Growing Concerns in Commercial Real Estate Market Due to Regional Banks Holding Majority of Outstanding Property Debt.
JPMorgan Chase Holds Over 50% of Precious Metals Contracts
Here is what we will be getting into today:
Concerns Rise in Commercial Real Estate Market as Regional Banks Hold 70% of Outstanding Property Debt.
JPMorgan Chase Holds Over Half of Precious Metals Contracts in U.S. Banking System
Saudi Aramco Strengthens Ties with China: Signs Deals for Crude Supply and Joint Ventures.
U.S. Banking System Deemed Sound Despite Stress in Some Institutions.
Let's Dive In!
YouTube Channel: Wall St For Main St
Title: Finance Unspun Ep 18: US Commercial Real Estate Will Cause Next Large Banking Crisis & Bailouts?
Link: https://www.youtube.com/watch?v=rL11Feo-wUA
Here are the key highlights:
With the collapse of Silicon Valley Bank & Signature Bank, there is real concern in the commercial real estate market as regional banks hold 70% of the outstanding property debt. Refinancing costs and interest payments on the debt are high, and property values are lower than they were. The occupancy rates of commercial spaces are collapsing, with many people working from home and shopping online. Commercial real estate investment trusts are doing wide-scale dividend cuts.
The Federal Reserve is backstopping these banks with emergency currency swap lines. The snowball of moral hazard continues to grow as governments bail out banks and increase risk for everyone. The commercial real estate market in the US is showing signs of a bubble similar to the residential real estate bubble in 2006-2007.
The Fed has set up a second permanent repo facility, which allows non-bank financial entities to post toxic collateral and receive loans. The government is expected to come out with new regulations that will favor the same big banks that currently receive favoritism. The Fed rate hikes are causing bank and derivative failures, falling asset prices, and counterparty failures. The smaller banks are more vulnerable to accounting and rule changes, and the FDIC may have to raise the amount of cash in a bank account to keep them solvent.
Website: Wall Street On Parade
Title: After Being Criminally Charged for Rigging Precious Metals, JPMorgan Chase Controls 53 Percent of All Precious Metals Contracts Held by Banks
Link: https://wallstreetonparade.com/2023/04/after-being-criminally-charged-for-rigging-precious-metals-jpmorgan-chase-controls-53-percent-of-all-precious-metals-contracts-held-by-banks/
Here are the key highlights:
According to the quarterly report released by the Office of the Comptroller of the Currency (OCC) four large commercial banks represented 88.2% of the total banking industry notional amounts and 62.5% of industry net current credit exposure (NCCE). These four banks are Goldman Sachs Bank USA, JPMorgan Chase Bank N.A., Citigroups Citibank, and Bank of America.
JPMorgan Chase held $200.12 billion in precious metals derivative contracts as of December 31, 2022, versus a total of $378.12 billion for all banks in the U.S. holding derivatives. This represents 53% of all precious metals contracts in the U.S. banking system.
The is reason for concern as the bank was charged by the Justice Department with two criminal felony counts for its role in aiding and abetting the largest Ponzi scheme in history, Bernie Madoff's looting of customer accounts. It also received another felony count for its role in rigging the foreign exchange market and one felony count each for rigging the precious metals market and U.S. Treasury market.
Despite these charges, Jamie Dimon remains as Chairman and CEO of JPMorgan Chase. The Board of Directors of JPMorgan Chase have allowed Dimon to remain in his current position despite five felony counts (to which the bank admitted) and a rap sheet that is unprecedented in the history of U.S. banking.
Website: Financial Times
Title: Saudi Aramco strengthens China ties with two refinery deals
Link: https://www.ft.com/content/9e091abb-9463-4f7c-a78f-1b95d0e1130b
Here are the key highlights:
Saudi Aramco, the Middle Eastern state oil company, has agreed to acquire 10% of Rongsheng Petrochemical Co, a Chinese oil refiner, for $3.6bn in a move to strengthen its relationship with China. Under the deal, Saudi Aramco will supply 480,000 barrels a day of Saudi crude to China's largest integrated refining and chemicals facility in Zhejiang province.
The investment comes a day after Saudi Aramco entered into a joint venture with two other Chinese companies to build a new 300,000 b/d refinery and petrochemicals complex in China's north-east. With these deals in place, Saudi Aramco's supply contracts with China are set to increase by up to 690,000 b/d.
This is timely given that Russia's cut-price deals on oil exports are putting Saudi Arabia's share of the world's largest oil import market under pressure. China's customs data reveals that Russia overtook Saudi Arabia as China's biggest supplier in the first two months of this year, delivering approximately 2mn b/d compared with Saudi Aramco's 1.7mn b/d.
Saudi Aramco, the world's biggest oil producer, has made deals with several Asian countries, including China, India, South Korea, and Malaysia, in a move that is being viewed as a climate action strategy. According to experts, this move will ensure that Saudi Aramco has committed buyers for its crude even if consumption starts to shrink in other parts of the world, particularly in the OECD countries where oil demand is declining.
YouTube Channel: Eurodollar University
Title: Shocking data shows there is much more to the story than Credit Suisse or Deutsche Bank.
Link: https://www.yyyoutube.com/watch?v=XThF__Ka49g
Here are the key highlights:
Last week, the Financial Stability Oversight Committee (FSOC) held an unscheduled meeting to discuss market developments. The Council discussed current conditions in the banking sector and noted that while some institutions have come under stress, the U.S. banking system remained sound and resilient.
The markets are focusing on Europe with potential fallout and spillover far beyond Europe. Deutsche Bank, which has been a troubled bank for quite some time, has unusually large amounts of derivative exposure on both sides of its balance sheet. Deutsche Bank is heavily exposed to derivative contracts that have seen an uptick in sensitivity to interest rates. Deutsche Bank took last year as a sign to become more risky, as it increased lending to financials and insurance companies.
Banks in Europe are raising credit standards due to a perception of risk and bank risk tolerance. Banks are becoming nervous as energy prices are going downward, and they are de-risking their loan books before we even get to March. The markets look at the banking system and say, maybe it's not so resilient.
Thanks For Reading!
If you find value in this newsletter and want to make sure you don't miss any important updates, you should definitely consider subscribing. By subscribing, you'll be the first to know about new articles and special offers.
We also offer a paid service which will give a breakdown of every source we cover that will be sent out almost daily.
Our Wednesday newsletter will always be free, but to make sure YOU are not missing anything be sure to sign up for our paid subscription.
If you have any newsletters you wish to see in our lineup, please reach out and let us know. We will continually look to incorporate more sources to our weekly wrap-up.