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Vested Shorts: US banks return $100B to shareholders, China posts $1T trade surplus, eToro files for $5B IPO, 23% of China’s listed companies report losses, pension funds invest in Bitcoin

by Parth Parikh
January 18, 2025
7 min read
Vested Shorts: US banks return $100B to shareholders, China posts $1T trade surplus, eToro files for $5B IPO, 23% of China’s listed companies report losses, pension funds invest in Bitcoin

In today’s edition,

  • US banks deliver solid growth
  • Trade tensions ahead
  • eToro’s IPO Move
  • China’s profit squeeze
  • Pensions and crypto?

Market Snapshot

U.S. equities ended the week higher, with the Nasdaq closing at 19,630.20 (+3.84%), the S&P 500 at 5,996.66 (+3.71%), and the Dow Jones at 43,487.83 (+3.73%). 

Value stocks outperformed growth stocks, driven by energy sector gains and profit-taking in large-cap tech. Financials surged as JPMorgan Chase, Goldman Sachs, Citigroup, and Wells Fargo reported strong Q4 earnings.

December’s inflation report showed core inflation rising 0.2%, the smallest gain since July, and year-over-year core inflation easing to 3.2%. The softer numbers sparked optimism about the Fed’s progress on inflation, though no rate cuts are expected in January. Retail sales rose 0.4% in December, slightly below expectations, while jobless claims increased to 217,000 but remained consistent with a resilient labor market.

Bond markets saw yields decline after the inflation report, boosting U.S. Treasuries. Municipal bonds recovered midweek, while strong demand supported investment-grade and high-yield corporate bonds. The week highlighted improving sentiment in financials and energy, with investors watching closely for further economic data and the Fed’s next policy moves.

Stock market closing data for the week of Jan 13th to Jan 17th, 2025

Special Coverage: Wall Street’s Big Win

2024 was a blockbuster year for US banks, with Wall Street’s biggest names delivering record-breaking profits. 

As the financial sector gears up for 2025, this surge in earnings is reshaping the conversation around trading, investment banking, and how banks return value to shareholders. But why does this matter to you? These results offer insights into the economy’s direction, the resilience of financial institutions, and what it all means for businesses and investors alike.

Trading and Dealmaking Take the Spotlight

Morgan Stanley capped the year with $3.7 billion in Q4 profits, more than doubling its previous year’s numbers. 

Trading was the star—equities revenue jumped 51%, and the firm saw a 25% rise in investment banking fees to $1.6 billion, thanks to a revival in mergers and acquisitions. CEO Ted Pick emphasized this as a turning point, with deal pipelines at their strongest in seven years.

JPMorgan Chase saw a similar boost, reporting $14 billion in Q4 profits, up 50% year-on-year. 

A boom in trading revenues, up 21% to $7 billion, combined with a 46% jump in investment banking fees, powered its growth. For investors, this reflects the resurgence of capital markets, which could shape opportunities in sectors ranging from private equity to IPOs in 2025.

Goldman Sachs added to the momentum, with Q4 profits doubling to $4.1 billion. Its equities business notched a record year, while investment banking fees grew 24% to $2.1 billion. 

Bank of America, meanwhile, posted a 43% increase in investment banking fees and a 3% rise in net interest income to $14.4 billion, signaling strength across lending and trading.

Citi’s Journey

While most banks did well, Citigroup struggled. It reported a $1.8 billion loss in Q4, driven by restructuring charges and geopolitical issues, including ties to Russia and Argentina’s peso crisis.

CEO Jane Fraser aims to streamline operations by cutting 20,000 jobs and removing five management layers by 2026. Despite these challenges, Citi found success: credit card revenues rose by 12%, and its investment banking division had the best quarter in two years, with fees increasing over 20%.

Why Does It Matter?

These numbers go beyond Wall Street. They reflect economic trends that affect everyone.

The strong performance in trading and investment banking shows renewed confidence in global markets. Higher interest rates are cooling borrowing, but banks remain robust. For consumers, the rise in lending revenues indicates banks can support businesses and individuals as rates adjust.

Additionally, banks are returning over $100 billion to shareholders in 2024 through dividends and buybacks. This move hints at how they might handle potential regulatory rollbacks under the Trump administration.

If lending increases as expected, new opportunities for businesses will arise. Better financial performance may also draw more investors to banking stocks.

What’s Next?

As 2025 unfolds, the banking sector faces key questions beyond profit. Can trading and investment banking maintain momentum amid rising geopolitical tensions and shifting economic conditions? Easing regulations under Trump’s administration may spark growth, but they also pose risks from reduced capital buffers. For example, of the $100 billion returned to shareholders in 2024, how much could have been reinvested in technology, risk management, or sustainability?

