Finance

Freetrade reported adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of £100,000 ($124,570) in the first quarter of 2024.
The development is welcome news for Freetrade’s crowdfunding investors, who’ve been looking for an update on the company’s move toward profitability.
Freetrade saw its valuation reduced by 65% to £225 million ($280.3 million) from £650 million in 2023, blaming a “different market environment” plagued by higher interest rates and inflation.

The Freetrade logo on a smartphone screen.
Rafael Henrique | Sopa Images | Lightrocket | Getty Images

British stock trading app Freetrade hit eked out breakeven earlier this year, the company told CNBC, marking its first-ever move into the black after incurring full-year losses in 2023.
Freetrade reported adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) of £100,000 ($124,863) in the first quarter of 2024, according to unaudited financial statements shared with CNBC.

Preliminary revenue hit £6.7 million in the quarter.
Freetrade still generated a loss of £8.3 million in 2023, down from the £28.8 million loss it racked up the year before. Revenues climbed to £21.6 million last year, up 45% from 2022.
“We defied difficult market conditions and delivered healthy growth in 2023 while dramatically reducing losses” in 2022, said Adam Dodds, CEO and founder of Freetrade.

Equity crowdfunders rejoice

The development will be welcome news for Freetrade’s crowdfunding investors, who’ve been looking for an update on the company’s move toward profitability after a tough financial period.
Freetrade saw its valuation reduced by 65% to £225 million ($280.3 million) from £650 million in 2023 in its latest equity crowdfunding round on Crowdcube, with the company blaming a “different market environment” plagued by higher interest rates and inflation.

Net inflows totalled £130 million in the first quarter, too, as retail investor activity grew in response to resurgent markets last year. Assets under administration also reached £1.8 billion.
“Importantly for our crowdfunding investors, we laid out a clear path towards breakeven during our last fundraise,” Dodds said.
“As we look ahead to the rest of 2024, we’ve got major product developments that are going to support our next phase of growth with preparations being made to roll out our web platform.”
Equity markets saw serious drops in 2022 as a result of macroeconomic uncertainty and higher interest rates stoked by Russia’s full-fledged invasion of Ukraine, which triggered a risk-off trade around the world.

Britain’s answer to Robinhood

Freetrade is a competitor to Robinhood, the U.S. stock trading platform. Robinhood recently relaunched in the U.K. in March, in its third attempt to crack the European market.
Freetrade’s Dodds said he’s undeterred by Robinhood’s move back into the U.K., telling CNBC via email that “more choice and competition are good for retail customers.”
“Ultimately, there will be multiple winners in the UK market, offering the full range of tax-wrappers and features that the local retail investor expects,” he added.
Freetrade said its first-quarter performance was driven by higher trading volumes as well as higher foreign exchange income.
Since October 2023, Freetrade said it has seen a marked increase in retail investor participation amid speculation over when and how often the U.S. Federal Reserve and other central banks will cut rates this year.
A rally in crypto prices also helped Freetrade in the first quarter. Though the platform doesn’t offer crypto trading, Freetrade experienced increased retail investor activity in crypto-correlated stocks like Coinbase, MicroStrategy, and Marathon Digital. More

Larry Swedroe, who is considered one of the market’s most esteemed researchers, thinks Warren Buffett’s investment style doesn’t work well anymore.
He cites the number of professional Wall Street firms and hedge funds now participating in the market.

“Warren Buffett was generally considered the greatest stock picker of all time. And, what we have learned in the academic research is Warren Buffett really was not a great stock picker at all,” Swedroe told CNBC’s “ETF Edge” this week. “What Warren Buffett’s ‘secret sauce’ was, he figured out 50, 60 years before all the academics what these factors were that allowed you to earn excess returns.”
Swedroe indicated index funds can help investors trying to mimic Buffett’s performance.
“[Investor] Cliff Asness and the team at AQR did some great research and showed that what you accounted for the leverage Buffett applied through his reinsurance company. If you bought an index of stocks that had these same characteristics, you would have matched Buffett’s returns virtually,” said Swedroe. “Now today, every investor can own through ETFs or mutual funds the same types of stocks that Buffett has bought through companies that apply this academic research — companies like Dimensional, AQR, Bridgeway, BlackRock, Alpha Architect and a few others.”
Swedroe is the author and co-author of almost 20 books — including “Enrich Your Future – The Keys to Successful Investing” released in February.
In an email to CNBC, he called it “a collection of stories and analogies … that help investors understand how markets really work, how prices are set, why it is so hard to persistently outperform through active management [stock picking and market timing,] and how human nature leads us to make investment mistakes [and how to avoid them].”

