Finance

NICOLAI TANGEN brings an unusual set of skills to the task of leading the world’s largest sovereign-wealth fund. In addition to a career in finance, the head of Norges Bank Investment Management (NBIM), which oversees Norway’s oil fund of $1.4trn, holds degrees in art history, economics and social psychology. Mr Tangen’s public profile and his musings on leadership, decision-making and cross-disciplinary learning have been admired by many Norwegians in his first year on the job. But the task of running Norway’s gargantuan piggy-bank is likely to become only more difficult in coming years.A fraught appointment process first thrust Mr Tangen into the limelight. The controversy centred on his potential conflicts of interest with AKO Capital, the $20bn hedge fund he founded. After months of heated public debate he transferred his stake in the firm to charity before taking the helm at NBIM.Having paid a hefty price for his job, Mr Tangen is determined to make his mark on the fund. Early in his tenure he announced three priorities: communication, talent development and returns. Mr Tangen communicates far more often with the public and the media than his predecessors, in an effort to make the workings of the fund more transparent. In January NBIM began publishing how it would vote at annual shareholder meetings five days ahead of the proceedings. Meanwhile, the publicity generated by his appointment has resulted in a surge in job applications to the fund, says Mr Tangen. He has also hired a sports psychologist in order to bolster his employees’ emotional resilience to the ups and downs of markets.It is the performance of the fund, however, that matters most. NBIM is given an investment mandate and an equities-bonds split by the ministry of finance. Over time the allocation towards stocks has risen to around 70% today (see chart). In return, income streams from the oil fund finance about a quarter of Norway’s annual budget. Performance has held up so far: the fund posted an annual return of 9.4% in the first half of this year (though in the third quarter it gained only 0.1% compared with the previous three months). Since it was established in 1996 the investment pot has delivered, on average, 0.25% of excess returns a year over a benchmark index of global equities and bonds.Mr Tangen has wriggle room within the confines of his mandate. The sheer size of the fund means that even small tweaks can make a big difference to returns, in cash terms. For a long time the investment pot was run much like an index fund owning, on average, 1.4% of every listed company in the world. But in April Mr Tangen announced a greater emphasis on a more active strategy called “negative selection”, which involves selling stakes in companies that look especially risky. He wants to strengthen the fund’s forensic-accounting team to root out fraud. (Even before Mr Tangen took over, the fund had cannily reduced its exposure to Wirecard, a German payments firm that imploded after a hole in its finances was exposed.)Mr Tangen, who says he plans his life in discrete chunks like a Communist apparatchik, expects to stay in his job for five years. The rest of his tenure is likely to hold several challenges. The biggest worry by far is inflation, which could hit the value of both the fixed-income and the equities portions of the fund’s portfolio. A period of low real returns looms, especially as politicians have little appetite for the fund to invest in opaque private assets, which may fare better in inflationary times.Lower returns as well as a more active approach could complicate the communications challenge. Espen Henriksen of the Norwegian Business School in Oslo worries that frequent hobnobbing with the public distracts Mr Tangen from “deep, principled thinking about asset management”. NBIM was such a political and financial success, Mr Henriksen reckons, because it oversaw a de facto index fund for so long. A more active strategy could leave the sovereign-wealth fund more open to criticism.Another concern is political interference, says Karin Thorburn of the Norwegian School of Economics. Politicians have previously been content to leave the fund to get on with making money. But Norway’s centre-left government, which came to power in September, seems to take a different view. In his first interview since the election Jonas Gahr Store, the prime minister, said that the fund was “political”, as it belonged to the Norwegian people and its mandate was set by parliament.The ruling party has made clear its intention to encourage NBIM to do more to reduce its portfolio companies’ greenhouse-gas emissions. This happily dovetails with Mr Tangen’s desire to be a responsible investor and, he says, need not jeopardise the fund’s returns. The danger, however, is that political influence does not stop there, and that it begins to hurt performance. Those lessons in psychological resilience could well prove handy in the years to come. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter.This article appeared in the Finance & economics section of the print edition under the headline “Point of low returns?” More

Check out the companies making headlines in premarket trading.
Snowflake — The cloud data company’s shares jumped more than 13% after the company reported quarterly results that beat revenue estimates. Snowflake also reported sales of $334 million during the third quarter, which exceeded the $306 million expected by analysts surveyed by Refinitiv.

