Finance

In some ways the covid-19 pandemic was a blip. After soaring in 2020, unemployment across the rich world quickly dropped to pre-pandemic lows. Rich countries reattained their pre-covid gdp levels in short order. And yet, more than two years after lockdowns were lifted, at least one change appears to be enduring: consumer habits across the rich world have shifted decisively, and perhaps permanently. Welcome to the age of the hermit.In the years before covid, the share of consumer spending devoted to services rose steadily upwards. As societies got richer, they demanded more in the way of luxury experiences, health care and financial planning. Then, in 2020, spending on services, from hotel stays to hair cuts, collapsed owing to lockdowns. With people spending more time at home, demand for goods jumped, with a rush for computer equipment and exercise bikes.image: The EconomistThree years on the share of spending devoted to services remains below its pre-covid level (see chart 1). Relative to its pre-covid trend, the decline is even sharper. Rich-world consumers are spending on the order of $600bn a year less on services than you might have expected in 2019. In particular, people are less interested in spending on leisure activities that generally take place outside the home, including hospitality and recreation. The money saved is being redirected to goods, ranging from durables such as chairs and fridges, to things like clothes, food and wine.In countries that spent less time in lockdown, hermit habits have not become ingrained. Spending on services in New Zealand and South Korea, for instance, is in line with its pre-covid trend. Elsewhere, though, hermit behaviour now looks pathological. In the Czech Republic, which was whacked by covid, the services share is about three percentage points below trend. America is not far off. Japan has witnessed a 50% decline in restaurant bookings for client entertainment and other business purposes. Pity the drunk salaryman staggering around Tokyo’s entertainment districts: he is now an endangered species.At first glance, the figures are hard to reconcile with the anecdotes. Isn’t it harder than ever to get a reservation at a good restaurant? And aren’t hotels full of travellers, causing prices to soar? Yet the true source of the crowding is not sky-high demand, but constrained supply. These days fewer people want to work in hospitality—in America total employment in the industry remains lower than in late 2019. And the disruption of the pandemic means that many hotels and restaurants that would have opened in 2020 and 2021 never did. The number of hotels in Britain, at around 10,000, has not grown since 2019.image: The EconomistFirms are noticing the $600bn shift. In a recent earnings call an executive at Darden Restaurants, which runs one of America’s finest restaurant chains, Olive Garden, noted that, relative to pre-covid times, “we’re probably in that 80% range in terms of traffic”. At Home Depot, which sells tools to improve your home, revenue is up by about 15% on 2019 in real terms. Investors are noticing. Goldman Sachs, a bank, tracks the share prices of companies that tend to benefit when people stay at home (such as e-commerce firms) and those that thrive when people are out and about (such as airlines). Even today, the market looks favourably upon firms that service stay-at-homers (see chart 2).Why has hermit behaviour endured? The first possible reason is that some tremulous folk remain afraid of infection, whether by covid or something else. Across the rich world people are swapping crowded public transport for the privacy of their own vehicles. In Britain, car use is in line with the pre-covid norm, whereas public-transport use is well down. People also seem less keen on up-close-and-personal services. In America spending on hairdressing and personal-grooming treatments is 20% below its pre-covid trend, while spending on cosmetics, perfumes and nail preparations is up by a quarter.The second relates to work patterns. Across the rich world people now work about one day a week at home, according to Cevat Giray Aksoy of King’s College London and colleagues. This cuts demand for the services bought when at the office, including lunches, and raises demand for do-it-yourself goods. Last year Italians spent 34% more on glassware, tableware and household utensils than in 2019.The third relates to values. The pandemic may have made people genuinely more hermit-like. According to official data from America, last year people slept about 11 minutes more than they did in 2019. They also spent less on clubs that require membership and other social activities, and more on solitary pursuits, such as gardening, magazines and pets. Meanwhile, global online searches for the “Patience”, a card game otherwise known as solitaire, are running at about twice their pre-pandemic level. Covid’s biggest legacy, it seems, has been to pull people apart. ■ More

