Market Update
European Markets Recover After Joint Actions by Six Central Banks Following Credit Suisse Rescue
Bridgette Randall
20 Mar, 2023
Frankfurt
European markets opened lower but turned higher after major central banks announced more liquidity measures following the Credit Suisse rescue by the Swiss authorities.
On Sunday, after days of negotiations, Switzerland National Bank and Swiss regulators announced a few details of Credit Suisse rescue.
The shotgun wedding between UBS, the largest Swiss bank and Credit Suisse, the second-largest Swiss bank, calmed financial markets for now.
The Federal Reserve Bank, the European Central Bank, the Swiss National Bank, the Bank of England, the Bank of Canada and the Bank of Japan announced coordinated measures to increase U.S. dollar liquidity to prevent the fallout from Credit Suisse's in global financial markets.
Market sentiment was further strengthened after the European Central Bank president Christine Lagarde assured investors in a speech on Monday that the Euro Area banks have more than adequate capital and liquidity needed.
"The euro area banking sector is resilient, with strong capital and liquidity positions," added Lagarde in a speech to the European Parliament on Monday.
Switzerland Government Forced UBS-Credit Suisse Merger
Credit Suisse Group AG plunged 52% to 96 cents in New York trading after the troubled Swiss bank agreed to be acquired by the rival UBS.
In a deal negotiated by the Swiss regulators and the Swiss National Bank, UBS agreed to pay 50 Swiss cents per share or $3.25 billion, significantly less than the expected price for shareholders.
The Swiss National Bank agreed to provide up to 100 billion Swiss francs in liquidity and the Swiss government will offer a loss guarantee of up to 9 billion Swiss francs but UBS will be responsible for the first 5 billion Swiss francs of potential losses.
Total assets held by Credit Suisse had declined to $70 billion just before the announcement of the transaction, indicating that a substantial part of the assets may be impaired or is expected to be impaired.
The deal orchestrated by the Swiss regulators and the central bank will pay stockholders but will write down $17 billion of AT1 bondholders, upending the traditional capital structure in the global banking industry.
UBS Group AG increased 4% to $18.95 in New York and advanced 1.3% to 17.33 Swiss francs.
Indexes & Yields
The DAX index increased 1.1% to 14,933.38, the CAC-40 index added 1.3% to 7,013.14 and the FTSE 100 index advanced 1% to 7,403.85.
The Swiss Market Index increased 0.3% to 10,643.64 after reversing the loss of 1.9% in the first twenty minutes of trading.
The yield on 10-year German Bunds decreased to 2.21%, French bonds fell to 2.66%, the UK gilts to 3.30% and Italian bonds to 3.97%.
The euro inched higher to $1.07, the British pound to $1.22 and the Swiss franc to 92.90 cents.
Brent crude oil increased 88 cents to $73.84 a barrel and the Dutch TTF natural gas price fell 3.52 to 39.33 per MWh.
German Wholesale Inflation Eased After Energy Prices Declined
Germany's producer price index, a measure of wholesale inflation, declined for the fifth month in a row and approached the lowest level in eighteen months, the latest data from the Federal Statistics Office or Destatis showed today.
The producer price index increased 15.8% from a year ago in February, slower than the 17.6% rise in January.
The latest increase in prices was the smallest since September when prices rose 14.2%.
Euro Area Good Trade Deficit Slightly Widened In January
The Euro Area international goods trade deficit slightly widened in January, the latest data from the Eurostat showed Monday.
The international good trade deficit increased to Є30.6 billion in January from Є30.2 billion a year ago.
Imports increased 9.7% to €253.5 billion from €231.1 billion and exports advanced 11.0% to €222.9 billion from €200.8 billion a year ago.
Europe Stock Movers
FirstGroup Plc declined as much as 1% but closed a fraction down to 104.50 pence despite the company extending its partnership to October 2023 with the Department for Transportation and HS2 Limited.
FirstGroup and Trenitalia are working together with the UK government in the largest infrastructure project in Europe to build high-speed rail service for the West Coast Partnership.
Spectris Plc increased 0.1% to 3,457.25 pence after the company said it initiated the third tranche of its stock repurchase program.
Between March 20 and July 31, the company plans to acquire its stock not to exceed 9.711 million shares for a total purchase price not to exceed £40 million.
