HSBC reports better-than-expected drop in profits

Miranda Wadham
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HSBC reports better-than-expected drop in profits

HSBC has reported a 14 percent drop in profits for the first quarter, hit by “extreme levels of volatility” in financial markets throughout January and February.

However, analysts had expected the fallout to be far worse for the bank, with chief executive Steve Gulliver commenting that it had been “resilient in tough market conditions”. “Market uncertainty led to extreme levels of volatility in January and February, which affected our ability to generate revenue in our markets and wealth management businesses. However, our diversified, universal-banking business model helped to cushion the impact through growth in other parts of the bank,” he added. Profit before tax stood at $6.1 billion for the three months to March, down from $7.1 billion a year ago. Its adjusted revenue for the first quarter amounted to $13.9 billion, a 4 percent drop from the same time last year.   Shares in HSBC have moved up on the news, currently trading up 2.50 percent at 463.75 (0811GMT). 
03/05/2016

Exxon Mobil beats expectations in tough market

Miranda Wadham
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Exxon Mobil beats expectations in tough market
Exxon Mobil, the world’s largest publicly traded oil producer, reported a sharp profit drop after being hit by low oil prices and tough market conditions. The company reported a $1.8 billion profit, a sharp decline from $4.94 billion in the same period last year and its lowest quarterly profit since 1999. However, the results remained better than expected by analysts, with CEO Rex Tillerson attributing this to the company’s large size and cash flow. He said: “The organization continues to respond effectively to challenging industry conditions.” Exxon Mobil’s share price is reflecting the positive earnings, up 1.12 percent at 89.02 (1519GMT)  

Earnings reports: IAG, AstraZeneca, Amazon, Restaurant Group

Miranda Wadham
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0
Earnings reports: IAG, AstraZeneca, Amazon, Restaurant Group

IAG, the owner of British Airways and Iberia, has announced plans to slow expansion plans in the wake of weaker demand after the Brussels attacks.

The group reported pre-tax profits of €124 million for the first quarter, compared with a loss of €37 million in 2015. However, shares have dropped 3.45 percent this morning on the news that they will be scaling back their planned expansion of routes.

Shares are currently down 3.81 percent at 530.00 (1142GMT).

AstraZeneca saw a 12 percent fall in underlying earnings in the first quarter, broadly in line with expectations.

The pharmaceutical company have been hit by drug patent expiries, with analysts expecting weak earnings throughout 2016 and 2017.

However, share price is broadly unaffected by the news, currently up 0.13 percent at 3964.50 (1146GMT).

Online retail giant Amazon has seen another strong quarter, reporting a $513 million profit and a 28 percent jump in sales.

The company’s investment into technology appears to have paid off, with their Kindle and Fire tablets pushing sales to $29.1 billion.

Restaurant Group, the owner of Chiquito and Frankie & Benny’s, saw shares take a dive this morning after cutting their profit forecast.

The group are now predicting full-year like-for-like sales will fall by between 2.5 percent and 5 percent, with profits between £74 million and £80 million.

Restaurant Group is currently trading down 23.91 percent at 284.91 (1156GMT).

29/04/2016

RBS reports £968 million loss after government fee

Miranda Wadham
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RBS reports £968 million loss after government fee
The Royal Bank of Scotland saw losses more than double to £968 million for the first quarter of the year, after paying a £1.2 billion fee to the British government. Operating profits rose to £421 million for the quarter, up from just £37 million in 2015. The £1.2 billion payment to the government was made to remove the Dividend Access Share, meaning it can now pay a dividend to investors. It was also hit by £238 million restructuring costs, including the spinning off of subsidiary Williams & Glynn. RBS shares are currently trading down 1.16 percent at 241.96 (1037GMT).

US economy slows in Q1 2016

Miranda Wadham
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0
US economy slows in Q1 2016

The US economy slowed in the first quarter of the year, according to figures released today, just hours after the Federal Reserve voted with caution and kept rates steady.

US economic growth slowed to an annual pace of 0.5 percent during the first three months of the year, a sharp drop from the 1.4 percent seen in the last quarter of 2015.

Gross domestic product rose at an annual pace of 0.5 per cent in the first quarter, slower than the 0.7 percent estimated by analysts. Household spending, a key driver of US growth, slowed to 1.9 per cent growth in the first quarter from 2.4 per cent previously. 
28/04/2016

Would banks really desert London in event of a Brexit?