Despite a murky macroeconomic environment and heightened fears around the health of the banking sector, the nation’s largest financial institutions all reported earnings beats for the third quarter. Some businesses performed better than others. However, none of them has been rewarded with higher stock prices — yet. As expected, money center banks like Wells Fargo (WFC) and JPMorgan (JPM) outperformed financials that lean more heavily on wealth management and investment banking such as Morgan Stanley (MS) and Goldman Sachs (GS). “A softer performance in investment banking was not a surprise, given the current dearth of mergers and acquisitions and a still-frozen market for initial public offerings,” Jeff Marks, CNBC Investing Club director of portfolio analysis, said after quarterly results from Morgan Stanley, which is one of the Club’s two bank holdings. Wells Fargo is the other. The third-quarter reporting season for major banks wrapped up this week. The banking sector is facing a myriad of obstacles right now, creating a difficult operating environment even for Wall Street’s most profitable firms. The fed funds overnight bank lending rate of 5.25%-5.5% is the highest in some 22 years. The Federal Reserve has increased the cost of borrowing 11 times since March 2022, with questions about whether one more rate hike is needed before year-end. The KBW Bank Index , a go-to stock index for the sector, has declined more than 27% since the start of the year. Wells Fargo’s decline of 2.5% in 2023 and Morgan Stanley’s 14% drop are relative outperformers. Morgan Stanley vs. Goldman Sachs MS YTD mountain Morgan Stanely YTD Morgan Stanley reported better-than-expected third-quarter results on Wednesday. For the three months ended Sept. 30, the company earned $1.38 per share on a 2% increase in revenue to $13.27 billion. The bank, however, reported weak results at its investment banking and wealth management units, sending shares down 6.8% on Wednesday and down another 2.6% on Thursday. The stock hit a 52-week low of $72.35 during Friday’s session but closed slightly higher. We think those headwinds will pass, so we bought Wednesday’s drop, picking up 75 more shares. On Friday, Marks said the Club is considering buying more future pullbacks. We’re content to be paid for our patience by an annual dividend yield of 4.6%. While investment banking has been downbeat for several quarters on fears of an economic downturn, management expressed optimism around this long-dormant part of its business. “The minute you see the Fed indicate they’ve stopped raising rates, the M & A and underwriting calendar will explode because there is enormous pent-up activity,” outgoing Morgan Stanley CEO James Gorman said Wednesday. The team also said that planned multiyear wealth management growth remains on plan. GS YTD mountain Goldman Sachs YTD As a point of comparison, outside our portfolio, Goldman Sachs on Tuesday also reported stronger-than-expected quarterly revenue and profits . Goldman, which is one of the most investment-banking-reliant firms in the sector, saw figures pale in comparison to what they once were. Third-quarter revenue dropped 20% year over year at Goldman’s asset and wealth management division. Goldman shares logged a three-session losing streak following earnings with a modest reprieve Friday. However, like Morgan Stanley, management at Goldman Sachs also forecasted improvements. “I also expect a continued recovery in both capital markets and strategic activity if conditions remain conducive. As the leader in M & A advisory and equity underwriting, a resurgence in activity will undoubtedly be a tailwind for Goldman Sachs,” CEO David Solomon said in the earnings release. Goldman Sachs’ asset and wealth management division saw Q3 revenue drop 20% year over year. Wells Fargo vs. JPMorgan WFC YTD mountain Wells Fargo (WFC) year-to-date performance On the money center side, Wells Fargo reported stellar quarterly results on Friday, Oct. 13, topping analysts’ expectations for both earnings and revenues. The stock soared 3% that day. It was up Monday and Tuesday before hitting a rough patch for the rest of the week. For the three months ended Sept. 30, the company delivered EPS of $1.39 on a 6.6% increase in Q3 revenue to $20.86 billion. Wells Fargo got a boost from better-than-expected net interest income and non-interest income, along with a decline in non-interest expenses. Expense control is a significant reason the Club favors Wells Fargo over some of the other majors. Management’s eye has been on improving efficiency for some time through cost-cutting via layoffs or optimizing certain parts of the bank’s business. Wells Fargo CFO Mike Santomassimo said in September that the firm may cut more jobs down the road on top of the roughly 40,000 jobs already slashed over the last three years. JPM YTD mountain JPMorgan Chase YTD Looking outside our portfolio for comparison, we saw JPMorgan Chase (JPM) also report solid results on Friday the 13th, beating expectations on third-quarter profit and revenue. Like Wells Fargo, the bank benefited from robust interest income, while costs for credit were lower than expected. However, CEO Jamie Dimon said the bank is “over-earning” on interest income and that its “below normal” credit costs will normalize over time. JPMorgan shares jumped 1.5% on Oct. 13 but then dropped every day this past week. (Jim Cramer’s Charitable Trust is long WFC, MS . See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A combination file photo shows Wells Fargo, Citibank, Morgan Stanley, JPMorgan Chase, Bank of America and Goldman Sachs.

