Raphael Stevens

Comerica, Zions and First Horizon might ultimately be acquired by more profitable competitors, according to KBW.
Larger banks with strong returns including Huntington, Fifth Third, M&T and Regions Financial are positioned to grow through taking over smaller lenders.
Two other lenders, Western Alliance and Webster Financial, could also consider selling themselves, KBW analysts said.

An automatic teller machine (ATM) at the Zions Bank headquarters in Salt Lake City, Utah, US, on Monday, July 10, 2023.
Kim Raff | Bloomberg | Getty Images

A trio of regional banks faces increasing pressure on returns and profitability that makes them potential targets for acquisition by a larger rival, according to KBW analysts.
Banks with between $80 billion and $120 billion in assets are in a tough spot, says Christopher McGratty of KBW. That’s because this group has the lowest structural returns among banks with at least $10 billion in assets, putting them in the position of needing to grow larger to help pay for coming regulations — or struggling for years.

Of eight banks in that zone, Comerica, Zions and First Horizon might ultimately be acquired by more profitable competitors, McGratty said in a Nov. 19 research note.
Zions and First Horizon declined comment. Comerica didn’t immediately have a response to this article.
While two others in the cohort, Western Alliance and Webster Financial, have “earned the right to remain independent” with above-peer returns, they could also consider selling themselves, the analyst said.
The remaining lenders, including East West Bank, Popular Bank and New York Community Bank each have higher returns and could end up as acquirers rather than targets. KBW estimated banks’ long-term returns including the impact of coming regulations.

A customer enters Comerica Inc. Bank headquarters in Dallas, Texas.
Cooper Neill | Bloomberg | Getty Images

“Our analysis leads us to these conclusions,” McGratty said in an interview last week. “Not every bank is as profitable as others and there are scale demands you have to keep in mind.”

Banking regulators have proposed a sweeping set of changes after higher interest rates and deposit runs triggered the collapse of three midsized banks this year. The moves broadly take measures that applied to the biggest global banks down to the level of institutions with at least $100 billion in assets, increasing their compliance and funding costs.

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Invesco KBW Regional Bank ETF

While shares of regional banks have dropped 21% this year, per the KBW Regional Banking Index, they have climbed in recent weeks as concerns around inflation have abated. The sector is still weighed down by concerns over the impact of new rules and the risk of a recession on loan losses, particularly in commercial real estate.
Given the new rules, banks will eventually cluster in three groups to optimize their profitability, according to the KBW analysis: above $120 billion in assets, $50 billion to $80 billion in assets and $20 billion to $50 billion in assets. Banks smaller than $10 billion in assets have advantages tied to debit card revenue, meaning that smaller institutions should grow to at least $20 billion in assets to offset their loss.
The problem for banks with $80 billion to $90 billion in assets like Zions and Comerica is that the market assumes they will soon face the burdens of being $100 billion-asset banks, compressing their valuations, McGratty said.
On the other hand, larger banks with strong returns including Huntington, Fifth Third, M&T and Regions Financial are positioned to grow through acquiring smaller lenders, McGratty said.
While others were more bullish, KBW analysts downgraded the U.S. banking industry in late 2022, months before the regional banking crisis. KBW is also known for helping determine the composition of indexes that track the banking industry.
Banks are waiting for clarity on regulations and interest rates before they will pursue deals, but consolidation has been a consistent theme for the industry, McGratty said.
“We’ve seen it throughout banking history; when there’s lines in the sand around certain sizes of assets, banks figure out the rules,” he said. “There’s still too many banks and they can be more successful if they build scale.”

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About 89% of employers allow workers to save in a Roth 401(k) account, according to a recent survey. Just 58% did so in 2013.
Employers and workers have historically gravitated to traditional pretax savings, instead.
The Secure 2.0 retirement law passed last year has changes likely to increase adoption.

