Morgan Stanley prime boss cites health in leaving; Goldman wins China nod

Receiving Wide Coverage ...

What’s the real story?

Morgan Stanley’s “global head of prime brokerage, Edward Keller, is stepping down from his role to deal with a personal health issue,” The Wall Street Journal reported. “The bank named Penny Novick and Kim Shaw as global co-heads of prime brokerage to succeed Mr. Keller. The pair are the first women Morgan Stanley has named to run prime brokerage globally.”

“Morgan Stanley was one of several banks that logged losses related to Archegos Capital Management, reporting a $911 million loss it said it believed was the first taken by its prime-brokerage business.”

“The move comes after the division triggered a $911 million hit to Morgan Stanley’s profits as a result of trades with the collapsed family office Archegos Capital Management, although the bank said it was not connected and Keller would return to a new role after dealing with a health issue,” the Financial Times said. “We wish Ed a very speedy recovery and look forward to having him back in the office soon,” the bank said.

Goldman gets the go-ahead

“Chinese regulators have approved a wealth-management joint venture between Goldman Sachs and Industrial & Commercial Bank of China, as China further opens up its lucrative financial sector to foreign banks,” the Journal reported. “Goldman’s asset-management arm will own 51% of the venture, and the remainder will be held by an ICBC wealth-management subsidiary.”

“Goldman on Tuesday cited its own research estimating that investible assets held by Chinese households could surpass $70 trillion by 2030. About 60% of that could be allocated to non-deposit products including securities, mutual funds and wealth-management products.”

“This joint venture with China’s pre-eminent financial institution will accelerate our objective of establishing a leadership position in one of the world’s largest, fastest-growing wealth management opportunities,” said Tuan Lam, head of client business for Asia Pacific ex-Japan at Goldman Sachs Asset Management.

“Foreign asset managers are rushing to capitalize on China’s vast pool of savings as the government liberalizes its tightly controlled financial system,” the FT said. “Wealth management products in China are typically distributed through the domestic banking network, pushing foreign asset managers into partnerships with local banks.”

Testifying

“The heads of the six largest U.S. banks are set to testify before Congress, where they likely will face conflicting pressures from Democrats seeking action on racial disparities in lending and Republicans who say banks should avoid taking positions on social issues,” The Wall Street Journal reported. “In two days of hearings starting Wednesday,” the six CEOs “plan to paint a favorable picture of an industry they say has helped the economy recover from a pandemic-induced recession, according to their prepared remarks.”

“Democrats, led by Sen. Sherrod Brown of Ohio and Rep. Maxine Waters of California, are expected to press the executives to commit to supporting minority communities, including by investing in smaller financial firms, such as minority depository institutions.”

The bank chiefs “expressed caution about dealing in cryptocurrencies in testimony released ahead of their scheduled appearances on Wednesday,” the Financial Times said.

Wall Street Journal

Caution on crypto

“Don’t bet against Beijing’s efforts to smother bitcoin,” the Journal says. “Investors should be cautious with all crypto as far as China is concerned. The government has its own reasons for smothering the sector, and a track record that suggests it will follow through effectively.”

“The first and most obvious reason is the stated one: to limit the risk of financial excesses becoming a broader social issue. The second reason applies to mining particularly: The energy intensity of ‘mining’ increasingly runs at odds with Beijing’s environmental goals. The third reason is unlikely to be mentioned in press communiqués, but remains a core priority for Beijing. Put simply, any avenues citizens might use to easily move money out of China will be under perpetual threat of closure. With such strong negatives from Beijing’s perspective, it’s difficult to see what the optimistic case for bitcoin mining and trading in China is—or for cryptocurrencies more broadly aside from the government’s own newly minted alternative, the digital yuan.”