Finance

Here are the numbers: Earnings: $10.81 a share vs. $11.76 estimate, according to Refinitiv
Revenue: $12.64 billion vs. $12.08 billion estimate.

David M. Solomon, Chairman and CEO of Goldman Sachs, speaks during the Milken Institute’s 22nd annual Global Conference in Beverly Hills, April 29, 2019
Mike Blake | Reuters

Goldman Sachs on Tuesday 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.    
Here are the numbers:

Earnings: $10.81 a share vs. $11.76 estimate, according to Refinitiv
Revenue: $12.64 billion vs. $12.08 billion estimate.

The bank said quarterly profit fell 13% from a year earlier to $3.94 billion, or $10.81 a share, below the $11.76 estimate of analysts surveyed by Refinitiv. While analysts had anticipated that a slowdown in trading would impact the quarter, equities desks posted revenue that was $300 million below the $2.43 billion estimate.
Still, companywide revenue in the quarter jumped 8% from a year earlier to $12.64 billion, more than $500 million above the consensus estimate, on gains in investment banking and wealth management.
Just as at rivals JPMorgan Chase and Citigroup, Goldman Sachs saw expenses rise in the quarter as the firm had to pay employees more after another year of outperformance.
Goldman said operating expenses in the quarter jumped 23% to $7.27 billion, exceeding the $6.77 billion estimate of analysts surveyed by FactSet. The bank cited “significantly higher” pay and benefits for its employees, technology expenses and $182 million set aside for litigation and regulatory costs, compared with $24 million in the year-earlier period.
Shares of the bank dropped 4.1% in premarket trading.

Goldman Sachs has thrived during the past two years — a booming period in capital markets that suited the bank’s Wall Street-centric business model.
Now, how will CEO David Solomon’s bank navigate the next phase?
The question is timely because the red-hot trading markets of the past year are expected to cool down in 2022. Fixed income trading in particular is expected to decline in the fourth quarter.
That’s expected to be offset by robust investment banking revenue amid a high rate of mergers and SPAC deals. Analysts will be keen to ask Solomon how the transaction pipeline looks in early 2022.
While trading revenue is expected to normalize from a record period, retail banks have gained favor with investors lately. That’s because big bank peers like Wells Fargo and Bank of America are expected to prosper as interest rates rise.
Goldman’s nascent retail banking business is still a relatively small contributor to its bottom line, but analysts will want to know how management expects to capture emerging opportunities in fintech.
Besides its Marcus consumer banking division, with loans, savings and a personal finance app, that includes a new corporate cash management offering and Goldman’s foray into cloud computing for hedge fund clients.
Shares of Goldman have fallen less than 1% this month before Tuesday after jumping 45% last year.
Last week, JPMorgan Chase, Citigroup and Wells Fargo all posted fourth-quarter results that topped estimates, but shares of JPMorgan and Citigroup sold off on higher-than-expected expenses. Bank of America and Morgan Stanley close out big bank earnings on Wednesday.  
This story is developing. Please check back for updates.

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U.K. Finance Minister Rishi Sunak plans to bring crypto ads under the same rules that apply to financial promotions.
The government says it will introduce legislation to amend existing laws on financial advertising.
Ads for crypto flooded London’s underground rail network and buses last year amid rising interest in bitcoin and other digital currencies.

The crypto ecosystem has expanded significantly in recent years. While institutions such as the IMF are starting to embrace its innovation, they are also calling for investors to exercise caution.
Jakub Porzycki | NurPhoto via Getty Images

LONDON — The U.K. government says it will bring cryptocurrency ads under tighter scrutiny and crack down on “misleading” claims that may cause investors to lose money.
Finance Minister Rishi Sunak plans to bring the ads under the same rules for financial promotions, according to proposals announced Tuesday.