Despite a murky macroeconomic environment and heightened fears around the health of the banking sector, the nation’s largest financial institutions all reported earnings beats for the third quarter.
Some businesses performed better than others. However, none of them has been rewarded with higher stock prices — yet. More

The most popular question on Ark Invest’s website has nothing to do with investing in the U.S., according to the firm’s CEO and Chief Investment Officer Cathie Wood.
“The No. 1 question on our website as we track these questions is: Why can’t we buy your strategies in Europe?” the tech investor told CNBC’s “ETF Edge” this week.

Wood’s firm expanded its exposure to Europe last month by acquiring the Rize ETF Limited from AssetCo.
“We found this little gem of a company inside of AssetCo, which philosophically and from a DNA point-of-view, is very much like Ark,” Wood said. “They know what’s in their portfolios. They’re very focused on the future, thematically oriented. They do have a sustainable orientation, which is absolutely essential in Europe.”
She speculates 25% of total demand for Ark’s research strategies comes from Europe.
“We’re terribly impressed with the quality of their [Rise ETF] own research and due diligence,” Wood said. “We saw it during the deal, and I think we’re going to hit the ground running if the regulators approve our strategies there. And, of course, we’d like to distribute their strategies throughout the world including the US.”
Wood’s firm has around $25 billion in assets under management, according to the firm. As of Sept. 30, FactSet reports Ark’s top five holdings are Tesla, Coinbase, UiPath, Roku and Zoom Video.

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Signage is displayed outside of a Comerica Bank branch in Torrance, California, on March 13, 2023.
Patrick T. Fallon | AFP | Getty Images

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Regional banks selling off

Regions Financial, a Birmingham, Alabama-based lender, posted a 6.5% decline in net interest income compared with the previous quarter. The bank also expects a further drop in NII, seeing a 5% decline in the fourth quarter.
NII is the difference between interest banks earn on loans and what they pay out on deposits. As interest rates rise, lenders are pressured to pay more to keep depositors.
The Federal Reserve has hiked its key borrowing rate 11 times since March 2022 by a total of 5.25 percentage points, and the central bank recently vowed to keep rates higher for longer to combat stubbornly persistent inflation. Higher rates could lead to more losses on banks’ bond portfolios and contribute to funding pressures as institutions are forced to pay higher rates for deposits.
Dallas-based Comerica issued a similar warning as Regions, saying its NII is expected to decline between 5% and 6% in the fourth quarter. The bank reported a $106 million year-over-year decline in NII to $601 million in the third quarter.
Also feeling the pain is Cincinnati-based Fifth Third Bancorp, which forecast a similar drawdown in the quarter ahead.

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Coinbase is confident that a U.S. bitcoin exchange-traded fund will be approved by the Securities and Exchange Commission, the company’s chief legal officer, Paul Grewal, told CNBC.
He didn’t say when that’s likely to happen, and added the caveat that any decision would ultimately be up to the SEC.
But, Grewal said, it’s likely now that the SEC will approve a bitcoin ETF soon, highlighting the regulator’s failure in court to block Grayscale from converting its GBTC bitcoin fund into an ETF.

Coinbase is confident that a U.S. bitcoin exchange-traded fund will be approved by the U.S. Securities and Exchange Commission, the company’s chief legal officer, Paul Grewal, told CNBC.
“I’m quite hopeful that these [ETF] applications will be granted, if only because they should be granted under the law,” Grewal said in an interview with CNBC’s Arjun Kharpal.

