WSJ : Crypto Custodian Prime Trust Teeters on the Brink of Collapse

Crypto Custodian Prime Trust Teeters on the Brink of Collapse
The company previously stored assets and provided banklike services to crypto firms Binance.US, FTX and Celsius

Another crypto quasi-bank appears to be on the brink.

Prime Trust, a state-chartered trust company that serves as a custodian for crypto firms, is feared by digital-asset investors to be on the verge of failing after being rebuked by its state regulator and abandoned by a potential acquirer.

Las Vegas-based Prime Trust has a shortfall of customer funds and was unable to honor customer withdrawals this week, according to the Nevada Department of Business and Industry.

The Department’s Financial Institutions Division on Wednesday ordered Prime Trust to cease and desist all activities that violate Nevada regulations, alleging that the company is in an unsafe condition to transact business and might be insolvent. Prime Trust declined to comment on the order.

Prime Trust previously ran a number of businesses, but one of its main functions was to hold dollars on behalf of crypto firms, parking the funds in its own bank accounts. Custodians such as Prime Trust are meant to be among the safer parts of the financial system, not engaging in risky activities. It is unclear what caused the reported shortfall of customer funds.

Prime Trust confirmed that it stopped all cash and crypto deposits and withdrawals, leaving crypto companies that keep customer assets with the custodian with an uncertain future.

The company once played a major role in the infrastructure of crypto markets by holding funds on behalf of companies like FTX, Binance.US and Celsius Network. While Prime Trust has retreated in importance over the past year, its abrupt shutdown sent ripples through the firms that rely on its services.

Securitize, a blockchain firm that keeps investors’ cash deposits for its trading platform at Prime Trust, said several of its functions have been paused. The firm said in a tweet that it was accelerating its transition to a new custodian and would ensure customers are made whole. Estonia-based crypto exchange Coinmetro, another customer of Prime Trust, said in a tweet that it was unable to process new U.S.-dollar transactions.

For weeks, the financial condition of Prime Trust has been the subject of speculation in crypto circles. The company has sought to raise tens of millions of dollars in emergency funding, sparking acute anxiety among crypto companies that store digital assets with the company. Some clients abandoned Prime Trust, such as bitcoin-investing platform Swan Bitcoin.

Earlier this month, rival custodian BitGo said it reached a preliminary agreement to buy Prime Trust, appeasing concerns of an immediate collapse. However, days after news of the deal, signs of trouble emerged. Last week, the Texas State Securities Board accused crypto lender Abra of securities fraud, alleging it has been insolvent or nearly insolvent for months. Prime Trust serves as the custodian for Abra’s trading and yield-generating accounts.

On Thursday, BitGo walked away from its deal to acquire Prime Trust. BitGo Chief Executive Mike Belshe said BitGo chose not to go ahead with the nonbinding offer after deciding that Prime Trust couldn’t manage its financial difficulties.

“They are burning a lot of money,” Belshe said in an interview.

For a crypto-focused company, Prime Trust has largely flown under the radar.

But its role as an intermediary, helping digital-asset companies park cash at network banks, made it a key partner for digital-asset firms that have struggled to access the banking system directly.

After the collapse of Signature Bank earlier this year, crypto exchange Binance.US used Prime Trust to store customers’ cash with the custodian’s network of banking partners, The Wall Street Journal previously reported. The SEC sued Binance.US and Binance earlier this month.

Founded in 2016, Prime Trust didn’t start out as a crypto company. It initially focused on acting as an escrow agent that held funds for crowdfunding efforts by early-stage businesses. The company began its pivot to crypto in 2018, agreeing to hold cash for TrustToken, the issuer of the TrueUSD stablecoin, now known as Archblock.

After Prime Trust halted deposits and withdrawals, TrueUSD told customers with accounts linked to Prime Trust in an email that they won’t be able to create or redeem the stablecoin while Prime Trust’s operations are suspended. TrueUSD has grown rapidly since Binance started to heavily promote the stablecoin on its platform.

Prime Trust’s founder and first CEO was Scott Purcell, a serial entrepreneur whose previous ventures included Kasidie, an online community for swingers. Purcell left in early 2021.