Movers: Amazon.com, First Republic, New York Community Bancorp, UBS
Scott Peters
20 Mar, 2023
New York City
Credit Suisse Group AG plunged 52% to 96 cents in New York trading after the troubled Swiss bank agreed to be acquired by the rival UBS.
In a deal negotiated by the Swiss regulators and the Swiss National Bank, UBS agreed to pay 50 Swiss cents per share or $3.25 billion, significantly less than the expected price for shareholders.
The Swiss National Bank agreed to provide up to 100 billion Swiss francs in liquidity and the Swiss government will offer a loss guarantee of up to 9 billion Swiss francs but UBS will be responsible for the first 5 billion Swiss francs of potential losses.
Total assets held by Credit Suisse had declined to $70 billion just before the announcement of the transaction, indicating that a substantial part of the assets may be impaired or is expected to be impaired.
The deal orchestrated by the Swiss regulators and the central bank will pay stockholders but will write down $17 billion of AT1 bondholders which generally have a higher priority than shareholders in the credit structure.
UBS Group AG increased 4% to $18.95 in New York and advanced 1.3% to 17.33 Swiss francs.
Regional banks rebounded in New York trading and Western Alliance Bancorp advanced 3%, PacWest soared 16% and Key Corp increased 4%.
First Republic Bank plunged 15.9% to $19.30 after the rating agency Standard & Poor's lowered its rating on the embattled bank's bonds to B+ from BB+, deeper in the junk bond territory.
Amazon.com, Inc declined 2.2% to $96.72 after chief executive Andy Jassy said in a memo to employees that the company is planning to layoff 9,000.
The latest announcement follows the elimination of 18,000 jobs in November ahead of the peak holiday sales period, after the online marketplace operator added 800,000 positions in two years of Pandemic between 2020 and 2021.
The current job cuts are expected to be hit the hardest in advertising and cloud computing unit AWS.
New York Community Bancorp, Inc soared 35% to $8.83 after the regional bank's subsidiary Flagstar Bank will assume nearly all bank deposits and own and operate all 40 branches of the former Signature Bank from the FDIC.
Foot Locker Inc declined 5.2% to $40.07 after the specialty athletic retailer reported a fall in total sales and a sharp decline in earnings in the fourth quarter.
Sales in the fourth quarter ending on January 28 decreased 0.3% to $2.33 billion and net income plunged to $19 million from $103 million and diluted earnings per share dropped to 19 cents from $1.02 a year ago.
Comparable sales in the quarter increased 4.2%.
During the fourth quarter, the company paid a quarterly dividend of 40 cents per share and repurchased 4.1 million shares for a total of $129 million and paid a total of $150 million in dividends.
The Board of Directors declared a quarterly cash dividend of 40 cents per share payable on April 28 to shareholders of record on April 14.
In the full-year 2022, total sales fell to $8.6 billion from $9.0 billion and net income dropped to $342 million from $893 million and diluted earnings per share fell to $3.58 from $8.61.
Switzerland Forced Merger of Credit Suisse with UBS and Prevent Wider Fallout
Scott Peters
20 Mar, 2023
New York City
Credit Suisse Group AG plunged 52% to 96 cents in New York trading after the troubled Swiss bank agreed to be acquired by the rival UBS.
In a deal negotiated by the Swiss regulators and the Swiss National Bank, UBS agreed to pay 50 Swiss cents per share or $3.25 billion, significantly less than the expected price for shareholders.
The Swiss National Bank agreed to provide up to 100 billion Swiss francs in liquidity and the Swiss government will offer a loss guarantee of up to 9 billion Swiss francs but UBS will be responsible for the first 5 billion Swiss francs of potential losses.
After four years of oversight lapses, management turmoil, multiple scandals and steady but rising deposit outflows in the last two years, regulators forced the 167-year old Swiss institution to be acquired by UBS.
Total assets held by Credit Suisse had declined to $70 billion just before the announcement of the transaction, indicating that a substantial part of the assets may be impaired or is expected to be impaired.
According to the sources in Zurich, London and New York, UBS was not interested in acquiring the troubled Credit Suisse and the bank was mildly interested in its asset management arm.
The deal orchestrated by the Swiss regulators and the central bank will pay stockholders but will write down $17 billion of AT1 bondholders which generally have a higher priority than shareholders in the credit structure.
After the merger, net assets under management will jump to $5 trillion with the addition of $1.3 trillion from Credit Suisse.