The SEC was recently dealt a major court setback when a judge ruled that the regulator had no basis to deny crypto-focused asset manager Grayscale’s bid to turn its huge GBTC bitcoin fund into an ETF.
The SEC last week declined to appeal that ruling by a key deadline, likely paving the way for a bitcoin-related ETF to be approved in the coming months.
“I think that the firms that have stepped forward with robust proposals for these products and services are among some of the biggest blue chips in financial services,” Grewal added.
“So that, I think, suggests that we will see progress there in short order.”
He didn’t say when that’s likely to happen, and added the caveat that any decision would ultimately be up to the SEC.

But, Grewal said, it’s likely now that the SEC will approve a bitcoin ETF soon, highlighting the regulator’s failure in court to block Grayscale from converting its GBTC bitcoin fund into an ETF.

SAN ANSELMO, CALIFORNIA – JUNE 06: In this photo illustration, the Coinbase logo is displayed on a screen on June 06, 2023 in San Anselmo, California. The Securities And Exchange Commission has filed a lawsuit against cryptocurrency exchange Coinbase for allegedly violating securities laws by acting as an exchange, a broker and a clearing agency without registering with the Securities and Exchange Commission. (Photo Illustration by Justin Sullivan/Getty Images)
Justin Sullivan | Getty Images

“I think that, after the U.S. Court of Appeals made clear that the SEC could not reject these applications on arbitrary or capricious basis, we’re going to see the commission fulfill its responsibilities. I’m quite confident of that.”
A bitcoin ETF would give investors a way to own bitcoin without having to make a direct purchase from an exchange.
That could be more appealing to retail investors looking to gain exposure to bitcoin without having to actually own the underlying asset.
Coinbase would likely benefit from any bitcoin ETF that is ultimately approved. The company, the largest crypto exchange in the United States, is a common stock held in portfolios designed to give investors exposure to crypto.
Not all is rosy in Grayscale’s bid to turn GBTC into an ETF, however.
The asset management firm’s parent company, Digital Currency Group, along with crypto exchange Gemini and DCG subsidiary Genesis, were accused in a lawsuit from New York’s attorney general of defrauding investors of more than $1 billion.
Still, Grewal sounded a positive note on the prospect of additional bitcoin ETFs being approved — sooner rather than later.
“We think that other ETFs are going to be coming online soon enough as the SEC follows the law and is required to apply the law in a neutral way to the applications that are pending,” he said.

Bitcoin has risen about 72% in the year to date, in a comeback by stealth for the world’s biggest digital currency after huge declines in 2022.
There’s been greater investor demand for the token in recent months, as the market reacts to prospect of the Federal Reserve ending its campaign of persistent interest rate rises, and as anticipation builds around the upcoming bitcoin “halving” event, which will see rewards to bitcoin miners reduced by half, thereby limiting the coin’s supply.
Still, trading volumes have declined, as retail investors have become uninterested in engaging in the market in light of a lack of volatility and in response to severe wounds suffered by once-large industry players like FTX, BlockFi and Three Arrows Capital.
FTX collapsed into bankruptcy last year after investors fled the platform en masse because of concerns over its liquidity. The company and its founder, Sam Bankman-Fried, are accused of defrauding investors in a multibillion-dollar scheme. Bankman-Fried is standing trial over these allegations and has pleaded not guilty.
Addressing the trial, Grewal said he was “quite encouraged and quite optimistic that a number of the bad actors in this space are being held to account through criminal trials and through aggressive regulatory actions.”
“We are quite excited that there are a number of developments we think that are just around the corner, or underway even as we speak, that will bring back investor and consumer interest in crypto,” Grewal added. More

Activision Blizzard, Electronic Arts, Japan’s Nintendo and other public gaming companies currently hold $45.1 billion in cash and cash equivalents, according venture capital firm Konvoy.
Konvoy expects Microsoft’s $69 billion Activision deal will likely lead to further mergers and acquisition activity and create a new generation of gaming companies.
Venture capital investment into video game firms slumped 64% year over year in the third quarter of 2023, according to Konvoy’s report, which was shared exclusively with CNBC.

Gamers play the video game “Star Wars Battlefront II” during the “Paris Games Week” on Oct. 31, 2017.