In an interview, Purcell told the Journal that Prime Trust had been mismanaged after his departure and had little to show for the more than $170 million it had raised from investors. “How do you burn through that?” said Purcell. “I don’t know. It’s astounding to me.”

Prime Trust’s crypto business boomed as bitcoin rallied in 2021. The company gained hundreds of new accounts that year, and its assets under custody nearly quadrupled, it said in a year-end press release in December 2021, though it didn’t detail the size of the firm’s assets.

Prime Trust raised $107 million last June in a Series B funding round that included FIS, Fin Capital, Mercato Partners and Kraken Ventures.

Among the clients that Prime Trust attracted were crypto lender Celsius Network and FTX, both of which filed for bankruptcy in 2022 as the crypto rally faded. FTX’s U.S. arm held cash at times at Prime Trust, and FTX founder Sam Bankman-Fried used Prime Trust to route donations to a political-action committee he bankrolled, according to Federal Election Commission filings.

WSJ : Demand for Airliners Soars: ‘We Cannot Make Planes Fast Enough’

Demand for Airliners Soars: ‘We Cannot Make Planes Fast Enough’
Airbus CEO sees demand continuing to outstrip supply as European plane maker accelerates output and pulls further ahead of Boeing

LE BOURGET, France—Economies are wobbling around the world, but that isn’t deterring travelers clamoring for airplane tickets.

The voracious postpandemic demand for flying doesn’t show signs of cooling soon, according to aviation executives who gathered at this week’s Paris Air Show. They point to recent large aircraft orders such as Indian budget carrier IndiGo’s record 500-jet deal earlier this week.

“There is economic slowdown, but airlines do not see a slowdown of bookings,” said Guillaume Faury, chief executive of Airbus EADSY -1.63%decrease; red down pointing triangle, the world’s biggest commercial jet maker. “And they continue to see a very strong demand with high prices.”

That demand has collided with the industry’s limited ability to quickly increase production of planes. Airbus and rival Boeing BA -0.10%decrease; red down pointing triangle have faced constraints on the supply of things like engines, chips and workers. Both have long order backlogs.

Airlines have recognized these constraints and are scrambling to reserve planes, even though they won’t be delivered for years to come.

“We cannot make planes fast enough to satisfy the demand,” Faury said, in an interview at the company’s temporary air-show office near the runway of a small airfield here northeast of Paris. An airplane order these days is “a reservation of slots in the backlog, indeed for a resource that is scarce,” he said.

IndiGo’s jets, for instance, aren’t scheduled for delivery until 2030 at the earliest.

Boeing CEO David Calhoun, at a press conference before the air show, said he doesn’t see his company’s supply chain stabilizing until the end of next year.

“Why are people ordering airplanes out into the ’30s now? Because they see the same thing,” Calhoun said.

The aviation industry is notorious for its booms and busts, but the cycle these past few years has been extraordinary. Flying all but stopped during parts of the pandemic.

When travel restrictions started falling away last year, airlines were taken by surprise by the pent-up demand. Airports were overwhelmed last summer. Airlines struggled to hire back staff and bring planes back into service.

In recent months, many carriers have pivoted from recovery mode to growth mode. IndiGo placed its record order for 500 Airbus narrow-body A320-family jets to build out its domestic network and expand its international flying. Air India briefly held the record order title with a February deal for 470 planes split between Airbus and Boeing.

Earlier this year, two Saudi Arabian airlines said they would buy almost 80 Boeing 787 Dreamliners, the company’s biggest plane, as part of a broader plan to boost travel to the oil-rich kingdom.

Late last year, United Airlines ordered 100 Boeing wide-bodies. Last month, Europe’s biggest carrier, no-frills Ryanair, ordered up to 300 Boeing 737 MAXs.

“We’ve had some really, really big orders,” Boeing commercial chief Stan Deal said at a press conference in Paris before the show. “You’re seeing the wide-body market pick up and very strong demand there.”

So far this year, airlines and airplane lessors have ordered 1,429 Airbus and Boeing jets, including firm deals announced this week. That is already more than the combined full-year order haul of 1,377 in 2019. Confirmed orders at this year’s air show were the highest they have been since 2011, according to aerospace research firm Agency Partners.

