Finance

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Check out the companies making headlines in midday trading.
Casino stocks — Las Vegas Sands and Wynn Resorts saw their shares jump 14.1% and 8.6%, respectively, after the Macau government said the number of casinos allowed to operate there would remain limited at six. Licenses of the current operators – which include Wynn Macau, Sands China and MGM China – are set to expire this year. Shares of MGM Resorts slipped slightly.

JPMorgan Chase — Shares of the major bank fell 6.1%, dragging down the major equity averages. The sell-off came after the firm posted its smallest quarterly earnings beat in nearly two years and the lender’s chief financial officer lowered guidance on companywide returns. CFO Jeremy Barnum said on a conference call that management expected “headwinds” of higher expenses and moderating Wall Street revenue.
Wells Fargo — The bank stock jumped 3.6% after the company posted quarterly revenue that exceeded analysts’ expectations and a significant jump in profit. Results were helped by a $875 million reserve release that the bank had set aside during the pandemic to safeguard against widespread loan losses.
Citigroup — Citi shares lost 1.2% despite the company reporting a beat on quarterly earnings and revenue. However, the bank also reported net income for the latest quarter dropped 26% to $3.2 billion, citing an increase in expenses.
BlackRock — Shares of the asset manager fell 2.1% after the company reported a quarterly revenue miss of $5.11 billion, versus expectations of $5.16 billion, according to FactSet’s StreetAccount. The company beat earnings estimates, however, and grew its assets under management to above $10 trillion.
Monster Beverage — Shares of Monster Beverage fell 4.7% a day after the company revealed plans to acquire CANarchy Craft Brewery Collective, a craft beer and hard seltzer company, for $330 million in cash. The deal would bring brands such as Jai Alai IPA, Florida Man IPA, Wild Basin Hard Seltzer and others to the Monster beverage portfolio.

Boston Beer Company — The alcoholic beverage company’s shares slid 8.1% a day after the brewer cut its annual earnings outlook, citing high costs related to supply chain issues and waning growth of its hard seltzer brand Truly.
Walt Disney Co — Disney shares dropped 2.2% after Guggenheim downgraded the stock to neutral from buy, citing slowing profit growth in streaming and parks. The firm also cut its price target on Disney to $165 from $205.
Sherwin-Williams — The paint company saw its shares fall 2.8% after it cut its full-year forecast, citing supply chain issues it expects will persist through the current quarter. Sherwin-Williams also said demand is still strong in most of its end markets.
Domino’s Pizza — Shares of Domino’s Pizza slid 1.7% after Morgan Stanley downgraded the restaurant chain stock to an equal weight rating. “DPZ still embodies many of the characteristics of a great long term growth compounder, we see limited justification for further multiple expansion, especially as DPZ’s sales growth will likely being to normalize after experiencing substantial Covid (and stimulus) benefits in 20/21,” Morgan Stanley said.
 — CNBC’s Yun Li and Hannah Miao contributed reporting

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Megabanks including JPMorgan Chase and Citigroup are disclosing that hot inflation in one area — employee wages — is casting a shadow over the next few years.
JPMorgan’s professional class in particular — trading personnel, investment bankers and asset management employees — have seen pay swell during two straight years of strong performance.
“Please don’t say I’m complaining about wages; I think wages going up is a good thing for the people who have the wages going up,” Jamie Dimon, the bank’s chairman, said. “CEOs shouldn’t be crybabies about it. They should just deal with it.”

Jamie Dimon, chief executive officer of JPMorgan Chase & Co.
Giulia Marchi | Bloomberg | Getty Images

Banks have been one of the main beneficiaries of high inflation recently because their profit margins tend to expand when higher prices force central banks to raise interest rates.
At least, that was the thinking as investors bid up bank shares while rates climbed and inflation reached multi-decade highs. Now, megabanks including JPMorgan Chase and Citigroup are disclosing that hot inflation in one area — employee wages — is casting a shadow over the next few years.

Shares of JPMorgan fell more than 6% on Friday after the bank said that expenses will climb 8% to roughly $77 billion this year, driven by wage inflation and technology investments. Higher expenses will likely push the bank’s returns in 2022 and 2023 below recent results and the lender’s 17% return-on-capital target, according to CFO Jeremy Barnum.
“We’ve seen a somewhat elevated attrition and a very dynamic labor market, as the rest of the economy is seeing,” Barnum said. “It is true that labor markets are tight, that there’s a little bit of labor inflation, and it’s important for us to attract and retain the best talent and pay competitively.”
The development adds nuance to the bull case for owning banks, which typically outperform other sectors in rising-rate environments. While economists expect the Federal Reserve to raise rates three or four times this year, boosting the finance industry, there is the risk that runaway inflation could actually wipe out those gains, according to Barnum.
“On balance, a modest inflation that leads to higher rates is good for us,” the CFO told analysts in a conference call. “But under some scenarios, elevated inflationary pressures on expenses could more than offset the rates benefit.”
Citigroup CFO Mark Mason said Friday that there was a “lot of competitive pressure on wages” as banks jostle for talent amid the boom in deals and trading activity.