Boeing — Shares of the aircraft maker rose 4.4% after China’s aviation regulator cleared the Boeing 737 Max to return to flying on Thursday. That model was grounded for more than two years worldwide after two fatal crashes.
Signet Jewelers — Shares of Signet Jewelers gained about 3% in the premarket after the company posted a better-than-expected earnings report. Signet notched a profit of $1.43 per share, 71 cents higher than the Refinitiv consensus estimate. Revenue also came in higher than projected. Signet raised its fiscal 2022 guidance.
Apple — Shares of Apple fell 3% after the company told some of its suppliers there could be slowing demand for iPhone 13 models, according to a report by Bloomberg. It previously expected the reduction in its initial production goal to be made up in 2022 but said that may not materialize now.
Five Below — The retailer’s shares gained more than 9% after reporting quarterly results that beat on both earnings and revenue. It also reported an increase in comparable-store sales of 14.8%, smashing the estimates of 5.3%, according to Refinitiv.
Okta — Shares of the identity company added 2.5% following the company’s quarterly results. Okta brought in a quarterly loss of 7 cents per share, which is narrower than the 24 cents per share loss estimated by analysts. It also beat revenue estimates and issued fourth-quarter guidance above estimates.

Lands’ End — Lands’ End saw its shares sink more than 14% in early morning trading after reporting lower-than-expected third-quarter revenue. The apparel retailer posted revenue of $375.8 million versus the StreetAccount consensus estimate of $398 million. Lands’ End earned 22 cents per share, in line with projections. The company also issued fourth-quarter earnings and revenue guidance below expectations.
Dollar General — Dollar General shares fell 1.7% after the company revealed plans to open 1,000 Popshelf stores by the end of the 2025 fiscal year. The vision for Popshelf, aimed at wealthier suburban shoppers, was announced a year ago. There are currently 30 Popshelf stores in six states.
— CNBC’s Hannah Miao contributed reporting.

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East Tech West

Fierce rivalry between Chinese internet tech giants meant that for years, consumers buying products on Alibaba’s Taobao e-commerce app could only pay with Alipay.
Tencent’s WeChat Pay vice-general manager, Lei Maofeng, said Wednesday he hoped consumers will soon be able to use the mobile payment app in all scenarios.
He was speaking at CNBC’s annual East Tech West conference in the Nansha district of Guangzhou, China.

A QR code for digital payment services WeChat by Tencent and Alipay by Ant Group, an affiliate of Alibaba Group, is displayed at a parking lot on December 27, 2020, in Yichang, Hubei province of China.
Wang Jianfeng | Visual China Group | Getty Images

GUANGZHOU, China — Barriers between China’s tech rivals like Alibaba and Tencent are coming down as Chinese companies rush to comply with Beijing’s crackdown on alleged monopolistic practices.
Mobile pay took off in the last decade to become the dominant form of consumer payment in mainland China, surpassing cash and credit cards. Tencent’s WeChat Pay and Alipay — run by Alibaba affiliate Ant Group — are the most popular, covering the majority of the mainland population of 1.4 billion people.

But fierce rivalry between the companies meant that for years, consumers buying products on Alibaba’s Taobao e-commerce app could only pay with Alipay. That’s about to change, according to a Tencent executive.
“As for payment, we also hope in the near future, in all places, users can freely choose. It’s also a show of fairness,” Lei Maofeng, vice-general manager of WeChat Pay, referring to more platforms in China.
He was speaking in Mandarin Wednesday at CNBC’s annual East Tech West conference in the Nansha district of Guangzhou, China.
Lei did not name specific apps or share a specific timeframe, and did not respond directly to a question on whether WeChat Pay was in discussions with Alibaba.

However, Lei pointed out that WeChat announced Monday that users can now share links from external sites, including Taobao.