The 737 MAX competes with the A320 in the hottest segment of the commercial aviation market. These narrow-bodies typically fly shorter flights with fewer people. That market has rebounded ahead of longer-haul travel.

Just before the pandemic hit, Boeing suffered two fatal MAX crashes, triggering a long grounding and regulatory review that hobbled it in the competition with its European rival.

Airbus, meanwhile, pushed aggressively during the pandemic to deliver its planes to customers—many of whom didn’t want them anymore. The European plane maker also worked closely with suppliers to keep assembly lines running, betting demand would bounce back quickly.

That bet paid off, allowing Airbus to tilt what is one of the world’s best-known business duopolies heavily in its favor. It surpassed Boeing as the biggest airplane manufacturer by both annual deliveries and total backlog in 2019.

For years, Boeing and Airbus had a roughly 50-50 split of global orders for single-aisle planes, both plane makers’ most profitable jets. Today, Airbus has about 62% of that market, according to a Wall Street Journal analysis of both companies’ orders and backlogs, including announcements made at the show this week.

Faury, in the interview, said Airbus’s dominance in the narrow-body market is “likely to last for long.”

He said he expects the single-aisle market to be dominated by Airbus and Boeing for the foreseeable future, but said he was taking China’s new homemade jetliner, the C919, seriously.

“By the end of the decade it’s not unlikely that they will have a significant share in China,” Faury said. “How they will perform compared to the international market I think it’s very difficult to say now. But we are humble, we don’t want to [have] too much complacency on what the Chinese can do.”

Boeing’s Calhoun, who didn’t attend this year’s air show, has said it isn’t as important for Boeing to regain its 50% share of the narrow-body market as it is for it to recover from its production issues.

“Most of the share losses that have occurred over the last four years, which are the ones that are really measurable, are because we couldn’t deliver airplanes,” he said at a preshow press conference in South Carolina, where Boeing produces its wide-body 787 Dreamliner. “And we still have a hangover from not being able to deliver airplanes.”

Even before IndiGo’s order, Airbus had been mostly sold out of its A320 narrow-body until the beginning of the next decade. Airbus is targeting a production rate of 75 A320-family models a month by 2026, after cutting production to around 40 a month during the pandemic. It has pushed its output goals back several times as it battles to overcome supply-chain issues.

Boeing, meanwhile, has set its sights on reaching a monthly production rate of 38 for its rival 737 MAX jets, up from 31. It should hit that target “pretty soon,” said Deal, Boeing’s commercial chief. The company plans to increase rates further but hasn’t yet set a specific target beyond that.

Boeing is still ahead in the market for bigger jets.

“The wide-body business is a different situation. It’s a fierce competition,” Faury said. “The backlogs are much shorter, there is capacity available much earlier, and for those years there is a tough competition and both sides trying to win the campaigns and dominate.”

FT : How a SEC rule change has opened more doors for activists

How a SEC rule change has opened more doors for activists
Despite companies rewriting bylaws to strengthen defences, more investors have won board seats in proxy battles

When the Securities and Exchange Commission introduced a rule change to make it easier for shareholder activists to elect board nominees, there was a notable dissenting opinion from one its commissioners.

Hester Peirce warned that the change would advance special interests rather than enhancing corporate value. Using a light-hearted example, she said even a passionate activist on issues surrounding bees would have leverage to demand companies “put beehives on the roof of each office building”.

The new rules have been in effect since last September. So far, no known proxy battles over beehives. But shareholder activists have made boardroom advances in a busy year for proxy showdowns in the US.

Activists have won 88 board seats through May 31, up from 77 at that point last year, according to Diligent, a data provider. Big activist firms like Nelson Peltz’s Trian and Elliott also scored concessions from Disney and Salesforce respectively without obtaining board seats.

And on Monday, a fight between an activist investor and Masimo, a small medical device maker, will climax at the company’s annual shareholder vote. Politan Capital Management, run by New York-based activist investor Quentin Koffey, has alleged that the corporate governance of Masimo is broken and the company is in need of more independent oversight. Politan has nominated Koffey and another candidate to Masimo’s board. The fight will be key test of a shift in corporate governance influenced by the SEC rule change.

