, we’re talking about a UK bank in the year 2021.
Standard Chartered’s slogan, “Here For Good”, means nothing if it means continuing to provide hundreds of millions to a company ripping the heart out of communities in my country and making global climate change worse.
Binbin Mariana is an energy finance campaigner living in Indonesia, campaigning with environmental group Market Forces. A former banker, she believes that financial institutions must stop contributing to the climate crisis.
Goldman Sachs formally announced the launch of its newly-formed cryptocurrency trading desk to markets employees, according to an internal memo obtained by Insider.
The team has successfully executed two types of bitcoin-linked trades – bitcoin non-deliverable futures and CME BTC futures, the bank said.
Members will report to Goldman partner Rajesh Venkataramani. It will function as part of the bank’s global currencies and emerging markets trading team within a division led by the global head of digital assets, Mathew McDermott.
Goldman had been weighing plans to create a crypto trading desk as early as 2017, according to CNBC. Thursday’s memo is the first time the US bank has formally acknowledged its involvement in the reported plans.
It plans to broaden its market presence by “selectively onboarding” crypto trading institutions to expand offerings, according to the memo.
CEO David Solomon said last month he expects a “big evolution” in the way bitcoin and other cryptocurrencies are regulated in the United States. “I’m not going to speculate on where the rules will go for regulated financial institutions, but we’re going to continue to find ways to serve our clients as we move forward,” he told CNBC in an interview.
A copy of the internal memo obtained by Insider is seen below:
May 6, 2021 Formation of Cryptocurrency Trading Team I am pleased to announce the formation of the firm’s cryptocurrency trading team, which will be our centralized desk for managing cryptocurrency risk for our clients. The Crypto trading team will be a part of Global Currencies and Emerging Markets (GCEM), reporting to me, within the firm’s Digital Assets effort led by Mathew McDermott.
As a part of our initial launch, we have successfully executed Bitcoin (BTC) NDFs and CME BTC future trades on a principal basis, all cash settling. Looking ahead, as we continue to broaden our market presence, albeit in a measured way, we are selectively onboarding new liquidity providers to help us in expanding our offering.
In addition, yesterday we launched our Digital Assets dashboard which provides daily and intraday cryptocurrency market data and news to our clients. We invite you to highlight the dashboard to your clients. For more information on trade approval and onboarding, contact the Digital Assets team.
Please note, the firm is not in a position to trade Bitcoin or any Crypto Currency (inc. Ethereum) on a physical basis.
Other large investment banks are also warming up to cryptocurrencies. JPMorgan, the largest US investment bank by assets, is actively working on offering a bitcoin fund to its private rich clients. Citi plans to launch crypto trading services after seeing surging interest from clients, according to the Financial Times.
JPMorgan Chase announced it is teaming up with Singapore’s DBS Group Holdings and Temasek Holdings to form a blockchain payments platform in a bid to ease cross-border payments, trade, and currency settlements.
The newly-established technology company, Partior, will leverage blockchain technology and digitize M1 commercial money, according to a statement Wednesday.
The platform will develop wholesale payment rails based on digitized commercial bank money to enable “atomic” or instantaneous settlement for various kinds of financial transactions, according to a statement.
“We are thrilled by the launch of Partior as it marks yet another milestone for JPMorgan and the industry – blockchain-based wholesale payments infrastructure where information and value can change hands around the world in a 24/7, frictionless way,” Takis Georgakopoulos, global head of wholesale payments at JPMorgan, said in a statement.
Partior will be designed to complement ongoing central bank digital currencies initiatives and use cases.
In the beginning, Partior will focus on facilitating flows primarily between Singapore-based banks in both US and Singapore dollars but will expand its service offerings to other markets and currencies.
Headquartered and listed in Singapore, DBS is a financial services group in Asia active in 18 markets.
Temasek, also based in Singapore with 11 global offices, is an investment company with a portfolio of $214 billion as of March 2020.
It’s been a dramatic year for financial markets so far. Retail traders pumped up GameStop in January, captivating the financial world and whacking hedge funds who had been betting against the stock.
Then in March, the Archegos investment fund spectacularly imploded, wiping out a $20 billion fortune and sending banks scrambling to distance themselves from the collapse.
Yet, despite this turbulence, banks and hedge funds just had one of the best quarters in recent memory, smashing expectations and earning big bucks for their clients.
How did they do it? JPMorgan boss Jamie Dimon put it well himself when his bank’s earnings came out: “Stimulus spending, potential infrastructure spending, continued quantitative easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic.”
Hedge funds turn it around after rocky January
The year got off to a bad start for many hedge funds, when a band of online retail traders decided to pump up GameStop stock. A number of high-profile funds, who had been betting against the ailing company, were hit hard.
A narrative built up in the media and among the retail investors themselves that a day-trading army was laying siege to Wall Street. And in some places it was: Gabe Plotkin’s Melvin Capital, for instance, was left nursing a 49% loss on its investments in the first quarter, according to reports.
