Finance

A sign is posted in front of Oracle headquarters on December 09, 2021 in Redwood Shores, California.
Justin Sullivan | Getty Images

Check out the companies making headlines before the bell:
Oracle — Shares jumped more than 5% after Oracle announced a beat on top and bottom lines for the fiscal fourth quarter. Meanwhile, CEO Safra Catz said she expects adjusted earnings in the fiscal first-quarter of $1.12 to $1.16 per share. Analysts polled by Refinitiv had expected $1.14 in adjusted earnings.

related investing news

Urban Outfitters — Shares rose 3.4% following an upgrade to overweight from equal weight by Morgan Stanley. The firm said the retailer has a de-risked 2023 forecast and low valuation.
Apple — Apple declined 0.7% in the premarket after UBS downgraded the stock to neutral from buy late Monday. The Wall Street firm said it sees continued pressure for iPhone demand even with support from emerging markets.
First Horizon — Shares fell 1.2% after JPMorgan moved to a neutral rating on First Horizon. It previously had an overweight rating. The firm said the near-term outlook looks uncertain amid rising expenses.
Zions Bancorp — Shares dipped 1.6% after the regional bank said its net interest income outlook was “decreasing.” The bank’s previous guidance described the outlook as “moderately decreasing,” according to StreetAccount. The update came in a presentation published Monday afternoon.
Bunge — The agriculture company said it would combine with Rotterdam, Netherlands-based Viterra in a stock and cash deal. The agreement values Bunge at more than $8 billion. As part of the deal, $9.8 billion of Viterra’s debt. Bunge shares fell 1.9% in premarket trading.

Home Depot — The retailer added 0.7% in premarket trading. The company reiterated earnings decline projections for fiscal year 2024 of 7% to 13% year over year. Home Depot is also slated to hold an investor day at 9 a.m.
Ulta Beauty — The beauty stock rose 0.8% after Loop Capital upgraded Ulta Beauty to buy from hold. The firm said Ulta’s expansion into the luxury category “represents a multi-year comparable sales growth driver,” and its partnership with Target will “drive incremental income.”
— CNBC’s Brian Evans, Alex Harring, Hakyung Kim and Jesse Pound contributed reporting More

Many terms and phrases were used by top banking and fintech executives to describe generative AI at Money 20/20 in Amsterdam this week, from “mind boggling” to an “explosion of innovation.”
Generative AI, which generates content in response to user prompts, can be used to automate complex processes in banking.
However, the technology is still in its early days, and many banks cautioned that it may be too risky to implement it in areas that touch consumers.

The GPT-4 logo is seen in this photo illustration on 13 March, 2023 in Warsaw, Poland. 
Jaap Arriens | Nurphoto | Getty Images

AMSTERDAM, Netherlands — Major banks and fintech companies claim to be piling into generative artificial intelligence as the hype surrounding the buzzy technology shows no signs of fizzling out — but there are lingering fears about potential pitfalls and risks.
At the Money 20/20 fintech conference in Amsterdam, Netherlands, executives at large lenders and online finance firms sang the praises of generative AI, calling it an “explosion of innovation,” and saying it will “unleash innovation in areas that we can’t even think about.”

related investing news

11 hours ago

Chalapathy Neti, head of AI at global bank messaging network Swift, described the progress made with ChatGPT and GPT-4 as “mind-boggling.” He added, “This is truly a transformative moment.”
But in the short term, banks are scrambling to figure out the use cases.
The Netherlands’ ABN Amro is one banking giant that’s piloting the use of generative AI in its processes.
Annerie Vreugdenhil, chief commercial officer of ABN Amro’s personal and business banking division, revealed on a panel that it is using the technology to automatically summarize conversations between bank staff and customers. It’s also using it to help its employees gather data on customers to assist with answering queries and avoid repetitive questions.
The bank is now in the process of scaling these pilots to 200 employees and is exploring a number of new pilots to start this summer.