The government will introduce legislation to amend existing laws on financial advertising to include crypto. The regime requires firms to be authorized by regulators if they want to promote investment products.
The Financial Conduct Authority, a U.K. watchdog tasked with regulating financial firms, will soon start consulting on their proposed financial promotions rules for cryptocurrencies, the government said.
“Cryptoassets can provide exciting new opportunities, offering people new ways to transact and invest — but it’s important that consumers are not being sold products with misleading claims,” Sunak said in a statement.
The FCA has attracted criticism for not taking action against crypto ads, which flooded London’s underground rail network and buses in the past year as interest in bitcoin and other digital currencies has risen.
The FCA warns cryptocurrencies are not regulated, and that people investing in them should be prepared to lose all their money. While the regulatory body doesn’t have any say over the crypto market specifically, it is getting tougher on companies operating in the sector.

Last June, the watchdog hit Binance, the world’s largest crypto exchange, with a sharp warning saying the firm is not authorized to undertake any regulated activity. While Binance can still sell its services to U.K. residents through its website, it must show a notice explaining its British unit is not regulated.
Tuesday’s announcement means the FCA will eventually have the power to clamp down on crypto ads.
British fintech firm Revolut, which offers trading in crypto and stocks, said it welcomes the news.
“Clear guidance in how companies describe their crypto offering will benefit consumers and help improve trust in the sector,” said Ed Cooper, Revolut’s head of crypto. “Revolut continues to follow the financial promotions rules in its crypto communications.”
Britain’s Advertising Standards Authority has already taken action against several crypto adverts. The regulator banned seven ads in December from companies including Coinbase and Papa John’s for “irresponsibly taking advantage of consumers’ inexperience.”
It also blocked a promotion from the crypto exchange Luno, which encouraged people to buy bitcoin without warning of the risks involved in trading cryptocurrencies. The ASA also said it is on “red alert” over the issue.
While bitcoin had a stellar year in 2021, climbing almost 60%, it and other digital tokens are notoriously volatile. They’ve been known to rise or fall more than 10% in a single day.
Bitcoin is currently down about 40% from an all-time high of nearly $69,000, which it hit in November.

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Check out the companies making headlines before the bell:
Alibaba (BABA) – Alibaba fell 3.8% in the premarket after a Reuters report said the Biden administration was reviewing the China-based company’s cloud unit to see if it poses a risk to US national security. The probe is said to focus on how the e-commerce giant stores the data of US clients.

Citrix Systems (CTXS) – Citrix jumped 2.8% in premarket trading following a Bloomberg report saying Elliott Investment Management and Vista Equity Partners were in advanced talks to buy the software company.
23andMe (ME) – The genetic testing company’s shares initially rallied 6% in the premarket after announcing that drug maker GlaxoSmithKline had exercised its option to extend a partnership with 23andMe. The company will receive a one-time $50 million payment as part of that agreement. The stock subsequently lost its gains and fell 1.4%.
Goldman Sachs (GS) – Goldman Sachs fell 2.2% in the premarket after reporting a mixed fourth quarter. Goldman earned $10.81 per share for the quarter, compared with a consensus estimate of $11.76, although revenue beat analyst forecasts.
Gap (GPS) – Gap tumbled 5.4% in premarket trading after Morgan Stanley downgraded the apparel retailer’s stock to “underweight” from “equal-weight,” saying it expects margins for Gap and other mall-based specialty retailers to revert back to the declining path seen pre-pandemic.
Credit Suisse (CS) – Credit Suisse chairman Antonio Horta-Osorio resigned after he reportedly violated Covid-19 protocols on multiple occasions. Horta-Osorio’s departure comes after just eight months with the bank. Credit Suisse fell 3.4% in premarket trading.

Unilever (UL) – Unilever tumbled 9.8% in premarket action after the consumer products company made a $68 billion bid for GlaxoSmithKline’s (GSK) consumer health business. That bid was the third in a series of offers to acquire the unit, but all were rejected by Glaxo as undervaluing the business. GlaxoSmithKline shares jumped 2.6%.
Kohl’s (KSS) – Activist investor Macellum Advisors is renewing its push for the retailer to increase shareholder value. Macellum holds a roughly 5% stake in Kohl’s, and is telling Kohl’s that it either needs to change its board or hire bankers to explore a possible sale or other transaction. Kohl’s rose 1% in the premarket.
Houghton Mifflin Harcourt (HMHC) – The stock surged 8.3% in the premarket following a Bloomberg report said the education materials publisher is exploring a possible sale of the company. The stock rose 4.5% Friday after the report first surfaced.
Peloton (PTON) – Peloton will begin charging for setup and delivery of its bicycles and treadmills starting January 31, services that had previously been included in the sales price. Peloton will charge $250 for setup and delivery of its bicycles and $350 for its treadmills. The stock fell 2.2% in premarket trading.