Treasury Yields Rise As Unrealized Losses at Banks Are Set to Rise After Rate Hike On Wednesday
Barry Adams
20 Mar, 2023
New York City
Financial markets turned higher after Swiss regulators and the central bank engineered takeover of Credit Suisse by UBS.
The move was widely anticipated by investors after Saudi National Bank, the largest stockholders in the troubled Swiss bank, was unable to add more capital in the bank citing regulatory limitations.
Credit Suisse has been struggling with deposit outflows with the growing worries of the viability of the institution.
Global markets looked beyond the "shotgun wedding" between the two Swiss banks but ripple effects are expected to be felt by global investors for months to come.
In New York Treasury bond yields rebounded from the six-month lows and crude oil dropped to a new 15-month low after the expected increase in China's demand growth failed to materialize after the ending of the zero-Covid policy for more than a month.
Despite the forced purchase of Credit Suisse by UBS, there is no end in sight for the capital shortfall at the U.S. regional banks and rising interest rates will only make unrealized losses larger in the banking system.
Investors are also bracing for higher rates at the end of a two-day policy meeting of the Federal Reserve on Wednesday. The central bank is expected to increase rates by at least 25 basis points, despite the ongoing financial instability in regional banks.
Indexes & Yields
The S&P 500 index increased 0.7% to 3,942.71 and the Nasdaq Composite index advanced 0.2% to 11,646.56.
The yield on 2-year Treasury notes increased to 3.92%, 10-year Treasury notes 3.44% and 30-year Treasury bonds advanced to 3.62%.
Crude oil decreased 72 cents to $66.01 a barrel and natural gas prices edged fractionally lower to $2.29 a thermal unit.
U.S. Movers
Credit Suisse Group AG plunged 52% to 96 cents in New York trading after the troubled Swiss bank agreed to be acquired by the rival UBS.
In a deal negotiated by the Swiss regulators and the Swiss National Bank, UBS agreed to pay 50 Swiss cents per share or $3.25 billion, significantly less than the expected price for shareholders.
The Swiss National Bank agreed to provide up to 100 billion Swiss francs in liquidity and the Swiss government will offer a loss guarantee of up to 9 billion Swiss francs but UBS will be responsible for the first 5 billion Swiss francs of potential losses.
Total assets held by Credit Suisse had declined to $70 billion just before the announcement of the transaction, indicating that a substantial part of the assets may be impaired or is expected to be impaired.
The deal orchestrated by the Swiss regulators and the central bank will pay stockholders but will write down $17 billion of AT1 bondholders which generally have a higher priority than shareholders in the credit structure.
Regional banks rebounded in New York trading and Western Alliance Bancorp advanced 3%, PacWest soared 16% and Key Corp increased 4%.
First Republic Bank plunged 15.9% to $19.30 after the rating agency Standard & Poor's lowered its rating on the embattled bank's bonds to B+ from BB+, deeper in the junk bond territory.
Investors are Waking Up to New Reality of Bank Stress, World Markets On Edge
Barry Adams
17 Mar, 2023
New York City
The U.S. bank system stress is finally getting some attention on Wall Street.
Investors are dealing with a new reality that the Federal Reserves' aggressive rate hikes are having impacts in the banking sector, a set of conditions not experienced by investors and bank executives for decades.
Rapid increases in interest rates have battered most portfolios of banks, especially those including U.S. Treasuries of longer maturities, 10-years and beyond.
Granted these are unrealized losses, but with every basis point increase in rates, bond prices are falling to adjust the new higher yield.
And with that comes higher stress in securities held by banks. For the last three decades banks have dealt with all kinds of problems, but none created as many challenges as the rapid hikes in rates in 2022.
What impact these banks will face will depend on how much of the bank's assets are in long-dated U.S. Treasury securities, but not a single bank will be able to escape unscathed from these losses.
This fast evolving interest rate crisis has worried regulators for years, but no one expected inflation to surge to a 4-decade high and sequential multiple large-sized rate hikes that followed.
The pledge by top banks to provide deposit infusion failed to impress investors and regional banks accelerated losses for the third day this week.
The largest 11 banks on Thursday pledged to deposit $30 billion for the next 120 days only with First Republic Bank, the move was partly driven by self preservation.
Big bank's move was orchestrated by the FDIC, Federal Reserve, U.S. Treasury and Office of Comptroller in an effort to revive the flagging support and prevent a run on the bank before it happens and avoid the perception of a government bailout.
Despite the announcement, First Republic Bank plunged 20% after investors looked for details on how and how much interest rate the bank will pay on these new deposits.