In a closed-door session on the application of AI in financial services, meanwhile, two banking executives explained how they’re using the technology to improve their internal code and analyze how their clients are behaving.
“We are experimenting at this stage and we don’t have necessarily anything client facing but we are using the [tech the] same as other companies, for example, code refactoring, comms calls, the other way around,” said Mariana Gomez de la Villa, an executive at ING Bank specializing in strategy and innovation.
Indeed, the banks appeared unanimous in their hesitation to roll out ChatGPT-like tools to customer-facing scenarios.

Jon Ander Beracoechea Alava, advanced analytics discipline head at Spanish bank BBVA, said that the lender had taken a “conservative approach” to AI, adding that, at this stage, generative AI is “still early” and “immature.”
A crucial issue is that advanced AI systems require the processing of huge volumes of data — a sensitive commodity wrapped up in all kinds of rules and regulations. As such, Alava said that at this stage it was too “risky” to involve sensitive information from customers.

Generative A.I., explained

Generative AI is a specific form of AI that is able to produce content from scratch. The systems take inputs from the user and feed them into powerful algorithms fueled by large datasets to generate new text, images and video in a way that’s more humanlike than most AI tools already on the market.
The technology was thrust into the spotlight following the success of OpenAI’s GPT language processing technology. ChatGPT, which uses massive language models to create human-sounding responses to questions, has ignited an arms race among some companies over what is seen as the next “paradigm shift” in tech.
In March, Goldman Sachs’ chief information officer, Marco Argenti, told CNBC the bank is experimenting with generative AI tools internally to help its developers automatically generate and test code.
More recently, in May, Goldman spun off the first startup from the bank’s internal incubator — an AI-powered social media company for corporate use called Louisa. The push into AI is part of a larger effort by CEO David Solomon to expedite the bank’s digital makeover.
Morgan Stanley, meanwhile, is using it to inform its financial advisors on queries they may have. The bank has been testing an OpenAI-powered chatbot with 300 advisors so far, with a view to ultimately aid its roughly 16,000 advisors in making use of Morgan Stanley’s repository of research and data, according to Jeff McMillan, head of analytics and data at the firm’s wealth management division.

A.I. ‘co-pilot’

These are just some examples of how financial firms are using AI, but more as a digital helper than as a core part of their services.
Gudmundur Kristjansson, CEO and co-founder of Icelandic regulatory technology firm Lucinity, showed CNBC how artificial intelligence can be used to assist with a key area in finance: fighting crime.
An AI tool the company created, called Luci, aims to help compliance professionals with their investigations. In a live demonstration, Kristjansson showed himself looking into a money laundering case. The AI tool analyzed the case and described what it saw and then completed an independent review.
In this use case, the AI acts as more of a resource — or “copilot” — to help an employee find data and flesh out a case rather than replace the role of a person looking into reports of suspicious activity.
“Where you find money laundering is through … interconnected networks of people who are basically employed to do it. That’s why it’s so hard to find it. Banks spent this year $274 billion on prevention,” Kristjansson told CNBC in an interview.
He said where Luci helps is by vastly reducing the amount of time spent trying to work out whether something is fraud or money laundering.

The whole appeal of AI to the big banks and fintechs, Money 20/20 attendees said, is the potential reduction in the time and money it takes to complete tasks that can take human employees days.
Niklas Guske, chief operating officer at Taktile, a startup that helps fintechs automate decision-making, acknowledged that the use of AI is challenging in the financial sector, given the lack of publicly available data.
But he stressed that it could be a “crucial” tool to reduce the companies’ operational expenses and improve efficiency.
“In many fintech applications, this is done through an increase in automation and reducing manual processes, especially in onboarding and underwriting,” he told CNBC.
“This automation is truly enabled through access to more data sources, which empower lenders to gain new insights and identify the right customers without having to parse through dozens of PDFs for the right piece of information.”
— CNBC’s Hugh Son contributed reporting. More

The Carnival Miracle cruise ship operated by Carnival Cruise Line is docked at Pier 27 in San Francisco, Sept. 30, 2022.
Justin Sullivan | Getty Images

Check out the companies making the biggest moves midday.
Carnival — The stock rallied 12.45% after it was upgraded by JPMorgan Chase to overweight from neutral and by Bank of America to buy from neutral. The former cited continued demand momentum in the cruise industry. Other cruise stocks also got a boost, with Norwegian Cruise Line gaining 7.22% and Royal Caribbean adding 2.57%.