But the GameStop saga was only felt by a handful of firms, says Andrew Beer, managing member at Dynamic Beta Investments, an investment firm that follows some hedge-fund tactics.
Hedge funds made a gain of 4.8% in the first three months of 2021, the best first-quarter performance since the heady days before the financial crisis, according to data from Eurekahedge. North American hedge funds gained 6.8%.
“GameStop to me was a tempest in a teapot,” Beer told Insider. “Most funds actually did fine… because what was more important for them was getting the value rotation right.”
The first quarter saw volatility in stock markets as investors positioned for stronger growth, rotating out of big tech into stocks in neglected sectors such as finance and industry.
Beer says that with the market going through “regime changes,” hedge funds did well because they had the flexibility and agility “to be tech investors in 2019, but value investors and small-cap investors today.”
There were also opportunities for hedge funds who specialize in betting against, or shorting, stocks, says Mohammad Hassan, head analyst at Eurekahedge.
“The growth factor struggled in Q1, creating opportunities on the short side of the book for hedge fund managers as non-profitable technology stocks got a ‘speeding ticket’, so to speak,” he told Insider.
Banks smash earnings expectations as market income booms
Wall Street’s banks also escaped largely unscathed from the Archegos implosion. Morgan Stanley posted a record profit despite taking a $911 million hit tied to the fund.
Like hedge funds, the big banks also reaped rewards from highly active financial markets, helping big names like JPMorgan and Goldman Sachs wow analysts with record earnings.
Earnings at S&P 500 banks grew a staggering 248% year on year, according to FactSet. Investment banking revenue at Goldman Sachs shot up 105% as the lender’s traders cashed in on rising and volatile markets.
Even at the more consumer-focused Bank of America, sales and trading revenue rose 17% as clients played the market, helping its profit more than double.
The boom in retail trading, which lay behind the GameStop saga may also have helped, says Filippo Alloatti, senior credit analyst at Federated Hermes.
“[Retail investors] may trade with some of the bank’s platforms, but [it also] brings more inflows into equities and therefore facilitates equity capital market business,” he told Insider.
Crucially, the brightening in the economic outlook after the arrival of COVID-19 vaccines. In addition, the announcement of more major stimulus measures helped banks release $10.2 billion from the provisions set aside to cover loan losses, according to FactSet.
“There’s just no doubt that the… bear case scenarios that the banks had put into those forecasts around building their loan-loss reserves have gotten less bad,” Ken Usdin, US banking analyst at Jefferies, tells Insider.
But there are a few dangers on the horizon for banks. Although many of those involved seem to have escaped the Archegos affair unscathed, Swiss lender Credit Suisse is still struggling and similar events could yet have broader ramifications.
Meanwhile, banks’ traditional business of making loans has slowed, as stimulus money has helped people pay down their debts.
The Federal Reserve looks set to keep the party going
Underlying the very strong quarter for banks and hedge funds has been the Federal Reserve, analysts say, which has made borrowing ultra-cheap and pumped cash into the economy and markets.
William McChesney Martin, Fed chair in the 1950s, famously said the Fed’s job is to provide the punch at the party but take it away just as things start warming up.
Beer said this no longer seems to be the case, with the central bank saying it wants to see a hot jobs market and will tolerate higher inflation. “The Fed has basically said, here’s the punch bowl, have at it, and the party is going to go on well past curfew,” he said.
JPMorgan’s Dimon is bullish, despite residual concerns about lower loans and rising coronavirus cases around the world, saying: “We believe that the economy has the potential to have extremely robust, multi-year growth.”
Credit Suisse, Switzerland’s second-biggest bank after UBS, reported first-quarter earnings on Thursday that showed the bank witnessed a slightly narrower net loss than analysts had expected.
A net loss of 252 million francs ($275 million) beat the 815 million francs ($890 million) mean estimate conducted by the bank’s own poll of analysts.
The bank said it had exited 97% of its trading positions related to a US-hedge fund. Credit Suisse has consistently been reluctant to name the fund, but the bank has cushioned the blow from its remaining exposure to Archegos Capital.
It expects to incur related losses of another 600 million francs ($654 million) in the second-quarter this year and said it would raise $2 billion to shore up its capital, in the aftermath of the hedge fund’s collapse.
Here are the key numbers:
Net Revenue: CHF 7.6 billion ($8.3 billion) versus CHF 5.2 billion ($5.6 billion) in Q4
International wealth management pre-tax profit: CHF 523 million ($571.3 million) versus CHF 442 million ($482 million) estimated
Revenue from investment-banking division: CHF 3.9 billion ($5.4 billion) versus CHF 2.2 billion ($3 billion) a year ago
Net loss: CHF 252 million ($275 million) versus CHF 353 million ($385 million) in Q4
“Our results for the first quarter of 2021 have been significantly impacted by a CHF 4.4 billion charge related to a US-based hedge fund,” CEO Thomas Gottstein said in a statement. “The loss we report this quarter, because of this matter, is unacceptable.”
