Raphael Stevens

Meta celebrated its 20th anniversary this week as all good and mature businesses should: by paying shareholders a dividend. In lieu of a birthday bash, the Silicon Valley stalwart marked its coming of age with a stock buy-back and, for the first time, by offering a dividend. Investors will receive 50 cents per share. Markets partied, with Meta’s share price rising by 20%, adding more than $200bn to the company’s market capitalisation on the day of the announcement.The dividend, a 17th-century innovation, was a mainstay of markets for much of the 20th century. Stockpickers used the cash they earned from dividends to price shares. The Bloomberg terminal of its time, Moody’s Analyses of Investments, evaluated the giants of American rail on dividends per mile of railroad laid. But the years have not been kind to the once-dominant dividend. Since the early 1990s, regular cash payments to shareholders have been in retreat, losing out to stock buy-backs, in which management uses earnings to repurchase their stock, boosting the share price.Managers love buy-backs because they cut the number of shares on the market, lifting earnings per share—and thus often executive compensation, too. A higher stock price is all the more enticing if management is compensated with the option to buy company shares. In the past, investors have also preferred buy-backs. Capital gains are taxed at a lower rates than dividend income in some countries, and investors like owning an appreciating asset because they can choose when to sell and pay the taxman.Meta’s decision to hand earnings to its minority owners received a raucous reception, however. It is just the latest sign that markets are coming to appreciate dividends. Those from s&p 500 firms rose to $588bn last year, up 22% against three years ago. Investors have put $316bn in dividend-focused exchange-traded funds globally, almost doubling their size over the same period. An analyst at Bank of America speculates that 2024 could be “a banner year for dividends”.Why the shift? Daniel Peris of Federated Hermes, an investment house, and author of a new book, “The Ownership Dividend”, puts the decline of cash payments down to decades of falling interest rates and Reagan-era changes to buy-back rules. As the risk-free rate fell, returns on bonds and savings diminished, and so did the advantages of holding cash. Cheap money enabled investors to plough capital into non-dividend-paying growth stocks.In that time, writes Mr Peris, highfalutin financiers came to see the dividend as the preserve of “widows and orphans”. Only staid companies, like banks and utilities, tended to bother with them. Yet today’s economic environment looks different. Interest rates have risen. Startups without a path to profitability are failing to win over investors. And the Biden administration has levied a tax on buy-backs. It is currently meagre but officials hope it will rise.Perhaps cash is once again king. Higher interest rates mean that investors can put income to work. Many are enjoying respectable, risk-free returns in money-market funds. Higher risk-free rates also lower the value of future earnings in today’s dollars, meaning some investors will prefer cash in hand today to higher stock prices tomorrow.A similar calculation holds true for management, whose options for deploying cash have become more limited. Higher rates demand higher expected returns from long-term investments and discourage taking on debt to fund share repurchases. The Biden administration’s distrust of corporate takeovers means that acquisitions are less viable. Many firms are therefore considering how best to return dollars to their shareholders.Investors have reason to be careful, however. As economists argue, earning a dividend is like taking cash out of an ATM—it does not make you richer. If a company were to reinvest its earnings rather than pay out a dividend, it ought to make more money in future and thus deliver a higher share price. As a consequence, investors should be equally happy with either option.A firm that issues a dividend is signalling that it has confidence in its future cash flows, since shareholders often assume dividends will be permanent and managers are loath to cut them. Yet such a move also suggests that bosses have nowhere better to invest company cash, which bodes poorly for a firm’s growth. Although high-yielding dividend stocks offer a reliable income stream, they are unlikely to reward owners with a capital gain worth celebrating.■Read more from Buttonwood, our columnist on financial markets: Bitcoin ETFs are off to a bad start. Will things improve? (Feb 1st)Investors may be getting the Federal Reserve wrong, again (Jan 24th)Wall Street is praying firms will start going public again (Jan 18th)Also: How the Buttonwood column got its name More

The French lender posted a group net income of 430 million euros, slightly above a consensus analyst forecast of 404 million euros, according to LSEG data.
Annual net banking revenue dropped 9.9% year-on-year to 5.96 billion euros, which the bank attributed largely to a decline in net interest income in French retail, private banking and insurance.