During his “ETF Edge” interview,’ Swedroe added investors can also benefit from momentum trading. He contends market timing and stock picking often don’t factor into long-term success.
“Momentum certainly is a factor that has worked over the long term, although it does go through some long periods like everything else will underperform. But momentum does work,” said Swedroe, who’s also the head of economic and financial research at Buckingham Wealth Partners. “It’s purely systematic. Computers can run it, you don’t need to pay big fees and you can access it with cheap momentum.”
In his latest book, Swedroe likens the stock market to sports betting and active managers to bookies. He suggests more investors “play” —or invest — the more likely they are to underperform.
“Wall Street needs you to trade a lot so they can make a lot of money on bid offer spreads. Active managers make more money by getting you to believe that they’re likely to outperform,” said Swedroe. “It’s virtually impossible mathematically for that to happen because they just have higher expenses including higher taxes. They just need you to play, and so, you know, that’s why they tell you active management’s a winner’s game.”

‘Dumb retail money’

He sees active management getting more efficient in pulling in emotional investors – which he calls “dumb retail money.”
“[Emotional investors] do so poorly [that] they underperform the very funds they invest in because they get stock picking wrong and market timing wrong,” Swedroe said.

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The Inflation Reduction Act turned a $7,500 tax credit for new electric vehicles into an upfront discount for buyers via an advance payment of their tax break.
About 90% of qualifying consumers buying a new EV have opted to get their tax break as an advance payment, a Treasury Department official said. 
Advance payments also allow consumers to get their full EV credit regardless of tax liability.

Maskot | Maskot | Getty Images

The bulk of Americans buying qualifying new electric vehicles are opting to receive an associated tax credit upfront from the car dealer instead of waiting until tax season, according to new Treasury Department data.  
About 90% of consumers who qualify for a “new clean vehicle” tax credit — worth up to $7,500 — have requested their tax break be issued as an advance payment, according to a Treasury Department official speaking on background.

“It means that it’s popular,” Ingrid Malmgren, policy director at nonprofit EV advocacy group Plug In America, said of the data.
Advance payments are a new, optional financial mechanism created by the Inflation Reduction Act, which President Joe Biden signed in 2022. They allow dealers to give an upfront discount to qualifying buyers, delivered as a partial EV payment, down payment or cash payment to consumers. The IRS then reimburses the dealer.
Not everyone will necessarily qualify for the full $7,500, depending on factors like the type of car that’s purchased.
The advance-payment provision kicked in Jan. 1.
Previously, all EV buyers had to wait until tax season the year after their purchase to claim related tax credits, meaning they may wait several months or longer.

Because the clean vehicle credit is nonrefundable, households with low annual tax burdens may not be able to claim the tax break’s full value on their returns. But that’s not the case with advance payments: Eligible buyers get their full value regardless of tax liability.
Advance payments are also available for purchases of used EVs. The previously owned clean vehicle credit is worth up to $4,000.
The advance payments can help with affordability, Malmgren said. For example, the upfront cash means households may not need to source funds from elsewhere to cover a down payment, she said. It can also reduce the cost of monthly car payments and overall interest charges, she added.
Car dealers have filed about 100,000 time-of-sale reports for new and used EVs to the IRS since Jan. 1, which signals that a consumer qualifies for a tax break, according to the Treasury official.
The Treasury has issued more than $580 million in advance payments since Jan. 1, the official said.
“Demand is high four months into implementation of this new provision with American consumers saving more than half a billion dollars,” Haris Talwar, a Treasury spokesperson, said in a written statement.

