Finance

Here are the numbers: Earnings: 82 cents a share vs. 76 cents a shares estimate, according to Refinitiv
Revenue: $22.17 billion vs. $22.2 billion estimate.

Brian Moynihan, chairman and chief executive officer of Bank of America Corp, speaks in New York City, September 25, 2019.
Shannon Stapleton | Reuters

Bank of America on Wednesday topped analysts’ estimates for profit on record asset management and investment banking fees and the release of $851 million in loan loss reserves.
Here are the numbers:Earnings: 82 cents a share vs. 76 cents a shares estimate, according to RefinitivRevenue: $22.17 billion vs. $22.2 billion estimate.

The lender said that fourth quarter profit rose 28% to $7.01 billion, or 82 cents a share, topping the 76 cents a share average estimate of analysts surveyed by Refinitiv. Revenue rose 10% to $22.17 billion, just under the $22.2 billion estimate.
The second biggest U.S. bank by assets said that credit quality improved during the quarter, allowing it to release the $851 million in reserves and book a nearly half billion dollar benefit after $362 million in chargeoffs. The bank said it was the lowest loss rate for loans in more than five decades.
Shares of the lender rose 3% in premarket trading.
Bank of America, led by CEO Brian Moynihan, had enjoyed tailwinds in recent months as rising interest rates and a rebound in loan growth promised to boost the industry’s profitability. But that narrative went off course after banks began disclosing the impact of wage inflation on results.
Bank of America said that noninterest expenses rose 6% to $14.7 billion on higher pay for its workers. That’s a smaller increase than at rivals; JPMorgan Chase said last week that expenses jumped 11% to $17.9 billion and Goldman Sachs said costs surged 23% to $7.27 billion in the quarter.

Analysts are likely to ask management about the impact of the bank’s recent decision to eliminate some fees and reduce overdraft charges to $10 from $35.
Shares of Bank of America have climbed 4% this year before Wednesday, underperforming the 8.6% gain of the KBW Bank Index.
JPMorgan and Citigroup each reported the smallest earnings beats in the last seven quarters, and Goldman Sachs missed estimates for fourth quarter profit because of elevated expenses. Wells Fargo has been the sole bright spot so far in bank earnings after it gave targets for higher interest income and lower expenses.  
This story is developing. Please check back for updates.

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After an assessment at the beginning of the year, ByteDance decided to “strengthen the focus of the business, reduce investments with low connection (to the main business) and disperse employees from the strategic investment department to various lines of business,” the spokesperson said in a Chinese-language statement translated by CNBC.
The news comes as ByteDance is undergoing restructuring since its founder Zhang Yiming stepped down as chairman in the fall.

TikTok logos are seen on smartphones in front of a displayed ByteDance logo in this illustration taken November 27, 2019.
Dado Ruvic | Reuters

BEIJING — TikTok owner ByteDance has disbanded its investment department, a company spokesperson told CNBC on Wednesday.
Following an assessment at the beginning of the year, ByteDance decided to “strengthen the focus of the business, reduce investments with low connection (to the main business) and disperse employees from the strategic investment department to various lines of business,” the spokesperson said in a Chinese-language statement translated by CNBC.

The move “strengthens the coordination between strategic research and the business,” the company said.
The news comes as ByteDance is undergoing restructuring since its founder Zhang Yiming stepped down as chairman in the fall. The company has created six business units to focus on different areas from gaming to enterprise software.
ByteDance, which is not publicly traded, is the world’s largest start-up valued at $140 billion, according to CB Insights.
Investments and acquisitions have been a key part of Chinese tech giants’ growth over the years. Companies like Alibaba and Tencent have snapped up smaller players at home and abroad.

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San Francisco-based SoFi got approval from its two key regulators to become a bank holding company.
Shares of the fintech spiked more than 16% in after-hours trading following the announcement.
“This important step allows us to add to our broad suite of financial products and services to better be there for our members during the major financial moments in their lives and all of the moments in between,” says CEO Anthony Noto.