Chinook Therapeutics — Shares soared 58.32% after Novartis announced it has agreed to acquire the biotech firm for up to $3.5 billion. Chinook Therapeutics’ shareholders will get $40 per share, about 67% higher than where the stock closed Friday. They may also get an additional $4 per share in cash through contingent value rights.
Nasdaq — Shares fell 11.81% after the exchange operator announced it was buying Adenza, the software firm owned by Thoma Bravo. The deal is valued at about $10.5 billion.
SentinelOne — The cybersecurity stock popped 8.18% after Morgan Stanley upgraded shares to overweight and called SentinelOne a “long-term share gainer” despite its recent execution troubles.
Oracle — Shares of the IT cloud software company gained 5.99% ahead of its quarterly earnings announcement scheduled for after the bell. Wolfe Research upgraded shares to outperform from peer perform in a Sunday note, citing the company’s early-mover advantage in the artificial intelligence boom.
Catalent — The stock jumped 10.23% after reporting delayed fiscal third-quarter results before the bell. The pharmaceutical company posted a loss of 9 cents per diluted share, excluding items, and revenue of $1.04 billion. It’s unclear if these figures are compatible with FactSet’s consensus estimates on revenue and EPS. CEO Alessandro Maselli said the fundamentals of the business remain strong.

Nio — The Chinese electric car maker’s stock added 8.67% after Nio said it was cutting prices for its vehicles and ending free battery swaps for new buyers. The company is also delaying capital expenditure projects, it said last week. Nomura assumed coverage of Nio with a neutral rating Sunday, after previously rating it a buy.
Illumina — Shares of the biotech company rose 3.79%. Illumina announced a change in leadership Sunday. CEO Francis deSouza resigned, effectively immediately, but will stay on in an advisory capacity through July. The company said it is exploring both internal and external replacement candidates. The change comes after a heated proxy fight with activist investor Carl Icahn.
KeyCorp — The regional bank stock slipped 4.31% after the company said at an investor conference that net interest income is going to come in softer than expected based on funding mix and deposit cost pressures.
— CNBC’s Hakyung Kim, Alex Harring, Samantha Subin and Jesse Pound contributed reporting. More