Team of millennial colleagues sharing ideas for new business start up, togetherness, innovation, diversity
10’000 Hours | Digitalvision | Getty Images

More workers are getting access to a Roth savings option in their 401(k) plans.
In 2022, 89.1% of employers that sponsor a 401(k) plan allowed workers to set aside money in a Roth account, according to a recent poll by the Plan Sponsor Council of America, a trade group.

That share has increased significantly over the past decade: Just 58.2% of employers made a Roth 401(k) available in 2013, PSCA found. It also rose slightly over the past year, from 87.8% in 2021.
More from Personal Finance:Retirees face significantly higher Medicare Part D premiums in 2024More part-time workers to get access to employer retirement plans next yearThese behavioral traits lead to greater retirement savings
A Roth is a type of after-tax account. Workers pay tax up front on 401(k) contributions, but investment growth and account withdrawals in retirement are tax-free. This differs from traditional pretax savings, whereby workers get a tax break upfront but pay later.
“Offering Roth as an option is a relatively easy-to-administer customization that offers employees more flexibility in their retirement savings approach,” Hattie Greenan, PSCA research director, explained in an email. “Offering this choice has become a best practice over the last 10 years.”

Why workers may miss out on a Roth 401(k)

However, Roth uptake by employees remains relatively low by comparison: About 21% of workers made a Roth contribution in 2022, according to PSCA data. By comparison, 72% saved in a traditional pretax account. (Workers can opt to use either, or both.)

There are a few reasons why usage likely doesn’t correspond with overall availability.

For one, automatically enrolling employees into 401(k) plans has become popular: 64% of plans used so-called auto enrollment in 2021, PSCA found. Companies often choose pretax — not Roth — accounts as the receptacle for automatic contributions. That means workers would have to make a proactive decision to switch their allocation.
High earners may also mistakenly think there are income limits to contribute to a Roth 401(k), as there are with a Roth individual retirement account.

Roth accounts are poised to be more widespread

Employers that match 401(k) savings have historically done so in the pretax savings bucket, regardless of whether the employee contributions are pretax or Roth. But that’s changing: A retirement law passed last year lets employers offer their company match in a Roth account, if a worker elects that option. About 12% of employers with a 401(k) plan are “definitely” adding that feature, and 37% are “still considering” it, according to the PSCA survey.
“Many [employers] are seeing requests from employees for this option, and it is something we will see begin to take hold moving forward,” Greenan said.

The recently passed retirement law, known as Secure 2.0, is also expected to increase Roth uptake in another way. It will require “catch up” 401(k) contributions to be made to Roth accounts, if the worker’s income exceeds $145,000 (indexed to inflation).
Employers must make the change by 2026. Those that don’t already do so must allow Roth contributions to facilitate this change, or disallow catch-up contributions, according to Principal.
Catch-up contributions are available to people age 50 and older. Such workers are permitted to funnel an additional $7,500 into 401(k) plans in 2024, beyond the $23,000 annual limit.

When Roth 401(k), IRA savings makes sense

Roth 401(k) contributions may not be wise for all workers. Generally, they make sense for investors who are likely in a lower tax bracket now than they expect to be when they retire, according to financial advisors.
That’s because they would accumulate a larger nest egg by paying tax now at a lower tax rate.
It’s impossible to know what your tax rates or exact financial situation will be in retirement, which may be decades in the future. “You’re really just making a tax bet,” Ted Jenkin, a certified financial planner and CEO of oXYGen Financial, previously told CNBC. Jenkin is also a member of CNBC’s Financial Advisor Council.
However, there are some guiding principles for Roth.