Anthony Noto CEO of SoFi at the newly named SoFi Stadium under construction in Los Angeles.
Stephen Desaulniers | CNBC

Shares of SoFi rallied as more than 16% in after-hours trading on Tuesday following news that the fintech cleared its final regulatory hurdle in becoming a bank.
San Francisco-based SoFi received approval from the Office of the Comptroller of the Currency, or OCC, and Federal Reserve to become a bank holding company. The mobile-first finance company offers banking products including loans, cash accounts and debit cards. But it’s not technically a bank. Like many fintech companies, it relies on partnerships with FDIC-insured banks to hold customer deposits and issue loans.

In order to become a bank, SoFi plans to acquire California community lender Golden Pacific Bancorp and operate its bank subsidiary as SoFi Bank. The deal was announced last year and is expected to close in February.
While officially entering the banking business brings on more regulatory oversight, it also improves the company’s economics. By cutting out the middleman, SoFi gets a bigger slice of each transaction. CEO Anthony Noto said a national bank charter will allow lending at more competitive interest rates, and give SoFi customers higher-yielding accounts.
“This important step allows us to add to our broad suite of financial products and services to better be there for our members during the major financial moments in their lives and all of the moments in between,” Noto, a former partner at Goldman Sachs and formerly chief operating officer at Twitter, said in a statement.
SoFi has been on the hunt for a bank charter for more than three years. Before going the bank acquisition route, it filed application for the charter with the Office of the Comptroller of the Currency. The OCC granted preliminary approval in October.
The company went public last year by merging with a blank-check company run by venture capital investor Chamath Palihapitiya. Shares have been under pressure this year as investors rotate away from high-growth tech companies. As of the close Tuesday, shares were down 23% to start the year.

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Compensation costs at Goldman jumped 33% to $17.7 billion for 2021, a whopping $4.4 billion increase, executives said.
That made the average per-employee compensation reach about $404,000 in 2021, up from $329,000 in 2020.
The average employee pay figure distorts the reality at Goldman, where top producers are paid multi-million dollar packages while most staffers earn considerably less.

People walk along Wall Street in the rain on July 08, 2021 in New York City.
Spencer Platt | Getty Images

Wall Street firms are playing catch up with employee compensation, boosting pay in the second year of a deal-making and trading boom.
That’s what Goldman Sachs CEO David Solomon conceded on Tuesday during a conference call with analysts to discuss the bank’s fourth-quarter results. At one point during trading, shares of the bank had fallen more than 8% after a jump in quarterly expenses took investors by surprise.

Analysts peppered Solomon and new CFO Denis Coleman with questions about the elevated expenses and their expectations for the future. The jump in compensation costs disclosed across Wall Street for 2021 may have surprised analysts because in the prior year, the first of the pandemic, banks showed restraint on compensation.
“There is real wage inflation everywhere in the economy, everywhere,” Solomon declared, when asked by Deutsche Bank analyst Matt O’Connor if the recent pay gains were “catch-up” raises.
“There were definitely places where I think with hindsight and with the constantly evolving environment of Covid and supply chain changes, the monetary and fiscal policy environment, what they did to savings rates, etc., there was real” pressure on wages, Solomon said.
Compensation costs at Goldman jumped 33% to $17.7 billion for 2021, a whopping $4.4 billion increase fueled mostly by pay increases for good performance, executives said. That made the average per employee compensation reach about $404,000 in 2021, up from $329,000 in 2020.
The pay increase at Goldman largely tracked the year-over-year increase in non-interest revenues, a 33% jump to $52.9 billion, driven by a massive 55% gain in investment banking revenue. The story was different in 2020, when revenues climbed 24% and compensation rose just 8%.