A logo outside a Societe Generale SA bank branch in Paris, France.
Bloomberg | Bloomberg | Getty Images

Societe Generale on Thursday reported a sharp decline in fourth-quarter net profit on the back of weaker net banking income, but launched a new 280 million euro ($302 million) share buyback program.
The French lender posted a group net income of 430 million euros, slightly above a consensus analyst forecast of 404 million euros, according to LSEG data, but well below the 1.07 billion euros recorded for the final quarter of 2022. It comes after the bank posted posted a group net income of 295 million euros for the third quarter, as resilient investment bank performance offset a sharp downturn in its French retail business.

Thursday’s result took France’s third-largest listed bank’s annual net profit to 2.49 billion euros, slightly above analyst expectations of 2.15 billion euros.
However, quarterly net banking revenue dropped 9.9% year-on-year to 5.96 billion euros, which the bank attributed largely to a decline in net interest income in French retail, and its private banking and insurance division, along with the negative impacts from unwinding hedges.
SocGen announced that it would be proposing a cash dividend to shareholders of 90 cents per share, and launching a 280 million euro share buyback, equivalent to 35 cents per share.
Other key figures the bank reported included its CET1 ratio, which sat at 13.1% to end the year, its reported return on tangible equity for the fourth quarter of 1.7%, and a cost-to-income ratio of 78.3%.
Group CEO Slawomir Krupa said 2023 was “a year of transition and transformation” for the bank, which is targeting revenue growth of 5% or above in 2024.

“The exceptional momentum of BoursoBank, the strength of our Global Banking and Investor Solutions franchises, the performance of our international banking activities across all regions, plus the capacity of our new bank in France and Ayvens to implement unprecedented transformations are all strong proof points on our ability to execute at a high level,” Krupa said in a statement.
“At the same time, while 2023 was negatively affected by a sharp decrease in net interest income in French Retail Banking and the elevated cost of integrating LeasePlan, it was also characterised by disciplined management of costs, risks and capital.”
Online and mobile banking subsidiary BoursoBank was a particular highlight for the Soc Gen, posting a record quarter for new client acquisitions at 566,000 compared to a year ago. It takes BoursoBank’s total clients to 5.9 million by the end of 2023. More

The Chinese venture capital world that once hoped for giant U.S. IPOs similar to Alibaba’s is changing drastically.
Geopolitics, slower growth and regulation are forcing VCs in China to look for alternatives to U.S. investors.
Beijing’s focus for policy support also means VCs need to look at industrial, rather than consumer, sectors — deals that require far more capital.

A bank employee count China’s renminbi (RMB) or yuan notes next to U.S. dollar notes at a Kasikornbank in Bangkok, Thailand, January 26, 2023.
Athit Perawongmetha | Reuters

BEIJING — Venture capitalists in China that once rose to fame with giant U.S. IPOs of consumer companies are under pressure to drastically change their strategy.
The urgency to adapt their playbook to a newer environment has increased in the last few years with stricter regulations in China as well as the U.S., tensions between the two countries and slowdown in the world’s second-largest economy.

Here are the three shifts that are underway:

1. From U.S. dollars to Chinese yuan

The business model for well-known venture capital funds in China such as Sequoia and Hillhouse typically involved raising dollars from university endowments, pension funds and other sources in the U.S. — known in the industry as limited partners.
That money then went into startups in China, which eventually sought initial public offerings in the U.S., generating returns for investors.
Now many of those limited partners have paused investing in China, as Washington increases its scrutiny of U.S. money backing advanced Chinese tech and it gets harder for Chinese companies to list in the U.S. A slowdown in the Asian country has further dampened investor sentiment.
That means venture capitalists in China need to look to alternative sources, such as the Middle East, or, increasingly, funds tied to local government coffers. The shift toward domestic channels also means a change in currency.

In 2023, the total venture capital funds raised in China dropped to their lowest since 2015, with the share of U.S. dollars falling to 5.3% from 8.4% in the prior year, according to Xiniu Data, an industry research firm.
That’s far less than in the previous years — the share of U.S. dollars in total VC funds raised was around 15% for the years 2018 to 2021, the data showed. The remaining share was in Chinese yuan.