Caveats to advance payments

Of course, there are some caveats to the advance payments. For one, not all car dealers are participating.
More than 13,000 dealers have so far registered with the IRS Energy Credits Online portal to facilitate these financial transfers to consumers. That number is up from more than 11,000 in early February.
For context, there were 16,839 franchised retail car dealers in the U.S. during the first half of 2023, according to the National Automobile Dealers Association. There are also roughly 60,000 independent car dealers, though they largely sell used cars, according to a 2021 Cox Automotive estimate. Not all these franchises or independent dealers necessarily sell EVs.
More from Personal Finance:3 signs it’s time to refinance your mortgageWhat Biden’s new student loan forgiveness plan means for your taxesWhy the Fed is in no rush to cut interest rates in 2024
Additionally, not all EVs or consumers will qualify for a tax break.
The Inflation Reduction Act has manufacturing requirements for new EVs — meant to encourage more domestic production — that temporarily limit the models that qualify for a full or partial tax credit.
There are 36 new EV models currently available for a tax break in 2024, according to U.S. Energy Department data as of March 18.
Manufacturers of those models include Acura, Audi, Cadillac, Chevrolet, Chrysler, Ford, Honda, Jeep, Lincoln, Nissan, Rivian, Tesla and Volkswagen. Some models qualify for half the tax credit — $3,750 — instead of the full $7,500.
Cars and buyers must meet other requirements, too, which include income limits for households and thresholds on EV sticker prices.
Buyers need to sign an affidavit at car dealerships affirming their annual income doesn’t exceed certain eligibility thresholds. Making an error would generally require consumers to repay the tax break to the IRS.

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The bank said first-quarter profit rose 6% to $13.42 billion, or $4.44 per share, from a year earlier, boosted by its takeover last year of First Republic during the regional banking crisis.
But in guidance for 2024, the bank said it expected net interest income of around $90 billion, which is essentially unchanged from previous wording.
That appeared to disappoint investors, who expected JPMorgan to raise its guidance by $2 billion to $3 billion for the year; shares of JPM slipped 3.5% in premarket trading.

Jamie Dimon, President and CEO of JPMorgan Chase, speaking on CNBC’s “Squawk Box” at the World Economic Forum Annual Meeting in Davos, Switzerland, on Jan. 17, 2024.
Adam Galici | CNBC

JPMorgan Chase on Friday posted profit and revenue that topped Wall Street estimates as credit costs and trading revenue came in better than expected.
Here’s what the company reported compared with estimates from analysts surveyed by LSEG, formerly known as Refinitiv:

Earnings: $4.44 per share, vs. $4.11 expected
Revenue: $42.55 billion, vs. $41.85 billion expected

The bank said first-quarter profit rose 6% to $13.42 billion, or $4.44 per share, from a year earlier, boosted by its takeover of First Republic during the regional banking crisis last year. Per-share earnings would’ve been 19 cents higher excluding a $725 million boost to the FDIC’s special assessment to cover the costs tied to last year’s bank failures.
Revenue climbed 8% to $42.55 billion as the bank generated more interest income thanks to higher rates and larger loan balances.
JPMorgan posted a $1.88 billion provision for credit losses in the quarter, far below the $2.7 billion expected by analysts. The provision was 17% smaller than a year ago, as the firm released some reserves for loan losses, rather than building them as it did a year earlier.
While trading revenue overall was down 5% from a year earlier, fixed income and equities results topped analysts’ expectations by more than $100 million each, coming in at $5.3 billion and $2.7 billion, respectively.
But in guidance for 2024, the bank said it expected net interest income of around $90 billion, which is essentially unchanged from previous wording.