The joint statement from the eleven banks is short on details.
First Republic Bank said in a filing with the Securities and Exchange Commission "on March 9, 2023, the bank has also increased short-term borrowings from the Federal Home Loan Bank by $10 billion at a rate of 5.09%."
The California bank is in discussion with several banks and other private equity funds in reviewing its options including sale of the company.
In Friday's trading, size of the bank did not matter and large and mid-sized banks declined amid lingering concerns about the health of the U.S. banking system.
JPMorgan Chase, Wells Fargo, Bank of America, PNC Bank, US Bancorp and Truist financial Corp declined between 3% and 7%.
U.S. banks are sitting on $620 billion of unrecognized losses as of the end of 2022, reflecting a 28% loss of unrealized equity capital in the banking system.
Moreover, in the first quarter of 2023, the yields on Treasury bonds have risen, generating additional losses for banks of all sizes holding long and short-dated U.S. Treasury securities.
If the Federal Funds rates are increased to 6%, total unrealized equity capital loss across all banks could rise to 50%, effectively endangering the entire U.S. banking system.
The rapid collapse of Silicon Valley Bank is raising questions about how prepared banks are in facing swift departure of bank deposits in the world of online banking.
Silicon Valley Bank lost 25% or $42 billion of deposits in less than eight hours, after a bank run was started by the venture capitalists community.
Indexes & Yields
The S&P 500 index decreased 1.1% to 3,916.64 and the Nasdaq Composite index dropped 0.7% to 11,630.51.
The yield on 2-year Treasury notes inched lower to 3.86%, 10-year Treasury notes to 3.44% and 30-year Treasury bonds dropped to 3.63%.
Crude oil price for immediate month delivery decreased $2.04 to $66.31 a barrel and natural gas price fell 16 cents to $2.34 a thermal unit.
U.S. Stock Movers
First Republic Bank declined 32.7% to $22.06 despite 11 largest banks pledged to deposit $30 billion in the embattled bank in a show of support and prevent a run on the bank.
Western Alliance Bancorp dropped 15% to $31.38, Zions Bancorporation fell 6.7% to $29.94 and KeyCorp declined 6.1% to $11.57.
FedEx Corp increased 7.9% to $220.34 after the parcel delivery company revised higher its fiscal year outlook.
Revenue in the quarter ended in February declined to $22.2 billion from $23.6 billion and net income fell to $771 million from $1.1 billion and diluted earnings per share dropped to $3.05 from $4.20 a year ago.
The parcel delivery company completed a repurchase of 9.2 million shares in the fiscal third quarter.
The company lifted its fiscal year 2023 diluted earnings per share forecast in the range of $13.80 to $14.40 before the mark-to-market retirement plans accounting adjustments, compared to the prior forecast of $12.50 to $13.50 a share.
The company estimated fiscal year capital spending of $5.9 billion.
European Markets Extend Weekly Losses On Bank System Worries
Rapid rise in rates has created a new scenario not experienced for decades and investors are questioning how many banks are strong enough to digest accumulating losses in the assets held by financial institutions.
With the rates advancing from negative to 3% and expected to reach as high as 5% before the end of 2023, large and small banks and insurance companies will be forced to deal with large losses in government securities.
U.S. banks have accumulated unrealized losses of $620 billion, about 28% of its equity capital as of end of 2022.
Rates are still rising in the U.S. and unrealized losses are expected to grow to as much as 50% of the equity capital, endangering most financial institutions.
In Europe, banks turned lower on the worries of large losses at banks and looming economic slowdown also dented market sentiment.
Investors were on defensive after the statistical office confirmed the elevated inflation in February.
Euro Area Inflation Edged Slightly Lower In February
The inflation rate in the Euro Area edged slightly lower in February from January but the rate was significantly higher than a year ago, the latest update from Eurostat showed.
The Harmonized index of consumer prices or HICP on an annual basis increased 8.5% in February, slightly lower than 8.6% in January. The index increased 5.9% in the month a year ago.
The final read on the inflation measure matched the preliminary estimate released on March 2.
Core rate of inflation, which excludes energy, food, alcohol and tobacco products, accelerated to 5.6%, matching the flash estimate, from 5.3% in January.
Indexes & Yields
The DAX index fell 1.3% to 14,768.20, the CAC-40 index declined 1.5% to 6,925.40 and the FTSE 100 index dropped 1% to 7,335.40.