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The average employee pay figure distorts the reality at Goldman, where top producers are paid multi-million dollar packages while most staffers earn considerably less. New hires are more likely to be made in lower-cost regions, the bank said. About 90% of workers added during the year were located outside of the financial capitals of New York, London and Hong Kong, the bank said.
Executives at JPMorgan Chase and Citigroup have made similar disclosures, saying that they were forced to pay up to retain valued employees. It makes sense that as inflation has hit nearly every type of good and service this year, it would eventually reach Wall Street personnel.
On Tuesday, Goldman’s CFO echoed those remarks, saying that the firm was “committed to rewarding top talent in a competitive labor environment.”
Management has the flexibility to quickly pivot and devote less capital to trading and lending should market conditions warrant it, the Goldman executives said.
“We’re not wrapped up in the quarter,” Solomon said. “We’re focused on our one, two, and three-year vision of how we can continue to drive the firm forward.”
Goldman employees will be told about their 2021 pay packages starting Wednesday this week, according to people with knowledge of the schedule.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York City, U.S., January 10, 2022.
Brendan McDermid | Reuters

U.S. stock futures were steady in overnight trading on Tuesday following a sell-off on Wall Street triggered by surging bond yields.
Dow futures rose just 10 points. S&P 500 futures gained 0.05% and Nasdaq 100 futures were flat.

On Tuesday, the Dow Jones Industrial Average lost more than 540 points, dragged down by a 7% drop in Goldman Sachs’ stock. The Wall Street bank missed analysts’ expectations for earnings as operating expenses surged 23%.
The S&P 500 declined 1.8%. The Nasdaq Composite, full of interest rate sensitive technology stocks, was the relative underperformer, dipping 2.6%. The Nasdaq closed at its lowest level in three months as investors feared how quickly the Federal Reserve will hike interest rates.
Bond yields continued their year-to-date climb on Tuesday with the 10-year Treasury topping 1.87%, its highest level in 2 years. The 10-year yield started the year around 1.5%. Meanwhile, the 2-year rate — which reflect short-term interest rate expectations — topped 1% for the first time in two years.
The move, which comes after a market holiday in the U.S. Monday, indicates that investors are preparing for the possibility of more aggressive tightening by the Federal Reserve.
The “2-year yield breaking above 1% is the bond market saying it agrees with the Fed that more aggressive hikes are coming,” said Ryan Detrick of LPL Financial. “Add those worries with crude flirting with $85 a barrel and stubbornly high inflation, and we have a perfect cocktail for a risk-off day.”

The S&P 500 ended the day nearly on top of its 100-day moving average. Jim Paulsen, chief investment strategist at the Leuthold Group, said traders will be watching if the index holds this level or breaks lower.
“With a light economic calendar this week, all eyes will be on key technical support levels, earnings reports and whether bond yields keep surging toward 2% or finally take a breather,” said Paulsen.
Bank earnings continue on Wednesday with reports from Bank of America and Morgan Stanley slated before the bell.
Of the 33 S&P 500 companies that have reported quarterly results, nearly 70% have topped Wall Street’s expectations.
Procter & Gamble, U.S. Bancorp, UnitedHealth and United Airlines also report quarterly earnings on Wednesday.

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A Peloton office sign is seen near a person riding a bicycle as the city moves into Phase 3 of re-opening following restrictions imposed to curb the coronavirus pandemic on July 16, 2020 in New York City.
Alexi Rosenfeld | Getty Images

Check out the companies making headlines in midday trading.
Activision Blizzard — The video game giant saw its shares soar by 25.8% after it announced Microsoft will buy it in a $68.7 billion all-cash deal, Microsoft’s largest acquisition to date. Activision CEO Bobby Kotick, who has faced calls to resign over cultural problems within the company, will remain CEO during the transition. Gaming companies Electronic Arts and Take-Two Interactive also rose 2.6% and 0.9%, respectively, and were among the top gainers in the S&P 500 in midday trading. Microsoft shares fell 2.4%.

