Uncle Sean's Update - 4/16/21

Happy Friday!!!!
 
No surprise that Big Bank earnings and Crypto dominated the news this week - Here is the Uncle Sean Update for 4/16/21:

• The Big 4 banks (JPMorgan Chase, Wells Fargo, Citigroup, and Bank of America) all reported 1Q2021 earnings this week.  Spoiler alert - they all beat Revenue and EPS estimates.  Two Key Financial Takeaways:  1) As expected, continued credit provision release is the theme, for an aggregate total of $13.3B for the quarter (Uncle Sean is well-known as a “credit risk superfreak”), but still holding on to substantial credit reserves totaling almost $80B as opposed to $44B pre-pandemic (Dec 2019).  As a result, I expect even more significant release of credit provision going forward as overall credit quality continues to remain stable (fingers-crossed); and 2) Net Interest Margin (NIM) for the Big 4 are all at record lows of 1.9% - 2.0% range – not totally surprising with Fed Rates at zero, but extremely relevant nonetheless (check out this Historical NIM Report from The St. Louis Fed showing industry averages at a 40 year low).  Based on these two points, future bank earnings could prove to be very impressive as additional credit reserves are released (hopefully), loan growth comes back, and interest rates inevitably rise (moderately and over time, of course - LOL) giving reprieve to Net Interest Margins.  You can check out their specific investor decks here - JPM, WF, Citi, BOA.  I really love investor decks WAAAYYY too much!!!!

 

• Coinbase (NASDAQ: COIN) began their highly anticipated Nasdaq debut this week with a reference price of $250 per share, opening at $381 per share, and hit an initial intraday high of $429 before ending their first trading day at $328 per share.  As a cool note, Coinbase granted 100 shares prior to trading (about a $33K value based on first day closing price alone) to each of their approximately 1,700 full time employees as a "thank you".  WOW!!!!

 

• Gary Gensler gets the nod as SEC chairman with a 53-45 Senate vote.  This Politico article labels Gensler as “a battle-tested Wall Street watchdog”.  Look for Gensler to tackle ESG disclosures, digital currencies (one of his specializations as a professor at MIT), SPACs, and payment for order flow.

 

• Credit card issuer, Synchrony Financial, and Gap, Inc. are mutually parting ways after a 22 year credit card relationship once the current contract expires in April 2022.  The portfolio covers approximately 11 million card accounts and represents about $3.8B (5%) of Synchrony’s loan receivables.  Gap is replacing Synchrony with Barclays for their private label and co-branded cards; and will also be switching networks for the co-branded cards from Visa to Mastercard.

 

• Now this gets interesting….  And of course it’s Robinhood – again LOL….  Just before Christmas we talked about Robinhood being sued by Massachusetts state regulator for “gamification of investing” and not focusing on their customers best interest by exposing them to “unnecessary trading risks” by “falling far short of the fiduciary standard.”  Well, this story is back and gets even more entertaining – oops I mean interesting…  The State of Massachusetts Securities Division has now sued Robinhood again and is seeking to revoke Robinhood's broker-dealer license.  On their blog, Robinhood responds by filing a preliminary injunction to prevent the case from proceeding.  Robinhood goes on to mention how much they “love Massachusetts and our Massachusetts customers” – but I bet you that Vlad Tenev isn’t going to rush out and buy a house there anytime soon – LOL!!!!

 

• Another intriguing development in the crypto CBDC space is China’s new digital yuan as referenced in this Newsweek article.  China’s central bank digital currency (CBDC) plans may push the US to some form of response (possibly a USD CBDC sooner rather than later, but who knows).  The Newsweek article lists one of the many concerns is that China could potentially use their CBDC to conduct financial transactions outside of the SWIFT network with countries currently under international sanctions (such as Iran and North Korea).

 

• ConsenSys raised $65M formation round aimed at further developing decentralized finance and other applications on the Ethereum blockchain network.

 

• Hatch launched their business debit card (Mastercard issued by LendingClub Bank) and announced that they have raised $20M in funding.

 

• Routable (business payments platform) raised $30M in Series B funding.

 
 
Random Uncle Sean Stuff:

• In remembrance of Prince Phillip, check out a few of these really nice collections of his life in pictures:  BBC, BuzzFeed, The Washington Post
  • Hey – a dapper & dashing mid-1940’s Duke of Edinburgh looks very similar to our very own FedFis FinTech Strategist and Head of Sales, Mr. Bobby Button!!!
• Gonna fire up the big smoker (Ole Nelly) this weekend and smoke some Salmon and maybe even some beef tri-tip….  Y’all come on over!!!!!

 
 
Have a GREAT weekend and please stay safe!!!
 
Uncle Sean
 
 
Sometimes known as Sean Mayo – contact me directly for scope and pricing of custom reports / analysis projects at smayo@fedfis.com | 214-604-6961 – or you can contact FedFis Sales Team at 512-960-0911 | info@fedfis.com #FedFisHasTheData FedFis
 
FedFis, LLC disclaimer – The views and opinions of Uncle Sean are of his own and may not necessarily represent the views, endorsements, and/or opinions of FedFis, LLC – we all know he’s a little bit different; but that’s why we love him.
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