Publicly listed gaming companies are sitting on a $45 billion pile of cash and cash equivalents — and that could lead to greater consolidation in the $188 billion video games market, according to a new report from venture capital firm Konvoy, which was shared exclusively with CNBC.
The likes of Activision Blizzard, Electronic Arts, Singapore’s Sea, Japan’s Nintendo and Bandai Namco, South Korea’s Nexon, and China’s NetEase, currently hold $45.1 billion in cash and cash equivalents, according Konvoy, which cited these companies’ latest public reports.

Public gaming companies currently hold cash and cash equivalents of $45.1 billion, according to a report from venture capital firm Konvoy.

That would give them more than enough financial firepower to look at potential acquisition targets that could help them build out their intellectual property and products.
In particular, gaming firms are looking to keep gamers more engaged for longer with live-service games that add more content over time and paid subscription packages that offer a certain amount of free games and access to cloud gaming, or the ability to play games via the cloud rather than downloading them to their machines.
Publicly listed gaming companies had a fairly rosy year in 2023, on the whole.
The VanEck Video Gaming and eSports ETF, which seeks to track MVIS Global Video Gaming & eSports Index, has climbed 20% in the year to date, according to Konvoy. The blue-chip S&P 500 index, by contrast, has climbed close to 12% year to date.

The performance of public gaming ETFs since the start of 2023.

The Global X Video Games & Esports ETF, which aims to track a modified market-cap-weighted global index of companies in video games and esports, hasn’t performed as well, slipping 0.4% since the start of 2023.

Big Tech eyes video games

Big Tech firms are also primed with plenty of cash to consider more gaming deals, according to Konvoy.
The VC firm said that the world’s biggest tech firms which includes Amazon, Microsoft, Google, Apple, Meta, Netflix, China’s Tencent, and Japan’s Sony, have a combined $229.4 billion of cash on their balance sheets to deploy on potential deals.

Josh Chapman, a partner at Konvoy, said the company expects the Microsoft-Activision deal — which saw the Redmond, Washington-based technology giant pay $69 billion for U.S. game publisher Activision Blizzard — would likely lead to further mergers and acquisition activity and create a new generation of gaming companies.
“As active gaming investors, we believe that gamers and gaming startups stand to benefit from the deal as it improves the value-proposition for gamers and leads to a vibrant M&A environment for other deals to get closed,” Chapman told CNBC in emailed comments.
Cloud gaming is a key area for Microsoft as it brings Activision into its growing portfolio of game publishers. The company is pushing its cloud gaming service, which does away with the need for traditional consoles likes its Xbox Series X or Sony’s PlayStation 5, with its Xbox Game Pass subscription product.
Chapman said this would lead to “new opportunities for emerging game developers, infrastructure companies and gaming platforms.”
Microsoft’s blockbuster acquisition of Activision Blizzard was approved by the U.K.’s Competition and Markets Authority earlier this month.
The deal, valued at $69 billion, will see Microsoft gain ownership of some of the most lucrative properties in video games, including the massive Call of Duty franchise, Candy Crush, Crash Bandicoot, Warcraft, Diablo, and Overwatch.

VC deal slump

Venture capital investment into video game firms slumped 64% year over year in the third quarter of 2023, according to Konvoy’s report.

Total venture funding into the video games industry in the third quarter of 2023 fell 9% quarter-over-quarter, to $454 million.

It’s a sign of how, despite the boost to the industry from Microsoft’s landmark deal, the boom times for the industry in 2020 and 2021 have ebbed.
Gaming startups raised a combined $454 million globally for the three months to September, down 9% quarter over quarter and more than 64% from the same three-month period a year ago.

Still, Konvoy’s Chapman anticipates the picture for gaming VCs and startups will look brighter next year, as grim venture investing conditions start to improve — however, funding for gaming firms has returned to a ” sustainable new normal” that will continue at the current pace for the next few years.
“As the global venture market rebounds we expect gaming, which was somewhat insulated from the initial impact of the economic downturn, to follow,” Chapman told CNBC. “We anticipate gaming VC funding to see a slight uptick over the next few quarters, when the industry will grow at a similar rate to before the pandemic.”
“Right now, VC deal volume and funding are comparable to pre-pandemic levels, and while we may not see the exponential growth of 2021, we’re excited to see a stable venture funding market in gaming for continued value creation in the industry.”