“We have seen some pressure in what one has to pay to attract talent,” Mason said. “You’ve even seen it at some of the lower levels, I should say entry levels in the organization.”
At JPMorgan, the biggest U.S. bank by assets, it is the bank’s professional class in particular — trading personnel, investment bankers and asset management employees — who have seen pay swell after two straight years of strong performance. The company also raised wages at branches last year.
“There’s a lot more compensation for top bankers and traders and managers who I should say did an extraordinary job in the last couple years,” chairman and CEO Jamie Dimon told analysts during a conference call.  “We will be competitive in pay. If that squeezes margins a little bit for shareholders, so be it.”
Dimon said that while overall inflation would “hopefully” start to recede this year as the Fed gets to work, increases in “wages, and housing and oil are not transitory, they’ll stay elevated for a while.”
In fact, Dimon told analysts that wage inflation would be a recurring theme among corporations this year. Some companies will navigate the change better than others, he said.
“Please don’t say I’m complaining about wages; I think wages going up is a good thing for the people who have the wages going up,” Dimon said. “CEOs shouldn’t be crybabies about it. They should just deal with it. The job is to serve your client as best you can with all the factors out there.”

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Here are the numbers: Earnings: $3.33 a share vs. estimate $3.01, according to Refinitiv.
Revenue: $30.35 billion vs. estimate $29.9 billion.

JP Morgan CEO Jamie Dimon listens as he is introduced at the Boston College Chief Executives Club luncheon in Boston, Massachusetts, U.S., November 23, 2021.
Brian Snyder | Reuters

JPMorgan Chase on Friday posted profit that exceeded analysts’ expectations on a benefit from better-than-expected credit losses and as loan growth returned to parts of the firms’ business.
Here are the numbers:

Earnings: $3.33 a share, vs. estimate $3.01, according to Refinitiv.
Revenue: $30.35 billion, vs. estimate $29.9 billion.

Shares of the bank dipped 3.7% in premarket trading. JPMorgan said it took a $1.8 billion net benefit from releasing reserves for loan losses that never materialized; without that 47 cent per share boost, earnings would have been $2.86 per share.
After setting aside billions of dollars for loans losses earlier in the pandemic, JPMorgan benefited as it steadily released the funds as borrowers held up better than expected. But CEO Jamie Dimon has said he doesn’t consider the accounting benefit a core part of business results. Even when including the boost, JPMorgan posted the smallest earnings beat in the past seven quarters.
“The economy continues to do quite well despite headwinds related to the Omicron variant, inflation and supply chain bottlenecks,” Dimon said in the release. “Credit continues to be healthy with exceptionally low net charge-offs, and we remain optimistic on U.S. economic growth.”
While companywide revenue rose a modest 1% in the quarter to $30.35 billion as a slowdown in markets revenue was offset by robust investment banking fees, non-interest expenses shot up 11% to $17.9 billion on rising compensation costs, the bank said. That was higher than the $17.63 billion estimate of analysts surveyed by FactSet.
JPMorgan executives have previously talked about the need to invest in technology and pay employees after a booming year on Wall Street; still, analysts may ask management about the trajectory of expenses this year.

“JPMorgan’s results were surprisingly weak and were hampered by uncharacteristically poor expense management,” Octavio Marenzi, CEO of consultancy Opimas LLC, said in an emailed statement.
Government stimulus programs during the pandemic left consumers and businesses flush, resulting in stagnant loan growth and prompting Dimon to say last year that loan growth was “challenged.” But analysts have pointed to a rebound in the fourth quarter, driven by demand from corporations and credit card borrowers.
JPMorgan chief operating officer Daniel Pinto said last month during a conference that fourth-quarter trading revenue was headed for a 10% drop, driven by a decline in fixed income activity from record levels.
Trading revenue slowed further than expected, however, dropping 13% to $6.3 billion in the quarter, the bank said. That was driven largely by a slowdown on bond trading desks. Investment banking helped with a 37% jump in investment banking fees.
The bank was forced to pay $200 million in fines last month to settle charges that its Wall Street division allowed workers to use messaging apps to circumvent record keeping laws.  
Analysts may also ask the bank about the impact of its recent decision to rein in overdraft fees. JPMorgan said last month that it would give customers a grace period to avoid the punitive fees, a move that along with other changes will have a “not insignificant” hit to revenue.
Shares of JPMorgan have climbed 6.2% this year before Friday, lagging the 11.6% rise of the KBW Bank Index.  
This story is developing. Please check back for updates.