The yield on 10-year German Bunds decreased to 2.09%, French bonds edged lower to 2.67%, the UK gilts to 3.24% and Italian bonds to 4.04%.
The euro edged higher to $1.067, the British pound inched up to $1.21 and the Swiss franc closed at 92.75 cents.
Brent crude oil declined $2.37 yo $72.30 a barrel and the Dutch TTF natural gas futures fell 2.3% to Є43.10 per MWh.
Europe Movers
Diploma PLC increased 3.5% to 2,727.12 pence after the company said it completed the sale of 9.3 million shares for 2,525 pence a share and raised £235 million.
The company said it plans to use proceeds to refinance the acquisition of Tennessee Industrial Electronics, LLC, a value-add distributor of aftermarket parts and repair services provider into the fast-growing US industrial automation end market,
The company plans to use some of the proceeds to fund its "strong M&A pipeline to accelerate future organic growth."
The purchase price of £76 million represents a multiple of 9.8 times operating earnings and the acquisition is expected to deliver revenue of £31 million.
Bodycote Plc increased 5.5% to 613.30 pence after the provider of thermal processing service and heat treatment reported revenue and earnings rose in in the full-year.
Revenue in the full-year 2022 increased 17.3% to £743.6 million from £615.8 million and net income rose to £74.3 million from £60.0 million and earnings per share to 38.6 pence from 31.2 pence a year ago.
European Markets Extend Weekly Losses On Banking System Worries
Bridgette Randall
17 Mar, 2023
Frankfurt
European markets closed down on the growing worries about the health of the banking system in the U.S. and Europe.
Rapid rise in rates has created a new scenario not experienced for decades and investors are questioning how many banks are strong enough to digest accumulating losses in the assets held by financial institutions.
With the rates advancing from negative to 3% and expected to reach as high as 5% before the end of 2023, large and small banks and insurance companies will be forced to deal with large losses in government securities.
U.S. banks have accumulated unrealized losses of $620 billion, about 28% of its equity capital as of end of 2022.
Rates are still rising in the U.S. and unrealized losses are expected to grow to as much as 50% of the equity capital, endangering most financial institutions.
In Europe, banks turned lower on the worries of large losses at banks and looming economic slowdown also dented market sentiment.
Investors were on defensive after the statistical office confirmed the elevated inflation in February.
Euro Area Inflation Edged Slightly Lower In February
The inflation rate in the Euro Area edged slightly lower in February from January but the rate was significantly higher than a year ago, the latest update from Eurostat showed.
The Harmonized index of consumer prices or HICP on an annual basis increased 8.5% in February, slightly lower than 8.6% in January. The index increased 5.9% in the month a year ago.
The final read on the inflation measure matched the preliminary estimate released on March 2.
Core rate of inflation, which excludes energy, food, alcohol and tobacco products, accelerated to 5.6%, matching the flash estimate, from 5.3% in January.
Indexes & Yields
The DAX index fell 1.3% to 14,768.20, the CAC-40 index declined 1.5% to 6,925.40 and the FTSE 100 index dropped 1% to 7,335.40.
For the week, the DAX declined 4.1%, the CAC-40 fell 4.3% and the FTSE 100 dropped 5.7%.
The yield on 10-year German Bunds decreased to 2.09%, French bonds edged lower to 2.67%, the UK gilts to 3.24% and Italian bonds to 4.04%.
The euro edged higher to $1.067, the British pound inched up to $1.21 and the Swiss franc closed at 92.75 cents.
Brent crude oil declined $2.37 yo $72.30 a barrel and the Dutch TTF natural gas futures fell 2.3% to Є43.10 per MWh.
Europe Movers
Diploma PLC increased 3.5% to 2,727.12 pence after the company said it completed the sale of 9.3 million shares for 2,525 pence a share and raised £235 million.
The company said it plans to use proceeds to refinance the acquisition of Tennessee Industrial Electronics, LLC, a value-add distributor of aftermarket parts and repair services provider into the fast-growing US industrial automation end market,
The company plans to use some of the proceeds to fund its "strong M&A pipeline to accelerate future organic growth."
The purchase price of £76 million represents a multiple of 9.8 times operating earnings and the acquisition is expected to deliver revenue of £31 million.
Bodycote Plc increased 5.5% to 613.30 pence after the provider of thermal processing service and heat treatment reported revenue and earnings rose in in the full-year.
