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On Tuesday, HSBC reported earnings that exceeded analyst expectations for the fourth quarter of 2022. The bank reported a profit before tax of $5.2 billion for the three months ended in December, a 108% increase from $2.5 billion a year earlier and higher than the $4.97 billion expected in estimates. HSBC said its fourth-quarter results reflect strong reported revenue growth and lower reported operating expenses.
For the full year, reported revenue was $51.73 billion, up from $49.55 billion in 2021. The bank’s reported profit before tax for 2022 fell to $17.53 billion from $18.91 billion a year ago. It said the 2022 reported pre-tax profit included a $2.4 billion impairment due to the planned sale of its retail banking operations in France. HSBC, Europe’s largest bank by assets, said higher global interest rates support the firm’s confidence in achieving its target of at least 12% return on average tangible equity in 2023. “We completed the first phase of our transformation and our international connectivity is now underpinned by good, broad-based profit generation around the world,” Noel Quinn, group chief executive said in the release. “We are on track to deliver higher returns in 2023 and have built a platform for further value creation,” he said. Globally, central banks have been raising interest rates to keep inflation in check, resulting in strong net interest income for banks. In 2023, HSBC expects to earn at least $36 billion in net interest income.

On Wednesday, a Manhattan federal judge approved an unsealing motion from media companies, including CNBC, revealing the names of two of FTX’s co-founder Sam Bankman-Fried’s guarantors. Bankman-Fried was released on a $250 million recognizance bond in December after being indicted on criminal fraud charges. There were four guarantors, including his parents, to ensure Bankman-Fried’s cooperation with pretrial detention requirements. The other two guarantors are known to be Larry Kramer, president of the William and Flora Hewlett Foundation and dean emeritus at Stanford Law School, and Andreas Paepcke, a senior research scientist at Stanford University. Their names had been sealed, but several media outlets moved to make their identities public.
Both of Bankman-Fried’s parents, Joe Bankman and Barbara Fried, are on the faculty of Stanford. They live near the university. “Joe Bankman and Barbara Fried have been close friends of my wife and I since the mid-1990s,” Kramer told CNBC’s Eamon Javers. “During the past two years, while my family faced a harrowing battle with cancer, they have been the truest of friends — bringing food, providing moral support, and frequently stepping in at moment’s notice to help. In turn, we have sought to support them as they face their own crisis.” Kramer said he was acting “in my personal capacity” and has “no business dealings or interest in this matter other than to help our loyal and steadfast friends.” Kramer signed a $500,000 unsecured bond, while Paepcke signed the same type of bond for $250,000.

The world’s leading stablecoin issuer, Tether, published its latest quarterly financial report on Thursday, revealing for the first time that it generated a profit. Tether, which Hong Kong-headquarter Ifinex owns, said in a new attestation report that it made a $700 million “net profit” in the December quarter. The company says it has added the money to its reserves.
Tether said its latest quarterly results were buoyed by interest rate hikes by the U.S. Federal Reserve, resulting in higher government debt yields. “Tether is not disclosing any financial information other than those reported in the CRR [Consolidated Reserves Report],” Tether told CNBC in emailed comments. Tether makes money from various fees, including a $1,000 withdrawal fee (with a minimum withdrawal requirement of $100,000), investments in digital tokens and precious metals, and issuing loans to other institutions. Tether is the issuer of USDT, the world’s largest stablecoin by market capitalization. Stablecoins are tokens that are always meant to be fully backed by an equivalent value of reserve assets. The idea is that when someone wants to sell one unit of tether, they get $1 dollar in return. But Tether has long been dogged by concerns that its token isn’t completely backed one-to-one by an equivalent value of reserves. Last May, USDT temporarily lost its peg when terraUSD, a so-called algorithmic stablecoin, plummeted to near $0. Tether said this was the result of volatility in the trading of USDT rather than a reflection of its ability to return cash to holders.