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Wells Fargo signage on May 5th, 2021 in New York City.
Bill Tompkins | Michael Ochs Archives | Getty Images

Wells Fargo shares rose on Friday after the bank posted quarterly revenue that exceeded analysts’ expectations and a significant jump in profit.
Shares of the bank climbed more than 2% in premarket trading following the earnings announcement.

Earnings per share: Adjusted $1.25 per share, excluding certain items, topping the consensus estimate of $1.13 per share from Refinitiv.
Revenue: $20.856 billion, topping consensus estimate of 18.824 billion, according to Refinitiv.
Net income: $5.75 billion, an 86% increase from $3.09 billion a year ago.

Results were helped by a $875 million reserve release that the bank had set aside during the pandemic to safeguard against widespread loan losses.
“As the economy continued to recover we saw increased consumer spending, higher investment banking fees, higher asset-based fees in our Wealth and Investment Management business, and strong equity gains in our affiliated venture capital and private equity businesses,” Wells Fargo CEO Charlie Scharf said in a statement.
Scharf also noted that after starting the year weak, lending began to pick up in the second half of 2021 with 5% growth in loans from its consumer and commercial portfolios in the final six months.
“We continued to manage credit well and the strong economic environment helped reduce charge-offs to historical lows and our results benefitted from reductions in our allowance for credit losses,” Scharf added.
After struggling for years, Wells Fargo finally has the wind at its back.

The fourth biggest U.S. bank by assets is considered by analysts to be one of the best plays for a rising interest rate environment because of its vast retail banking network and large deposit base. Rising rates allow banks to charge more for loans, fattening their profit margins.
The quarterly results showed it is not yet seeing that benefit with net interest income for the fourth quarter falling slightly to $9.26 billion from a year ago.
The bank repurchased 139.7 million shares, or $7.0 billion, of common stock in fourth quarter 2021.
The company’s stock bested peers last year, surging 59%, and the run has continued so far this year amid surging interest rates.
In November, the bank said it was “likely to experience issues or delays” in satisfying demands from multiple U.S. regulators. Most relevant to investors is the Federal Reserve’s edict forcing the bank to keep its balance sheet frozen at 2017 levels.
Wells Fargo shares have jumped 17% this year, exceeding the 11% rise of the KBW Bank Index.
— CNBC’s Hugh Son contributed reporting.

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Check out the companies making headlines before the bell:
BlackRock (BLK) – BlackRock earned an adjusted $10.42 per share for the fourth quarter, beating the consensus estimate of $10.16, although revenue for the asset manager was slightly below forecasts. Assets under management rose above the $10 trillion mark for the first time.

JPMorgan Chase (JPM) – JPMorgan beat estimates by 32 cents with quarterly earnings of $3.33 per share, while revenue topped forecasts as well. The bank was helped by strong performance at its investment banking unit, but results at its trading operation slowed. JPMorgan shares fell 2.7% in the premarket.
Wells Fargo (WFC) – Wells Fargo gained 2.3% in the premarket after beating estimates on the top and bottom lines for the fourth quarter. Wells Fargo earned an adjusted $1.25 per share, 12 cents above estimates. Overall profit was boosted by the release of loan loss provisions and improving loan demand.
Sherwin-Williams (SHW) – The paint company’s stock fell 3.3% in premarket action after it cut its full year forecast amid supply chain issues that it expects to persist through the current quarter. Sherwin-Williams did say demand remains strong in most of its end markets.
Macau casino stocks – Las Vegas Sands (LVS), Wynn Resorts (WYNN), Melco Entertainment (MLCO) and MGM Resorts (MGM) rallied in premarket trading after Macau’s government said it would limit the number of casino licenses to six. These companies are among the six operating in Macau, with their current licenses due to expire this year. Las Vegas Sands rocketed 10.7%, Wynn surged 10%, Melco soared 12.9% and MGM added 4%.
Walt Disney (DIS) – Disney lost 1.6% in premarket trading after Guggenheim downgraded the stock to “neutral” from “buy,” reflecting lowered predictions for Disney’s direct-to-consumer and parks businesses.