For activists, the new “universal proxy” rule guarantees that all board candidates will appear on shareholder ballots at a company’s annual meeting. It also allows shareholders to pick and choose individual directors. Previously, unless shareholders turned up in person to an AGM, they were forced to vote for a slate of the company’s nominees in contested elections or those of the activists.

Proposed by the SEC in 2016, the rule change was applauded by activists such as Carl Icahn and was not adopted until Democrats came back into power under president Joe Biden.

The universal proxy voting rules raised concerns among companies that potential activists — environmentalists, labour unions and human rights advocates — would have an easier time waging proxy campaigns. Hester argued any activist “need only to dangle the possibility of buying a few shares and putting forward directors to scare management into the negotiating room”.

For months, Wall Street’s big law firms warned clients of boardroom chaos, predicting non-traditional activists would try to nominate directors. Fears peaked when a former Warner Music executive launched a campaign in early December to put herself forward for a board seat, relying on the universal proxy rule change. Fearing an activism surge, hundreds of companies rewrote their corporate bylaws to make life harder for activists.

Some bylaw changes demanded more information from activists, including about their funders. Masimo approved such changes last year, and in October, Koffey sued the company to overturn its bylaw changes. Masimo eventually relented and allowed Koffey’s nominees to proceed to a vote on Monday.

“Companies were weaponising their bylaws a lot more than ever,” said Elizabeth Gonzalez-Sussman, vice-chair of the activism practice at law firm Olshan.

But while bylaw changes might ward off unsophisticated activists, they offer only a false sense of security. If activists will splurge on a court fight to war over arcane bylaw changes, then these defences will prove beatable, says Richard Thomas, a managing director at Lazard. 

“If the juice was worth the squeeze it is going to be worth the squeeze no matter what the bylaws say,” he says. “You really don’t avert a problem simply by bylaw changes.”

The activists’ successes in winning more board seats this year also show conventional shareholders and asset managers approve of the need for board overhauls at certain companies. On the Masimo battle, asset manager Neuberger Berman has already said it is voting for Koffey, who previously worked at DE Shaw and Elliott Management, and his other candidate, citing concerns about corporate governance at the company.

Shaun Mathew, a partner at law firm Kirkland & Ellis, says the fundamentals of activism did not change because of the SEC’s universal proxy changes. Rather, they “may have made it somewhat easier for activists to win at least one board seat”. In the months ahead, “boards should also not take too much comfort”. Perhaps boards would have preferred a “bee activist” after all.

Barrons : The Age of Oil Will Endure. These Drilling Stocks Could Be Gushers.

The Age of Oil Will Endure. These Drilling Stocks Could Be Gushers.

Offshore oil drillers were about the worst place to be in 2020 as oil prices were falling and demand for crude seemed to be seeping away. Now, the stocks may be the ones to own as investors realize that oil will be needed to make the world go around for decades.

Make no mistake, it was a historic downturn for providers of offshore rigs over the past few years. Oil prices tumbled during the pandemic lockdowns as driving nearly ceased, while the pivot toward renewable energy caused big oil companies to reduce their spending on drilling in hard-to-reach locales. Rigs were taken out of commission as they became too costly to operate profitably, but it wasn’t enough. Many of the offshore drillers eventually filed for bankruptcy in 2021 and 2022, wiping out investors who had bought shares as a value play.

What a difference 12 months makes. The drilling companies, including Noble (ticker: NE), Valaris (VAL), and Seadrill (SDRL), emerged from bankruptcy in strong financial shape and are poised to thrive as major energy companies ramp up their offshore spending.

The stocks are down from early-year highs as oil prices have fallen to under $70 a barrel from the low $80s. The drop in crude, however, isn’t expected to dampen the industry’s ambitious offshore investment plans. Offshore drillers are benefiting as they get higher leasing rates for their rigs, which portend better earnings in the coming years.

Most of the operators have little or no net debt after restructuring their balance sheets in bankruptcy. And while none of the companies pays a dividend, some companies are initiating or expanding buyback programs, and payouts could be reinstated as free cash flow grows sharply in the coming years. With the risks to investors reduced, the stocks look like a buy.

