HSBC bans customers from buying bitcoin-backer MicroStrategy shares

LONDON (Reuters) – HSBC has banned customers of its online share-trading platform from buying or moving into their accounts MicroStrategy Inc stock, a message seen by Reuters showed, calling it a “virtual currency product”.

The bank will not facilitate the buying or exchange of products related to or referencing the performance of virtual currencies, the message to an HSBC InvestDirect client said. Bitcoin is the largest and best-known virtual currency.

MicroStrategy declined to comment. The U.S. business software firm is led by bitcoin proponent Michael Saylor and owns bitcoin worth billions of dollars.

While HSBC will allow the holding, sale and outgoing transfer of MicroStrategy shares, it will forbid new purchases or incoming transfers, said the message dated March 29.

“HSBC has no appetite for direct exposure to virtual currencies and limited appetite to facilitate products or securities that derive their value from VCs (virtual currencies),” HSBC said in a statement.

HSBC InvestDirect is available to customers in countries including Canada and Britain.

The bank said its policy towards cryptocurrencies had been in place since 2018 and is kept under review. It could not immediately say which countries the ban applied to.

The move comes amid a growing embrace of cryptocurrencies by large financial firms, companies and investors seeking yield in a world of ultra-low interest rates.

Goldman Sachs Group Inc said last month it would offer investments in bitcoin and other digital assets to its wealth management clients. Morgan Stanley has also started offering clients investments to the emerging asset class.

MicroStrategy has along with Tesla Inc and payments firm Square Inc become one of several publicly listed U.S. companies to buy large amounts of bitcoin for its treasury.

MicroStrategy said last week it owns around 91,579 bitcoins. Its holdings, worth around $5.5 billion according to a Reuters calculation, are equal to around 80% of its $6.8 billion market capitalisation.

Reporting by Tom Wilson; Editing by David Holmes

Canadian banks reduce workforces: Investment in technology

TORONTO (Reuters) – Canada’s top banks are shedding workers for the second straight year, moving toward leaner operations to satisfy investors demanding returns on tens of billions of dollars that lenders have poured into new technologies.

Five of Canada’s six biggest banks cut their workforces 4.4% from a year earlier to a combined total of 291,409 full-time equivalent employees as of Jan. 31. That is down 5.2% from a peak in the third quarter of 2019.

Despite growing optimism about a robust economic recovery, loan growth outside of mortgages has been stagnant due to the relatively slow pace of COVID-19 vaccinations in Canada and renewed lockdowns in some major cities.

“It’s very difficult to grow” revenues, said Todd Johnson, chief investment officer at BCV Asset Management, which owns shares of all the big banks.

Banks are likely to continue investing in technology at similar levels as the past few years, which will be “welcomed by investors as long as earnings and dividends continue to grow, and especially if tech investment displaces some labor costs,” he said.

The pullback in headcounts follows combined quarterly year-on-year growth of 4% to 5% in 2018 and 2019 across the six big banks. The cuts have reduced efficiency ratios, or non-interest expenses as a proportion of revenues, by about 2 percentage points from a year ago at most banks, disclosures show.

The phenomenon isn’t unique to Canada. U.S. and European banks last year joined Bank of Montreal and Canadian Imperial Bank of Commerce in announcing or resuming layoffs, with the former expected to shrink headcounts by an average of 5-10%.

While job cuts at banks in other countries have included technology roles, Canadian lenders are still growing in this area because their digital shift has lagged.

MORE CUTS TO COME

Toronto-Dominion Bank has been expanding its technology teams while redeploying employees from temporarily closed branches to other areas, Chief Executive Bharat Masrani said in an interview.

TD’s workforce has shrunk by about 0.7% from its peak in the fourth quarter of 2019, following quarterly growth of 4-6% over the prior year.

“You should view this as the bank constantly adapting to evolving expectations,” Masrani said. TD declined to comment on its technology spending plans.

Bank of Nova Scotia (Scotiabank), which has been divesting some international operations, and BMO, which has been working on improving efficiencies, have had the biggest year-on-year headcount reductions, 9.5% and 5.3% respectively.

Royal Bank of Canada, the country’s biggest lender, has been the only one to grow its workforce, by 1.9% from a year earlier, as it expands its wealth management divisions in the U.S. and Canada.

A spokeswoman said RBC continues to hire “selectively.”

In February, CIBC executives said the bank had saved C$800 million ($633.91 million) over the past five years by streamlining operations. It reinvested the funds in high-growth areas, and accelerated technology spending.

The other banks declined to comment.