Currently, many USD funds are shifting their focus to government-backed hard tech companies, which typically aim for A share exits rather than U.S. listings

For foreign investors, high U.S. interest rates and the relative attractiveness of markets such as India and Japan also factor into decisions around whether to invest in China.
“VCs have definitely changed their view on Greater China from a couple years ago,” Kyle Stanford, lead VC analyst at Pitchbook, said in an email.
“Greater China private markets still have a lot of capital available, whether it be from local funds, or from areas such as the Middle East, but in general the view on China growth and VC returns has changed,” he said.

2. China investments, China exits

Washington and Beijing in 2022 resolved a long-standing audit dispute that reduced the risk of Chinese companies having to delist from U.S. stock exchanges.
But following the fallout over Chinese ride-hailing giant Didi’s U.S. listing in the summer of 2021, the two countries have increased scrutiny of China-based companies wanting to go public in New York.
Beijing now requires companies with large amounts of user data — essentially any internet-based consumer-facing business in China — to receive approval from the cybersecurity regulator, among other measures, before they can list in Hong Kong or the U.S.
Washington has also tightened restrictions on American money going into high-tech Chinese companies. A few large VCs have separated their China operations from those in the U.S. under new names. Last year, Sequoia most famously rebranded in China as HongShan.
“USD funds in China can still invest in non-sensitive sectors for A share IPOs, but have the challenge of local enterprise preferring capital from RMB [Chinese yuan] funds,” said Liao Ming, founding partner of Beijing-based Prospect Avenue Capital, which has focused on U.S. dollar funds.
Stocks listed in the mainland Chinese market are known as A shares.
“The trend is shifting towards investing in parallel entity overseas assets, marking a strategic move ‘from long China to long Chinese,” he said.
“With U.S. IPOs no longer being a viable exit strategy for China assets, investors should target local exits in their respective capital markets—in other words, China exits for China assets, and U.S. exits for overseas assets,” Liao said.

Read more about China from CNBC Pro

Only a handful of China-based companies – and barely any large ones – have listed in the U.S. since Didi’s IPO. The company went public on the New York Stock Exchange in the summer of 2021, despite reported regulatory concerns.
Beijing promptly ordered an investigation that forced Didi to temporarily suspend new user registrations and app downloads. The company delisted later that year.
The probe, which has since ended, came alongside Beijing’s crackdown on alleged monopolistic practices by internet tech companies such as Alibaba. The clampdown also covered after-school tutoring, minors’ access to video games and real estate developers’ high reliance on debt for growth.

3. VC-government alignment, larger deals

Instead of consumer-facing sectors, Chinese authorities have emphasized support for industrial development, such as high-end manufacturing and renewable energy.
“Currently, many USD funds are shifting their focus to government-backed hard tech companies, which typically aim for A share exits rather than U.S. listings,” Liao said, noting that it aligns with Beijing’s preferences as well.
These companies include developers of new materials for renewable energy and factory automation components.
In 2023, the 20 largest VC deals for China-headquartered companies were mostly in manufacturing and included no e-commerce business, according to PitchBook data. In pre-pandemic 2019, the top deals included a few online shopping or internet-based consumer product companies, and some electric car start-ups.
The change is even more stark when compared with the boom around the time online shopping giant Alibaba went public in 2014. The 20 largest VC deals for China-headquartered companies in 2013 were predominantly in e-commerce and software services, according to PitchBook data.

… the venture capital scene has become even more state-concentrated and focused on government priorities.

Camille Boullenois
Rhodium Group

The shift away from internet apps towards hard tech requires more capital.
The median deal size in 2013 among those 20 largest China VC transactions was $80 million, according to CNBC calculations based off PitchBook data.
That’s far smaller than the median deal size of $280 million in 2019, and a fraction of the median of $804 million per transaction in 2023 for the same category of investments, the analysis showed.
Many of those deals were led by local government-backed funds or state-owned companies, in contrast to a decade earlier when VC names such as GGV Capital and internet tech companies were more prominent investors, according to the data.
“In the past 20 years, China and finance developed very quickly, and in the past ten years private [capital] funds grew very quickly, meaning just investing in any industry would [generate] returns,” Yang Luxia, partner and general manager at Heying Capital, said in Mandarin, translated by CNBC. She has been focused on yuan funds, while looking to raise capital from overseas.
Yang doesn’t expect the same pace of growth going forward, and said she is even taking a “conservative” approach to new energy. The technology changes quickly, making it hard to select winners, she said, while companies now need to consider buyouts and other alternatives to IPOs.
Then there’s the question of China’s growth itself, especially as state-linked funds and policies play a larger role in tech investment.
“In 2022, [private equity and venture capital] investment in China was cut in half, and it fell again in 2023. Private and foreign actors were the first to withdraw, so the venture capital scene has become even more state-concentrated and focused on government priorities,” said Camille Boullenois, associate director, Rhodium Group.
The risk is that science and technology becomes “more state-directed and aligned with government’s priorities,” she said. “That could be effective in the short term, but is unlikely to encourage a thriving innovation environment in the long term.” More