“We are in the second year of what we view as a minimum of a five-year…investment growth cycle,” says David Anderson, a Barclays analyst, who views the offshore drillers as the most attractive area of the energy service sector.

The offshore industry is a concentrated niche led by Noble, Transocean (RIG), Valaris, Seadrill, and Diamond Offshore Drilling (DO), and their rigs are increasingly in demand. Global oil production is now running at about 100 million barrels a day, and isn’t likely to change much over the coming decade.

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Offshore fields are critical to maintaining the pace. While an onshore well that uses hydraulic fracturing, or fracking, can produce 1,000 barrels of oil a day, offshore fields like one off the coast of Guyana in South America can hold billions of barrels of crude, and individual wells can produce 20,000 barrels of oil a day, according to Evercore ISI analyst James West. The annual rate of production declines for offshore wells are typically in the single digits, versus 50% or more for the first year for fracked wells in the U.S.

Despite being hounded by climate activists, European majors like Shell and BP have pivoted back to oil and pleased their investors after de-emphasizing investments in renewable energy.

“There’s a realization that the oil age will last longer than many prognosticators have suggested,” says West. “The major energy companies recognize they need baseload oil production, and they need offshore for that.”

Just follow the money. Oil-service industry leader SLB (SLB), formerly known as Schlumberger, highlighted the offshore opportunity this past week, projecting that major oil companies would commit up to $500 billion in new projects from 2022 through 2025. And for good reason—SLB noted that 85% of offshore fields are profitable even if oil prices drop to $50 a barrel.

There are two main types of rigs: jackups, which operate in shallow water of 500 feet or less, and deepwater rigs, either ships or floating platforms that can operate in 10,000 feet of water, with reservoirs often several miles below the seafloor. The latter command the highest rates, and they are the ones owned and operated by the public offshore drillers.

There are now 100 to 150 deepwater rigs operating in such places as the Gulf of Mexico, the North Sea, and Guyana. Day rates on these rigs bottomed at about $125,000 a day at the height of the Covid crisis in May 2020 and now are approaching $500,000 a day. With the rigs’ operating costs generally below $150,000 a day, current contracts are highly profitable.

Not all of that is flowing through to the drillers just yet. Current earnings are depressed because of older contracts carrying lower leasing rates, but profits are expected to ramp up sharply in 2024 through 2026 as a result of higher rates on more recent contracts.

The bankruptcies, consolidation, and tight supply also have produced more pricing discipline. And there is virtually no new construction of rigs, which can cost nearly $1 billion each. That should keep the most desirable rigs in short supply, and limit overspending by the offshore drillers. Earnings at Noble, for instance, are expected to more than double, to nearly $6 a share in 2024 from $2.45 this year, and head even higher in 2025.

Noble is a favorite of Barclays’ Anderson, who says it has an “enormous recontracting opportunity” in the next two years, a clean balance sheet, and a buyback program under way. In May, Noble inked a 2.5-year contract with Petrobras , the Brazilian oil company, for a floating rig at $490,000 a day, a new high for the current cycle. Anderson has a $56 price target on Noble, up more than 50% from Friday’s close of $35.62. At 9.1 times 12-month forward earnings, it’s slightly more expensive than other drillers, but also slightly higher quality.


Valaris stock has lagged behind peers in 2023 because it agreed to lease a group of rigs in the past year or so at what are now below-market rates, which means its re-contracting opportunity will take longer to play out. Valaris has an attractive rig joint venture with Saudi Aramco, the state-controlled Saudi oil giant, that could be taken public in the coming years. “Valaris is well positioned with a high quality deepwater fleet with a handful of rigs being reactivated,” says West. He also likes the Saudi joint venture and has an Outperform rating and $86 price target on Valaris stock, which closed on Friday at $56.56.

Diamond Offshore has the smallest market value of the main offshore drillers, and fewer high-quality assets, but they include four “seventh-generation drillships,” the latest models. Diamond, which trades at nine times projected 2024 earnings, is another Anderson pick, in part because its small size could make it a consolidation target. He has a $20 price target, up more than 60% from a recent $12.37.

