Finance

The three biggest American retail banks collected 25% less overdraft revenue last year as the companies created new ways for customers to avoid the penalties.
JPMorgan Chase, Wells Fargo and Bank of America reported a combined $2.2 billion in overdraft fees in 2023, roughly $700 million less than in 2022, according to regulatory filings.
The industry is girding itself for a battle over overdraft fees after the Consumer Financial Protection Bureau proposed to limit charges to as little as $3 per transaction.

Pedestrians pass a JPMorgan Chase bank branch in New York.
Michael Nagle | Bloomberg | Getty Images

The three biggest American retail banks collected 25% less overdraft revenue last year as the companies, under pressure from regulators to cap the fees, created new ways for customers to avoid the penalties.
JPMorgan Chase, Wells Fargo and Bank of America reported a combined $2.2 billion in overdraft fees in 2023, roughly $700 million less than in the previous year, according to regulatory filings.

Overdraft fees are triggered when a customer attempts to spend more than the balance in their checking accounts. At around $35 per transaction at many banks, the fees have been a lucrative line item for the industry, generating $280 billion in revenue since 2000, according to the Consumer Financial Protection Bureau.
The industry is girding itself for a battle over overdraft fees after the CFPB in January unveiled a proposal to limit charges to as little as $3 per transaction. Banks say overdraft services are a lifeline that helps users avoid worse options such as payday loans, while critics including President Joe Biden say the fees exploit struggling Americans.

The practice has brought unwelcome attention to big banks. During a 2021 hearing, Sen. Elizabeth Warren needled JPMorgan CEO Jamie Dimon on the fees. Dimon at the time refused her call to refund $1.5 billion to customers.
But even before recent efforts by regulators, banks’ haul from overdraft has been on the decline. Pandemic stimulus money helped Americans trigger fewer of the fees starting in 2020, and then firms including Capital One, Citigroup and Ally voluntarily ended the practice.
Those who kept the fees, including JPMorgan, limited the types of transactions that trigger penalties, got rid of fees for bounced checks and introduced one-day grace periods and $50 cushions to reduce their frequency.

Bank of America cut the fees to $10 from $35 in 2022.
“Whether folks eliminated some fees or dramatically reduced the cost of others, there’s been very significant shifts here,” said Jennifer Tescher, CEO of nonprofit group Financial Health Network. “Banks aren’t just getting rid of overdraft, they’re trying to find more customer-friendly ways of meeting their liquidity needs while making sure they aren’t overextended.”