Hainan Airlines this week started handing out Rokid’s augmented reality glasses on a few routes for in-flight entertainment, the tech startup announced Thursday.
Rokid claimed it’s the first time AR glasses — whose tech allows digital images to be imposed over the real world — have been used at scale on flights.
Apple’s Vision Pro virtual reality headset, which isn’t available in China yet, comes with a motion-stabilizing “travel mode” for use on airplanes.

A passenger tries out a pair of Rokid AR glasses on a Hainan Airlines flight in China.

BEIJING — Hainan Airlines this week started letting passengers on some routes use Rokid’s augmented reality glasses for free for in-flight entertainment, the tech startup announced Thursday.
Chinese start-up Rokid claimed it’s the first time AR glasses — which allow computer-generated images to be superimposed on the real world — have been used at scale on flights. Passengers can watch 3D movies, read e-books and play simple games using the glasses, instead of doing so on a built-in monitor.

Apple’s Vision Pro virtual reality headset, which isn’t available in China yet, comes with a motion-stabilizing “travel mode” for use on airplanes. The device allows wearers to see the real world using what the company calls “spatial computing” technology.
Rokid’s deal with Hainan Airlines is more of a marketing effort to boost consumers’ awareness of AR glasses, rather than a large commercial deal, the startup’s founder and CEO Misa Zhu told CNBC in a phone interview Wednesday.
He claimed Rokid was in talks “with lots of airlines” for similar partnerships, including at least one major international operator. Zhu said he wasn’t authorized to disclose details, but expects more announcements in the next few months.

Hainan Airlines is one of the major flight operators in China, and offers international routes as well. The company released a short video to promote its collaboration with Rokid.
Zhu said the airline bought hundreds of Rokid AR glasses for passengers to use for free on more than 20 flights. Each pair retails for just over 3,000 yuan ($420) and weighs 75 grams.

For comparison, Apple’s Vision Pro costs about $3,500 and weighs 600 grams to 650 grams.

Read more about China from CNBC Pro

Hainan Airlines first tested Rokid’s AR glasses on a commercial flight from Shenzhen to Xi’an on Wednesday, and is rolling out the devices on many other flights starting Thursday, Rokid said.
The initial trial period is set for a month, coinciding with the weeklong Lunar New Year holiday in China that officially kicks off on Saturday, during which hundreds of millions of locals travel domestically.
“Airlines are quite excited because they can offer more services, and it’s very competitive,” Zhu said in Mandarin, translated by CNBC.
He said Rokid is in talks to incorporate AR glasses into other means of transit, such as high speed trains. More