Previously, users of WeChat — the ubiquitous social messaging app in mainland China — could not directly share a link to a product on Alibaba-run Taobao. Instead, users could only copy and paste a jumble of keyboard symbols from a Taobao product page into WeChat. Copying and pasting the same combination of symbols into Taobao would bring the user to the product page.
A test by CNBC on Thursday found that the share function on Taobao now allowed users to send a product page link to WeChat — along with some promotional text.
WeChat is looking for other ways to keep users engaged with its app beyond mobile pay and messaging. These functions include automatically deducting a shipping charge once a courier has retrieved a package for shipment, eliminating the need for the user to pay manually, Lei told CNBC.

WeChat Pay comes to some Alibaba apps

Several Alibaba apps, including food delivery app Ele.me and video platform Youku, have already started allowing WeChat Pay. Alipay was still the only payment option on Taobao and Tmall as of Thursday morning local time.
JD.com’s e-commerce app supported WeChat Pay, a domestic version of Apple Pay, and a number of Chinese credit cards as of Thursday morning. Tencent has a nearly 17% stake in JD, according to S&P Capital IQ.
Small business owners in China have complained in the past that an e-commerce site or food delivery app from one company would not allow them to operate simultaneously on another platform. Even if they managed to do so, the businesses might face higher fees.
Since late last year, the Chinese government has sought to limit alleged monopolistic practices by internet technology companies, notably by slapping a record $2.8 billion fine on Alibaba for such behavior.

— CNBC’s Arjun Kharpal contributed to this report.
Correction: The headline has been changed to accurately reflect that the executive who spoke to CNBC was from WeChat Pay. An earlier version misrepresented his title. Lei also said he hopes its payments business can be available on more platforms in future. More

Payments giant Square will change its corporate name to Block, effective Dec. 10.
The move comes as Square expands beyond its original credit card-reader business, with a focus on new technologies such as blockchain.
Square CEO Jack Dorsey stepped down from his role as Twitter CEO on Monday.

Square is renaming itself Block as it focuses on technologies such as blockchain and expands beyond its original credit card-reader business.
Jack Dorsey’s payments giant said in an announcement that the new name, effective Dec. 10, “acknowledges the company’s growth” and “creates room for further growth.” Block will still trade under the ticker SQ on the New York Stock Exchange.

“We built the Square brand for our Seller business, which is where it belongs,” Dorsey, cofounder and CEO, said in a statement. “Block is a new name, but our purpose of economic empowerment remains the same. No matter how we grow or change, we will continue to build tools to help increase access to the economy.”

Jack Dorsey (L), CEO of Square and CEO of Twitter, live casts video while standing outside the New York Stock Exchange for the IPO of Square, in New York November 19, 2015.
Lucas Jackson | Reuters

Dorsey co-founded Square in 2009 with a focus on in-person payments and its namesake card reader, which let people accept credit card payments on a smartphone. San Francisco-based Square has since added a peer-to-peer digital banking app and small business lending, received a bank charter and begun offering crypto and stock trading. The company has acquired buy-now-pay-later provider Afterpay and Jay-Z’s music streaming service Tidal. It’s also doubling down on bitcoin with a crypto-focused business called TBD.
As part of the Square rebrand, Square Crypto, a separate part of the company “dedicated to advancing Bitcoin,” will change its name to Spiral.
The name Block “has many associated meanings for the company — building blocks, neighborhood blocks and their local businesses, communities coming together at block parties full of music, a blockchain, a section of code, and obstacles to overcome,” Block said in a statement.
Dorsey stepped down from his other job as Twitter CEO on Monday after running both Twitter and Square since 2015. He said he believes Twitter is “ready to move on from its founders” and he will now have more time to dedicate to Square’s growing portfolio. But Dorsey is also expected to focus on his fascination with cryptocurrency.

The news comes roughly a month after Facebook changed its name to Meta to reflect CEO Mark Zuckerberg’s plan to build a virtual world called the metaverse. Google famously renamed itself Alphabet six years ago in a similar move to reflect other lines of business.
Square was one of the biggest winners of 2020 as consumers shifted to digital payments. Shares are down roughly 2% so far this year, as investors rotate away from higher-growth tech names.
Correction: Square (now Block) trades on the NYSE.