For example, Roth accounts generally make sense for young people, especially those just entering the workforce, who are likely to have their highest-earning years ahead of them. Those contributions and any investment growth would then compound tax-free for decades. (One important note: Investment growth is only tax-free for withdrawals after age 59½, and provided you have had the Roth account for at least five years.)
Some may shun Roth savings because they assume both their spending and their tax bracket will fall when they retire. But that doesn’t always happen, according to financial advisors.
There are benefits to Roth accounts beyond tax savings, too.
For example, investors with Roth 401(k) savings won’t need to take required minimum distributions from those accounts starting in 2024. This already applies to Roth IRAs. However, the same isn’t true for traditional pretax accounts: Retirees must pull funds from pretax 401(k)s and IRAs starting at age 73, even if they don’t need the money.
Roth savings can also help reduce annual premiums for Medicare Part B, which are based on taxable income. Because Roth withdrawals are considered tax-free income, pulling money strategically from Roth accounts can prevent one’s income from jumping over certain Medicare thresholds.
Some advisors recommend allocating 401(k) savings to both pretax and Roth, regardless of age, as a hedge and diversification strategy.
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Morgan Housel is a partner at The Collaborative Fund and became a best-selling author with the 2020 publication of his book, The Psychology of Money.
Now Housel is back with a second book, “Same As Ever: Timeless Lesson on Wealth, Greed and Happiness.”
It utilizes the same style that Morgan rode to success in his previous book: short chapters, paragraphs, sentences and an emphasis on storytelling to reveal deep insights into very broad topics.

Morgan Housel, author of “The Psychology of Money” and partner at the Collaborative Fund, says no one is crazy when it comes to money. But we all need to update our thinking in key ways in order to build true wealth.
Morgan Housel

(Note: Morgan Housel will be on HalfTime Report today at 12:35 PM ET and on ETF Edge at 1:10 PM.  ETFedge.cnbc.com)
Morgan Housel has become the Mark Twain of financial writers: funny, pithy, folksy, occasionally sarcastic and always seeking to peel away the layers of reality to reveal a deeper truth below.

Housel is a partner at The Collaborative Fund and became a best-selling author with the 2020 publication of his book, The Psychology of Money. It explored the relationship between money and human behavior. The main thesis was to maximize what you can control: managing your own expectations, knowing when was enough, how to stop changing the goalposts.
It was a relatively brief (250 pages) book, with short chapters, laden with Housel’s folksy wisdom on savings, the power of compounding interest, and plenty of stories about the role of luck and risk, and how certain key people (like Bill Gates) got lucky breaks that enabled them to go on to greater things (in Gates’ case, he had attended Lakeside High School in Seattle, one of the few high schools that had a computer at the time).
The book not only caught on, it has sold roughly 4 million copies worldwide.
To give you an idea of how big that is, a typical financial book will sell roughly 5,000 copies. If you can sell 10,000 copies, you’re really doing well.
Now Housel is back with a second book, “Same As Ever: Timeless Lesson on Wealth, Greed and Happiness.”

It utilizes the same style that Morgan rode to success in his previous book: short chapters, paragraphs, sentences and an emphasis on storytelling to reveal deep insights into very broad topics.
Except this time Housel is going for a larger audience than those who wanted financial insights: He is going for timeless wisdom that is aiming to show people how to look at life in general. 
Morgan’s thesis is that the same things that have motivated men and women throughout our existence (fear, love, hate, greed, envy) are still present today, and because of that, much of what happens is perfectly predictable: Same as ever.

The role of envy

Take envy. Housel cites Charlie Munger, who noted that the world isn’t driven by greed, it’s driven by envy.
Morgan illustrates this with a fine digression: Why are people so nostalgic about the past, and was it really better than the present?
Take the 1950s, which baby boomers and their parents seem to think was some kind of golden age.
On one level, it was: It was possible to have a family with one wage earner to have a modest, middle-class life.
But the idea that people were better off in the 1950s is not supported by the facts. 
Mortality rates were much higher. People died far younger.
Today’s families are also far wealthier than prior generations. Housel notes the median family income adjusted for inflation:

1955: $29,000
1965: $42,000
2021: $70,784 

“Median hourly wages adjusted for inflation are nearly 50 percent higher today than in 1955,” Housel noted. “And higher income wasn’t due to working more hours, or entirely due to women joining the workforce in greater numbers.”  It was due to gains in productivity.
More stats about the “golden era” of the 1950s versus today:

The homeownership rate was 12 percentage points lower in 1950 than it is today;
An average home was a third smaller than today’s, despite having more occupants;
Food consumed 29 percent of an average household’s budget in 1950 versus 13 percent today;
Workplace deaths were three times higher than today. 