Revenue in the full-year 2022 increased 17.3% to £743.6 million from £615.8 million and net income rose to £74.3 million from £60.0 million and earnings per share to 38.6 pence from 31.2 pence a year ago.
Movers: Children's Place, First Republic, FedEx, Signet Jewelers
Scott Peters
17 Mar, 2023
New York City
In Friday's trading, size of the bank did not matter and large and mid-sized banks declined amid lingering concerns about the health of the U.S. banking system.
JPMorgan Chase, Wells Fargo, Bank of America, PNC Bank, US Bancorp and Truist financial Corp declined between 3% and 7%.
U.S. banks are sitting on $620 billion of unrecognized losses as of the end of 2022, reflecting a 28% loss of unrealized equity capital in the banking system.
Moreover, in the first quarter of 2023, the yields on Treasury bonds have risen, generating additional losses for banks of all sizes holding long and short-dated U.S. Treasury securities.
First Republic Bank declined 23.7% to $26.16 despite 11 largest banks pledged to deposit $30 billion in the embattled bank in a show of support and prevent a run on the bank.
Western Alliance Bancorp dropped 18% to $30.28, Zions Bancorporation fell 5.5% to $30.39 and KeyCorp declined 6.6% to $11.47.
FedEx Corp increased 7.8% to $220.24 after the parcel delivery company revised higher its fiscal year outlook.
Revenue in the fiscal third quarter ending in February declined to $22.2 billion from $23.6 billion and net income fell to $771 million from $1.1 billion and diluted earnings per share dropped to $3.05 from $4.20 a year ago.
The parcel delivery company completed a repurchase of 9.2 million shares in the fiscal third quarter.
The company lifted its fiscal year 2023 diluted earnings per share forecast in the range of $13.80 to $14.40 before the mark-to-market retirement plans accounting adjustments, compared to the prior forecast of $12.50 to $13.50 a share.
The company estimated fiscal year capital spending of $5.9 billion.
Ballard Power Systems fell 2.4% to $5.01 after the Vancouver, Canada based company reported a sharp decline in revenue.
Revenue in the fourth quarter declined to $20.5 million from $36.7 million and net loss from continuing operations shrank to $34.4 million from $43.8 million and diluted loss per share fell to 12 cents from 15 cents a year ago.
The fuel cell power system maker said full-year revenue in the full-year 2022 declined to $83.8 million and $104.5 million and net loss per continuing operations increased to $173.5 million from $114.4 million a year ago.
The Children's Place Inc decreased 0.7% to $38.35 after the specialty retailer reported a decline in revenue and swung to a loss in the final quarter.
Revenue in the fourth quarter ending in January declined 10.2% to $456.1 million from $507.8 million a year ago.
The retailer swung to a loss of $50.5 million from a profit of $39.0 million and diluted earnings per share was ($4.10) from $2.68 a year ago.
In the full-year 2022 revenue dropped 10.8% to $1.71 billion compared to $1.92 billion in the previous year.
Net loss in the year was $1.1 million compared to a profit of $187.2 million and diluted earnings per share was ($0.09) compared to $12.59 in the previous year.
The retailer ended the quarter with 613 stores and square footage of 2.9 million, a decrease of 8.3% compared to the prior year.
The company permanently closed 59 stores in fiscal 2022 and permanently closed 586 stores, since the announcement of its optimization plan in 2013
Signet Jewelers Ltd fell 3.6% to $72.85 after the parent of Zales and Kay Jewelers reported a decline in sales in the holiday quarter.
Revenue in the fourth quarter ending in January declined 5.2% to $2.66 billion from $2.81 billion and net income fell to $268.7 million from $305.7 million a year ago.
Diluted earnings per share in the period increased to $5.02 from $4.91 in the previous year.
Same store sales declined 9.15% from the previous year but rose 16.4% from the comparable period in fiscal year 2020.
Total sales in the fiscal year 2023 decreased 0.2% to $7.8 billion and net income dropped to 342.2 million from 735.4 million and diluted earnings per share fell to $6.64 from $12.22 a year ago.
Same store sales in the year fell 6.1% from the previous year but rose 18.1% from the fiscal year 2020.
Large and Regional Banks Selloff Drives Market Indexes Down On Wall Street
Barry Adams
17 Mar, 2023
New York City
Stocks turned lower on Friday and investors digested the latest move by big banks to shore up confidence in regional banks.
