Midsized Banks Get Squeezed, Las Vegas Revenues Hit All-Time Highs and Niche ETFs Close Shop in this Week's Edition...
Take a Lap Around the Industry
Investors Tap Out of Souring Housing Market, Purchases Down 45% (Insider)
Regional Banks Face Fed Scrutiny on Risk Controls (Bloomberg)
Powell Signals Caution on Further Rate Hikes (WSJ)
UBS Falls in ESG Rankings After Credit Suisse Purchase (Bloomberg)
Midsized Lenders Face Regulatory Squeeze and Stiffer Competition
Regional banks in the U.S. find themselves in a difficult position in 2023. For institutions with assets between $85B and $250B, they lack the scale and diversification of money center banks like JPMorgan Chase and Bank of America. Yet stricter regulations loom that could constrain lending and require them to hold more capital. These mid-sized banks face deposit attrition, higher funding costs, weaker profitability and risks from commercial real estate exposure. Recently, S&P and Moody's have downgraded some regionals including KeyCorp and Comerica, citing these headwinds. Competition from private credit funds able to lend more freely adds further pressure. Still, executives argue regional banks remain vital lenders to mid-sized companies and local economies. Though facing challenges on multiple fronts, regional banks aim to adapt their business models to the new environment. Their future health depends on striking the right balance between prudent lending and keeping credit flowing in their communities.
"The further away you get from $100 billion, the better scale, the better profitability you’ll have...because you’re straddling that new threshold with more regulatory requirements.
David Konrad, KBW
Private Funding Pulse Check
SuperBottoms, India's top sustainable brand for baby and mom essentials, has recently closed their $5M Series A funding round, with the participation of Sharrp Ventures
Azim Premji's Family Office, Premji Invest, has invested in a $25M Series A funding round in Ikigai Labs, an AI app platform that helps operational teams make faster and better decisions under uncertainty
In a recent Venture round, Willett Advisors participated in an investment in IOTech Systems, a company solving industrial data problems at the edge
Abacon Capital has joined a $11.9M Series B investment round in Wireland, a Munich, Germany-based company providing EV charging infrastructure and services
Las Vegas Strikes Gold with All-Time High Gaming Revenue
Casinos in Nevada had a record-breaking year in 2022, generating over $14.8B in gambling revenue according to the Nevada Gaming Control Board. This represents a 10.5% increase from 2021's previous record of $13.4B. The state's gaming industry has strongly rebounded after struggling during the pandemic, posting 22 straight months of over $1B in revenue. December 2022 was particularly robust, with the Las Vegas Strip seeing all-time highs. Several factors contributed to Nevada's banner year. Las Vegas hosted more events and still benefitted from pandemic stimulus funds. However, the primary driver was steady customer demand for gambling, even amidst inflation, recession fears and high gas prices. Visitation to Las Vegas increased 20.5% year-over-year, though it remains below 2019 levels. Slot machines accounted for the majority of gaming revenue at $10B. While growth may slow in 2023 due to broader economic conditions, analysts predict Nevada's gaming industry will continue to see solid revenue, especially as convention attendance recovers. The state is well-positioned to withstand a potential downturn given the substantial gains made over the past two years.
"You assume this year is coming out strong based off of what we ended up with in December, and that will continue to trend...We still have some economic bumps on the road, but [the industry] seems to be weathering the storm."
Brendan Bussmann, B Global
Niche ETFs Shutting Down in Record Numbers as Investors Shun Risk
A record number of niche exchange-traded funds (ETFs) are shutting down this year as investor enthusiasm wanes for specialized products betting on hot themes like the metaverse or stocks favored by younger generations. ETF closures have climbed to 929 globally so far in 2023, far exceeding last year's pace, according to research firm ETFGI. Many of the funds forced to close were launched just 1-2 years ago to capitalize on individual investors' demand for tactical investments in specific sectors or stocks. However, flows into these niche ETFs have slowed alongside the broader equity fund space. Investors instead prefer the relative safety of fixed income and large cap funds during a year of rising rates, surging inflation and heightened market volatility. The dominance of big tech stocks in driving gains for major indexes like the S&P 500 has also reduced the incentive to take risks on more speculative, narrowly focused funds. As a result, asset managers are now reckoning with unsustainably low asset bases and being forced to shut down unprofitable niche ETFs.
"There used to be tactical money chasing this hot theme or that hot theme, and that enthusiasm has died down a little bit...With lukewarm flows activity, asset managers are having to make some tough decisions."
Elisabeth Kashner, FactSet
Bellwether Instacart IPO Signals Reopening of Tech Unicorn Window
Instacart, the grocery delivery giant, filed for an initial public offering (IPO) on Friday, with plans to begin trading on the Nasdaq next month. This signals the opening of the IPO window, which has been closed for over a year due to market volatility.
As one of the most anticipated tech IPOs, Instacart is considered a bellwether for many “unicorn” startups valued at billions by venture capitalists but still private. The company going public will provide insights into current consumer trends, given Instacart partners with over 80% of grocery chains to power their delivery services.
Instacart reached profitability in 2022, reporting $428M in net profits for the year. The company generated $2.55B in total revenue in 2022. Instacart was valued at $39B in its last private funding round in early 2021, but has since lowered its valuation to $13B ahead of its planned IPO. Instacart’s upcoming roadshow and share pricing, expected in September, will provide more clarity into its market debut and implications for other startups waiting in the wings.
"The new valuation was announced internally at a recurring employee meeting on Thursday where executives cited volatile market conditions as the reason for the revision. Leaders also reiterated the company’s intention of going public, stressing the business fundamentals were healthy and ready for that milestone but that it was waiting for an optimal open market window."
A four-advisor, $320M AUM team previously with Merrill Lynch launched an independent RIA firm called Veritas Legacy Wealth in Amarillo, Texas
The team is led by John Klein and includes advisors Blake Bailey and Lavona Kuhn, who helped build the multigenerational practice over 21 years
The team serves clients in industries like oil/gas and farming who are nearing retirement and views true wealth as impact on future generations
The team decided to go independent for the freedom and entrepreneurial spirit it allows, partnering with LPL Strategic Wealth Services (InvestmentNews)
Written by:
Andrew Popp | Sr. Research Associate
FINTRX delivers an industry-leading suite of private wealth data and research solutions to the alternative investment space and private capital markets. Engineered to help clients identify and access family office and RIA capital intuitively, the FINTRX platform ensures accurate and updated data and research on 850,000+ private wealth records globally. To subscribe to our newsletter and see previous versions click below.