Seadrill, meanwhile, has been a consolidator, and could benefit from a $1 billion merger earlier this year with the privately held Aquadrill that resulted in what the company called a “best in class” fleet, with seven seventh-generation drillships. With low-price legacy contracts expiring, Seadrill’s earnings could ramp up in the years ahead. At $38, it trades for eight times projected 2024 earnings.

Transocean is the riskiest of the drillers—but may also have the most reward. It is the industry leader, with the most operational deepwater rigs, while owning the most that have been mothballed and could be returned to market.

The company has considerable debt of $7 billion against a market value of $4 billion. It is the only major rig operator to have avoided bankruptcy. The debt means higher risk for Transocean stock, which trades around $6, or 15 times projected 2024 earnings. But paying it down could push equity prices higher as ownership passes from bondholders to stockholders.

The company could be “one of the greatest deleveraging stories” in energy in the coming years, with potential annual free cash flow of $1 billion in 2024 through 2026, Anderson says. Ultimately, its equity amounts to a turbocharged play on an industry revival, and investors can also buy its debt, like the 6.8% bonds due in 2038, now yielding about 11%.

The risks to these companies are real. They include the finite life of the rigs, which should run another 20 to 25 years or so, but could be cut short by the energy transition, and the companies’ linkage with oil prices, which are likely to be volatile. But it’s dawning on the world that oil will be a key energy source for decades. The consolidated, financially disciplined rig industry could be one of the best ways to play that longevity.

>>> US Close Dow -0,65% S&P-0,77% Nasdaq -1,01%

Closing Stock Market Summary

The stock market closed the week on a downbeat note. Ongoing consolidation efforts contributed to some of the weakness, although concerns about global growth prospects were another contributing factor. The major indices hit their best levels in the early afternoon trade as a few mega cap stocks recovered from opening losses, yet selling picked up again to interrupt that rebound effort.

Ultimately, the major indices all closed in negative territory with losses ranging from 0.7% to 1.4%.

The downside moves followed a slate of disappointing preliminary June manufacturing PMIs for Japan, Germany, the UK, the eurozone, and the U.S., all of which came in below 50 (i.e. the dividing line between expansion and contraction). Following yesterday's central bank rate hikes, those reports fueled worries that prior rate hikes may be adversely impacting economic activity, specifically in the manufacturing sector.

Growth concerns manifested themselves in falling commodity prices, the outperformance of the dollar, and sliding Treasury yields. The U.S. Dollar Index rose 0.5% today to 102.91. WTI crude oil futures fell 0.4% to $69.18/bbl and copper futures fell 2.0% to $3.80/lb. The 2-yr note yield fell five basis points to 4.75% and the 10-yr note yield fell six basis points to 3.74%.

Today's retreat in the stock market was broad and orderly. Decliners led advancers by a greater than 2-to-1 margin at both the NYSE and the Nasdaq. 24 of the 30 Dow components logged declines and all 11 S&P 500 sectors closed in the red. 

The communication services (-0.3%) sector saw the slimmest loss, boosted by a gain in Meta Platforms (META 288.73, +3.85, +1.4%). Other sectors exhibiting relative strength included the health care (-0.3%) and financials (-0.4%) sectors. Meanwhile, the utilities (-1.5%) and consumer discretionary (-1.1%) sectors fell to the bottom of the pack. 

Trading volume was extremely heavy today, reflecting the reconstitution of the Russell Indexes. 

  • Nasdaq Composite: +28.9% YTD
  • S&P 500: +13.3% YTD
  • Russell 2000: +3.4% YTD
  • S&P Midcap 400: +3.5% YTD
  • Dow Jones Industrial Average: +1.8% YTD

Reviewing today's economic data:

  • June IHS Markit Manufacturing PMI - Prelim 46.3; Prior 48.4
  • June IHS Markit Services PMI - Prelim 54.1; Prior 54.9

There is no U.S. economic data of note on Monday.