So why are we so nostalgic about the 1950s? It gets down to envy and the very human desire to compare how you are doing with everyone else:  in the 1950s, “The gap between you and most of the people around you wasn’t that large.” 
During World War II, wages were set by the National War Labor Board, which preferred flatter wages: “part of that philosophy stuck around even after wage controls were lifted,” Housel noted.
During the 1950s, very few people lived in financial circles that were dramatically better than everyone else. Smaller houses felt fine because everyone had one.  Everyone went on camping vacations because, well, that’s what everyone did.
By the 1980s, that had changed. Changes in the tax code, among other changes, created a group of ultra-wealthy individuals: “The glorious lifestyles of the few inflated the aspirations of the many,” Housel concluded.
What did people do? They looked around, saw that some people were doing better, some much better, and they got envious. And then they got mad.
Housel notes that envy has been given a much greater boost than in the past thanks to social media, “in which everyone in the world can see the lifestyles — often inflated, faked, and airbrushed—of other people. You compare yourself to your peers through a curated highlight reel of their lives, where positives are embellished and negatives are hidden from view.”
“The ability to say, I want that, why don’t I have that? Why does he get it but I don’t? is so much greater now than it was just a few generations ago. Today’s economy is good at generating three things: wealth, the ability to show off wealth, and great envy for other people’s wealth.”
Envy triumphs. Same as ever.
But Housel goes a bit deeper, which is what makes this book satisfying: Besides demonstrating that envy is a key element, what else does this nostalgia for the 1950s illustrate?
This nostalgia, Housel says, “is one of the best examples of what happens when expectations grow faster than circumstances.”

Managing expectations

“When asked, ‘You seem extremely happy and content. What’s your secret to living a happy life?’ Charlie Munger replied: The first rule of a happy life is low expectations. If you have unrealistic expectations you’re going to be miserable your whole life. You want to have reasonable expectations and take life’s results, good and bad, as they happen with a certain amount of stoicism.” 
Housel’s conclusion: “Wealth and happiness is a two-part equation: what you have and what you expect/need. When you realize that each part is equally important, you see that the overwhelming attention we pay to getting more and the negligible attention we put on managing expectations makes little sense, especially because the expectations side can be so much more in your control. ”
I put this slightly differently: Everyone has circumstances that they are living in:  how much money they make, where they live, whom they are living with, what they own.  These circumstances have a definitely external reality.  Your mortgage is very real, as is your house or apartment, as is your spouse or partner.
Beyond your current circumstances, there are needs, and there are wants.  Needs are what people require to get by: shelter, food. Wants are what people aspire to:  a bigger house, a bigger car, a bigger everything. Those wants are being dramatically inflated by the wealth gap that has opened up and is amplified by social media. 
Here’s the mental trick: While your circumstances and your needs have a definite external reality, the “wants” only exist in your head; they have no external reality.  You don’t have to be envious of your neighbor who has the Rolex or the big house.  To the extent that is causing your envy and your anxiety, it is completely in your own control to change those thoughts.  By changing your relationship with your wants, which only exist in your head, you can change the way you view your circumstances.
Housel comes to the same conclusion:  “the expectation side of that equation is not only important, but it’s often more in your control than managing your circumstances.”

On risk taking

Managing risk is a topic Housel addressed in The Psychology of Money, and he returns to it again.   