In Australia house prices have risen for the past three months. In America a widely watched index of housing values has risen by 1.6% from its low in January, and housebuilders’ share prices have done twice as well as the overall stockmarket. In the euro area the property market looks steady. “[M]ost of the drag from housing on gdp growth from now on should be marginal,” wrote analysts at JPMorgan Chase, a bank, in a recent report about America. “[W]e believe the peak negative drag from the recent housing-market slump to private consumption is likely behind us,” wrote wonks at Goldman Sachs, another bank, about South Korea. Economists had expected a house-price bloodbath. In March 2022, the month that the Federal Reserve started raising rates to combat inflation, the average value of a house in a rich country was 41% higher than five years earlier. Prices had bounced back from the financial crisis of 2007-09, then surged during the covid-19 pandemic (see chart). Since then central-bank policy rates have risen by more than three percentage points on average globally, making mortgages costlier and slowing the economy. Global house prices have certainly come off the boil. They are 3% below their recent peak, or 8-10% lower once adjusted for inflation. This is in line with the average correction since the late 19th century. Yet this episode is different because it followed a boom during the pandemic when prices rose at their fastest rate of all time. The upshot is that real house prices remain miles above the level of 2019. Many millennials and Gen-Zers, who had dreamt that a crash would allow them to buy their first house, are no doubt disappointed. During a typical global housing slump some countries have a torrid time. After the financial crisis Irish house prices fell by half. American house prices dropped by 20%. This time the underperformers are doing better. In San Francisco house prices are a tenth off their peak, as tech types have decamped to Florida and Texas. Yet they have stopped falling—and the average house will still set you back over $1.1m.In Australia, where in 2020-21 house prices went bananas, they have fallen by 7%. But, as a recent auction hinted, the market is recovering. A two-bedroom bungalow in Double Bay, a greying suburb on Sydney’s harbour, recently opened at A$4m ($2.7m). It represents, the auctioneer declares, an “outstanding opportunity to come along and add a lot of value”. Translation: it needs some work. That does not deter the well-heeled crowd which jostles outside its gate—the bidding is frantic. The gavel finally drops at over A$6m.By contrast with previous housing slumps, there is no hint that lower house prices have created financial contagion. Banks do not seem worried about a surge in bad mortgages. They have fewer risky loans and have not binged on dodgy subprime securities. In New Zealand mortgage arrears have risen, but remain below their pre-pandemic norm. In America delinquencies on single-family mortgages recently hit a post-financial-crisis low. In Canada the share of mortgages in arrears is close to an all-time low. Nor do property woes appear to be throttling the wider economy. Weaker housing investment is dragging on economic growth, but the effect is small. In previous housing busts the number of builders declined sharply long before the rest of the labour market weakened. Yet today there is still red-hot demand for them. In South Korea construction employment has dropped slightly from its pandemic highs but now seems to be growing again. In America it is rising by 2.5% a year, in line with the long-run average. In New Zealand construction vacancies are well above historical levels.Three factors explain the rich world’s surprising housing resilience: migration, household finances, and preferences. Take migration first, which is breaking records across the rich world. In Australia net migration is running at twice pre-pandemic levels, while in Canada it is double the previous high. Demand from the new arrivals is supporting the market. Research suggests that every 100,000 net migrants to Australia raise house prices by 1%. In London, the first port of call for many new arrivals to Britain, rents for new lets rose by 16% last year.Strong household finances, the second factor, also play a role. Richer folk drove the housing boom, with post-crisis mortgage regulations shutting out less creditworthy buyers. In America in 2007 the median mortgagor had a credit score of around 700 (halfway decent), but in 2021 it was close to 800 (pretty good). Wealthier households can more easily absorb higher mortgage payments. But many borrowers will also have locked in past low interest rates. From 2011 to 2021 the share of mortgages across the eu on variable rates fell from close to 40% to less than 15%. Even as rates have risen, the average ratio of debt-service payments to income across the rich world remains lower than its pre-pandemic norm. As a result fewer households have had to downsize, or sell up, than during previous slumps. The pandemic itself has played a role. In 2020-21 many households drastically cut back on consumption, leading to the accumulation of large “excess savings” worth many trillions of dollars. These savings have also cushioned families from higher rates. Analysis by Goldman Sachs suggests a positive correlation across countries between the stock of excess savings and resilience in house prices. Canadians accumulated vast savings during the pandemic; against expectations home prices have recently stabilised. Swedes amassed smaller war chests, and their housing market is a lot weaker.The third factor relates to people’s preferences. Research published by the Bank of England suggests that shifts in people’s wants—potentially including the desire for a home office, or a house over a flat—explained half of the growth in British house prices during the pandemic. In many countries, including Australia, the average household size has shrunk, suggesting that people are less willing to house-share. And at a time of higher inflation, many people may want to invest in physical assets, such as property and infrastructure, that better hold their value in real currency. All this could mean that housing demand will remain higher than it was before the pandemic, limiting the potential fall in prices.Could the housing bust be merely delayed? Perhaps. Some past house-price declines, including in the late 19th century, were grinding rather than spectacular. Central bankers may also be minded to raise rates or keep them high until the higher cost of money truly starts to bite. Making homeowners feel poorer is one way of getting them to cut spending, which would help trim inflation.Yet there is reason to believe the worst is over. After reaching an all-time low last year, consumer confidence across the rich world is rising again. Households on average still have plenty of excess savings. A structural shortage of housing means that there is almost always someone willing to buy if someone else cannot. And there is little sign that people are losing their taste for home offices and weight-lifting in the attic. The housing boom may have ended, and with a whimper, not a bang. ■ More

More than one-quarter of all U.S. households think they’re on track to maintain their standard of living in retirement but are actually at risk of falling short, according to the Center for Retirement Research at Boston College.
The affluent are more likely to hold this mistaken view, the center said in a new report.
Booming stock and housing markets may have contributed to a “wealth illusion” among high-income households.