That appeared to disappoint investors, who expected JPMorgan to raise its guidance by $2 billion to $3 billion for the year; shares of JPM slipped 3.5% in premarket trading.
JPMorgan CEO Jamie Dimon called his company’s results “strong” across consumer and institutional areas, helped by a still-buoyant U.S. economy, though he struck a note of caution about the future.
“Many economic indicators continue to be favorable,” Dimon said. “However, looking ahead, we remain alert to a number of significant uncertain forces” including overseas conflict and inflationary pressures.
Though the biggest U.S. bank by assets has navigated the rate environment well since the Federal Reserve began raising rates two years ago, smaller peers have seen their profits squeezed.
The industry has been forced to pay up for deposits as customers shift cash into higher-yielding instruments, squeezing margins. Concern is also mounting over rising losses from commercial loans, especially on office buildings and multifamily dwellings, and higher defaults on credit cards.
Still, large banks are expected to outperform smaller ones this quarter.
Shares of JPMorgan have jumped 15% this year, outperforming the 3.9% gain of the KBW Bank Index.
Wells Fargo and Citigroup also report quarterly results Friday, while Goldman Sachs, Bank of America and Morgan Stanley report next week.  
This story is developing. Please check back for updates.

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The bank said profit fell 27% from a year earlier to $3.37 billion, or $1.58 a share, on higher expenses and credit costs.
Revenue slipped 2% to $21.10 billion, mostly driven by the impact of selling an overseas business in the year-earlier period.

Jane Fraser, CEO of Citi, speaks during the Milken Institute Global Conference in Beverly Hills, California, on May 1, 2023. 
Patrick T. Fallon | AFP | Getty Images

Citigroup on Friday posted first-quarter revenue that topped analysts’ estimates, helped by better-than-expected results in the bank’s investment banking and trading operations.
Here’s how the company performed, compared with estimates from LSEG, formerly known as Refinitiv:

Earnings: $1.86 per share, adjusted, vs. $1.23 expected
Revenue: $21.10 billion vs. $20.4 billion expected

The bank said profit fell 27% from a year earlier to $3.37 billion, or $1.58 a share, on higher expenses and credit costs. Adjusting for the impact of FDIC charges as well as restructuring and other costs, Citi earned $1.86 per share, according to LSEG calculations.
Revenue slipped 2% to $21.10 billion, mostly driven by the impact of selling an overseas business in the year-earlier period.
Investment banking revenue jumped 35% to $903 million in the quarter, driven by rising debt and equity issuance, topping the $805 million StreetAccount estimate.
Fixed income trading revenue fell 10% to $4.2 billion, edging out the $4.14 billion estimate, and equities revenue rose 5% to $1.2 billion, topping the $1.12 billion estimate.
The bank also posted an 8% gain to $4.8 billion in revenue in its Services division, which includes businesses that cater to the banking needs of global corporations, thanks to rising deposits and fees.

Shares of the bank climbed about 1% in premarket trading.
Citigroup CEO Jane Fraser previously said her sweeping corporate overhaul would be complete by March, and that the firm would give an update to severance expenses along with first-quarter results.
“Last month marked the end to the organizational simplification we announced in September,” Fraser said in the earnings release. “The result is a cleaner, simpler management structure that fully aligns to and facilitates our strategy.
Last year, Fraser announced plans to simplify the management structure and reduce costs at the third-biggest U.S. bank by assets. Now, analysts want to know if Citigroup can maintain its previous guidance for full-year revenue and expense targets.
JPMorgan Chase reported results earlier Friday, and Goldman Sachs reports on Monday.
This story is developing. Please check back for updates. More

Wells Fargo first-quarter earnings and revenue beat Wall Street expectations, despite a decline in net interest income.
Net interest income decreased 8% in the quarter, due to the impact of higher interest rates on funding costs and a shift by customers to higher yielding deposit products.
“Our solid first quarter results demonstrate the progress we continue to make to improve and diversify our financial performance,” Wells CEO Charlie Scharf said in a statement.