WSJ : Yellen Says More Bank Mergers Likely This Year

Yellen Says More Bank Mergers Likely This Year
Treasury secretary says she doesn’t see ‘huge threat,’ but comments show regulators bracing for turbulence

PARIS—Treasury Secretary Janet Yellen said more banks will probably seek to merge this year as higher interest rates and recent banking turmoil are making it more expensive for them to hang onto depositors.

Some smaller banks have said they are paying more on savings accounts after the Federal Reserve began quickly raising rates last year. Yellen said that trend has continued following the collapses of Silicon Valley Bank and Signature Bank in March, when small and midsize banks across the country saw depositors jump to larger institutions they believed were less vulnerable.

Paying higher rates for deposits is denting those banks’ profitability, Yellen said, which could become apparent in banks’ second-quarter earnings next month. She said she didn’t expect a return of the instability of earlier this year, but weaker earnings could put pressure on stock prices and potentially prompt some banks to merge.

“I don’t think it’s a huge threat to the sector, but there will probably be banks that end up wanting to merge,” Yellen said in an interview in Paris, where she is attending meetings on debt and climate projects in the developing world.

Yellen didn’t name any banks she was watching. She has previously said it was possible some banks could look to buy each other, but her new comments are the clearest sign that regulators are bracing for industry turbulence when banks report their second-quarter earnings.

Bank regulators have been reluctant to let big lenders buy each other recently. But some banking experts have said they would need to allow more mergers to shore up confidence in the system. Regulators seized First Republic Bank and sold the bulk of its operations to JPMorgan Chase in May.

Yellen said more consolidation in the banking industry could be healthy, though she has warned against the biggest banks becoming bigger.

“We certainly don’t want overconcentration and we’re pro-competition, but that doesn’t mean no” mergers, she said. “We have more banks, relatively speaking, in the United States than almost any country of which I’m aware.”

While she doesn’t expect any decline in earnings to send the industry back into crisis, federal regulators are watching for signs of trouble. The Financial Stability Oversight Council, an interagency panel of regulators led by Yellen, met last week to discuss the banking sector, focusing on risks banks face in their lending for commercial real estate.

Yellen said those risks primarily lie in the loans smaller banks have extended for office buildings.

A shift toward remote work has undermined the value of many office buildings, while higher interest rates have increased the cost of many commercial mortgages. That has left many landlords at risk of default, which could in turn create trouble for the smaller banks that hold much of that debt. About $270 billion in commercial mortgages held by banks is set to expire this year, according to data provider Trepp.

Yellen said she doesn’t expect office-building loan defaults to cause broad fallout, though it could cause additional banks to fail. She said smaller banks have generally been conservative in their lending.

“There may be some problems from this, but I think it’s going to be manageable,” she said. “But I don’t really think that this is systemic.”

>>> 'Double Trouble' Swirls Deep In Tropics As Cindy Forms With East Coast In Cr

'Double Trouble' Swirls Deep In Tropics As Cindy Forms With East Coast In Crosshairs

Tropical Storm Cindy formed Thursday night over the Atlantic Ocean, while Tropical Storm Bret churns in the Caribbean Sea. Two named storms swirling in June are an extraordinarily rare event.
As of 0500 ET, TS Cindy was located about 990 miles east of the Lesser Antilles, moving west-northwest at 15 mph with maximum sustained winds of 45 mph.
"On the forecast track, the system is expected to remain well east and northeast of the northern Leeward Islands through early next week," the NHC said. "Some strengthening is forecast during the next couple of days."
Computer models show TS Cindy's possible trajectory is near the US East Coast sometime late next week though nothing is concrete.
Meanwhile, Tropical Storm Bret is moving westward over the Caribbean Sea with maximum sustained winds of 60 mph.
According to meteorologist Philip Klotzbach at Colorado State University, the two tropical storms simultaneously forming in June have not happened since 1968.
Perhaps what's leading to increased tropical activity is a marine heatwave in the Atlantic.