Goldman Sachs — Shares of the investment bank dropped 6.9% following disappointing quarterly results, dragging down the major averages. Goldman posted fourth-quarter profit below analysts’ expectations as the bank’s operating expenses surged 23% on higher pay for Wall Street workers and increased litigation reserves. Other large banks fell Tuesday as well after reporting rising expenses for the quarter. Morgan Stanley and JPMorgan fell about 4%, while Citi slid 2.4%.
Bank of New York Mellon — The bank’s stock fell 1% despite reporting quarterly earnings that exceeded Wall Street analysts’ expectations. BNY Mellon reported $1.04 per share in its most recent quarterly earnings, compared with estimates of $1.01 cents. Revenue came in at $4.02 billion, versus expectations of $3.98 billion.
BlackRock — The asset manager saw its shares fall 1.9% after its CEO, Larry Fink, fired back at accusations that it uses its position to influence a politically correct agenda. In his annual letter. Fink said stakeholder capitalism isn’t about politics and is “not woke.”
Charles Schwab — The brokerage’s stock slid 3.5% after the company reported a quarterly miss on both earnings and revenue. Schwab reported earnings of 86 cents per share, falling short of estimates by 2 cents per share. Revenue came in at $4.71 billion, vs. expectations of $4.79 billion.
Gap — Shares of the retailer dropped 6.7% after Morgan Stanley downgraded Gap to underweight from equal-weight. The investment firm said in a note that rising cost pressures and strong competition could hurt Gap’s profit margins in 2022.

Citrix Systems — The enterprise software firm’s shares jumped 5.4% following a Bloomberg News report over the weekend that Elliott Investment Management and Vista Equity Partners are in advanced talks to buy Citrix. Both firms have reportedly tapped banks to finance their offer, and a deal could be announced within a few weeks.
Exxon Mobil — Shares of the oil giant gained 1.6% as oil prices jumped to the highest level in seven years. Through midday trading on Wall Street, energy stocks were the only S&P 500 sector to trade down by less than 1%, though Exxon was the only company from the group trading in the green. Exxon on Tuesday announced plans to reach net-zero emissions by 2050 for its operations.
Moderna — Shares fell 8.8% even after the vaccine maker said it expects to be able to share data from an Omicron-specific vaccine with regulators in March, CEO Stephane Bancel said at the World Economic Forum’s virtual Davos Agenda conference. He also said a single vaccine combining a booster dose against Covid-19 with its experimental flu shot would, in the best-case scenario, be available by fall 2023.
Peloton — The stock fell more 3.5% after CNBC reported the at-home fitness company is working with management consulting group McKinsey & Co. to review its cost structure and potentially cut some jobs. The news came after CNBC reported the company is set to charge delivery fees on its bike and treadmill products.
 — CNBC’s Pippa Stevens, Yun Li, Jesse Pound and Hannah Miao contributed reporting

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U.S. companies are expecting to pay an average 3.4% raise to workers in 2022, according to a Willis Towers Watson survey.
That growth would be higher than in 2020 and 2021 — and is expected across all types of positions, regardless of seniority.
Difficulty finding and retaining workers is the top reason cited for higher pay. Inflation and higher profits also are factors.

U.S. employers expect to pay an average 3.4% raise to their workers in 2022, according to a Willis Towers Watson survey.
That projected wage growth is faster than actual raises paid in the prior two years, amid a competition for workers and high inflation, according to the poll of 1,004 companies, conducted between October and November.

“Inflation is an element of it, but that’s not the sole factor,” said Lesli Jennings, senior director of work and rewards at Willis Towers Watson. “I think the bigger piece is about this race for talent.”
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What’s more, companies expect to pay similar average raises across positions, from entry level to more senior workers, Jennings said.

The ‘Great Resignation’

Job openings in the U.S. are near an all-time high as a record 4.5 million workers quit their jobs in November, a phenomenon that’s been dubbed the “Great Resignation.”
Ongoing public health fears surrounding Covid-19, as well as other factors such as child care duties, burnout and higher relative levels of savings amassed during the pandemic, have reduced the number of workers in the labor force, according to economists.

