—— U.S. Mortgage Applications Jump 28%; JPMorgan Slashes Investment Bank Bonuses; Bank of America Freezes Hiring; Amazon Cuts 18,000 Jobs Today; Microsoft Lays Off 10,000 with $1.2B Charge; Crypto Firm Genesis Files for Bankruptcy; Brookfield Real Estate Fund Drops for Second Month
1. U.S. Mortgage Applications Jump 28%
According to data released today by the Mortgage Bankers Association (MBA), the average rate for 30-year fixed-rate mortgages fell by 19 basis points to 6.23% in the week ending January 13, marking the lowest level in four months.
Thanks to the rate drop, mortgage applications surged 28% during the same week. The MBA’s index tracking home purchases and refinancing rose to its highest point since September, though it remains well below historical averages.
Since 1990, MBA has conducted weekly surveys of mortgage bankers, commercial banks, and savings institutions to gather the latest market information. MBA’s data covers 75% of all retail residential mortgage applications in the U.S.
Mortgage rate declines may reflect weakened housing sales and loan demand.
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2. JPMorgan Slashes Investment Bank Bonuses
Today, JPMorgan Chase & Co.’s Global Co-Head of Investment Banking Vis Raghavan told Bloomberg that last year was a dismal one for investment banking, and bankers’ bonuses will certainly be cut this year.
Vis stated that bonuses are directly tied to company performance, and given last year’s poor results, employees naturally won’t receive much. However, the firm’s commodities and other trading units performed relatively well.
Last week, JPMorgan’s earnings report showed that Q4 investment banking revenue fell 57% year-over-year to $1.4 billion. Other Wall Street banks reported similar declines.
With a sharp drop in capital markets activity, major investment banks are now laying off staff or cutting bonuses.
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3. Bank of America Freezes Hiring
According to sources, Bank of America recently informed department heads that hiring would be frozen, except for essential roles.
At the end of last year, Bank of America had already announced a slowdown in hiring. To manage costs and prepare for an economic downturn, the bank has now implemented a more stringent hiring policy.
Reportedly, no new hiring will take place until midyear or until the economy shows signs of recovery. Departments with continuing revenue growth—such as corporate finance, trading, asset management, and tech—will still be allowed limited hiring.
As of the end of 2022, Bank of America had a total of 216,800 employees. Its hiring pace in recent years has far exceeded layoffs. In the final quarter of last year, Bank of America’s costs totaled $15.5 billion, $240 million more than the previous quarter, primarily due to increased salaries and tech service costs.
Bank of America has joined Goldman Sachs and other banks in freezing hiring until economic recovery appears.
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4. Amazon Cuts 18,000 Jobs Today
Today, Amazon.com’s global retail chief Doug Herrington announced that the company will lay off 18,000 employees worldwide and will notify all affected staff by the end of the day.
As the world’s largest e-commerce company, Amazon is now preparing for a potential financial crisis, which could hit consumer spending and company revenue hard.
Doug said this round of layoffs aims to cut operating costs. The company will still selectively invest in B2B, healthcare, and third-party seller services.
While the layoffs only affect about 1% of the total workforce, they represent 6% of Amazon’s corporate positions. Many hourly warehouse workers will also be impacted.
Amazon expanded rapidly during the pandemic, and now must trim its workforce in response to economic pressure.
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5. Microsoft Lays Off 10,000 with $1.2B Charge
Today, Microsoft announced plans to lay off 10,000 employees, about 5% of its workforce. The related severance costs may reach $1.2 billion in Q2 of the fiscal year, reducing earnings per share by 12 cents.
Microsoft CEO Satya Nadella said the tech industry grew rapidly during the pandemic, but the market is now returning to normal.
Last year, Microsoft was relatively unaffected and did not announce large-scale layoffs. But analysts expect the company will also feel the pain of the current market conditions.
In the coming months, Microsoft will begin notifying affected employees. U.S. workers will receive above-market severance packages and six months of healthcare benefits.
With economic conditions worsening, companies are cutting back on B2B software and service purchases.
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6. Crypto Firm Genesis Files for Bankruptcy
Sources said crypto lender Genesis Global Capital is preparing to file for bankruptcy. The company is holding confidential meetings with creditor groups, and unless it secures financing, bankruptcy may be inevitable.
In November last year, Genesis halted user withdrawals. The company also had exposure to the bankrupt exchange FTX, for which it had custodied some funds. The troubles faced by both firms also impacted the Gemini crypto platform, which likewise froze withdrawals.
According to sources, creditors, Genesis, and parent company Digital Currency Group (DCG) have exchanged several restructuring proposals, but none have been accepted.
Yesterday, DCG informed investors that quarterly dividends would be suspended, as the company needs to conserve cash by all possible means.
The collapse of hedge fund Three Arrows Capital initially triggered a crisis across the entire crypto industry.
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7. Brookfield Real Estate Fund Drops for Second Month
In December, Brookfield Asset Management’s real estate investment fund for high-net-worth investors posted its second consecutive monthly decline, as rising interest rates weighed on the sector.
Over the past two months, the Brookfield Real Estate Income Trust declined by 1.9% and 1.6%, respectively. According to filings, the fund had previously only posted one monthly loss since its launch in 2019.
Despite a weak finish in 2022, the fund still gained 12.7% for the full year. The $2.4 billion fund primarily holds U.S. apartments, office buildings, and logistics facilities.
One year ago, the fund also purchased DreamWorks Animation’s California campus for $327 million.
Rising benchmark rates have increased borrowing costs for both buyers and sellers in the real estate market.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.