Morning Toast 2nd May

The bank of Apple rises as First Republic falls.


A new month, a new bank collapse. U.S. stocks closed lower after First Republic fell, and JPMorgan picked up the bulk of the California lender's assets in a $10.6 billion deal. 

This comes ahead of the Fed's 2-day policy meeting this week, and with the third bank failure this year and inflation still ripping, the Fed is expected to raise interest rates for the 10th consecutive time.

Meanwhile, the three major indexes posted skimpy gains in April, with Big Tech reporting earnings that collectively added $320 billion to their market values in a sign that the sector is waking up from its post-pandemic hibernation, the WSJ reports.

Stock Spotlight

This week authorities seized First Republic Bank and sold most of its assets to JPMorgan, the country’s largest bank.

By quickly finding a buyer over the weekend, the government avoided the unsavoury tactic it had to deploy for SVB: protecting deposits over the federally insured cap of $250,000. JPMorgan said it would assume First Republic’s $92 billion in deposits, which is a welcomed outcome since making SVB depositors whole cost the FDIC’s Deposit Insurance Fund about $20 billion.

First Republic Bank’s collapse marks the second-biggest banking failure in U.S. history, topping Silicon Valley Bank’s collapse in March. Like SVB, First Republic is a midsized California-based lender with a specific client base—in this case, wealthy individuals—that exposed it to the shockwaves of the recent banking turmoil.

First Republic tried to weather the storm itself, but after customers withdrew more than $100 billion in deposits in Q1 and its share price plunged nearly 75% last week, the government had to hang the “closed” sign on the door.

This government-brokered acquisition is the latest in a series of bigger banks swallowing failing, smaller banks at a discount this spring. First Citizens collected the scraps of SVB, New York Community Bank snatched up assets of Signature Bank, and UBS absorbed crosstown rival Credit Suisse.

Stock Spotlight

Apple’s New Savings Account Draws Nearly $1 Billion In Deposits In First Four Days.

Apple’s freshly launched high-yield savings account brought in as much as $990 million in deposits over its first four days, according to Forbes. On launch day alone, the savings account drew nearly $400 million in deposits.

The account’s eye-catching 4.15% annual return, plus the ubiquity of iPhones, is likely the main driver for account openings, especially when the average bank in the U.S. is paying less than half a percent.

By the end of launch week, roughly 240,000 accounts had been opened, one source adds. The account is offered through a partnership with Goldman Sachs Bank USA. Goldman’s high-yield savings account housed under its consumer brand, Marcus, offers a 3.90% return, notably less than the Apple product.

While First Republic failed following unprecedented deposit outflows, Goldman Sachs is rapidly pulling in consumer funds by tapping Apple’s 2 billion iPhone owners. The new savings account is only available to holders of Apple’s credit card, Apple Card. Clients can open a savings account in less than one minute directly from their iPhone. Apple Card spend rewards, called daily cash, are automatically directed into the high-yield account.

Sustainability News

Daimler Truck North America (DTNA), NextEra Energy Resources, and BlackRock Alternatives have joined forces to launch a new joint venture called Greenlane.

This new venture will develop and operate a nationwide EV charging network for commercial vehicles in the United States.

With companies increasingly focusing on their value chains to reduce emissions, transportation has emerged as a significant source of value chain emissions. This makes the need for a publicly available nationwide charging infrastructure for commercial vehicles all the more pressing.

The three companies have committed more than $650 million in funding to the venture, which will design, develop, install and operate a network of zero-emission public charging and hydrogen sites for medium and heavy-duty battery-electric and hydrogen fuel cell vehicles. The network will be built on critical freight routes along the east and west coasts and Texas.

Greenlane will initially focus on battery-electric medium and heavy-duty vehicles, adding hydrogen fueling stations for fuel cell trucks. The JV also plans to expand access in the future to light-duty vehicles.

With the Biden administration proposing strict truck emissions reductions over the next several years, this new venture is timely and much-needed. Stay tuned for updates on Greenlane as it works towards enabling the widespread deployment of electric trucks!

Quote of the Day

“It all went south.”

Twitter’s former CEO Jack Dorsey is not impressed with how the current CEO runs the ship. Writing on Bluesky, the Twitter rival he helped create, Dorsey said that Musk should’ve backed out of the deal and that the board shouldn’t have forced him to buy it. It’s a total 180 from last year when Dorsey said Musk was “the singular solution I trust” to lead the company.

Douugh, did you know?

When it comes to investing, knowing the total value of a company's shares (market capitalisation), currently held by its shareholders, can be beneficial when deciding to invest.

If a company has 5 million outstanding shares, and each share sells for $100, that company’s market capitalisation is $500 million (5 million x $100 = $500 million).

In general, stocks and companies are lumped into three main categories: large, mid and small-cap (capitalisation).

Large Cap

Due to their size, large-cap stocks are generally believed to be less volatile and are less likely to go bust. While they may not offer the same growth opportunities as emerging mid-cap and small-cap companies, large cap companies can be innovative market leaders. Their stock price can gain significantly through specific market initiatives or around groundbreaking market solutions.

Mid Cap

These are often expected to grow and increase profits, market share and productivity, which puts them in the middle of their growth curve. Since they are still considered to be in a growth stage, they are deemed less risky than small-caps, but more risky than large-caps. 

Small Cap

This is used to classify companies with a relatively small market capitalization. Historically they’ve outperformed large-cap stocks but are also more volatile and riskier. 

In simple terms, think: Large-cap = low-risk, mid-cap = medium-risk, and small-cap = super high-risk.

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