A woman walks past Wells Fargo bank in New York City, U.S., March 17, 2020.
Jeenah Moon | Reuters

Wells Fargo on Friday reported first-quarter earnings and revenue that beat Wall Street expectations, despite a decline in net interest income.
Here’s how the company performed compared with what Wall Street was anticipating, based on a survey of analysts by LSEG, formerly known as Refinitiv:

Earnings per share: $1.26 cents adjusted vs. $1.11 cents expected
Revenue: $20.86 billion vs. $20.20 billion expected

Shares of Wells dipped after the earnings report in premarket trading Friday morning.
Wells said its net interest income, a key measure of what a bank makes on lending, decreased 8% in the quarter, due to the impact of higher interest rates on funding costs and a shift by customers to higher-yielding deposit products.
Net interest income for 2024 is expected to post a decline in the 7% to 9% range, unchanged from its prior guidance.
The San Francisco-based bank saw net income decline to $4.62 billion, or $1.20 per share, from $4.99 billion, or $1.23 per share, a year earlier. Excluding a Federal Deposit Insurance Corp. charge of $284 million, or 6 cents per share, tied to the bank failures in 2023, Wells said it earned $1.26 per share, topping analyst estimates of $1.11 per share.
Revenue of $20.86 billion came in above the $20.20 billion estimate.

“Our solid first quarter results demonstrate the progress we continue to make to improve and diversify our financial performance,” Wells CEO Charlie Scharf said in a statement.
“The investments we are making across the franchise contributed to higher revenue versus the fourth quarter as an increase in noninterest income more than offset an expected decline in net interest income,” Scharf added.
For the latest period, the bank set aside $938 million as provision for credit losses. The bank said the provision included a decrease in the allowance for credit losses, driven by commercial real estate and auto loans.
Wells’ stock is up more than 15% year to date, beating the S&P 500’s 9% return.
The bank repurchased 112.5 million shares, or $6.1 billion, of common stock in first quarter.

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Investors looking to weather a volatile market may want to opt for physical gold over gold stocks.
That’s according to George Milling-Stanley, one of the world’s experts in gold and the chief gold strategist at State Street Global Advisors.

“One of the reasons I own gold bar(s) is that I believe it offers me some protection against potential weakness in the equity market,” Milling-Stanley told CNBC’s “ETF Edge” this week. “When the equity market goes down, gold mining stocks remember that they’re equities, and they tend to go down with the general level of the equity market. So, they’re not offering me that extra level of protection.”
Milling-Stanley’s firm runs two exchange-traded funds that track the performance of the spot price of gold: the SPDR Gold Shares ETF (GLD) and SPDR Gold MiniShares Trust (GLDM).
They’re differentiated by their gross expense ratios — 0.40% for GLD and 0.10% for GLDM — and it’s this key distinction that also differentiates the type of investor they attract, according to Milling-Stanley.
“If you are someone who wants to trade … or if you want to be a tactical player — that means you need to be able to move very, very quickly — then GLD’s liquidity after 20 years now means that that has very, very low trading costs compared to any other gold ETF,” he said. “If you have a million dollars and you want to put a million dollars into gold and leave it out there, then GLDM with its lower expense ratio makes more sense for you.”
As of Thursday’s close, GLD and GLDM were both up 15% year to date.

Bullion, bitcoin and boomers

The notion that gold is a “fuddy-duddy” investment no longer rings true, according to Milling-Stanley. State Street’s 2023 Gold ETF Impact Study found that millennials had greater portions of their portfolios allocated in gold than older generations. 
The metal’s popularity among younger investors comes as bitcoin continues to attract assets from both millennials and Generation Z. A Policygenius survey published this week found that millennials were more likely to own bitcoin than any other generation, and Gen Z was more likely to own bitcoin than stocks, bonds or real estate.
But Milling-Stanley pushed back on the idea that gold and bitcoin are competing for assets across the board.
“Bitcoin may well be some competition for the people who want to take a tactical position in gold and just wait for the price to go up and sell. I think that bitcoin may well offer competition there,” he said. “But I don’t think that bitcoin really competes in terms of a long-term strategic allocation, and that’s where I think gold really comes into its own.”
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The evolving picture on interest rates — dubbed “higher for longer” as expectations for rate cuts this year shift from a once-anticipated six reductions to perhaps three – will boost revenue for big banks while squeezing many smaller ones.
JPMorgan Chase, the nation’s largest lender, kicks off earnings for the industry on Friday, followed by Bank of America and Goldman Sachs next week.
The focus for all of them will be how the shifting view on interest rates will impact funding costs and holdings of commercial real estate loans.