Courtneyk | E+ | Getty Images

Many Americans are mistaken about their financial preparedness for retirement. But overconfidence skews higher for the wealthy than for others, according to a new report.
Twenty-eight percent of all U.S. households have an overly rosy view. They think they’re on track to maintain their standard of living in retirement but are actually at risk of falling short, according to an analysis by the Center for Retirement Research at Boston College.

The analysis examines these households by income group. Thirty-two percent of high-income households are “not worried enough” about their retirement risk, a larger share than the 26% of low- and middle-income earners.
More from Personal Finance:’Quiet luxury’ may be Americans’ most expensive trend ever3 steps to take before you start investingSocial Security may be key issue for GOP presidential rivals
The divergence between perception and reality can be dangerous, experts said. Such households may be able to save more money during their working years but don’t know they should do so.
“If they’re not aware they should be saving more, they run the risk of having to cut back their consumption — perhaps substantially — in retirement,” said Anqi Chen, senior research economist and assistant director of savings research at the Boston College center.
They may also be unable to manage some risks in old age like higher health-care costs, added Chen, who co-authored the report.

There’s an important caveat here: The meaning of being “at risk” differs between income groups. Low-income earners who are at risk may not be able to afford basic living necessities in old age, while an affluent household is unlikely to fall into poverty, for example, the analysis said.
The affluent risk a “difficult adjustment that may require them to lower their expectations of their retirement lifestyle,” the report said.

There are headwinds against retirement security

The analysis leverages data from the Federal Reserve’s Survey of Consumer Finances, a triennial assessment of households. Its most recent iteration reflects 2019 data.
The survey defines income groups by age and marital status. For example, the 2019 survey defines married couples ages 45 to 47 as low-, middle- and high-income if their median income is $50,000, $110,000 and $248,000, respectively.
The Center for Retirement Research uses the survey data to construct a National Retirement Risk Index. The index models retirement preparedness according to a range of assets like Social Security, pensions, home equity and employer-sponsored retirement plans, such as a 401(k).

If they’re not aware they should be saving more, they run the risk of having to cut back their consumption — perhaps substantially — in retirement.

assistant director of savings research, Center for Retirement Research at Boston College

In 2019, 47% of American households were at risk of not being able to maintain their standard of living in retirement, according to the index. That’s down slightly from the years following the 2008 financial crisis, but up significantly from earlier in the current century.
Many factors have put pressure on Americans’ retirement preparedness.
For one, they’re living longer, meaning their savings must stretch over a greater number of years.

Why the rich are more likely to underestimate risk

Westend61 | Westend61 | Getty Images

Nineteen percent of U.S. households correctly identify as being at risk of falling short in retirement, according to the center’s report. But the more concerning cohort is the aforementioned 28% of households who aren’t worried enough, experts said.
“The ones who worry me the most are the people who think they’re in good shape but they’re not,” said David Blanchett, head of retirement research at PGIM, the investment-management arm of Prudential Financial.
The booming stock and housing markets may be giving a “wealth illusion” to affluent households that disproportionately own these financial assets, Chen said.

The ones who worry me the most are the people who think they’re in good shape but they’re not.

David Blanchett
head of retirement research at PGIM

For example, the median price of a home sold in the U.S. had jumped to $327,000 by the end of 2019, up from $223,000 at the beginning of 2010, according to federal data tracked by the Federal Reserve Bank of St. Louis. The S&P 500 roughly tripled over that period.
Further, about 24% of affluent households who underestimated their retirement risk had a large amount of housing debt relative to their home equity — three times more than middle and lower earners, according to the Center for Retirement Research analysis.
Social Security also replaces a smaller portion of annual income for wealthy households relative to other income groups — meaning they must save more money to maintain their standard of living.