>>> Half Of Russia's Strategic Missile Units Have Been Rearmed With Hypersonics:

Half Of Russia's Strategic Missile Units Have Been Rearmed With Hypersonics: Putin
BY TYLER DURDEN
FRIDAY, JUN 23, 2023 - 04:00 AM
Russian President Vladimir Putin has in fresh statements revealed the status of Russia's hypersonic and nuclear-capable arsenal within the context of the Ukraine war.
In early May, Ukraine's military claimed to have intercepted Russian ballistic missiles for the first time in the conflict, using a US-made anti-air defense system. The Kremlin rejected the claims, but did confirm it had been using hypersonic missiles within specific or limited operations and long-range launches.
Putin said Wednesday, as translated in TASS: "About half of the units of Russia’s Strategic Missile Force have been equipped with the latest Yars missile systems and are being rearmed with modern Avangard warheads."
He was speaking at an event honoring graduates of military academies and stressed the "unconditional priority" of missile readiness.
The Russian president continued:
"In light of the new challenges and invaluable experience of the special military operation we will continue to improve the Armed Forces in every possible way," he said, adding that the most important task here was to develop the nuclear triad as the key guarantee of Russia's military security and global stability.
Putin also announced that new Sarmat missile launchers would enter duty soon.
"In the near future, the first launchers of the Sarmat complex with a new heavy missile will be put on combat duty," he said.
"The arsenals of aviation and naval components of strategic nuclear forces are being replenished in strict accordance with the timetable," he emphasized. "Russia’s nuclear triad allows for effective and guaranteed strategic deterrence and maintains the global balance of power," Putin concluded.
As for the feared Sarmat, which is Russia's new super-heavy intercontinental ballistic missile (ICBM), state media has also continued touting it will soon be deployed.
The ultra-large Sarmat missile has been dubbed in the West as the 'Satan II' - which is nuclear capable. In February of this year there were reports the Russian military tested the weapon, but the test may have failed.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • XAIR -6.4%

Other news:

  • SPCE -10.5% (entered into a distribution agency agreement for the offer and sale of up to $400000000 of shares of common stock)
  • ASLN -3.4% (ASLAN Pharmaceuticals announces publication in clinical immunology highlighting Eblasakimab's unique mechanism of action in the treatment of atopic dermatitis)
  • TYGO -3% (stock offering relates to warrants)
  • TAST -2.9% (stock offering by selling shareholder)
  • AVDL -2.6% (JAZZ seeks court action to declare FDA's approval of AVDL's Lumryz as unlawful)
  • AKRO -2.6% (Presents Analyses of Phase 2b HARMONY Study at the 2023 International Liver Congress Reinforcing and Characterizing EFX-Related Improvements in Liver Histopathology)
  • MSGE -2.4% (prices secondary offering of and concurrent share repurchase)
  • GNW -1.8% (discloses security breach)
  • JAZZ -1% (JAZZ seeks court action to declare FDA's approval of AVDL's Lumryz as unlawful)
  • MRNA -1% (completes submission to FDA for its updated COVID-19 vaccine)

Analyst comments:

  • UAA -2.6% (downgraded to Equal Weight from Overweight at Wells Fargo)
  • VTRS -2% (downgraded to Underweight from Equal Weight at Barclays)
  • ACN -1.4% (downgraded to Market Perform from Outperform at TD Cowen)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • APOG +6.6%, KMX +6.1%, SWBI +5.3% (also increases dividend)

Other news:

  • TRUP +15.8% (provides update on its rate filing approval status in CA and NY)
  • MGTX +9.3% (to present data from Phase 1 AQUAx study and provide update on phase 2 study of AAV-hAQP1)
  • IONQ +9.3% (increases its 2023 bookings expectations by 25%)
  • GSK +5.4% (provides Zantac litigation update)
  • ICPT +4.1% (receives Complete Response Letter from FDA for obeticholic acid as a treatment for pre-cirrhotic fibrosis due to NASH; to restructure to focus on rare and serious liver diseases; significantly reduces operating expenses)
  • EGLE +3.9% (to repurchase Oaktree Capital's entire 28% stake for $219.3 mln)
  • MMM +3.8% (enters into broad class resolution to support PFAS remediation)
  • BC +2.1% (provides update on previously reported IT security incident)
  • SAH +1.5% (suspends operations at eight EchoPark locations)

Analyst comments:

  • W +2.5% (upgraded to Market Perform from Underperform at MoffettNathanson)