Steady decline

Industrywide overdraft revenue totaled $7.7 billion in 2022, 35% below the 2019 level, according to a May CFPB report that included all U.S. banks with at least $1 billion in assets.
Recent regulatory filings show that the steady decline continued last year, though JPMorgan and Wells Fargo remain by far the largest players in overdraft.
JPMorgan had $1.1 billion in overdraft revenue last year, about 12% lower than in 2022. Wells Fargo saw a 27% decline to $937 million. Bank of America posted a 64% decline to $140 million.
More than 70% of overdraft transactions no longer incur fees, and customers can choose accounts that don’t allow the penalties, a JPMorgan spokesman told CNBC.
“Our customers continue to tell us they want and need access to overdraft protection, which helps them when they are temporarily short on money,” the JPMorgan spokesman said.
Wells Fargo declined to comment. A Bank of America spokesman noted that after the company voluntarily changed its overdraft policies in 2022, revenue from the practice fell more than 90%, and they now collect less than smaller banks.
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In politics, repetition is a crucial part of any campaign. But for Indonesian voters, who go to the polls to elect a new president on February 14th, one pledge is starting to sound a little too familiar. Candidates hoping to lead the world’s third-largest democracy have now, for the better part of two decades, been vowing to raise the country’s growth rate to 7%.Joko Widodo, the outgoing president known as Jokowi, was elected on such a promise in 2014. So was his predecessor, Susilo Bambang Yudhoyono, who came to office in 2004. This time, two of the three contenders are making similar pledges. Ganjar Pranowo, former governor of Central Java, has a growth target of 7%. Prabowo Subianto, Indonesia’s minister of defence and the front-runner, has suggested that double-digit growth is possible.image: The EconomistSo far, two decades of promises have fallen short. Indonesia’s economy grew by around 5% last year, close to the average rate over the past two decades. The country’s last 7% expansion was in 1996, the year before the Asian Financial Crisis (see chart 1). Since Indonesia’s transition to democracy in 1998, promises of higher growth have been far more common than the policies that might encourage such a shift.The outgoing president has achievements to flaunt. A decade ago the country was one of the “Fragile Five”, a group of emerging-market economies vulnerable to high interest rates abroad and a strong dollar. Today its current account is roughly balanced and its external debts modest. After legislative and legal speed bumps, Jokowi’s omnibus bill, which cuts restrictions on foreign investment and simplifies licensing, finally became law last year. Indonesia’s infrastructure has improved over the past decade, helped by the construction of thousands of kilometres of roads.Yet the government’s proudest achievement is its nickel-focused industrial policy. The metal is used in electric-vehicle batteries, and Indonesia has the world’s largest deposits. Export of most raw ore has been banned since 2014, the aim being to force companies to process and manufacture in Indonesia. BYD, Ford and Hyundai are among the carmakers now investing in the country. Exports of ferronickel, a processed form of the metal, rose from $83m in 2014 to $5.8bn in 2022.Although openness to investment from both China and the West and an enormous stockpile of a vital battery metal is proving to be a powerful combination, there are risks to the approach. One is technological. Cullen Hendrix of the Peterson Institute for International Economics, a think-tank, notes that lithium-iron phosphate batteries, which contain no nickel, are becoming more popular. Sodium-ion batteries, which need neither nickel nor lithium, could surpass both types. Last month JAC Motors, a Chinese carmaker backed by Volkswagen, a German one, delivered the first commercial vehicles powered by sodium-ion batteries to customers.There are also signs that Indonesian policymakers are learning the wrong lessons from their nickel success. Despite obvious opportunities in the sunny archipelago, solar-power investment is suppressed by rules that panels must contain lots of domestically produced materials. Last year TikTok, a short-form video platform, was prodded into a shotgun tie-up with Tokopedia, an Indonesian e-commerce firm. It paid $840m for a 75% stake in the firm after new regulations halted its own e-commerce operations in the country.Moreover, Indonesian businesses remain stifled by local regulations, despite reforms introduced by the omnibus law. Rules requiring imports to be screened at particular entry points are equivalent to a 22% tariff, according to research by the World Bank—more than twice the South-East Asian average. Indeed, non-tariff barriers impose costs equivalent to 60-130% of the cost of computers, electronics and transport equipment. The election campaign has featured few concrete economic-policy proposals, but none of the candidates has expressed any zeal for peeling back the country’s many trade restrictions.Indonesia’s industrial policy undermines officials when they seek to attract investors who do not need the country’s resources. Malaysia, Thailand and Vietnam, which place fewer restrictions on outside investors, are more obvious destinations for firms looking for alternatives to Chinese manufacturing. As a consequence, Indonesia’s exports of electronics are not just lower than any other large economy in South-East Asia; they have grown more slowly, too (see chart 2). The share of Indonesian exports heading to America is lower than in any of its local competitors.Although Indonesia is a relatively young country, by the time of the next presidential election in 2029 this tailwind will have disappeared. The country’s dependency ratio—the number of children aged under 15 and adults over 65 per 100 working-age adults—will begin to rise steadily from that year. Without more effective attempts to boost the economy, talk of 7% growth will remain illusory. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