Much of the technology investment so far has gone into automating manual processes such as enabling online mortgage applications and e-signing documents. Future investments will likely focus on beefing up cybersecurity, upgrading systems, and data and analytics, said Robert Colangelo, senior vice president for credit ratings at DBRS Morningstar.

Headcounts are unlikely to “grind lower for years and years,” but they are expected to lag revenue growth, said Brian Madden, portfolio manager at Goodreid Investment Counsel, who estimates that lenders have invested a combined C$10 billion annually in technology in the last few years.

With labour the biggest part of non-interest expenses, and the pandemic’s “unexpected turbo boost” to customer adoption of online banking, “most of the return on investment in tech spend is going to have to come from efficiency gains/headcount reductions,” he said.

($1 = 1.2620 Canadian dollars)

Credit Suisse has closed bulk of exposure to Archegos – Source

ZURICH (Reuters) – Credit Suisse has substantially reduced the vast bulk of its exposure to Archegos, a source familiar with the matter said, adding some residual risk remained despite its positions having been substantially eliminated.

Switzerland’s second-largest lender on Tuesday announced an estimated loss of 4.4 bln Swiss francs ($4.69 bln) from its relationship with Archegos Capital Management LP after offloading over $2 billion worth of stock to end exposure to the troubled investor.

The scandal-hit bank now expects to post a loss for the first quarter of around 900 million Swiss francs.

The Archegos fallout is the second major scandal for Credit Suisse in just over a month after the collapse of Greensill Capital, which led to the closure of its $10 billion supply chain funds which invested in bonds issued by Greensill.

That matter had not resulted in a material loss for the bank in the first quarter, the source said, as the bank does not hold trading exposure to Greensill.

Credit Suisse Archegos fallout at $4.7bn: Executive overhaul

(Reuters) – Credit Suisse Group on Tuesday announced an estimated charge of 4.4 billion Swiss francs ($4.7 billion) from its relationship with Archegos Capital Management LP, suspended a share buyback programme and cut its proposed dividend.

Following are reactions to the development.

MICHAEL KUNZ, ANALYST AT ZUERCHER KANTONALBANK

“An individual case has ruined the otherwise successful work of the bank as a whole in the first quarter. At least – in our opinion – personnel consequences have now been taken.

The main damage, however, has been inflicted on shareholders, who have to make do with a lower dividend and a suspended share buyback.

In view of the bank’s vulnerability to risk….it does not seem appropriate to us to recommend bets on the securities of CS Group.”

ANDREAS VENDITTI, ANALYST AT BANK VONTOBEL

“CHF 4.4 bn Archegos charges are at the higher end of the range. However, the 1Q21 pre-tax loss is limited to CHF 0.9 bn thanks to very strong operating results. While the short-term impact seems less severe than feared, the full consequences from the reputational loss will only be visible over time.

“CEO Gottstein is quoted saying “serious lessons will be learned”. In addition to the Executive Board changes, we look forward to hear about the “broader consequences” of the Board’s investigations.”

Credit Suisse chief risk officer to depart – Sources

NEW YORK (Reuters) – Credit Suisse Group AG will on Tuesday detail losses from its relationship with Archegos Capital Management LP after dumping over $2 billion worth of stock to end exposure to the troubled investor, two sources familiar with the matter said.

The episode, which analysts have said could cost the Swiss bank several billion dollars, is also expected to result in the departures of Chief Risk Officer Lara Warner and Brian Chin, the bank’s investment banking head, the sources said.

Credit Suisse and Archegos declined to comment. Warner and Chin did not respond to requests for comment.

The two executives are paying the price for a year in which Credit Suisse’s risk management protocols have come under harsh scrutiny, with two major relationships turning sour in quick succession, saddling the bank with what JPMorgan Chase & Co analysts estimate could add up to $7.5 billion.

Archegos, a private investment vehicle of former hedge fund manager Sung Kook “Bill” Hwang, fell apart late last month when its debt-laden bets on stocks of certain media companies unraveled. Credit Suisse and other banks, which acted as Archegos’ brokers, had to scramble to sell the shares they held as collateral and unwind the trades.

While sources have said some banks, including Goldman Sachs Group Inc, Morgan Stanley and Deutsche Bank AG, managed to exit the trades without taking a hit, others have ended up with losses. Japan’s Nomura Holdings Inc has flagged a possible $2 billion loss, for example. Nomura declined to comment.

For Credit Suisse, the Archegos episode came just weeks after the demise of another major client – the British finance firm Greensill. Credit Suisse had marketed funds that financed Greensill’s operations. Warner’s role has come under scrutiny in the aftermath of that firm’s collapse as well.