Tougher times

Video game publishers have been grappling with a deterioration of macroeconomic conditions, with high inflation and rising interest rates denting consumer appetite for discretionary spending.
Whereas in 2020, when consumers were flush with cash thanks to easy monetary conditions, times have gotten tougher in 2022 and 2023 as central bankers have increased interest rates in a bid to stem rising prices.
Still, the video game player base continues to increase, with a worldwide player base of 3.381 million today, according to Konvoy.
The video game market is still massive, and is projected to reach $188 billion in overall sales in 2023, according to Konvoy. That figure is up a modest 3% from the previous year, when gaming sales totaled $183 billion. But growth has accelerated slightly from 2022, when gaming sales rose only 2%.
That came after the standout year of 2021.
Gaming revenue reached $180 billion that year, climbing more than 8% from $166 billion in 2020 I assume, according to Konvoy’s research.
In 2020, the industry saw even bigger growth — more than 9% year over year. That was when pandemic lockdowns were in full swing, and people had more time to spend playing video games indoors.
Konvoy is projecting long-term growth for the games industry in the coming years, though. The firm said that it expects a compound annual growth rate of 9% in the next five years, with the industry reaching a whopping $288 billion in overall sales by 2028.
WATCH: Bandai Namco Entertainment discusses the success of ‘Elden Ring’ More

Ahead of Siemens Energy’s fourth-quarter earnings, analysts at Kepler Cheuvreux suggested in a research note Tuesday that despite having already warned on profits, the company “remains vulnerable to large negative cashflow swings in the next fiscal year.”
Deutsche Bank earlier this week slashed its 12-month share price forecast for Danish energy giant Ørsted by 36%, citing supplier delays, lower tax credits and rising rates.
ONYX Insight, which monitors wind turbines and tracks over 14,000 across 30 countries, revealed in a report Tuesday that supply chains remain the greatest challenge to operations across the sector.

A Siemens Gamesa blade factory on the banks of the River Humber in Hull, England on October 11, 2021.
PAUL ELLIS | AFP | Getty Images

As the biggest players in wind energy gear up to report quarterly earnings, supply-chain reliability issues are front and center for both stock analysts and industry leaders.
Siemens Energy made the headlines earlier this year when it scrapped its profit forecast and warned that costly failures at wind turbine subsidiary Siemens Gamesa could drag on for years.

It sparked concerns about wider problems across the industry and thrust Europe’s wind energy giants’ earnings into the spotlight.
Siemens Energy is set to report its fiscal fourth-quarter results on Nov. 15. Its shares are currently down more than 35% year-to-date.
Aside from the turbine problems, the German energy giant posted orders of around 14.9 billion euros ($15.7 billion) for its third quarter, a more-than 50% increase from the previous year, primarily driven by large orders at Siemens Gamesa and Grid Technologies. Yet the 2.2 billion euro charge due to Gamesa’s quality issues prompted Siemens Energy to forecast a net loss for the fiscal year of 4.5 billion euros.
Ahead of its fourth-quarter earnings, analysts at Kepler Cheuvreux suggested in a research note Tuesday that despite having already warned on profits, the company “remains vulnerable to large negative cashflow swings in the next fiscal year.”

“We expect Siemens Gamesa to suffer very weak order intake in H1, which will combine with extensive delivery delays and rising customer penalty payments. Challenges at Siemens Gamesa will continue to overshadow resilience in the group’s other divisions,” they added.