Miranda Wadham
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Would banks really desert London in event of a Brexit?
With the threat of a Brexit growing ever closer, stark warnings of the potential impact on the City of London grow louder. Bank of England governor Mark Carney has warned of major banks leaving the city in their droves, fleeing towards the safety of EU countries. But how likely is that to happen? It appears to be a generally universal opinion that a Brexit would have a negative effect on the City, at least in the short term. London’s financial centre is the world’s largest, contributing 9.6 percent to the UK’s GDP in 2011. It is home to 250 foreign banks, most of which are based here because of the access London gives to the EU market. Without that, banks could be forced to relocate abroad. “A significant amount of financial trade currently booked in London would leave if the UK left the EU,” says Alex Wilmot-Sitwell, head of the European arm of Bank of America Merrill Lynch. “It wouldn’t happen overnight but, steadily, it would fragment throughout the EU.” Of course, it largely depends on the agreement the UK reaches with the EU as to whether the City would retain unfettered access to the single market. However, without it, Carney has warned of the consequences: “Fundamentally in its broadest terms, the question is what degree of mutual recognition would be accorded to the UK… and whether or not a mutual recognition framework could be negotiated that would as much as possible replicate the current passporting regime,” Carney said. HSBC warned in February of the possibility of moving a large part of their investment banking arm to Paris should a Brexit happen: “If the UK leaves the EU it could have a significant impact on our non-ring-fenced bank – our trading room, corporate banking and investment banking – although it would not have an impact on our holding company domicile,” he said. “In that situation a number of jobs would leave the UK.” However, some are sceptical as to whether the impact would really be so great. After all, London was a global financial centre long before Britain joined the EU in 1973, and has remained so despite not joining the single currency. It boasts an impressive skill set, the world’s most universal language, and a time zone that allows for same-day working with both Japan and the US – even without access to the EU, London is a beneficial city to base business. In reality, it is not easy to simply move your operations abroad – it would be timely and costly. According to lobby group TheCityUK the 250 foreign banks based in the UK employ almost 160,000 people; moving this number abroad, or recruiting again, would be no easy task. Arguably, the City is the greatest financial centre in Europe with one of the most welcoming tax and regulatory environments. Any post-Brexit negotiations are likely to saw in favour of the UK; as we import £68 billion more goods from Europe each year than we sell there, we are in a strong bargaining position. In the event that the public vote ‘yes’ to leaving the European Union on the 23rd June, in the short term the effects are likely to be negative. The Sterling may well drop against many other currencies, largely on the panic created by the uncertainty of the future. But after that, it could go either way – in reality, no one can be sure. With a lack of any precedent to follow, we can only hope for smooth post-vote negotiations. 
Miranda Wadham on 28/04/2016

Earnings round-up: Airbus, Sony, Boeing, Samsung

Miranda Wadham
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0
Earnings round-up: Airbus, Sony, Boeing, Samsung
Airbus shares have dropped this morning after CEO Tom Enders warned of a “challenging year” for 2016. The company reported a 23 percent drop in core operating profits to 501 million euros, causing shares to fall nearly 6 percent. Recent problems with the gearbox on the A400M’s giant turboprop engines could also prove “significant” in the near future, according to finance director Harald Wilhelm. Shares are currently trading down 5.68 percent at 55.12 (1340GMT). The world’s largest plane-maker Boeing also reported today, with earnings falling $0.12 billion from last year to $1.22 billion. The company saw first-quarter profit drop 9 percent after being hit by a $156 million charge for its KC-46 aerial refueling tanker, as well as a $70 million pretax charge for its 747 program. Its share price remains largely unaffected, currently trading down 0.01 percent at 137.06 (1349GMT). Samsung reported a strong second quarter, with operating profit coming in ahead of expectations after a “robust” sales of their Galaxy S7 smartphones. The company reported a 12 percent earnings gain between January and March, with operating profit coming in at 6.7 trillion won. Sales were really driven by their mobile range, with profit for the smartphone division jumping 42 percent from a year earlier to 3.9 trillion won, an almost two-year high. “We expect our solid performance to continue,” Samsung investor relations chief Robert Yi said during a post-earnings conference call. Sony shares fell this morning after reporting a loss in its image-sensor business, a sector designed to push growth in the technology company. Annual operating profit more than quadrupled to 294.2 billion yen for the year ended March, after a cost-cutting a restructuring programme put in place by chief financial officer Kenichiro Yoshida. However, its image sensor arm swung to a loss of 29 billion yen, down from a profit of 89 billion yen the previous year. Sony is currently trading down 2.08 percent at 2,778.00 (1403GMT). 
28/04/2016