Traders work on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., February 7, 2024.
Brendan Mcdermid | Reuters

The benefits of scale will never be more obvious than when banks begin reporting quarterly results on Friday.
Ever since the chaos of last year’s regional banking crisis that consumed three institutions, larger banks have mostly fared better than smaller ones. That trend is set to continue, especially as expectations for the magnitude of Federal Reserve interest rates cuts have fallen sharply since the start of the year.

The evolving picture on interest rates — dubbed “higher for longer” as expectations for rate cuts this year shift from six reductions to perhaps three – will boost revenue for big banks while squeezing many smaller ones, adding to concerns for the group, according to analysts and investors.
JPMorgan Chase, the nation’s largest lender, kicks off earnings for the industry on Friday, followed by Bank of America and Goldman Sachs next week. On Monday, M&T Bank posts results, one of the first regional lenders to report this period.
The focus for all of them will be how the shifting view on interest rates will impact funding costs and holdings of commercial real estate loans.
“There’s a handful of banks that have done a very good job managing the rate cycle, and there’s been a lot of banks that have mismanaged it,” said Christopher McGratty, head of U.S. bank research at KBW.

Pricing pressure

Take, for instance, Valley Bank, a regional lender based in Wayne, New Jersey. Guidance the bank gave in January included expectations for seven rate cuts this year, which would’ve allowed it to pay lower rates to depositors.

Instead, the bank might be forced to slash its outlook for net interest income as cuts don’t materialize, according to Morgan Stanley analyst Manan Gosalia, who has the equivalent of a sell rating on the firm.
Net interest income is the money generated by a bank’s loans and securities, minus what it pays for deposits.
Smaller banks have been forced to pay up for deposits more so than larger ones, which are perceived to be safer, in the aftermath of the Silicon Valley Bank failure last year. Rate cuts would’ve provided some relief for smaller banks, while also helping commercial real estate borrowers and their lenders.
Valley Bank faces “more deposit pricing pressure than peers if rates stay higher for longer” and has more commercial real estate exposure than other regionals, Gosalia said in an April 4 note.
Meanwhile, for large banks like JPMorgan, higher rates generally mean they can exploit their funding advantages for longer. They enjoy the benefits of reaping higher interest for things like credit card loans and investments made during a time of elevated rates, while generally paying low rates for deposits.
JPMorgan could raise its 2024 guidance for net interest income by an estimated $2 billion to $3 billion, to $93 billion, according to UBS analyst Erika Najarian.
Large U.S. banks also tend to have more diverse revenue streams than smaller ones from areas like wealth management and investment banking. Both should provide boosts to first-quarter results, thanks to buoyant markets and a rebound in Wall Street activity.

CRE exposure

Furthermore, big banks tend to have much lower exposure to commercial real estate compared with smaller players, and have generally higher levels of provisions for loan losses, thanks to tougher regulations on the group.
That difference could prove critical this earnings season.
Concerns over commercial real estate, especially office buildings and multifamily dwellings, have dogged smaller banks since New York Community Bank stunned investors in January with its disclosures of drastically larger loan provisions and broader operational challenges. The bank needed a $1 billion-plus lifeline last month to help steady the firm.
NYCB will likely have to cut its net interest income guidance because of shrinking deposits and margins, according to JPMorgan analyst Steven Alexopoulos.
There is a record $929 billion in commercial real estate loans coming due this year, and roughly one-third of the loans are for more money than the underlying property values, according to advisory firm Newmark.
“I don’t think we’re out of the woods in terms of commercial real estate rearing its ugly head for bank earnings, especially if rates stay higher for longer,” said Matt Stucky, chief portfolio manager for equities at Northwestern Mutual.
“If there’s even a whiff of problems around the credit experience with your commercial lending operation, as was the case with NYCB, you’ve seen how quickly that can get away from you,” he said.

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