Credit Suisse’s share price has fallen by a quarter in the past month as investors assess the hit to the bank’s bottom line and credibility, overshadowing an otherwise strong start to the year. The episodes have also put pressure on Chief Executive Thomas Gottstein who has been trying to move Credit Suisse on from another string of bad headlines, spanning a spy scandal that ousted predecessor Tidjane Thiam to a $450 million write-down on a hedge fund investment.

UNWINDING THE TRADES

Hwang, a former Tiger Asia manager, ran into trouble following a March 24 stock sale by media company ViacomCBS Inc. Archegos was heavily exposed to ViacomCBS, sources said, and the slide in stock set off alarm bells at its banks, which called on the fund for more collateral.

When the firm could not meet the demand, the banks started selling the collateral, which included shares of Baidu Inc and Tencent Music Entertainment Group, among others.

While some banks were able to offload their collateral earlier, Credit Suisse still had shares left. On Monday, it offered 34 million shares of ViacomCBS priced between $41 to 42.75; 14 million American depository receipts of Vipshop Holdings Ltd between $28.50 and $29.50; and 11 million shares of Farfetch Ltd, priced between $47.50 and $49.25 in secondary offerings, a source familiar with the situation said.

The shares were the remaining holdings tied to Archegos that Credit Suisse needed to sell before tallying up losses, the source said.

ViacomCBS shares, which traded at a record of $101.97 in March, closed down 3.9% at $42.90 in regular trading. Vipshop was down 1.19% at $29.78, while Farfetch shares fell nearly 6.1% to $49.69.

Greensill Bank customers get $3 billion – Deposit protection scheme

FRANKFURT (Reuters) – Germany’s private banking association said on Monday that it had paid out around 2.7 billion euros ($3.17 billion) to more than 20,500 Greensill Bank customers as part of its deposit guarantee scheme after the bank collapsed last month.

The banking association said only a few customers had yet to receive compensation under the protection fund, which protects individuals but not institutional investors.

($1 = 0.8511 euros)

Japan’s central bank issues digital currency

TOKYO (Reuters) – The Bank of Japan (BOJ) began experiments on Monday to study the feasibility of issuing its own digital currency, joining efforts by other central banks that are aiming to match the innovation in the field achieved by the private sector.

The first phase of experiments, to be carried out until March 2022, will focus on testing the technical feasibility of issuing, distributing and redeeming a central bank digital currency (CBDC), the BOJ said in a statement.

The BOJ will thereafter move to the second phase of experiments that will scrutinise more detailed functions, such as whether to set limits on the amount of CBDC each entity can hold.

If necessary, the central bank will launch a pilot programme that involves payment service providers and end users, BOJ Executive Director Shinichi Uchida said last month.

“While there is no change in the BOJ’s stance it currently has no plan to issue CBDC, we believe initiating experiments at this stage is a necessary step,” Uchida told a committee of policymakers and bank lobbies looking into CBDC.

Global central banks are looking at developing digital currencies to modernise their financial systems, ward off the threat from cryptocurrencies and speed up domestic and international payments.

While China leads the pack, the BOJ has been speeding up efforts to catch up with a plan announced in October to begin experimenting on how to operate its own digital currency.

Greensill administrator unable to verify invoices underpinning loans to Gupta: FT

(Reuters) – Greensill Capital’s administrator has been unable to verify invoices underpinning loans to Liberty Steel owner Sanjeev Gupta, the Financial Times reported on Thursday.

Greensill’s administrator, Grant Thornton, has received denials from companies listed as debtors to the steel group stating that they had never done business with Gupta, the FT report added.

Insolvent finance firm Greensill collapsed last month, days after losing investor funding and insurance coverage for its supply chain financing business.

Liberty is part of the GFG Alliance, a conglomerate owned by the Gupta family and one of the biggest customers of Greensill Capital.

Grant Thornton and GFG Alliance declined to comment on the report. Reuters was not immediately able to reach Greensill Capital.

Grant Thornton, which is looking to regain the money owed to Greensill in its role as administrator to the collapsed firm, last month approached companies that were listed as debtors to Gupta’s Liberty Commodities trading firm, the FT report added.

Earlier on Thursday, Gupta cautioned creditors against pulling the plug on Liberty Steel, saying he had garnered huge interest from financiers willing to refinance billions of dollars in debt owed to failed lender Greensill Capital. He did not give details on any specific offers.

Morgan Stanley plans to raise dividend when Fed allows: Letter

NEW YORK (Reuters) – Morgan Stanley plans to increase the dividend it pays shareholders when restrictions are lifted by the Federal Reserve, according to a letter Chief Executive James Gorman sent to shareholders on Thursday.

The bank also set a long-term goal of achieving a return on tangible common equity (ROTCE) above 17%, according to the letter.