Bank profits soar as outlook brightens, Coinbase debut puts focus on cryptos, and housing's supply-demand imbalance: This Week in Finance

Welcome to This Week in Finance, your weekly roundup of the conversations trending among financial professionals on LinkedIn. Click Subscribe to be notified of each edition. This week:

Banks revel in growth recovery

In a sign of economic thaw, big banks have begun unfreezing billions in funds set aside to deal with an anticipated flood of bad loans due to the pandemic. Not only did defaults not materialize on the scale envisioned, but fiscal stimulus and faster vaccine distribution are buoying growth. JPMorgan Chase, the biggest U.S. bank, reported its best quarter ever during the first three months of the year, after the release of more than $5 billion in "rainy day" funds helped drive a fivefold increase in profit from a year earlier — to $14.3 billion. Wells Fargo reported a sevenfold increase, to $4.74 billion; and Goldman Sachs, a record profit of $6.84 billion. Bank of America doubled its profit in the quarter, and Citigroup reported three times its year-ago earnings. 💲 Here's what people are saying.

• Citi to exit retail banking in Asia: The bank will pull out of its consumer banking operations in China, India, Australia, South Korea, and nine other countries across Asia, Europe, and the Middle East where it doesn't have "the scale we need to compete," CEO Jane Fraser said.

China reports record economic growth

Official figures released Friday suggest China's economy grew a record 18.3% in the first three months of the year, compared with the same period in 2020, when cities were shut down and the economy was shrinking rapidly. While factory activity and property sales have picked up, the figures were slightly below what economists had forecast and the country faces a number of challenges ahead, including the prospect of inflation, a "lagging" consumer recovery, and concerns about asset bubbles, noted The Wall Street Journal. China's quarter-over-quarter growth slowed to 0.6% in the most recent period, from 2.6%; the quarterly comparison is the most important in many economies. 💲 Here's what people are saying.

U.S. economy hits 'inflection point'

The U.S. economy is about to start growing much more quickly, Federal Reserve Chair Jay Powell said in an interview with CBS, with hiring set to accelerate. The central bank chief said economic factors have hit an "inflection point" where the outlook has "brightened substantially" following progress in the COVID-19 vaccination program and strong fiscal and monetary support. He noted, however, that the spread of coronavirus remains the main risk to the economy, adding that it was "highly unlikely we would raise rates anything like this year." 💲 Here's what people are saying.

• Inflation is looming larger: Consumer prices rose the most in March since 2012, jumping 0.6% from the previous month. The movement higher is likely to last for several months, as trillions of dollars in federal stimulus combine with pent-up demand. The Federal Reserve has said meaningful price increases will likely prove temporary as the economy rebounds.
• Jobless claims at pandemic-era low: The initial filings for state unemployment benefits still exceed pre-contagion levels — and 8.4 million jobs remain lost since the onset of the pandemic last year — but the trend in claims this year, while choppy, has been downward.
• Boom could last into 2023: Dimon: In his annual letter to shareholders, the JPMorgan CEO said strong consumer savings, expanded vaccine distribution, and the Biden administration's proposed $2.3 trillion infrastructure plan could lead to an economic "Goldilocks moment." Dimon said the boom would mean fast and sustained growth for the economy, but it could be derailed by obstacles such as virus variants and quicker-than-expected inflation.

• National debt: Should we be worried?: The national debt is at an all-time high, and it's projected to hit 102% of gross domestic product this year. The Wall Street Journal notes that a 90% threshold, based on flawed Harvard research, was once considered cause for panic, and it would have set off a combination of inflation, tax hikes, and spending cuts.
• Why can't businesses find workers?: Some businesses, especially services, are struggling to hire back workers, even with the unemployment rate at 6%. While expanded jobless benefits and pandemic stimulus payments are playing a role in the dynamic, research suggests it's small compared to the scale of the economy's reopening.

After Coinbase's debut, what's next?

Coinbase made history on Wednesday by becoming the first major cryptocurrency exchange to go public in the U.S. The stock ended the day at $328.28 a share, valuing the company at $85.8 billion — nearly on par with giants like Facebook and Airbnb when they went public. The move, alongside the recent rise in digital currency prices to record highs, is "fueling a boom in possibilities" for the industry and catching the eyes of banks and traditional investors who had long been skeptical of the $2.2 trillion crypto market, noted Bloomberg.

• Digital-currency lending startup BlockFi and rival exchange Kraken are among U.S. companies in the space also considering going public, Bloomberg reported.
• Coinbase, which gets the vast majority of its revenue from transaction fees, has brought in $1.3 billion in the past year as currencies such as bitcoin have soared.
• Here's what people are saying.

World's biggest SPAC merger

Southeast Asia's most valuable startup, Grab, is going public in the world's largest special purpose acquisition company (SPAC) merger. In the $40 billion deal, the ride-hailing and food-delivery firm will merge with blank-check company Altimeter Capital and list on Nasdaq. The move would value Grab at more than twice its last private valuation of $16 billion. It comes amid a rush of investor interest both in SPAC mergers as well as in Southeast Asia's booming internet economy. 💲 Here's what people are saying.

Housing supply 3.8M short of demand

New data from Freddie Mac reveal the U.S. is 3.8 million single-family homes short of meeting current demand for housing, with the deficit "especially acute" for entry-level homes. Freddie Mac's chief economist said this is what happens "when you underbuild for 10 years." The Wall Street Journal reports home builders would have to build more than 1 million single-family homes a year to meet long-term demand. Not only is the shortage a detriment to would-be buyers trying to enter the market; it's also hindering economic growth, according to Freddie Mac.

• The same dynamic is playing out in countries such as Canada.
• U.S. housing starts rebounded last month to their highest since 2006, beating expectations and signaling "residential construction is getting back on track," reported Bloomberg.
• Here's what people are saying.

Madoff, of Ponzi scheme infamy, dies

Bernie Madoff, who pleaded guilty in 2009 to running the largest Ponzi scheme in history, died of apparently natural causes in federal prison at age 82. Madoff was serving a 150-year sentence for defrauding thousands of clients, from luminaries such as Steven Spielberg to ordinary investors, of $19 billion. He was being treated at a prison care center in Butner, North Carolina, for kidney disease when he died Wednesday, officials there said. 💲 Here's what people are saying.

With Cate Chapman, Abhigyan Chand, Riva Gold, Gianna Prudente, Jake Perez, Yunita Ong, and Monica Fike.

What's your take on the week's news and other developments impacting you or your business? Join the conversation in the comments below.