Labor shortages have been most acute for low-paying, in-person jobs — such as bar, restaurant and hotel positions in the leisure and hospitality sector.
Employers have increased wages to attract and retain employees amid the demand for labor. About 74% of companies cited the tight labor market as a reason to increase their budgeting for raises, according to the Willis Towers Watson survey.

Fewer companies (31%) cited inflation as a factor in higher estimated pay. The cost of living is growing at its fastest annual pace in about four decades, as the pandemic has snarled supply lines and led consumers to shift consumption toward more physical goods. Employers may feel the need to increase pay to help employees keep up with rising costs.
Corporate profits also jumped significantly in 2021, giving companies more bandwidth to expand pay for their employees. Just over a third of companies cited stronger anticipated financial results as a reason to boost pay.
Overall, 32% of companies increased their salary projections over the course of just a few months. In June 2021, for example, respondents had budgeted for an average 3% increase in worker pay this year, according to Willis Towers Watson.

Respondents paid a 2.8% raise to employees in 2021, on average.
Higher pay isn’t the only way companies are competing for workers; some are also focusing on career advancement, mental well-being programs and other workplace elements to keep employees happy and engaged, according to Jennings.

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Coinbase customers will be able to use Mastercard credit and debit cards to make purchases the crypto company’s upcoming NFT marketplace.
The deal is the latest in a flurry of crypto partnerships for Mastercard and Visa.
Bitcoin and other cryptocurrencies were created to get around banks and intermediaries. But payment giants have embraced the asset class as it becomes mainstream.

A 3D printed Mastercard logo is seen in front of displayed stock graph in this illustration taken September 20, 2021.
Dado Ruvic | Reuters

Mastercard said Tuesday it inked a deal with Coinbase, the latest in a recent flurry of partnerships between payment and cryptocurrency giants.
As part of the agreement, Coinbase customers will be able to use Mastercard credit and debit cards to make purchases on the crypto exchange’s upcoming NFT marketplace. Coinbase unveiled late last year plans to launch the platform for minting and buying nonfungible tokens, which have exploded in popularity over the past 12 months.

By teaming up with Mastercard, Coinbase executives said they’re looking to reduce friction in the NFT buying process. Right now, that often requires customers opening up a crypto wallet, buying digital currencies, then spending those on NFTs in an online marketplace. Mastercard, meanwhile, said it’s looking to help expand consumer choice on how to pay for NFTs.
“Getting more people involved safely and securely is perhaps the best way to help the NFT market thrive. As it does, Mastercard sees even greater potential for NFTs’ underlying tech to go beyond art and collectibles into many more areas,” Mastercard’s Raj Dhamodharan said.
Mastercard, one of the world’s largest credit card and payment companies, has been on a crypto partnership spree lately. Mastercard announced in October that it’s teaming up with Bakkt to let banks and merchants in its network offer crypto-related services. It has also partnered up with Gemini, BitPay and Mintable, among others.
Rival Visa has been equally active the crypto space. The company has more than 60 partnerships with companies in the space, including the one with Coinbase.
American Express has also said it’s exploring using its cards and network with stablecoins. But CEO Stephen Squeri recently told Yahoo Finance that consumers should not expect to see an Amex-crypto-linked card “anytime soon.”

Cryptocurrencies like bitcoin were first designed to get around banks and intermediaries. But banks and payment companies have embraced those technologies as cryptocurrencies become mainstream.
Mizuho Securities analyst Dan Dolev said in an email that Tuesday’s announcement as another example of Mastercard’s “out-of-the-box thinking” in its approach to crypto. Over the long-term, though, Dolev said blockchain technologies and decentralized finance “can be a threat to the overall network ecosystem as they are challenging the trusted third party concept.”
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