Have you noticed that America’s bankers are seething over proposed new capital rules? What gave it away? Perhaps it was the advertisements that warn of dire consequences for the economy, which blare out during prime-time spots in Sunday-night football games. Maybe it was the not-at-all-veiled threats from executives. Suing your regulator is “never a preferred option”, Jeremy Barnum of JPMorgan Chase told investors on a recent earnings call, but “it can’t be taken off the table.” Or perhaps it was the deluge of letters that recently arrived in the postboxes of the Federal Reserve and other banking agencies.America’s process for creating new bank rules has many stages. Regulators publish their agenda in the Federal Register, a scintillating journal published every weekday, which chronicles plans for rules, proposed rules, finalised rules and so on. They talk to industry members and carry out impact analyses. Back-and-forth between industry and overseer, at this stage, is done over coffee, often in private rooms in federal buildings. Then a “Notice of Proposed Rulemaking” is published, the “comment period” begins, interested parties submit letters to regulators—and the battle emerges into the open.The process is normally pretty technical. It has been anything but for proposals on how to implement Basel III, known as “Basel III endgame”, that were first published in July. Bosses of large banks seem to have been personally offended by them. Perhaps their thought process goes as follows: are we really so incompetent at managing risk that system-wide capital levels must be raised by 16%? After grievances piled up, the comment period was extended from November 30th to January 16th.Now all complaints have been filed, and letters published, the depth of opposition is clear. Latham & Watkins, a law firm, finds that whereas 347 submissions disagreed in whole or in part with the rules, just nine supported them as proposed. A wide range of groups found fault. It is hard to imagine another cause that would unite BlackRock and Goldman Sachs with the National Association for the Advancement of Coloured People, environmentalists, estate agents and most sitting senators.The rules are long and complicated, and so are the complaints. But they boil down to three themes. First, a big increase in capital is unnecessary. Second, the rules will hamper banks’ ability to intermediate capital markets. Third, they will crush lending to important parts of the economy, such as housing and environmental projects (especially ones favoured by President Joe Biden’s Inflation Reduction Act).Last year bank bosses seemed resigned to their fate. Marianne Lake of JPMorgan described the proposals as “a little bit like being a hostage”. The requirement was so shocking at first that “even if it changes a bit, you sort of are grateful for that, but it’s still probably going to be high.” They now seem more confident that the rules will be amended. “I don’t think anyone [thinks] that this is going to move forward as proposed,” said Denis Coleman of Goldman Sachs on January 16th.Fed governors usually try to come to a consensus on regulatory matters. This time, however, they are split, with Michelle Bowman and Christopher Waller, two Donald Trump appointees, opposing the rules when they were first proposed. On January 16th Mr Waller told the Brookings Institute, a think-tank, that it “might even be best to just pull it back” and start again. On January 17th Ms Bowman told the Chamber of Commerce, a lobbying group, that agencies should make “substantive changes” to the rules. Even Jerome Powell, the Fed’s chairman, has expressed reservations.Capital punishmentThere are three ways things can proceed. Regulators could press on undeterred, and finalise the rules. This would almost certainly result in the lawsuit to which Mr Barnum alluded. Any legal action would centre on procedural issues—bank lobbyists argue that agencies have violated legislation requiring data and analysis behind proposals to be made available to the public. (Banks allege it was not; the agencies have not yet responded.)The two other options are equally unpalatable: agencies could make more substantial changes to the rules or they could pull them back and start again. Either approach would require a repeat of the proposal-and-comment cycle.A difficult situation is made still more difficult by the fact that the agencies are starting to run out of time. The Congressional Review Act allows an incoming Congress to throw out any rule that is finalised less than 60 legislative days before it assumes power. Given the forthcoming presidential election and time off for summer recess, that deadline is closer than it seems. It will fall in July. If rules are not finalised soon and Mr Trump, who watered down bank capital requirements when last in office, wins the election in November, it seems likely that extra-tough standards would be tossed out entirely.Thus bankers have every incentive to delay the time at which the rules might be finalised. Will that sway their politics? Bank bosses are not typically big political donors. According to data compiled by Open Secrets, a non-profit outfit, neither Jamie Dimon of JPMorgan nor David Solomon of Goldman Sachs has given money during this presidential campaign. Among more junior staff, there does not seem to have been a rightward swing. If anything, donations from people employed by JPMorgan, Citigroup and Bank of America favour Democrats by a wider margin than in 2020. Perhaps some things are more important than capital requirements—which is not what you would gather from listening to bank advertisements. ■For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. More

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