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Cumulative digital yuan transactions have reached 87.57 billion yuan ($13.68 billion), Zou Lan, director of the PBOC financial markets department, told reporters.
That means digital yuan transactions totaled 53.1 billion yuan in the second half of last year, based on CNBC calculations of previously released figures.
The central bank began testing the digital yuan about two years ago, but limited access and incentive for use have kept transaction value well below that of dominant mobile pay apps like Alipay.

A sign for China’s digital currency, the electronic Chinese yuan (e-CNY) is displayed at a shopping mall in Shanghai on March 8, 2021.
STR | AFP | Getty Images

BEIJING — In a country where consumer payments are measured in the trillions, China’s digital yuan has made little headway, according to 2021 figures released by the central bank on Tuesday.
The People’s Bank of China began conducting trials of the digital yuan in the last two years. Since then, cumulative transactions in the currency have reached 87.57 billion yuan ($13.68 billion), Zou Lan, director of the PBOC’s financial markets department, told reporters.

That means digital yuan transactions totaled 53.1 billion yuan in the second half of 2021, based on CNBC calculations of previously released figures.
For context, Ant Group’s Alipay disclosed in 2020 that monthly payment volume averaged 10 trillion yuan. The company is an affiliate of Alibaba that operates one of China’s two dominant apps for mobile pay, and has become the dominant form of consumer payment on the mainland.
Alipay said it had about 711 million monthly active users as of June 2020.

New users climb

China’s digital yuan users have increased faster than transaction volume has.
The number of individual digital yuan users climbed to 261 million as of the end of 2021, an increase of 240.13 million from the end of June, according to the PBOC.

Still, the digital yuan’s wider availability and government promotions could encourage greater use.
Earlier this month, the bank started allowing the general public to download a pilot version of the digital yuan app from the Android and Apple app stores, for users in 10 Chinese cities.
Before offering the digital yuan to the general public, the central bank’s initial tests were only open to users selected by lottery. Once invited, residents of certain cities could use digital yuan vouchers to buy products at designated stores within certain time periods.
— CNBC’s Arjun Kharpal contributed to this report.

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Billionaire investor Chamath Palihapitiya said during a recent podcast episode that “nobody cares” about the ongoing human rights abuses against the Uyghurs in China.
The abuse of Uyghurs and members of other Muslim minorities in the region has been described as “widespread, state-sponsored forced labor” and “mass detention.”
Palihapitiya went on to say that he cared about supply chain issues, climate change, America’s crippled healthcare system as well as the potential economic fallout of a Chinese invasion of Taiwan.
“Of all the things that I care about, it is below my line,” Palihapitiya said of the Uyghurs’ plight.

Venture capitalist Chamath Palihapitiya.
Mark Kauzlarich/Bloomberg via Getty Images

WASHINGTON – Billionaire investor Chamath Palihapitiya triggered a backlash on social media after saying during a recent episode of his podcast that “nobody cares” about the ongoing human rights abuses against the Uyghurs in China.
During a 90-minute episode, Palihapitiya told co-host Jason Calacanis on their “All-In” podcast that he would be lying if he said that he cared about the Uyghurs, an ethnic Muslim minority in China’s northwest region of Xinjiang.

“Every time I say that I care about the Uyghurs, I’m really just lying if I don’t really care. And so, I’d rather not lie to you and tell you the truth, it’s not a priority for me,” said Palihapitiya, a venture capitalist who owns 10% of the NBA team the Golden State Warriors.
The team wrote in a statement Monday that Palihapitiya “does not speak on behalf of our franchise, and his views certainly don’t reflect those of our organization.”
The duo began talking about the Uyghurs when Calacanis praised President Joe Biden’s foreign policy approach to China.
For months, the Biden administration has previously described the abuse of Uyghurs and members of other Muslim minorities in the region as “widespread, state-sponsored forced labor” and “mass detention.” The Biden administration has also warned businesses with supply chain and investment ties to Xinjiang that they could face legal consequences.
In July, that warning manifested as a joint advisory from the Departments of State, Treasury, Commerce, Homeland Security and Labor, along with the Office of the U.S. Trade Representative. The most-pointed line from the Xinjiang Supply Chain Business Advisory states that “businesses and individuals that do not exit supply chains, ventures, and/or investments connected to Xinjiang could run a high risk of violating U.S. law.”