Saving money is the one thing that “dramatically improves” a household’s retirement readiness, Blanchett said.
Aside from the obvious benefit of having a larger pool of assets from which to draw in old age, saving more money today effectively reduces one’s standard of living, Blanchett said. More money saved means less money spent, and households grow accustomed to living on a lower monthly budget — a lifestyle change that would likely carry into retirement, he added.
The easiest way for households to get a rough sense of their retirement preparedness is by consulting two or three free online retirement calculators and inputting all relevant financial information, Blanchett said. Someone who wants a more detailed examination or personalized plan might consider consulting a financial planner, he said. More

Andreessen Horowitz said it was looking to take advantage of what it sees as a more welcoming environment for crypto and Web3 entrepreneurs in the U.K.
The U.S. has been heavily restrictive with its enforcement of companies and projects in crypto lately, announcing huge lawsuits against Binance and Coinbase last week.
Andreessen Horowitz has been one of the most active investors in crypto and Web3.

Andreessen Horowitz partner Marc Andreessen.
Justin Sullivan | Getty Images

LONDON — Andreessen Horowitz is opening its first office outside of the U.S. in London, the venture capital firm announced Monday.
Andreessen Horowitz, a Silicon Valley venture capital firm that has backed leading tech companies from Airbnb to Coinbase, said it was looking to take advantage of what it sees as a more welcoming environment for crypto entrepreneurs in the U.K. The firm believes the U.K. will become a global leader in crypto, blockchain and digital currencies.

The U.S. has been cracking down on the crypto industry lately, with the U.S. Securities and Exchange Commission announcing lawsuits against crypto titans Binance and Coinbase last week. Essentially, the SEC is arguing many crypto tokens should be classified as securities, which would subject them to much stricter oversight and transparency requirements.

The U.K. earlier this year also proposed its first formal regulations of the crypto industry, seeking to clamp down on practices in the wake of the collapse of FTX, a crypto exchange once worth $32 billion. Many crypto investors say this would provide more clarity, particularly as they are facing heightened uncertainty in the U.S.
“The prime minister’s leadership is critical, but we have seen a wonderful openness to the promise of the technology, as well as a strong interest in whatever regulatory regime comes online, focusing on consumer protection,” Brian Quintenz, head of policy at Andreessen Horowitz, told CNBC in an interview.
“Frankly, I don’t think this current administration in United States is doing either — it’s a moment in a time when the U.K. acts nimbly and quickly, but robustly.”
Sriram Krishnan, an ex-Twitter employee who joined Andreessen Horowitz as a general partner, will relocate to London to head up the firm’s office there, Quintenz said.

Andreessen Horowitz also plans to launch its first crypto startup school in the U.K. in a bid to identify future talent in the crypto and Web3 space. The firm launched a school to coach entrepreneurs on building blockchain and cryptocurrency companies in 2019.
Andreessen Horowitz has been one of the most active investors in crypto and Web3, backing startups ranging from the crypto-based sports collectibles trading game Dapper Labs to nonfungible token marketplace OpenSea.
But it has felt the chilling effects of a downturn known as “crypto winter” in the past 18 months, following major collapses such as the spectacular bankruptcy of FTX. Andreessen Horowitz was not an investor, but several rival firms, including Sequoia, were.
The firm’s commitment to open a presence in the U.K. suggests long-term belief in the crypto market, at least outside the U.S.
“In terms of the United States, there is tremendous uncertainty here — that’s a kind word — there’s plenty of opportunity to create more uncertainty that has not been embraced,” Quintenz told CNBC.
“We’re seeing regulation by enforcement that does nothing to understand benefits of the technology or embrace entrepreneurs, innovators trying to build next iteration.”
WATCH: Crypto enthusiasts want to remake the internet with ‘Web3.’ Here’s what that means More

Goldman Sachs CEO David Solomon told CNBC’s Sara Eisen the New York-based firm will post impairments on loans and equity investments tied to commercial real estate in the second quarter.
“There’s no question that the real estate market, and in particular commercial real estate, has come under pressure,” Solomon said in the interview on CNBC’s “Squawk on the Street.”
On top of Goldman’s lending activities, it also took direct stakes in real estate that will also face markdowns, Solomon said.