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U.S. stock index futures inched higher during overnight trading on Wednesday, after the CDC confirmed the first known case of the omicron variant in the U.S., sending stocks tumbling.
Futures contracts tied to the Dow Jones Industrial Average gained 72 points. S&P 500 futures advanced 0.2%, while Nasdaq 100 futures added 0.25%.

During regular trading the Dow fell about 460 points, or 1.34%. Earlier in the session the 30-stock benchmark had advanced 521 points, or 1.5%. The S&P dipped 1.18%, giving back an earlier gain of about 1.9%. The Nasdaq Composite slid 1.83%, after earlier trading 1.8% higher.
Stocks drifted from their morning highs after Fed Chairman Jerome Powell said that he expects policymakers to discuss the possibility of a faster taper schedule at the meeting this month.
“At this point, the economy is very strong and inflationary pressures are higher, and it is therefore appropriate in my view to consider wrapping up the taper of our asset purchases, which we actually announced at the November meeting, perhaps a few months sooner,” he said in a Congressional testimony. “I expect that we will discuss that at our upcoming meeting.”
But selling accelerated when the CDC confirmed that the omicron variant has made its way to the U.S., with the first confirmed case in California.
“Investors are increasingly cautious about the Omicron variant as well as the likelihood of faster tapering,” TD Securities said in a note to clients.

Travel-related stocks were especially hard hit as investors feared that the omicron variant could lead to stricter travel requirements. Cruise companies, airlines and hotel stocks all finished the session deeply in the red.

Wednesday’s whipsaw continues a highly volatile streak for stocks as the market digests what the new variant means.
“We’ve seen this movie before and Wall Street will likely remain COVID-variant headline driven until a clear assessment over this wave can be made,” said Ed Moya, senior market analyst at Oanda. “The next couple of weeks will likely see risk appetite take a cue from incremental Omicron updates, supply chain issues, and every inflation reading,” he added.
On the data front, weekly initial jobless claims numbers will be released Thursday at 8:30 a.m. ET. Economists are expecting a print of 240,000, according to estimates from Dow Jones. The prior reading showed 199,000 first-time filers, which was the lowest since November 1969. The November jobs report will be released on Friday.
Thursday’s reading follows a better-than-expected ADP report on Wednesday. Private payrolls increased by 534,000 in November, ahead of the expected 506,000.
While the bulk of the third-quarter earnings season is over, there are still some companies posting quarterly results. Dollar General, Kroger and Signet Jewelers report on Thursday before the opening bell. Ulta Beauty, Marvell Technology and Ollie’s Bargain Outlet are among the names on deck for after the market closes.

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An overall view of the Snowflake IPO banner on the front of The NYSE as employees of the tech company celebrate the largest tech IPO in exchange history, Sept. 16, 2020.
Kostas Lymperopoulos | CSM | AP

Check out the companies making headlines in after hours trading:
Square — The payments company said Wednesday evening that it will change its name to Block. The name change will go into effect on Dec. 10, and comes as the company expands into new technologies, including blockchain. The stock advanced 1% during extended trading.

Five Below — Shares of the retailer jumped 10% after the company beat top- and bottom-line estimates during the third quarter. Five Below earned 43 cents per share, which was ahead of the 29 cents analysts were expecting, according to estimates from Refinitiv. Revenue came in at $608 million, also ahead of the expected $565 million.
Snowflake — Snowflake shares jumped more than 11% after the company beat revenue estimates. The company reported sales of $334 million during the third quarter, which was ahead of the $306 million analysts surveyed by Refinitiv were expecting.
Splunk — Shares of the technology name dipped 1% following Splunk’s third-quarter earnings. The company lost 37 cents per share. Analysts were expecting a loss of 52 cents, according to data from StreetAccount.

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It’s the largest U.S. bank yet to end the industry practice of charging customers a hefty fee, typically $25 to $35 each instance, for allowing transactions that exceed a customer’s balance, according to the McLean, Virginia-based lender.
The move will cost the bank an estimated $150 million in lost revenue per year, according to a company spokesperson.
Customers who paid the fees will be automatically rolled over into a free overdraft protection service early next year, the bank said. Those who opt out of the service will simply have overdrawn transactions declined at no fee.