“It’s impossible to plan for what you can’t imagine,” he says, urging his readers to think of risk the way the State of California thinks of earthquakes: “It knows a major earthquake will happen. But it has no idea when, where or of what magnitude.”  But the state has emergency crews at the ready, and buildings designed to withstand earthquakes that may not occur for years. The lesson: he quotes Nassim Taleb: ‘Invest in preparedness, not in prediction.'” 

What does that mean in practice?  It’s about managing your own expectations, and risk tolerance. “In personal finance, the right amount of savings is when it feels like it’s a little too much.  It should feel excessive; it should make you wince a little.”

On the right way to view geniuses like Elon Musk, Steve Jobs and even Walt Disney

“What kind of person is likely to go overboard, bite off more than they can chew, and discount risks that are blindingly obvious to others? Someone who is determined, optimistic, doesn’t take no for an answer, and is relentlessly confident in their own abilities…the same personality traits that push people to the top also increase the odds of pushing them over the edge.”

On why so many events that are supposed to happen once in a hundred years seem to happen quite often

“If next year there’s a 1 percent chance of a new disastrous pandemic, a 1 percent chance of a crippling depression, a 1 percent chance of a catastrophic flood, a 1 percent chance of political collapse, and on and on, then the odds that something bad will happen next year—or any year—are . . . not bad.”

On why companies are much more than just the sum of their financial figures 

“The valuation of every company is simply a number from today multiplied by a story about tomorrow.”

On the impossibility of predicting the future and the need to be more comfortable with uncertainty

 “The ones who thrive long term are those who understand the real world is a never-ending chain of absurdity, confusion, messy relationships, and imperfect people.”

On the value of patience

“Most great things in life—from love to careers to investing—gain their value from two things: patience and scarcity. Patience to let something grow, and scarcity to admire what it grows into.”

“The trick in any field—from finance to careers to relationships—is being able to survive the short-run problems so you can stick around long enough to enjoy the long-term growth…An important lesson from history is that the long run is usually pretty good and the short run is usually pretty bad. It takes effort to reconcile those two and learn how to manage them with what seem like conflicting skills. Those who can’t usually end up either bitter pessimists or bankrupt optimists.”

On why compounding interest is the key to understanding stock market investing

“If you understand the math behind compounding you realize the most important question is not ‘How can I earn the highest returns?’ It’s ‘What are the best returns I can sustain for the longest period of time?’ Little changes compounded for a long time create extraordinary changes.”

On what the best financial plan looks like

“The best financial plan is to save like a pessimist and invest like an optimist. That idea—the belief that things will get better mixed with the reality that the path between now and then will be a continuous chain of setback, disappointment, surprise, and shock—shows up all over history, in all areas of life.”

On trying to understand people who don’t agree with you

The question “Why don’t you agree with me?” can have infinite answers. Sometimes one side is selfish, or stupid, or blind, or uninformed. But usually a better question is, “What have you experienced that I haven’t that makes you believe what you do? And would I think about the world like you do if I experienced what you have?”

Same as ever?

Housel ends with a series of questions the reader should be asking themselves, including “What strong belief do I hold that’s most likely to change? What’s always been true? What’s the same as ever?”
This is an ambitious book that sits at the intersection between investing, self-help, leadership, and motivation & personal success.  The primary message is simple but easy to lose sight of:  technology, politics and other trends seem to be accelerating, but human behavior has not changed. 
And as long as those age-old emotions that motive us don’t change, the new fancy gadgets we all have are just different tools to help us engage the same old emotions. More

Coinbase CEO Brian Armstrong told CNBC’s Joumanna Bercetche that the U.S. government’s enforcement action against Binance will allow the crypto industry to “turn the page.”
Binance was hit by the U.S. government with a $4 billion settlement last week, which saw its founder and CEO Changpeng Zhao step down and plead guilty to charges of money-laundering violations.
Armstrong pushed back on the suggestion that crypto is mainly used for nefarious purposes such as fraud, money laundering, and terrorist financing, however.