The Chinese government has previously denied any wrongdoing or human rights abuses in Xinjiang.
About 15 minutes into the podcast, Calacanis pointed to the Biden administration’s steps to curb and address China’s sweeping human rights abuses when the following conversation ensued:
Calacanis: His [President Biden’s] China policy, the fact that he came out with a statement on the Uyghurs, I thought it was very strong.
You know, it’s one of the stronger things he did, but it’s not coming up in the polls.
Palihapitiya: Let’s be honest, nobody, nobody cares about what’s happening to the Uyghurs, okay? You bring it up because you really care. And I think that’s really nice that you care but …
Calacanis: What? What do you mean nobody cares?
Palihapitiya: The rest of us don’t care. I’m just telling you a very hard truth.
Calacanis: Wait, you personally don’t care?
Palihapitiya: I’m telling you a very hard truth, okay? Of all the things that I care about. Yes, it is below my line. Okay, of all the things that I care about it is below my line.
Calacanis: Disappointing.
Palihapitiya went on to say that he cared about supply chain issues, climate change, America’s crippled health-care system as well as the potential economic fallout of a Chinese invasion of Taiwan.
He later clarified his remarks in a Monday evening tweet, saying he recognizes that he came across as “lacking empathy.”
“As a refugee, my family fled a country with its own set of human rights issues so this is something that is very much a part of my lived experience,” said Palihapitiya, who was born in Sri Lanka. “To be clear, my belief is that human rights matter, whether in China, the United States, or elsewhere. Full stop.”
Last month, the White House announced a diplomatic boycott of the 2022 Winter Olympics in Beijing, citing “ongoing genocide and crimes against humanity in Xinjiang and other human rights abuses.”
Governments, civil society groups and United Nations officials have previously expressed concern over Beijing’s harsh measures of repressing those who criticize the Chinese Communist Party.

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Traders work on the floor of the New York Stock Exchange (NYSE) in New York, January 12, 2022.
Brendan McDermid | Reuters

U.S. stock futures were little changed Monday night as traders braced for the latest batch of corporate earnings reports.
Futures tied to the Dow Jones Industrial Average ticked higher by 33 points, or 0.1%. S&P 500 futures rose 0.1%, and Nasdaq 100 futures slipped marginally. U.S. markets were closed Monday due to the Martin Luther King holiday.

The shortened trading week will feature quarterly reports from 35 companies in the S&P 500, including Bank of America, UnitedHealth and Netflix. Goldman Sachs is also set to post its most-recent quarterly figures Tuesday before the bell.
Major banks Wells Fargo, JPMorgan Chase and Citigroup kicked off the earnings season on Friday, with the three companies posting better-than-expected profits. However, the market’s reaction to those results was mixed. Wells Fargo shares posted a gain on the back of those results, but JPMorgan Chase and Citigroup slid.
Overall, 26 S&P 500 companies have reported calendar fourth-quarter earnings thus far, according to Refinitiv. Of those companies, nearly 77% posted bottom-line results that beat analyst expectations.

Stock picks and investing trends from CNBC Pro:

“The economic backdrop to the fourth quarter was positive, boding well for profit and revenue growth,” UBS Global Wealth Management CIO Mark Haefele said in a note last week. “Guidance from companies also looks set to point to continued demand strength in 2022, even if omicron is disrupting some businesses right now.”
The spread of the omicron Covid-19 variant has raised questions over the state of the global economic recovery ever since news of its discovery broke. Some countries and regions reinstated lockdowns and other social distancing measures to curb the outbreak.