Capital One CEO and Chairman, Richard Fairbank.
Marvin Joseph| The Washington Post | Getty Images

Capital One says it is eliminating all overdraft fees for retail banking customers.
It’s the largest U.S. bank yet to end the industry practice of charging customers a hefty fee, typically $25 to $35 in each instance, for allowing transactions that exceed a customer’s balance, according to the McLean, Virginia-based lender.

The move will cost the bank an estimated $150 million in lost revenue per year, according to a company spokesperson.
“We will completely eliminate overdraft and non-sufficient funds (NSF) fees for all Capital One consumer bank customers,” CEO Rich Fairbank told the bank’s employees Wednesday in a memo, calling it a “first for major banks in the U.S.”
For years, banks have been under pressure from consumer advocates to eliminate overdraft fees because they often punish those who can least afford to pay them: Americans struggling to make ends meet. The rapid growth and surging valuations of a new crop of fintech-enabled digital banks with no-fee models has added pressure to the industry, however.
In June, Ally Bank said that it was dropping the punitive fees. Other banks including PNC Bank and Bank of America introduced features that make it less likely for a customer to trip into an overdraft, without eliminating the revenue source completely.
While Ally is an online-only bank without physical branches, Capital One maintains about 350 physical locations and 70,000 ATMs in states including New York, New Jersey, Texas, Maryland and Virginia.

Overdraft fees are a lucrative revenue source for the industry, and one that has been difficult for big banks to drop. The industry reaped more than $14 billion in overdraft fees in 2019, Fairbank said in the employee memo. Capital One took in $131 million in service charges and other customer fees in the first nine months of 2021, according to disclosures.
Sen. Elizabeth Warren has lambasted the industry, and JPMorgan Chase and its CEO Jamie Dimon in particular, on the unpopular fees. When confronted by Warren this year on the matter, Dimon refused to end the practice.
CNBC asked the four biggest U.S. banks by assets if they were reconsidering their overdraft policy.
A Wells Fargo spokesman said Wednesday that the lender “continues to evaluate our products and services, including overdraft services, as the marketplace evolves.” The bank also offers no-overdraft accounts and automated features like alerts that make the fees less likely, he said.
A JPMorgan spokeswoman said the bank ended non-sufficient funds fees and increased the amount that customers can overdraft before a fee kicks in. “These changes reflect our continuous efforts to offer the best, most competitive products and services our customers want,” the bank said.
Before the policy change, which will start in January, Capital One charged customers $35 overdraft fees, capped at four such fees per day, or up to $140 daily. Then, in August, the bank capped overdraft fees at one daily and eliminated NSF fees, the bank said.
Customers who dip into overdraft fees often inadvertently trigger a cascade of such fees, compounding the financial hit, industry advocates have said.
“This move by Capital One will have tremendous benefits for the most vulnerable consumers,” Lauren Saunders, associate director of the National Consumer Law Center, said in a statement. “It’s critical we keep working to make the banking system more inclusive and fair for all.”
Now, when Capital One customers attempt transactions that dip beyond their balances, they will mostly use the bank’s free overdraft protection service, the bank said. Customers who paid the fees will be automatically rolled over into the service early next year, it said. Those who opt out of the service will simply have overdrawn transactions declined at no fee.
Similar to fintech firms like Chime that pioneered a feature that extends up to $200 in no-fee overdraft protection, Capital One customers have to demonstrate a stream of steady deposits to qualify for the service.
“We expect the vast majority of current bank customers, as well as the vast majority of overdraft users, to be eligible for free overdraft protection,” Fairbank said. “The same is true for our low and moderate income customers.”
Capital One was co-founded by Fairbank and started out as a credit card company in the 1990s before branching out into auto loans and deposits. It has $425.4 billion in total assets, good for a top 10 rank among U.S. retail banks.

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The Consumer Financial Protection Bureau is increasing oversight of banks with a heavy reliance on overdraft fees for revenue, the agency said Wednesday.
Banks earned more than $15 billion from such charges in 2019, according to the CFPB. The fees largely impact families who can least afford to pay them, according to agency director Rohit Chopra.
Capital One said Wednesday it will eliminate overdraft fees in 2022 and lose $150 million in annual revenue.