Brian Armstrong, chief executive officer of Coinbase Global Inc., speaks during the Messari Mainnet summit in New York, on Thursday, Sept. 21, 2023.
Michael Nagle | Bloomberg | Getty Images

The crypto industry can finally close the chapter on a litany of scandals and problems after Binance was hit with a historic settlement by the U.S. Department of Justice, Coinbase CEO Brian Armstrong said Monday.
“The enforcement action against Binance, that’s allowing us to kind of turn the page on that and hopefully close that chapter of history,” Armstrong said in an interview with CNBC’s Joumanna Bercetche.

“There are many crypto companies that are helping build the crypto economy and change our financial system globally. But many of them are still small startups.”
“I think that regulatory clarity is going to help bring in more investment, especially from institutions,” he added.
Binance was hit by the U.S. Department of Justice with a $4 billion settlement last week, which saw its founder and CEO Changpeng Zhao step down and plead guilty to charges of money laundering violations.
The government accused Binance of violating the U.S. Bank Secrecy Act and of breaching sanctions in Iran.
Armstrong pushed back on the suggestion that crypto is mainly used for nefarious purposes such as fraud, money laundering, and terrorist financing, a common refrain from financial firms that have avoided jumping into the space due to compliance concerns.

“It’s true that there have been some small amount of illicit activity in crypto but it’s actually less than 1% from what we’ve seen. If you look at illicit uses of cash it’s oftentimes more than that,” Armstrong told CNBC.

Some players, he conceded, have been “bad actors,” referring to the case of Binance, as well as the collapse of crypto exchange FTX and the sentencing of its founder Sam Bankman-Fried to jail over allegations of fraud.
Armstrong is in the U.K. Monday for the Global Investment Summit, which gathers a host of business leaders to encourage foreign investment in the U.K.
Coinbase was the only crypto company invited to the summit, which Armstrong termed an “endorsement” for the company, but not necessarily the broader industry.
Armstrong said he is “impressed” with U.K. Prime Minister Rishi Sunak’s leadership when it comes to digital currencies and that Coinbase was investing more in the U.K. as a result.
The U.K. is seeking to bring digital assets such as cryptocurrencies and stablecoins into the regulatory fold.
Coinbase is currently engaged in a tense legal battle with the U.S. Securities and Exchange Commission over allegations that the company is violating securities laws with its platform.
On that point, Armstrong said he feels very good about Coinbase’s chances fighting the lawsuit. He also disputed the idea that the SEC’s actions have forced Coinbase to move offshore, adding that the company is still investing actively in its home market. More

Cautious investors piling into cash may want to consider other options.
According to SPDR Exchange Traded Funds’ Matthew Bartolini, active management can also provide them with stability and income while creating more opportunities for upside.

“Active fixed income has been really a consistent engine of support within the active [ETF] construct — not only from flows but also returns,” the firm’s managing director and research head told CNBC’s “ETF Edge” this week.
Bartolini contends that not only do they give investors more flexibility, the strategies also provide consistent performance and improved tax efficiencies.
He also believes the forward-looking returns are looking better than they have in the past.
“But with higher returns comes higher volatility,” added Bartolini, who sees big benefits from active management. “The thing we keep going back to with investors [is] about creating portfolios that can generate income returns while maximizing the amount of risk they are taking to get those because yields are high.”
Bartolini warns cash carries its own set of risks.

“On the cash portion of the market, that income is not going to be as stable as it once was because of reinvestment risk,” he said.

‘Very hard to get people to think about bonds’

Dan Egan, vice president of behavioral finance and investing at robo-advisor Betterment, said it’s “very, very difficult” to pull investors out of cash.
“It’s very hard to get people to think about bonds when you can get that risk-free,” he said. “Don’t forget that FDIC insurance plays a very big role in people’s sense of safety.”
Betterment’s website as of Friday shows its variable high-yield cash account pays 4.75% APY. It’s also giving new customers a promotional rate of 5.50% for three months.
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