Jul 14, 2021

Axios Closer

Today's newsletter is 673 words ... 2½ minutes.

🐪 The dashboard: The S&P 500 closed up 0.1%.

  • Biggest gainer? Wells Fargo (+4%) as the embattled bank showed signs of progress.
  • Biggest decliner? Oil and gas company Occidental Petroleum (-7%). The energy sector was the day's worst performer.
1 big thing: Borrowing dries up

Illustration: Aïda Amer/Axios

A phenomenon ushered in by the pandemic is lingering: less borrowing. People are paying down their credit card balances faster, and mom-and-pop shops are holding back on loans. Thank all the stimulus for that.

Why it matters: Government aid left consumers and businesses buoyed with cash, so they aren't turning to banks to borrow nearly as much.

  • "Consumers have continued to use liquidity from stimulus and other relief programs to pay down debt, driving lower loans," Citibank CFO Mark Mason said during the bank's earnings call today.

What's new: Spending is soaring, but loan balances aren't, the big banks said this week.

  • Wells Fargo said today loan balances are down 10% compared to a year ago — and 6% from the first three months of 2021.
  • At JPMorgan, they're down 3% (but lending is picking up among its wealthiest clients, Bloomberg reports).

There are some signs of life. Bank of America said consumer banking loans and leases saw the first quarterly uptick in a year — though they're down 12% from 2020.

  • And there's strong demand among consumers that want loans for cars and homes, JPMorgan CEO Jamie Dimon said yesterday.

Between the lines: The dynamic is squeezing a profit engine for banks (though they are still making plenty of money).

  • An upshot: All the cash sloshing around meant fewer loans going bad — something banks braced for at the onset of the pandemic.

What to watch: Executives bet borrowing momentum kicks in when stimulus wears off and the economy revs up.

  • "Companies need to build inventory and hire workers to meet the growing customer demand," which could spur more borrowing, Bank of America CEO Brian Moynihan said today.
2. Charted: One airline's pandemic milestone*
Expand chart
Data: FactSet and corporate filings; Chart: Danielle Alberti/Axios

Delta's second-quarter profit of $652 million comes with an asterisk, Axios' Hope King reports.

  • Strip out $1.5 billion from government assistance and other one-time boosts, and the airline actually lost $678 million.

What to watch: Domestic leisure travel is "fully recovered to 2019 levels," CEO Ed Bastian said today.

  • The airline says it's not having trouble finding workers — it's planning to hire between 4,000 and 5,000 people. It didn't disclose wage strategies.
  • "We're still losing money. We need to get the company stabilized first before we start talking about wage increases," said co-CFO Gary Lee Chase.
3. What’s moving

🛢️ Saudi Arabia and the UAE reportedly reached a compromise that could lead to an OPEC+ deal that would boost the global oil supply. (Reuters)

  • Crude oil prices fell 3%, or about $2.30.

📝 Over 150 companies — including Amazon and PepsiCo — called on Congress to pass voting rights legislation. (Axios)

4. Poll: How short-on-staff business picks up slack
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Adapted from a U.S. Chamber of Commerce report; Chart: Axios Visuals

Small business owners who can't find workers are stepping into the unfilled roles themselves — and asking existing staff to take on more hours — to meet demand, per a new survey by the U.S. Chamber of Commerce and MetLife.

  • How they plan to lure workers ... Over a quarter say they will switch up advertising, while others will boost pay (24%), offer flexible hours (22%) or offer a hybrid work environment (21%).

See the survey.

5. 🐦 R.I.P. Twitter "Fleets"

Example of a Twitter fleet from today. Credit: Twitter, user @lisahopeking

It turns out that Twitter's "Fleets" feature was fleeting. The company's version of Snapchat and Instagram "Stories" is going away less than a year after it was launched, Axios' Sara Fischer reports.

What they're saying: The nascent feature wasn't getting enough engagement to make it worth its while, the company said today.

  • Intended to help people share fleeting thoughts in a "lower-pressure, ephemeral way," Fleets were used most frequently by active accounts trying to amplify their own Tweets.

Thought bubble from our in-house Fleeter, Hope: It's true, I mainly used it to amplify my own Tweets, so I suggest Twitter offer more options to pin multiple Tweets to the top of timelines.

6. What they're saying
"Whereas Florida should be glad to see [Norwegian Cruise Line Holdings] resuming safe operations and generating valuable economic returns, no one will suffer from passengers simply confirming that they have been vaccinated."
— Norwegian’s suit against Florida’s surgeon general over the state ban on vaccine passports, which the industry says is necessary to restart cruising safely. Go deeper.

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