The largest 11 banks on Thursday pledged to deposit $30 billion for the next 120 days only with First Republic Bank, the move was partly driven by self preservation.
Big bank's move was orchestrated by the FDIC, Federal Reserve, U.S. Treasury and Office of Comptroller in an effort to revive the flagging support and prevent a run on the bank before it happens and avoid the perception of a government bailout.
Despite the announcement, First Republic Bank plunged 20% after investors looked for details on how and how much interest rate the bank will pay on these new deposits.
The joint statement from the eleven banks is short on details.
First Republic Bank said in a filing with the Securities and Exchange Commission "on March 9, 2023, the bank has also increased short-term borrowings from the Federal Home Loan Bank by $10 billion at a rate of 5.09%."
In Friday's trading, size of the bank did not matter and large and mid-sized banks declined amid lingering concerns about the health of the U.S. banking system.
JPMorgan Chase, Wells Fargo, Bank of America, PNC Bank, US Bancorp and Truist financial Corp declined between 3% and 7%.
U.S. banks are sitting on $620 billion of unrecognized losses as of the end of 2022, reflecting a 28% loss of unrealized equity capital in the banking system.
Moreover, in the first quarter of 2023, the yields on Treasury bonds have risen, generating additional losses for banks of all sizes holding long and short-dated U.S. Treasury securities.
If the Federal Funds rates are increased to 6%, total unrealized equity capital loss across all banks could rise to 50%, effectively endangering the entire U.S. banking system.
The rapid collapse of Silicon Valley Bank is raising questions about how prepared banks are in facing swift departure of bank deposits in the world of online banking.
Silicon Valley Bank lost 25% or $42 billion of deposits in less than eight hours, after a bank run was started by the venture capitalists community.
Indexes & Yields
The S&P 500 index decreased 1.2% to 3,910.39 and the Nasdaq Composite index dropped 1% to 11,593.23.
The yield on 2-year Treasury notes inched lower to 3.96%, 10-year Treasury notes to 3.40% and 30-year Treasury bonds dropped to 3.60%.
Crude oil price for immediate month delivery decreased $2.30 to $66.93 a barrel and natural gas price fell 15 cents to $2.35 a thermal unit.
U.S. Stock Movers
First Republic Bank declined 23.7% to $26.16 despite 11 largest banks pledged to deposit $30 billion in the embattled bank in a show of support and prevent a run on the bank.
Western Alliance Bancorp dropped 18% to $30.28, Zions Bancorporation fell 5.5% to $30.39 and KeyCorp declined 6.6% to $11.47.
FedEx Corp increased 7.8% to $220.24 after the parcel delivery company revised higher its fiscal year outlook.
Revenue in the quarter ended in February declined to $22.2 billion from $23.6 billion and net income fell to $771 million from $1.1 billion and diluted earnings per share dropped to $3.05 from $4.20 a year ago.
The parcel delivery company completed a repurchase of 9.2 million shares in the fiscal third quarter.
The company lifted its fiscal year 2023 diluted earnings per share forecast in the range of $13.80 to $14.40 before the mark-to-market retirement plans accounting adjustments, compared to the prior forecast of $12.50 to $13.50 a share.
The company estimated fiscal year capital spending of $5.9 billion.
11 Big Banks to Temporarily Deposit $30 Billion In First Republic Bank
Barry Adams
16 Mar, 2023
New York City
Benchmark indexes advanced nearly 2% after a consortium of large banks announced a plan to deposit as much as $30 billion in First Republic Bank.
The surprising announcement bolstered market sentiment and regional banks rebounded.
The move appears to be orchestrated by the Federal Reserve and banking industry regulators to show the public a vote of confidence in the financial system.
But the surprise move also highlighted the fragile nature of the banking system and large banks were driven by the need to shore up confidence in the banking system so that wider bank runs do not arrive at their doors.
"The bank will receive uninsured deposits totaling $30 billion on March 16, 2023 from Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, Goldman Sachs, Morgan Stanley, Bank of New York Mellon, PNC Bank, State Street, Truist, and U.S. Bank," First Republic said in a filing with the SEC today.
Bank of America, Citigroup, JPMorgan Chase and Wells Fargo will deposit about $5 billion each and Goldman Sachs and Morgan Stanley about $2.5 billion each and remaining banks will park $1 billion each.
Despite the show of support and industry solidarity, bank stock traded volatile.
Regulators are concerned that the deposit flows from regional banks will end up with larger banks, making the financial system even more concentrated.