CEO David Solomon, Goldman Sachs, during a Bloomberg Television at the Goldman Sachs Financial Services Conference in New York, Dec. 6, 2022.
Michael Nagle | Bloomberg | Getty Images

Goldman Sachs CEO David Solomon said Monday that his bank will disclose markdowns on commercial real estate holdings as the industry grapples with higher interest rates.
Solomon told CNBC’s Sara Eisen the New York-based firm will post impairments on loans and equity investments tied to commercial real estate in the second quarter. Financial firms recognize loan defaults and falling valuations as write-downs that affect quarterly results.

“There’s no question that the real estate market, and in particular commercial real estate, has come under pressure,” he said in an interview on CNBC’s “Squawk on the Street.” “You’ll see some impairments in the lending that would flow through our wholesale provision” this quarter.
After years of low interest rates and lofty valuations for office buildings, the industry is in the throes of a painful adjustment to higher borrowing costs and lower occupancy rates due to the shift to remote work. Some property owners have walked away from holdings rather than refinancing their loans. Defaults have just begun to show up in banks’ results. Goldman posted almost $400 million in first-quarter impairments on real estate loans, according to Solomon.
On top of Goldman’s lending activities, it also took direct stakes in real estate as it ramped up its alternative investments in the last decade, Solomon said.
“We think that we and others are marking down those investments given the environment this quarter and in the coming quarters,” Solomon said.
While the write-downs are “definitely a headwind” for the bank, they are “manageable” in the context of Goldman’s overall business, he said.

They may be less manageable for smaller banks, however. About two-thirds of the industry’s loans are originated by regional and midsize institutions, Solomon said.
“That’s just something that we’re going to have to work through,” he said. “There’ll probably be some bumps and some pain along the way for a number of participants.”
In the wide-ranging interview, Solomon said he was “surprised” by the resiliency of the U.S. economy, and he was seeing “green shoots” emerge after a period of subdued capital markets activities. More

UBS has completed the legal takeover of its former Swiss rival Credit Suisse.
The $3.2 billion deal was agreed in March amid worries about Credit Suisse losses would destabilize the banking system.
The enlarged UBS will have a balance sheet of $1.6 trillion and a workforce of 120,000.

UBS expects to complete its takeover of Credit Suisse “as early as June 12”, which will create a giant Swiss bank with a balance sheet of $1.6 trillion.
Fabrice Coffrini | Afp | Getty Images

Swiss bank UBS on Monday said that it formally completed the takeover of its rival Credit Suisse.
“Instead of competing, we’ll now unite as we embark on the next chapter of our joint journey,” UBS Group’s newly-returned CEO Sergio Ermotti said in a statement.

related investing news

an hour ago

In an open letter, the bank’s chiefs also said they would not compromise UBS’s “strong culture” or “conservative risk approach.” Risk management failures over a number of years played a key role in Credit Suisse’s eventual downfall.
Ermotti told CNBC’s “Squawk Box” in a Monday interview that he believed the combined bank — which he said was the world’s 21th largest — would “compete better, serve our clients better.”
“We are the only bank with this kind of magnitude and size and scope that is focused on wealth management,” Ermotti said.
“We need to make sure we don’t fall back into any bad habits or do things the wrong way. But in that sense we have a very clear view on how to manage a UBS-led integration,” he continued, as it seeks to “restore confidence.”
UBS Group will manage UBS and Credit Suisse as separate banks at least for the short term. Questions linger over the future of assets including Credit Suisse’s prized retail bank.