However, recent data indicates the spread may be easing. In New York the seven-day average of daily new cases has been falling since hitting a record earlier this month, according to data compiled by Johns Hopkins University. In Maryland, daily infections are down 27% week over week. Cases are also falling in South Africa and the UK.

Rocky start to the year

Monday’s moves come as equities have struggled to start 2022.
The Dow, S&P 500 and Nasdaq Composite are all down for the year amid concerns over the recent inflationary surge and the prospect of tighter monetary policy from the Federal Reserve.
Philadelphia Fed President Patrick Harker told CNBC last week that the central bank could raise rates three or four times this year. He noted that inflation is “more persistent than we thought a while ago.”
Tech, the biggest S&P 500 sector by market cap, has been hit especially hard this year, falling more than 4%. Big Tech names like Meta Platforms, Amazon, Netflix, Alphabet and Apple are all down year to date.
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Online payment processor Stripe has signed a five-year deal with Ford aimed at bolstering the auto giant’s e-commerce strategy.
Ford will also use Stripe to route a customer’s payments to the correct local Ford or Lincoln dealer.
The tie-up marks one of the biggest client wins yet for Stripe, and forms part of Ford’s turnaround plan under CEO Jim Farley.

A Ford F-150 pickup truck is offered for sale at a dealership on September 6, 2018 in Chicago, Illinois.
Scott Olson | Getty Images

Online payment processor Stripe has signed up Ford Motor Company as a customer, in a five-year deal aimed at bolstering the automotive giant’s e-commerce strategy.
Ford Motor Credit Company, the carmaker’s financial services arm, will use Stripe’s technology to process digital payments in markets across North America and Europe, the companies said in a statement Monday.

Stripe will handle transactions for consumer vehicle orders and reservations, as well as bundled financing options for Ford’s commercial customers. The automaker also plans to use Stripe to route a customer’s payment from its website to the correct local Ford or Lincoln dealer.
The tie-up marks one of the biggest client wins yet for Stripe, and forms part of Ford’s turnaround plan under CEO Jim Farley, who took the helm in October 2020.
Founded in 2010 by Irish brothers Patrick and John Collison, Stripe is the most valuable start-up in Silicon Valley, with a $95 billion valuation. The company sells software that makes it simple for businesses of all shapes and sizes to accept payments over the internet.
The firm, which makes money by taking a small cut on each transaction it processes, counts the likes of Shopify, Salesforce and Deliveroo as customers. But it faces growing competition from rival fintechs such as Adyen and Checkout.com, which was valued at $40 billion in a $1 billion funding round last week.
“We are making strategic decisions about where to bring in providers with robust expertise and where to build the differentiated, always-on experiences our customers will value,” Marion Harris, CEO of Ford Motor Credit Company, said in a statement.

Ford expects to start rolling out Stripe’s technology in the second half of 2022, starting with North America.
“During the pandemic, people got comfortable paying online for groceries, health care, even home haircut advice from barbers,” said Mike Clayville, Stripe’s chief revenue officer. “Now, they expect to be able to buy anything and everything online.”  
Ford’s market capitalization topped $100 billion for the first time last week, as investors cheered the firm’s electric vehicle strategy and its Ford+ restructuring plan. The company was the best-performing auto stock in 2021, beating the likes of Tesla and General Motors.
Stripe, meanwhile, is still privately held. There’s long been speculation about when the company will go public. A Bloomberg report in September said Stripe had held talks with investment banks about going public as soon as 2022. But John Collison, Stripe’s president, told CNBC a month later that the company is “very happy” staying private.
Stripe hired Dhivya Suryadevara, the former chief financial officer of General Motors, as its finance chief in August 2020.
– CNBC’s Michael Wayland contributed to this report

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Horta-Osorio took over as chairman of Switzerland’s second-biggest lender in April last year, with a mission to clean up its corporate culture after its damaging involvement with collapsed investment firm Archegos Capital and insolvent supply chain finance company Greensill Capital.
These came on the back of a bizarre and protracted spying saga which ultimately led to the resignation of former CEO Tidjane Thiam, who was replaced by Thomas Gottstein.
Horta-Osorio, who was found to have committed multiple breaches of Covid-19 quarantine requirements in the U.K. and Switzerland, will be replaced by UBS executive Axel P. Lehmann.