“Among other decisive actions, we have made changes in our senior business and control functions; we have enhanced our risk review across the bank; we have launched independent investigations into these matters by external advisors, supervised by a special committee of the Board; and we have taken several capital-related actions,” he added.
Swiss regulator FINMA announced the same day that it has opened enforcement proceedings against the bank after it suffered losses in connection with Archegos.
Credit Suisse has emerged as the hardest-hit among the banks affected by the Archegos collapse. Other banks were quicker to wind down their related positions, leaving them relatively unscathed. The Swiss lender was already battling with a controversy linked to supply-chain finance as it had $10 billion worth of funds tied to Greensill Capital.
The impact on Credit Suisse from both the Archegos and Greensill saga could add up to $8.7 billion, Bloomberg reported, citing JPMorgan analysts.
Shares in Credit Suisse fell 5% in early European trading.
US stocks edged higher on Thursday after three of the largest US banks beat analyst expectations with their first-quarter results, and Coinbase began trading at a valuation of more than $100 billion.
The crypto exchange’s shares closed 14% lower at $328.28 per share on Wednesday, giving it a valuation of $86 billion on a fully diluted basis.
Futures on the Dow Jones, S&P 500, and Nasdaq rose between 0.3% and 0.6%, suggesting a higher open for US indices later in the day.
JPMorgan reported a 25% jump in trading revenue even as analysts expected lower volumes across the market, with an overall revenue of $33 billion for the quarter. Revenue estimates were $30.4 billion.
Goldman Sachs too posted a profitable quarter on the back of strong trading and deal-making. Wells Fargo’s earnings topped estimates as its quarterly net income rose to $4.7 billion, helped by a larger than expected release of loan loss reserves.
Fed Chairman Jerome Powell reiterated on Wednesday the central bank won’t taper its emergency asset purchases until it sees progress on its goals of above 2% inflation and maximum employment. Powell disclosed he hasn’t had conversations on policy with President Joe Biden – a sharp contrast from how former President Donald Trump frequently urged the Fed to lower interest rates and critiqued its independence.
Elsewhere in Europe, ECB President Lagarde said at a Reuters event the euro zone economy is still standing on “two crutches” of monetary and fiscal stimulus, and they shouldn’t be removed until full recovery.
Members of the ECB are scheduled to meet next week for the first time since they increased the pace of the Pandemic Emergency Purchase Programme to decelerate the surge in bond yields.
Asian markets were trading lower aside data showing India reported a record 200,000 new coronavirus cases.
Shares in Japan firms with strong Chinese ties declined ahead of Prime Minister Yoshihide Suga’s meeting with President Joe Biden, as investors are wary of potential pressure to align with Washington’s tough stance on Beijing.
Mohamed El-Erian says the Archegos blow-up is a “one-off,” but it may lead to a tightening of financial conditions as banks become more cautious.
Over the weekend reports came out that showed Archegos Capital Management had been behind roughly $20 billion worth of block sales of companies like ViacomCBS and several Chinese tech stocks including Tencent and Baidu.
The sales came after the hedge fund failed to meet margin calls from Credit Suisse, Nomura, and Goldman Sachs.
Queen’s College President and Allianz chief economic advisor told CNBC on Monday that he believes the incident was a “one-off,” caused by Archegos’ “highly concentrated positions”, “massive leverage”, and “derivative overlay on top of that.”
El-Erian said that he doesn’t see a “fast-moving contagion” spilling over and creating a significant market sell-off, adding that “for now it looks contained.”
The Allianz chief economist did say investors should be keeping an eye on “slower-moving contagion forces” which might cause a “tightening in financial conditions” forcing banks to become more cautious.
“There’s been so much liquidity sloshing around the system that there has been excesses and we’ll get fender benders like this one, but what we don’t want is a pile-up, and that’s why it’s really important to look at these slow-moving contagions,” El-Erian said.
El-Erian said he hoped the Archegos blow-up would lead to “better discipline in the marketplace because we’ve lost a lot of discipline.”
He added that Archegos’ positions, overall, are a “small” portion of the market, but said it could cause banks to make changes.
“I can tell you that in a lot of investment houses right now, and banks, people are being asked look how we are positioned, who are we exposed to, do we have enough margin, is the collateral moving or not, and all that causes somewhat of a slowdown in the system,” El-Erian said.
When asked what caused Goldman Sachs to force the liquidation when it did, the Queen’s College President said that “price action”, “how big was the margin overall”, and desire to move first and catch other banks “offsides” was the reason Goldman made its liquidation call.
Goldman Sachs told Bloomberg that its losses from the Archegos liquidation were “immaterial” while Nomura and Credit Suisse both face “significant” losses after the blow-up.