A bank publishes lousy earnings or an “update” on its business. Its share price plunges. Its name is splashed on newspaper front pages. The bank’s bosses hold a conference call urging calm. Its share price slides some more. Anyone who has paid attention to America’s banking industry over the past year will recognise these events. They ended in failure for Silicon Valley Bank (svb) in March and First Republic Bank (frb) in April.At first glance, the same script seems to be playing out. On January 31st New York Community Bancorp (NYCb) of Hicksville, New York, reported a quarterly loss. Its stock promptly dropped by 46%. During a hastily organised conference call to investors on February 7th, Alessandro DiNello, the bank’s hastily appointed executive chairman, attempted to soothe fears. Shares sagged, dropping another 10% when markets opened that morning.Yet the surface-level similarities in these stories belie two big differences. The first, and most important, is that nycb does not appear to be on the brink of failure, nor is it easy to see how it will fail in the coming weeks. Indeed, its shares later rallied on February 7th. The second is that its problems indicate a different type of trouble has begun. When interest rates rise their impact on things like bond prices is immediate. Their impact on borrowers’ ability to repay debts takes longer to play out. svb and frB were both imperilled by a combination of flighty deposits and their investments in low-interest-rate securities or loans, the value of which collapsed when rates climbed. nycb is struggling, in large part, because a big loan went bad.Start with nycb’s balance-sheet. The bank, which holds $116bn in assets, earned around $200m in the third quarter of 2023. But in the final quarter it had to set aside $552m to cover property loans, resulting in a $252m loss. Even before this, it was working to beef up capital levels. In 2023 it acquired assets and deposits from Signature Bank, which failed along with SVB last March. This pushed NYCb’s assets past $100bn, subjecting it to stricter regulation. Compared with its new 12-figure peers, NYCb is no fortress. The bank’s common equity tier-1 ratio, a measure of capital based on the riskiness of its assets, fell to an unimpressive 9.1%, down from 9.6% in September. In a bid to retain more equity, the bank slashed its dividend.More than half of the bank’s value has now evaporated, leaving it with a market capitalisation of $3bn, less than a third of the book value of its equity. Analysts have slashed their profit forecasts for the bank. On February 6th Moody’s, a rating agency, downgraded NYCB to junk status, citing the bank’s exposure to commercial property and the recent exit of important audit and risk-management personnel.Grim stuff. But NYCB’s deposits provide reassurance. More than two-thirds of the $83bn deposited at the bank is insured, a much larger share than at SVB and FRB before their collapses, which should mean depositors are less inclined to run. If they do, the bank should be able to weather it. Against an uninsured deposit base of $23bn, nycb holds $17bn in cash, $6bn in securities and collateral that could be used to borrow $14bn from the Federal Home Loan Banks (FHLB) system or the Federal Reserve’s discount window. In addition, it can exchange $10bn of “reciprocal deposits” with other banks, which could in effect reduce the share of nycb‘s deposits that are uninsured.As a result, the bank has access to almost three times as much cash as it needs to pay out all uninsured depositors. And, for now at least, depositors do not appear to be going anywhere. Deposit levels have risen since the end of 2023, according to an unaudited balance-sheet the bank published on February 6th. “We have seen virtually no deposit outflow from our retail branches,” Mr DiNello told investors on February 7th.Despite this, NYCB’s troubles might provoke broader unease. One reason for this is its reliance on the FHLB system. This inconspicuous part of America’s financial plumbing comprises 11 government-sponsored banks, with total assets of $1.3trn. America’s lender of “second-to-last resort” raises money from capital markets, and does so cheaply owing to the assumption that the government would backstop its borrowing. It then lends to FHLB members, which are also its dividend-receiving owners. By the end of March 2023 FHLB advances, a type of loan usually secured against mortgages, had nearly tripled since the year before. SVB alone had increased its borrowing to $15bn by the end of 2022.Because the nycb holds more loans than deposits it has long relied on FHLB advances as a source of funding, especially before its recent purchases brought in more depositors. At the end of 2023, NYCB had borrowed $20bn of FHLB advances. This borrowing amounts to 17% of NYCB’s assets, up from 12% at the end of September. The bank taps the FHLB system at nine times the rate of similar peers.Another reason for broader unease is that this could be the first sign that a crisis in commercial property is now harming the banking system. Although total lending to office buildings is small as a share of loan books across small banks—at around 5% of total assets—the slump in office-building values has been steep. Other losses are already appearing. Aozora, a Japanese lender that tried out American commercial-property lending, reported losses related to its loans on January 31st. On February 7th Deutsche Pfandbriefbank, a German bank, announced it had increased loss provisions for its commercial-property loans. Given the post-pandemic fall in office use, more losses are likely. These are unlikely to imperil the broader banking system—but they might keep individual banks on the front pages. ■ More

China is encouraging banks and local business vendors to accept foreign bank cards, said Zhang Qingsong, deputy governor of the People’s Bank of China.
His written comments, exclusive to CNBC, come as Beijing has stepped up efforts to encourage visits from foreign tourists and business people.
“Now, when using Alipay or WeChat Pay, foreign visitors do not need to provide ID information if their total annual transaction volume is under $500,” he said, adding “We are also looking at the possibility of raising the $500 threshold in the future.”