Boston Beer (SAM) – Boston Beer tumbled 8% in the premarket after the brewer cut its annual earnings outlook. The company is being hit by supply chain issues as well as waning growth for its Truly hard seltzer brand.
Virgin Orbit (VORB) – Virgin Orbit successfully launched seven small satellites Thursday, the first launch since the company went public last month. Shares gained 1.1% in premarket trading.
BJ’s Wholesale (BJ) – BJ’s shares lost 3% in premarket action after J.P. Morgan Securities downgraded the warehouse retailer’s stock to “underweight” from “neutral,” reflecting concerns about inflation and a pullback in stimulus measures for consumers.
Bausch Health (BHC) – Bausch Health rallied 3.2% in the premarket following news that its Bausch + Lomb eyecare unit filed to go public and that the unit reported a jump in sales for the nine months ended in September. Bausch Health will remain a majority owner of Bausch + Lomb.

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Budget electric car Hongguang Mini was the best-selling electric car in China last year, according to the China Passenger Car Association.
More expensive cars from Tesla and BYD dominated the top vehicles sold in the new energy vehicle category, which includes battery-powered and hybrid cars.
A relatively newcomer to the market, the low-priced, fully electric Nezha V SUV, took 15th place, and pushed three far more expensive Nio models even lower in the sales rankings.

A Neta (Nezha) V electric car is on display at the Hozon Auto stand during an auto show in Tianjin, China, on Oct. 4, 2021.
VCG | Visual China Group | Getty Images

BEIJING — Tesla and BYD remained by far the market leaders in China’s electric car market in 2021, while new competitors emerged against smaller rivals like Nio, according to the China Passenger Car Association.
Budget electric car Hongguang Mini retained the best-selling spot — more than tripling sales last year to 395,451 units, the association data showed Thursday.

But more expensive cars from Tesla and BYD dominated the top vehicles sold in the new energy vehicle category, which includes battery-powered and hybrid cars.
Here’s the list of top 15 best-selling new energy passenger cars, including SUVs, in China for 2021:
1. Hongguan Mini (SAIC-GM-Wuling)2. Qin (BYD)3. Model Y (Tesla)4. Model 3 (Tesla)5. Han (BYD)6. Song (BYD)7. Li One (Li Auto)8. eQ (Chery)9. Benben EV (Changan)10. Aion S (GAC Motor spin-off)11. Ora Black Cat (Great Wall Motor)12. P7 (Xpeng)13. Tang (BYD)14. Ora Good Cat (Great Wall Motor)15. Nezha V (Hozon Auto)
Three BYD models ranked among the top 10, with the BYD Qin sedan reaching sales of 187,227 units — and outselling all Tesla models.
Close behind the BYD Qin was Tesla’s Model Y, which launched in China last year and leaped to the top of the high-end new energy SUV category with 169,853 units sold in 2021, according to the association.

Tesla’s Model 3 came next, with 150,890 units sold last year, up nearly 10% from 2020, the data showed.

Some in China’s auto industry have cast doubt on the accuracy of the association’s figures. But the numbers can reflect broader trends.
Li Auto’s hybrid Li One made the top 10 list of new energy passenger cars, while Xpeng’s P7 sedan made the top 15.
A relatively newcomer to the market, the low-priced, fully electric Nezha V SUV took 15th place, and pushed three far more expensive Nio models even lower in the sales rankings.
Nezha is a brand under start-up Hozon Auto, and closed a 4 billion yuan ($625 million) funding round in the fourth quarter. Prices for the Nezha V start at 62,900 yuan ($9,722) after subsidies. In comparison, Nio’s ES6 SUV starts at 346,660 yuan after subsidies.

Read more about electric vehicles from CNBC Pro

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Exports rose by 20.9% year-on-year in U.S. dollar-terms, above the 20% increase forecast by a Reuters poll.
Imports grew by 19.5% in U.S. dollar-terms, missing expectations of a 26.3% increase.
China’s trade surplus with the U.S. was $396.58 billion, marking the second straight year the surplus has risen since a drop between 2018 and 2019 amid trade tensions with the U.S.

Containers sit at the Yangshan Port in Shanghai, China, Aug. 6, 2019.
Aly Song | Reuters

BEIJING — China’s exports grew slightly more than expected in December, while imports rose less than expected, according to customs data released Friday.
Exports rose by 20.9% year-on-year in U.S. dollar-terms, above the 20% increase forecast by a Reuters poll.

Imports grew by 19.5% in U.S. dollar-terms, missing expectations of a 26.3% increase.
December’s figure also marked a sharp slowdown from November, when imports rose by 31.7% year-on-year. Exports had grown by 22% year-on-year in November.
“We expect China’s exports to remain strong in Q1 because of resilient global demand and worsening pandemic in many developing countries,” Zhiwei Zhang, chief economist, Pinpoint Asset Management, said in a note.
“Currently the strong exports may be the only driver helping China’s economy. We expect infrastructure investment to be the second driver picking up in the next few months,” he said.