For Citigroup, restructuring offers both challenge and opportunity. Streamlining operations can boost efficiency, yet the human cost of 20,000 job cuts and the long path to savings highlight the complexities of change.

Meanwhile, JPMorgan Chase and Morgan Stanley are racing to dominate dealmaking and equities. This competition could reshape global banking.

On the client side, a resurgence in IPOs and mergers presents opportunities for businesses to raise capital. However, with borrowing costs still above pre-2023 levels, companies must navigate financing trade-offs carefully.

The real question is whether banks can shift strategies to support not just large corporate clients but also smaller businesses and consumers—sectors that often feel economic pressure first.

For readers looking to explore further, we’ve provided a detailed analysis of U.S. banks’ earnings.

News Summaries

China’s trade surplus reached a record $992 billion in 2024. Of this, $361 billion came from the US, marking a 6.9% increase from last year. The surge was fueled by a 10.7% rise in exports, while imports grew only 1% in December. This imbalance has heightened global trade tensions, especially with US tariffs looming under Donald Trump’s incoming administration. Key factors included exporting in advance to avoid tariffs and weak domestic demand. Notably, exports to Southeast Asia rose by 16.4% as manufacturers sought diversification. China’s push for green industries and electric vehicle exports under Xi Jinping shows a strategic shift. However, the heavy reliance on exports amid slowing imports raises concerns about the sustainability of this growth. As tariffs tighten, the pressure to boost domestic demand may force a shift in China’s economic strategy. Observers will be keen to see how policymakers balance trade resilience with internal growth.

eToro, a retail trading platform, has filed confidentially with the SEC for a US IPO. The company aims to go public by Q2 and seeks a valuation over $5 billion. Managing $11.3 billion across 3 million accounts, eToro chose a US listing for greater liquidity and a wider investor base, according to CEO Yoni Assia. This move follows eToro’s withdrawal from a $10.4 billion SPAC deal in 2022 due to poor market conditions. In a 2023 funding round backed by SoftBank, its valuation rebounded to $3.5 billion. With Goldman Sachs, Jefferies, and UBS as advisors, the IPO could signal renewed confidence in public markets. However, investors will closely watch if eToro can sustain growth in a competitive trading space. The success of this IPO may also influence other fintech startups looking to go public.

Chinese corporate profits fell for the third year in a row in 2024. They dropped 4.7% from January to November. A quarter of firms reported losses, up from 16% in 2019. Revenue growth slowed to 1.8%, down from 5.9% in 2022. This decline comes as producer prices have been falling for 28 months. Increased competition has eroded profitability. State-owned enterprises saw profits fall 8.4%, adding to fiscal strain. These firms are heavily burdened by government-directed roles. Private and foreign companies fared better but still faced slow demand and price pressures. Analysts expect muted profit growth in 2025. Companies will need to focus on shareholder returns, like dividends and buybacks. Investors will watch how firms adapt to a deflationary economy. This shift may change priorities from expansion to sustaining value in a tough landscape.

From the World of Crypto

Pension funds, usually cautious, are now looking at cryptocurrencies. This change follows bitcoin’s rise to $100,000 in 2024 and expectations of more gains in 2025, especially with a pro-crypto US government.

Funds in Wisconsin and Michigan have invested in regulated crypto ETFs. Their holdings are $155 million and $12.9 million, respectively. In the UK and Australia, pensions are also dipping their toes in. They’re making small investments in bitcoin futures or direct purchases. This shows a shift in attitude, even though the industry has been slow to adopt crypto.

These moves come after a rocky past. Many faced big losses during the 2022 crypto crash. For instance, the Ontario Teachers’ Pension Plan had a $95 million write-off with FTX. Now, consultants like Cartwright are advising smaller pension schemes to consider bitcoin. They see it as a way to tackle funding gaps. Cartwright is also thinking about creating opt-in bitcoin funds for multiemployer pensions. This could attract members interested in crypto.

Still, skepticism is strong. The US Government Accountability Office has warned about crypto’s volatility and lack of solid valuation methods. Aon’s global investment practice suggests exposure only through specialist managers. They stress the risks of direct allocations in long-term pension plans.

Pension funds venturing into crypto show a wider acceptance of digital assets. The key takeaway? Crypto’s influence is making even conservative investors rethink their strategies. The challenge lies in balancing the high risks of cryptocurrencies with the need for diversification and returns.

As things change, one question remains: Will crypto become a mainstream asset for pensions, or will its volatility keep it on the sidelines? This ongoing shift is worth watching. It could redefine how retirement funds handle innovation and risk in the coming years.

Comments

NIRAV 4 weeks ago

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