Following the acquisition, Credit Suisse and its American Depositary Shares will be delisted from the SIX Swiss Exchange and New York Stock Exchange, with shareholders receiving one UBS share for every 22.48 Credit Suisse shares held.
The enlarged UBS will have a balance sheet of $1.6 trillion and a workforce of 120,000. Ermotti previously warned the new group “won’t be able to create, short term, job opportunities for everybody. Synergies is part of the story.” The combined company will report its first consolidated results on August 31.
UBS said Monday it expected “Credit Suisse operating losses and significant restructuring charges” to be offset as it ditches risk-weighted assets, and forecast a common equity tier 1 capital ratio — a measurement of capital against assets — of around 14% for the rest of the year.

Top team shake-up

In an internal memo seen by CNBC, the bank announced that several senior Credit Suisse figures intend to leave the company, including Chief Financial Officer Dixit Joshi, who only took on the role in October, and Asia Pacific regional CEO Edwin Low.
Simon Grimwood, currently Credit Suisse’s global head of tax and finance change, will take over as Credit Suisse CFO. Grimwood has been managing integration planning since March, the bank said.
Former Credit Suisse Co-head of Markets Michael Ebert will become head of the Credit Suisse investment bank and head of Americas at UBS investment bank, while Jake Scrivens will replace Markus Diethelm as general counsel. Credit Suisse Global Head of Operations Isabelle Hennebelle joins the board in her existing role as head of operations.
Asked whether he was concerned about an exodus of talent, Ermotti told CNBC: “We are always sorry to see talented people leaving, in other cases people were anticipating probably the inevitable restructuring that we will need to go through and decided to go.”
He added that the bank had managed to attract external talent after the acquisition announcement.
Ermotti’s own return to the UBS top job was confirmed in March shortly after the takeover announcement to oversee the transition. He previously led the company from November 2011 to October 2020, managing the fallout from the 2008 financial crisis and a $2.3 billion loss stemming from a rogue trader in London. UBS Chair Colm Kelleher said he “transformed” the bank through cost cutting and implementing cultural changes.

Challenging environment

The $3.2 billion takeover was the tumultuous conclusion of a frantic weekend in March, when worries that severe losses at Credit Suisse would destabilize the banking system drew the key involvement of Swiss regulators.
Sweetening the deal, the Swiss government has agreed to cover losses of up to 9 billion Swiss francs ($10 billion) after UBS incurs the first 5 billion Swiss francs as part of the transaction, as the bank absorbs a portfolio that does not entirely “fit its business and risk profile.”
The takeover, which follows multiple scandals and years of share price decline at Credit Suisse, controversially wiped out the 16 billion Swiss francs ($17 billion) worth of assets of the bank’s AT1 bond holders.
Beat Wittmann, co-founder and partner at Porta Advisors, said the speed with which UBS had managed the takeover was positive for the bank.
Going forward will be “certainly a challenge … but UBS, due to the emergency operation and the collective failure of policymakers and of course of Credit Suisse, got over a weekend an extraordinarily advantageous deal,” Wittmann told CNBC’s “Squawk Box Europe”.
“There’s so much margin of safety in terms of price, in terms of credit lines, in terms of risk sharing with the government, that this is a great deal indeed.”
Wittmann said that UBS faces several key challenges, the first of which is the physical integration of the two banking juggernauts and merging of their operating models.
Citing a Financial Times report published over the weekend — which CNBC has not confirmed — that UBS had set “red lines” for Credit Suisse bankers including bans on new clients from high-risk countries and on launching new products without the approval of UBS managers, Wittmann said “that’s exactly what a bank should do in any case.”
Addressing the report, Ermotti told CNBC: “We have developed that ‘red line’, which I wouldn’t really call a ‘red line’, over the course of years. This is simply what I mentioned before, we are introducing our processes, our operating model, into Credit Suisse. It’s not meant to be discriminatory.”
As for further challenges, Wittman drew attention to an upcoming parliamentary inquiry into the Credit Suisse takeover and wider banking stability. Swiss elections could also lead to “populist demands,” he stressed, as jobs are cut and branches close around Switzerland. A final trial is the broader macro environment, Wittman said, given the current credit crunch and likely financial market volatility resulting from higher interest rates. More