Fidor and Atom: the rise of the online challenger banks

Miranda Wadham
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Fidor and Atom: the rise of the online challenger banks
Everything is online these days – talking, shopping, even banking. But would you trust a bank with no high street branches or customer service phone line – in fact, no way to talk to a real person at all? Fidor Bank is a German online-only bank launched in 2009, which entered the UK market last year. Despite having over 300,000 customers in Germany, it employs under 50 employees. Advice is given and received through an online ‘community’ of Fidor customers, sharing advice and helping each other with their problems. In true modern fashion, its interest rates are influenced by Facebook likes – the more it receives, the higher the rate will rise, up to a maximum of 0.5 percent AER. Chief executive Matthias Kroner says: “Our account is more like a marketplace than a closed box current account, it is a social community with a banking licence, it is a peer-to-peer economy. It’s a marketplace, shielded by a banking licence.” In January it launched a contactless debit card for its current account, but ut only the first three ATM withdrawals are free. After that, there is a £1 per withdrawal charge, whether the card is used in the UK or overseas. There is also a 1.5% foreign exchange fee on all non-sterling transactions, including cash machine withdrawals. The most recent online challenger bank to enter the UK market is Atom, whose chairman is the co-founder of Britain’s newest high-street bank Metro. It was granted a license less than a year ago to become the UK’s first digital-only lender, and its investors include star fund manager Neil Woodford and venture capitalist Jon Moulton, as well as Goldman Sachs asset manager Jim O’Neill. Unlike Fidor, Atom bank doesn’t even have online banking; everything is done through the mobile app, including mortgage applications and unsecured personal lending. “Mobile banking has overtaken branches, telephones and even internet transactions,” Mr Thomson said. “We have no branches, no legacy costs, no legacy IT systems or legacy balance sheet.” In fact, Thomson believes that customers are happier with less contact with their bank. “Customers who have less contact – face-to-face or voice-to-voice – with their banks are, surprise, surprise, most content,” he added. So far, its too early to tell for these banks just how well UK consumers will adapt to banking solely online; however, its clear that as with everything else, the internet is the future – and traditional banks will need to adapt faster in order to compete against the rise of start-up challengers. 
Miranda Wadham on 28/04/2016

Morning Round-Up: Facebook shares jump, house prices slow, Lloyds makes progress

Miranda Wadham
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Morning Round-Up: Facebook shares jump, house prices slow, Lloyds makes progress

Facebook shares jump as profits triple

Facebook shares jumped over 8 percent in pre-market trading after results showed a tripling of first quarter profits.

Profits rose to $1.51 billion, up from $512m in the same period last year, with advertising revenues also increasing to $5.2 billion.

The company also announced plans to issue a new class of stock to enable CEO Zuckerberg to remain in control of the company as he gives shares to charity, with a statement saying that it would “encourage Mr Zuckerberg to remain in an active leadership role at Facebook”.

House price growth slows on tax changes

British annual house price growth slowed in April, according to the latest survey from mortgage lender Nationwide on Thursday.

House price growth eased to 4.9 percent year-on-year from 5.7 percent in March, slightly less than forecast by analysts.

Over the last month alone house prices edged up 0.2 percent, with Nationwide citing the increase in the stamp duty land tax for second home purchases as the reason behind the easing.

Nationwide also warned that wage and job growth could put pressure on the housing market in the future, with chief economist Robert Gardner saying that “there is a risk that the surge in house purchases in recent months will exacerbate the shortage of homes on the market.”

Lloyds makes steady progress in difficult economic climate

Lloyds Banking Group reported underlying profits in line with expectations on Thursday, keeping its head above water in a tricky economic climate.

The group saw a 46 percent drop in profits in the first quarter to £654 million, but saw underlying profits fall only 6 percent to £2.1 billion. This was in line with analysts’ expectations of £1.9 billion.

Chief executive Antonio Horta-Osorio has put in place a strategy to streamline the business, cutting thousands of jobs and restructuring. In a statement, he commented:

“These results demonstrate the strength of our differentiated, simple, low risk business model and reflect our ability to actively respond to the challenging operating environment.”

28/04/2016

US Federal Reserve vote to keep rates steady

Miranda Wadham
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US Federal Reserve vote to keep rates steady
US interest rates will remain unchanged until at least June, with all but one of the Federal Reserve members voting to keep rates at the current level of between 0.25 and 0.5 percent. Global economic outlook has caused the Fed to slow down its rate hike programme after it raised rates for the first time in almost a decade in December. However, the Federal Reserve softened its warnings on the state of the economy in its meeting yesterday and left the door open for a rate hike in June: “The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market indicators will continue to strengthen”, the Fed said in a statement. 
29/04/2016
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