Read more about China from CNBC Pro

U.S. trade with China surges

The U.S. remained China’s largest trading partner on a single-country basis. Only two regions, the Association of Southeast Asian Nations and the European Union, traded more with China in 2021, the data showed.
Exports to the U.S. rose by 27.5% for the year to $576.11 billion, while imports grew by 32.7% to $179.53 billion for the year, customs data showed.
That meant for 2021, China’s trade surplus with the U.S. was $396.58 billion, marking the second straight year the surplus has risen since a drop between 2018 and 2019 amid trade tensions with the U.S.
China’s trade with Australia grew last year despite tensions between the two countries. Chinese exports to Australia rose by 24.2%, while imports climbed by 40%.

China’s crude oil imports in December rose by 19.9% year-on-year to 46.14 million tonnes, but were down for the year overall.
Imports of coal in December edged off a high in November as a power shortage eased, and were down 20.8% from a year ago to 30.95 million tonnes. Natural gas imports climbed by 3.8% from a year ago in December to 11.65 million tonnes.
China’s soybean imports grew by nearly 18% from a year ago in December to 8.87 million tonnes.

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Citigroup will sell its consumer banking businesses in Indonesia, Malaysia, Thailand and Vietnam to Singapore’s United Overseas Bank, the banks announced Friday.
UOB, which has a prominent presence in Southeast Asia, will pay Citigroup for the net assets of the acquired businesses as well as a premium of $690 million.
Approximately 5,000 Citi consumer banking staff and supporting employees in the four markets are expected to transfer to UOB when the proposed deal closes.

A Citibank branch in New York, U.S., on Friday, Jan. 7, 2022.
Victor J. Blue | Bloomberg | Getty Images

Citigroup will sell its consumer banking businesses in Indonesia, Malaysia, Thailand and Vietnam to Singapore’s United Overseas Bank, the banks announced Friday.
As part of the deal, UOB said it will acquire Citi’s unsecured and secured lending portfolios, wealth management and retail deposit units that make up its consumer banking business in the four markets.

UOB, which has a prominent presence in Southeast Asia, will pay Citigroup for the net assets of the acquired businesses as well as a premium of $690 million.
Citi’s consumer business had an aggregate net value of about 4 billion Singapore dollars ($2.97 billion) and a customer base of approximately 2.4 million as of June 30, 2021, UOB said.
The proposed transaction is expected to be financed through the bank’s excess capital and is estimated to reduce UOB’s common equity tier 1 ratio — which measures a bank’s capital in relation to its assets — by 70 basis points to 12.8%, UOB said. It added that the impact on the CET1 ratio is not expected to be material and will remain within regulatory requirements.

The sale of these four consumer markets, along with our previously announced transactions, demonstrate our sense of urgency to execute our strategic refresh.

Mark Mason
CFO, Citigroup

“UOB believes in Southeast Asia’s long-term potential and we have been disciplined, selective and patient in seeking the right opportunities to grow,” Wee Ee Cheong, deputy chairman and chief executive officer at UOB, said in a statement.
Approximately 5,000 Citi consumer banking staff and supporting employees in the four markets are expected to transfer to UOB when the proposed deal closes.

“The acquired business, together with UOB’s regional consumer franchise, will form a powerful combination that will scale up UOB Group’s business and advance our position as a leading regional bank,” Wee said.
UOB shares ticked higher by 1.23% Friday afternoon, following the announcement.

Citi said it expects the deal to release approximately $1.2 billion of allocated tangible common equity and an increase to tangible common equity of over $200 million. Tangible common equity is a measure used to assess a financial institution’s ability to deal with potential losses.
The New York-based bank will still retain control of its institutional businesses in Indonesia, Malaysia, Thailand and Vietnam.
Citigroup CEO Jane Fraser said last year that the bank will exit retail operations in 13 countries outside the United States to improve returns. Many of those markets are in Asia-Pacific, including Australia, China, India and Indonesia.
“The sale of these four consumer markets, along with our previously announced transactions, demonstrate our sense of urgency to execute our strategic refresh,” Citi CFO Mark Mason said in a statement on Friday.
Citi expects the deal to be completed between mid-2022 and early 2024, depending on the progress and outcome of regulatory approvals.
Last year, Citi said it agreed to sell its consumer banking businesses in the Philippines and Australia and was winding down consumer banking operations in South Korea.

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