Morgan Stanley cut its price target for Siemens Energy from 20 euros per share to 18 euros per share, but retains an overweight long-term strategic position on the company’s stock.
“Valuation for Siemens Energy is currently factoring in a negative value for the Gamesa division, which we believe may have been over penalized,” Morgan Stanley capital goods analyst Ben Uglow said in a research note Monday.
“While we acknowledge the low visibility on Gamesa margin trajectory and that rebuilding investor confidence will take time, we remain Overweight on undemanding valuation and good fundamentals of the Gas & Grid businesses.”
Elsewhere, Deutsche Bank earlier this week slashed its 12-month share price forecast for Danish wind energy producer Ørsted by 36% ahead of its interim earnings report on Nov. 1. The stock has already halved in value so far this year.
Read more:

Deutsche Bank just cut its price target on nearly 30 global stocks ahead of earnings — and upgraded 1

Deutsche had previously highlighted challenges in the wind turbine industry including supplier delays, lower tax credits and rising rates. However, Ørsted’s share price tanked further earlier this year when it raised the possibility of a 2.1-billion-euro impairment charge in its U.S. offshore wind portfolio.
Meanwhile, Danish wind turbine manufacturer Vestas — despite continuing to bag significant orders — has seen its shares plunge by around 30% year-to-date as reliability concerns plague the wider industry. Vestas publishes its interim financial report for the third quarter on Nov. 8.
Supply chain worries
ONYX Insight, which monitors wind turbines and tracks over 14,000 across 30 countries, revealed in a report Tuesday that supply chains remain the greatest challenge to the sector, with reliability not far behind.
The analytics firm, which is owned by British energy giant BP, interviewed senior personnel at over 40 owners and operators of wind turbines around the world in order to gauge the mood of industry leaders, and found that 57% cited the supply chain as the main obstacle to their operations.
ONYX Chief Commercial Officer Ashley Crowther said the lingering impacts of Covid-19 on manufacturing had just begun to heal — and then Russia’s invasion of Ukraine and the subsequent surge in inflation hit.

“Survey participants are now citing delays on new projects due to longer lead times for supply of new turbines and significant price increases,” Crowther said in the report.
“This is in line with what OEMs have told their investors, for example Vestas noting in their 2022 annual report they ‘increased our average selling prices of our wind energy solutions by 29%’. Similarly for major components, particularly main bearings on newer turbines with large rotor diameters, long delays are leaving turbines offline for extended periods.”
Although supply chain issues are creating problems for operators, the most direct impact has been on OEMs like Siemens Gamesa and Vestas, Crowther noted, as has been evident in recent financial results.
“Major western OEMs have recently reported losses or profit warnings and announced major restructuring projects in order to address the challenges they are facing. Some are even re-thinking their approach to the aftermarket which was always seen as the most profitable part of the business,” he added.
Reliability issues
Those surveyed by ONYX also expressed reliability concerns, with 69% expecting more reliability issues due to aging assets and 56% seeing problems associated with new turbine technology. Just 22% expected fewer reliability issues due to new turbine technology improvements.
“As the sector matures, turbines are getting older and the failure rate of electromechanical systems are increasing with age,” Crowther noted.
“Likewise, the initial operating period of newer turbines are seeing a rash of failures due to shorter development cycles, new turbine designs, and a squeeze on turbine prices. This is resulting in machines that are not durable enough.”
During an initial boom in the wind industry a number of years ago, OEMs faced huge market demand and, in turn, created a variety of turbine designs delivered on short cycles to a customer base seeking to generate more energy with greater efficiency at lower cost, Crowther explained.

“Fast-forward to the present and between the perfect storm of supply chain issues and too many turbine designs to support, OEMs have been losing significant amounts of money, including those paid out in liquidated damages (LDs),” he said.
“Manufacturers have been locked into a price competition spiral, attempting to produce larger turbines for more competitive pricing. But with bigger turbines produced in shorter production cycles, it’s no surprise that manufacturing quality has diminished.” More

Even as the economy has surprised forecasters with its resilience, lenders have cut headcount or announced plans to do so, with the key exception being JPMorgan Chase.
The next five largest U.S. banks cut a combined 20,000 positions so far this year, according to company filings.
A key factor driving the cuts is that job-hopping in finance slowed drastically from earlier years, leaving banks with more people than they expected.

The largest American banks have been quietly laying off workers all year — and some of the deepest cuts are yet to come.
Even as the economy has surprised forecasters with its resilience, lenders have cut headcount or announced plans to do so, with the key exception being JPMorgan Chase, the biggest and most profitable U.S. bank.