The logo of Swiss bank Credit Suisse is seen at its headquarters in Zurich, Switzerland March 24, 2021.
Arnd Wiegmann | Reuters

LONDON — Credit Suisse Chairman Antonio Horta-Osorio resigned on Sunday after violating Covid-19 quarantine rules, the latest in a series of high-profile scandals that have rocked the Swiss bank in recent years.
Horta-Osorio took over as chairman of Switzerland’s second-biggest lender in April last year, with a mission to clean up its corporate culture after its damaging involvement with collapsed investment firm Archegos Capital and insolvent supply chain finance company Greensill.

These came on the back of a bizarre and protracted spying saga which ultimately led to the resignation of former CEO Tidjane Thiam, who was replaced by Thomas Gottstein.
Horta-Osorio, who was found by an internal investigation to have committed multiple breaches of Covid quarantine requirements in the U.K. and Switzerland, will be replaced by UBS executive Axel P. Lehmann. Credit Suisse has insisted that its strategic overhaul, announced in November and which includes a scaling back of its investment banking business, will continue undeterred.
Analysts told CNBC Monday that the bank had made the right call in removing Horta-Osorio, and that Lehmann was a wise appointment as the firm looks to deliver stability.
Bruno Verstraete, managing partner at Zurich-based asset manager Lakefield Partners, said Lehmann was a choice that represented the stability the bank needs, given his wealth of experience in risk management.
“One can only hope that the scandals will fade over time, and that they will be able to turn the nose of the ship in the right direction, away from the storm. It is about time, that is clear,” Verstraete told CNBC.

However, some emphasized that the problems run deeper than one individual, with the bank facing a litany of legal issues.
“I think the job at hand for Credit Suisse over the coming months and year is frankly to repair its risk management, to repair its reputation, and obviously one factor that needs to be looked at carefully is, can it retain its talent?” said Bob Parker, investment committee member at Quilvest and former senior advisor at Credit Suisse.
“One thing that happened after Archego was that a number of talented people in the investment bank left the firm.”
Share price woes
Credit Suisse’s share price has taken a substantial hit over the past 12 months, and analysts have pointed to the divergence from the performance of its domestic rival UBS as an indication that investors remain skeptical about the turnaround.
Credit Suisse is down more than 24% over the past year and was last trading at 9.37 Swiss francs ($10.25) per share on Monday morning, while UBS has gained more than 31% in the past 12 months to trade at around 18 Swiss francs per share.
“I think the performance of the share price in recent months clearly reflects the view by investors that a number of these legacy issues are going to take time to repair, and I think that is probably right,” Parker said.

Beat Wittmann, chairman of Zurich-based Porta Advisors, told CNBC that Credit Suisse will need to rebuild its reputation over time through changing its business practices and demonstrating leadership by example, rather than seeking quick PR victories or “culture-washing.”
“The price performance difference between Credit Suisse and UBS is 50% — not five, 50% — and therefore the shares are cheap, but for many reasons cheap,” Wittmann said.
However, he suggested that if the new chairman and management team can deliver stability and a strategic redirection with “discipline and focus,” then Credit Suisse shares are a “big buy” at their current valuations.
“Key shareholders like Harris Associates, Dodge & Cox etc., have suffered for many years, and the general public as well, so it’s all in the hands of management and the board to get this done. It’s absolutely possible to get it done,” he said.
What does the future hold?
Credit Suisse’s third-quarter revenues were strong and the bank beat profit expectations despite a hit from charges related to settling allegations of corruption in Mozambique, along with several other legal issues.
Wittmann highlighted that along with sound financial fundamentals, Credit Suisse is operating against a very supportive macro backdrop.
“For banking businesses, the last year was one of the best years on record in terms of rising risk assets, record M&A activity, basically all factors aligned and in favor of such a bank,” he said.
Given the potential that could be unlocked should the revamp go as planned and the low share price, Wittmann said he would not be surprised to see strategic buyout efforts being launched for Credit Suisse, noting that “the European landscape is overdue for consolidation,” as several regulators have pointed out.

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