Rohit Chopra, director of the Consumer Financial Protection Bureau.
Alex Edelman/Bloomberg via Getty Images

The Consumer Financial Protection Bureau is cracking down on banks charging fees for customers who overdraw their checking accounts, the bureau announced Wednesday.
The financial watchdog is planning a “range of regulatory interventions” targeting firms that rely heavily on overdraft fees as a revenue source, Rohit Chopra, director of the CFPB, said in a press call.

Overdrafts occur when customers don’t have enough funds in their accounts to cover a transaction. Banks may allow the transaction to proceed, but charge a fee to cover the cost.
Charging for overdrafts and non-sufficient funds is a big money maker for banks, and has continued during the Covid-19 pandemic, Chopra said. Banks earned more than $15 billion from such charges in 2019, a figure that has risen steadily, according to the bureau.
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The fees, typically around $34 for each overdraft, largely impact families who can least afford them, Chopra said.
“Banks, especially big banks, continue to rely on overdraft and [non-sufficient funds] fees as a major source of revenue,” Chopra said. “Rather than competing on transparent upfront pricing, large financial institutions are still hooked on exploitative junk fees that can quickly drain a family’s bank account.”

The CFPB, a federal agency created by the Dodd-Frank financial reform law in the aftermath of the Great Recession, will increase its oversight of banks “heavily dependent” on overdraft fees, according to the Wednesday announcement.
Officials didn’t quantify what constitutes heavy reliance on overdraft fees. The agency will tell firms how they measure against peers, Chopra said.

The market won’t solve this on its own.

Rohit Chopra
director of the Consumer Financial Protection Bureau

The agency’s oversight will come via additional supervisory and enforcement scrutiny, according to the bureau.
The agency will take action against large banks with overdraft practices that violate the law, and officials will prioritize examinations of banks heavily reliant on overdrafts, Chopra said.
Officials declined to outline whether it will take additional steps to curb the practice.
Banks continued to charge overdraft fees during the Covid-19 pandemic, and shareholders enjoy a predictable, steady revenue stream from them, Chopra said.

Three banks — JPMorgan Chase, Wells Fargo and Bank of America — accounted for about $5 billion of total overdraft fees collected in 2019, representing 44% of the fees collected by banks with over $1 billion in assets, according to the CFPB.
Of course, not all banks charge customers for overdrafts. For example, Ally Bank, an online bank, got rid of overdraft fees earlier this year. And other firms, including PNC Bank and Bank of America, have made it tougher for customers to overdraw their accounts.
Capital One said Wednesday that it is eliminating all overdraft fees for retail banking customers starting in 2022. It’s the largest U.S. bank yet to end the industry practice. The bank expects to lose $150 million in annual revenue as a result.
Chopra said he’s not expecting other banks to follow in the near term.
“The market won’t solve this on its own,” Chopra said. “We have a clear market failure here,” he added.

However, Rob Nichols, president and CEO of the American Bankers Association, a trade group, said the consumer bureau’s assessment “paints an unrecognizable picture” of institutions and their overdraft fees.
Many banks provide overdraft-free account options and preventative services such as text alerts about low balances, Nichols said.
“Banks remain committed to ensuring their customers understand and make informed choices about their overdraft options,” said Nichols. “Under federal rules, customers can only receive debit card and ATM overdraft protection by opting in, and they can opt out at any time.”
A small share of households account for the bulk of overdraft revenue. About 9% of consumer accounts pay 10 or more overdrafts per year, accounting for close to 80% of all overdraft revenue, according to the CFPB.
The bureau will also “harness technology” to make it easier for customers to change banks, a difficult task due to the need to update information like automatic debits with many sources, Chopra said. He advocated for an “open banking infrastructure” in the future to make this easier, but didn’t detail how or when this might come to fruition.
(Correction: The market share of overdraft revenue for three large banks was misstated by the CFPB in an earlier version of this story. The agency has since amended the figures.)

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