Pressured by the impact of higher interest rates on the mortgage business, Wall Street deal-making and funding costs, the next five largest U.S. banks have cut a combined 20,000 positions so far this year, according to company filings.
The moves come after a two-year hiring boom during the Covid pandemic, fueled by a surge in Wall Street activity. That subsided after the Federal Reserve began raising interest rates last year to cool an overheated economy, and banks found themselves suddenly overstaffed for an environment in which fewer consumers sought out mortgages and fewer corporations issued debt or bought competitors.

“Banks are cutting costs where they can because things are really uncertain next year,” Chris Marinac, research director at Janney Montgomery Scott, said in a phone interview.
Job losses in the financial industry could pressure the broader U.S. labor market in 2024. Faced with rising defaults on corporate and consumer loans, lenders are poised to make deeper cuts next year, said Marinac.
“They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad,” he said. “By the time we roll into January, you’ll hear a lot of companies talking about this.”

Deepest cuts

Banks disclose total headcount numbers every quarter. While the aggregate figures mask the hiring and firing going on beneath the surface, they are informative.
The deepest reductions have been at Wells Fargo and Goldman Sachs, institutions that are wrestling with revenue declines in key businesses. They each have cut roughly 5% of their workforce so far this year.
At Wells Fargo, job cuts came after the bank announced a strategic shift away from the mortgage business in January. And even though the bank cut 50,000 employees in the past three years as part of CEO Charlie Scharf’s cost-cutting plan, the firm isn’t done shrinking headcount, executives said Friday.
There are “very few parts of the company” that will be spared from cuts, said CFO Mike Santomassimo.
“We still have additional opportunities to reduce headcount,” he told analysts. “Attrition has remained low, which will likely result in additional severance expense for actions in 2024.”

Goldman firings

Meanwhile, after several rounds of cuts in the past year, Goldman executives said that they had “right-sized” the bank and don’t expect another mass layoff like the one enacted in January.
But headcount is still headed down at the New York-based bank. Last year, Goldman brought back annual performance reviews where people deemed low performers are cut. In the coming weeks, the bank will terminate around 1% or 2% of its employees, according to a person with knowledge of the plans.
Headcount will also drift lower because of Goldman’s pivot away from consumer finance; the firm agreed to sell two businesses in deals that will close in coming months, a wealth management unit and fintech lender GreenSky.

Pedestrians walk along Wall Street near the New York Stock Exchange in New York.
Michael Nagle | Bloomberg | Getty Images

A key factor driving the cuts is that job-hopping in finance slowed drastically from earlier years, leaving banks with more people than they expected.
“Attrition has been remarkably low, and that’s something that we’ve just got to work through,” Morgan Stanley CEO James Gorman said Wednesday. The bank has cut about 2% of its workforce this year amid a protracted slowdown in investment banking activity.
The aggregate figures obscure the hiring that banks are still doing. While headcount at Bank of America dipped 1.9% this year, the firm has hired 12,000 people so far, indicating that an even greater amount of people left their jobs.

Citigroup’s cuts

While Citigroup’s staff figures have been stable at 240,000 this year, there are significant changes afoot, CFO Mark Mason told analysts last week. The bank has already identified 7,000 job cuts linked to $600 million in “repositioning charges” disclosed so far this year.
CEO Jane Fraser’s latest plan to overhaul the bank’s corporate structure, as well as sales of overseas retail operations, will further lower headcount in coming quarters, executives said.
“As we continue to progress in those divestitures … we’ll see those heads come down,” Mason said.
Meanwhile, JPMorgan has been the industry’s outlier. The bank grew headcount by 5.1% this year as it expanded its branch network, invested aggressively in technology and acquired the failed regional lender First Republic, which added about 5,000 positions.
Even after its hiring spree, JPMorgan has more than 10,000 open positions, the company said.
But the bank appears to be the exception to the rule. Led by CEO Jamie Dimon since 2006, JPMorgan has best navigated the surging interest rate environment of the past year, managing to attract deposits and grow revenue while smaller rivals struggled. It’s the only one of the Big Six lenders whose shares have meaningfully climbed this year.  
“All these companies expanded year after year,” said Marinac. “You can easily see several more quarters where they go backwards, because there’s room to cut, and they have to find a way to survive.”

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– CNBC’s Gabriel Cortes contributed to this article. More