Jeffrey Gundlach, CEO of DoubleLine Capital, believes the Federal Reserve will raise interest rates one more time before its tightening cycle ends. “I think one more,” Gundlach said Wednesday on CNBC’s “Closing Bell: Overtime.” “I think it’s tough to make the statement ‘ongoing increases’ with an ‘s’ at the end of the word ‘increase’ and do zero unless you had very substantial change in economic conditions.” The Federal Reserve raised its benchmark interest rate by a quarter percentage point on Wednesday, taking its target range to 4.5%-4.75%, the highest level since October 2007. The Fed’s statement included language noting that the central bank still sees the need for “ongoing increases in the target range.”
The so-called bond king said that Fed Chairman Jerome Powell made a “clarifying” statement at the press conference on Wednesday, saying real yields are positive across the curve. Gundlach said he was referring to Treasury Inflation-Protected Securities (TIPS), whose yields have stopped their ascent. “He’s looking at the TIPS market, which had a huge increase in yields last year. That was a major headwind for risk assets in the stock market,” Gundlach said. “They’ve stopped going up and I have a feeling that real yields are going to not go up in the first part of this year. So that keeps a little bit of runway, I think.” Stocks staged a big comeback in January, led by beaten-down technology names. The S&P 50 rallied 6.2% in January, notching its best start of the year since 2019. The tech-heavy Nasdaq Composite jumped 10.7% last month for its best monthly performance since July.

In an effort to compete with Apple Pay and PayPal, several banks are reported to be developing a digital wallet that integrates debit and credit cards. According to The Wall Street Journal, the digital wallet will be operated by Early Warning Services, a joint venture between several banks that also operates Zelle. According to the report, Wells Fargo, JPMorgan Chase, and Bank of America are among the major banks involved. The new wallet would initially be launched with Visa and Mastercard already on board. The company has confirmed to CNBC that it intends to launch a wallet product in the near future. Read More

FTX has recovered over $5 billion in liquid assets, including cash and digital assets, according to attorneys representing FTX in Delaware bankruptcy court. The news comes after federal prosecutors announced plans to seize at least $500 million worth of FTX-connected assets as part of their ongoing prosecution of FTX co-founder Sam Bankman-Fried. It will be a welcome boon to FTX customers following the collapse of the crypto exchange in November. FTX’s new CEO, John J. Ray, previously attested that at least $8 billion of customer assets were unaccounted for in the “worst” case of corporate control he’d ever seen. Read More

Esther George, president of the Kansas City Federal Reserve, is urging her colleagues to remain aggressive in their efforts to deal with runaway inflation as she nears the end of her 40-year central banking career. She stated on Thursday that the Fed should raise its benchmark borrowing rate to above 5% and maintain it there until substantial evidence that prices are stabilizing. “Holding that until we get evidence that inflation is actually coming down is really the message we’re trying to put out there,” she told CNBC’s Steve Liesman during a “Squawk Box” interview. “I’ll be over 5%, and I see staying there for some time, again, until we get the signal that inflation is really convincingly starting to fall back toward our 2% goal.” Read More

Despite recent turmoil and concern over Elon Musk’s priorities, Morgan Stanley remains bullish on Tesla stock. In a client note, longtime Tesla advocate Adam Jonas cut his price target on the stock to $250 from $330, his new forecast calls for a 122% upside from Wednesday’s close. Tesla will extend its lead over electric-vehicle competitors, and the Inflation Reduction Act will benefit the company. Those are the reason for Jonas’ optimistic outlook. Read More

On Tuesday, Robinhood Markets CEO Vlad Tenev said he did not know what the disgraced former CEO of FTX, Sam Bankman-Fried, intends to do with his 7.6% stake in his trading app. “I’m not surprised that it’s one of the more valuable assets they have on their balance sheet because it is public company’s stock,” Tenev said on CNBC’s “Squawk Box.” “We don’t have a lot of information that you guys don’t have. We’re just watching this unfold and … it’s going to be locked up in bankruptcy proceedings, most likely for some time. And so we’re just kind of seeing how that plays out.” Read More

On Thursday, the Commerce Department reported that inflation grew roughly in line with estimates in October, suggesting that price increases might stabilize, at least for the time being. The core personal consumption expenditures price index, which excludes food and energy and is favored by the Federal Reserve, rose 0.2% for the month and was up 5% from a year ago. The monthly increase was less than the 0.3% estimate by Dow Jones, while the annual growth was in line with estimates. The gains reflect a slowdown from September, which saw a 0.5% monthly increase and a 5.2% annual increase. Including food and energy, headline PCE was up 0.3% on the month and 6% every year. The monthly increase was the same as in September, while the annual gain was a step down from the 6.3% pace. Read More