A coffee shop at Beijing Capital Airport shows customers can use Visa, Mastercard, the digital Chinese yuan and other payment methods.
CNBC | Evelyn Cheng

BEIJING — China is encouraging banks and local businesses to accept foreign bank cards and is considering other steps to make mobile pay for international visitors even easier, said Zhang Qingsong, deputy governor of the People’s Bank of China.
“Banks and vendors (such as hotels, restaurants, department stores and even coffee shops) are encouraged to accept foreign bankcards,” Zhang said.

His written comments, exclusive to CNBC, come as Beijing has stepped up efforts to encourage visits from foreign tourists and business people. In the last few months, authorities have enacted visa-free travel policies for residents of several European and Southeast Asian countries — after stringent border controls during the pandemic.
Mobile pay took off in China in the last several years. But while it’s been convenient for locals to scan a QR code with a smartphone to pay, financial system restrictions have also meant foreigners often found it difficult to make payments. Shopping malls have increasingly preferred not to accept foreign credit cards.
But that’s started to change in recent months.
Last summer, the two dominant mobile pay apps WeChat and AliPay started allowing verified users to connect their international credit cards — such as those from Visa. Tencent owns WeChat, while AliPay is operated by Alibaba affiliate Ant Group.
“We are fully aware that foreign visitors care very much about their privacy,” Zhang said “We take this issue seriously and have put in place measures for information protection.”

“Now, when using Alipay or WeChat Pay, foreign visitors do not need to provide ID information if their total annual transaction volume is under $500,” he said. “It is estimated that over 80% transactions are below this threshold. We are also looking at the possibility of raising the $500 threshold in the future.”

Zhang and other officials attended an event Monday at Beijing Capital Airport to formally open a payments service center for visiting foreigners.
While their public remarks mentioned the digital yuan, they focused on discussing the availability of cash currency exchange, greater acceptance of overseas cards and more mobile pay support.
The number of travelers in and out of mainland China has “continued to improve but both remained below 2019 levels,” Visa executives said on an earnings call in late January, according to a FactSet transcript.
Foreign financial services businesses have also started to see improved access to China, after years of waiting during which international companies criticized Beijing for favoring domestic players until they grew large enough.
Mastercard in November announced its joint venture in China received approval from the PBOC to begin processing domestic payments. The venture waited nearly four years since its application to begin preparations was approved in principle.

Read more about China from CNBC Pro

Zhang said China’s plan for supporting foreigners’ payments in the country would focus on allowing card transactions for large payments and mobile pay for smaller amounts.
Users of 13 foreign mobile wallet apps can also directly use QR payment codes in China, Zhang claimed, without naming the apps.
“At the same time cash is always available and accepted,” he said.
Ant Group in September said users of 10 major mobile payment apps in countries such as Singapore, South Korea and Thailand could use the same apps to scan AliPay QR payment codes in mainland China — a product the company calls Alipay+. More

Nvidia shares hit a fresh all-time high today, and its gains may still be in the early innings, according to VanEck CEO Jan van Eck.
Van Eck, whose firm runs the largest U.S. semi exchange-traded fund, points to a first-mover edge in the race to fabricate artificial intelligence chips that could bolster the performance of stocks including Nvidia.

“It’s just that these companies have huge competitive advantages, almost quasi-monopolies,” he told CNBC’s “ETF Edge” on Monday.
Nvidia is up 216% over the past year and 41% since Jan. 1, as of Wednesday’s close.
“Who competes against Nvidia for GPUs [graphics processing units]?” he questioned. “They’ve got great pricing power. They’ve got AI.”
Nvidia is the VanEck Semiconductor ETF’s top holding. The fund tracks 25 of the largest semiconductor companies weighted by market cap. According to FactSet, Nvidia accounts for almost a quarter of the fund’s assets.
“[Nvidia’s] lead is so big,” van Eck added. “The return on equity is huge.”

He suggests as more competitors enter the AI GPU space, Nvidia’s more advanced capabilities could buffer the company’s current status as the most valuable semiconductor stock. 
“They’re trying to build their moat by now having software services, and now they’re building a cloud solution,” van Eck said. “But who can really compete with them?”
The VanEck Semiconductor ETF’s top holdings as of Wednesday are Nvidia, Taiwan Semiconductor and Broadcom. The ETF is up more than 12% this year.
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