"Today, 11 banks announced $30 billion in deposits into First Republic Bank. This show of support by a group of large banks is most welcome, and demonstrates the resilience of the banking system," noted a short joint statement released by Secretary of the Treasury Janet L. Yellen, Federal Reserve Board Chair Jerome H. Powell, FDIC Chairman Martin J. Gruenberg, and Acting Comptroller of the Currency Michael J. Hsu.
The deposit move also shows that despite the strong temporary financial support, none of the large banks are interested in acquiring the troubled First Republic Bank.
If all assets held-to-maturing were sold by the First Republic Bank, the bank may suffer a loss of as much as $25 billion, wiping out more than three times its equity capital base.
Indexes & Yields
The S&P 500 index increased 1.8% to 3,960.28 and the Nasdaq Composite index advanced 2.5% to 11,717.28.
The yield on 2-year Treasury notes rose to 4.17%, 10-year Treasury notes inched lower to 3.57% and 30-year Treasury bonds inched lower to 3.71%.
Crude oil increased 75 cents to $68.37 a barrel and natural gas prices rose 8 cents to $2.52 a thermal unit.
U.S. Stock Movers
Regional banks continued their downward slide after the collapse of Silicon Valley Bank.
Comercia fell 1.5% and Zions Bancorp declined 3.5% but Western Alliance Bancorporation rose 1.4%.
First Republic Bank dropped as low as $20.47 but recovered to jump 10% to $34.37 and 161 million shares changed hands, ten times its average daily volume after the release of strong support from a consortium of largest 11 U.S. banks.
Credit Suisse AG jumped 20% to $2.23 after the Swiss bank said it will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.
Two days ago, Saudi National Bank, the largest shareholder in the bank said it would not inject additional liquidity in the embattled bank.
Occidental Petroleum Corporation increased 2.0% to $57.93 after Warren Buffett controlled Berkshire Hathaway purchased additional 7.9 million shares for $466.7 million.
European Markets Rebounded After Switzerland Offered Emergency Liquidity
European markets rebounded and closed higher and the European Central Bank announced rate hikes matching expectations.
Benchmark indexes rebounded from one-year lows after bank stocks advanced following the Credit Suisse announcement.
The Swiss National Bank agreed to provide emergency lending of as much as 50 billion Swiss francs or $54 billion after the troubled lender's largest shareholder rejected calls to pump more liquidity.
The move to support the bank lifted banks across Europe and the broader market followed higher. The market mood further improved after several largest U.S. banks agreed to pump $30 billion in deposits in the Los Angeles-based First Republic Bank.
Investors also reviewed the latest rate hike of 50 basis points and the downward revision in inflation and a slight upward revision in economic growth by the European Central Bank.
ECB Hikes Rates by 50 Basis Points
The European Central Bank lifted its key lending rate by 50 basis points and said it is ready to provide more liquidity if banks need it.
"Inflation is projected to remain too high for too long. Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points,
in line with its determination to ensure the timely return of inflation to the 2% medium-term target," noted the statement released by the European Central Bank.
After the latest rate hike, the deposit rate will increase to 3.0%, the rate on the marginal lending facility will increase to 3.75% and refinancing operation to 3.50%.
The European Central Bank has been raising rates as inflation stays near four-decade high and shows little sign of easing.
The overall inflation in February in the 20-member Euro Area was estimated at 8.5%, significantly higher than the central bank's target level of 2%.
The recent inflation surge was driven by a sharp jump in energy price but now the inflationary forces are fueled by price increase in food, industrial goods and services.
The central bank said inflation in the Euro Area is expected to cool to 5.3% in 2023 and 2.9% in 2024 from 6.3% and 3.4% in December.
and revised higher its baseline estimate of the economic growth from its previous projection in December to 1.0% in 2023.
The economic expansion is expected to gain a slight pace to 1.6% in 2024 and 2025.
President Christine Lagarde was keen to highlight that the recent market turmoil is different from what transpired during the global financial crisis of 2008.
"The euro area banking sector is resilient, with strong capital and liquidity positions.
In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy," noted the statement released by the European Central Bank.
Indexes & Yields
The DAX index increased 1.6% to 14,967.10, the CAC-40 index rose 2.0% to 7,025.72 and the FTSE 100 index advanced 0.9% to 7,410.03.
The yield on 10-year German Bunds rose to 2.26%, French bonds advanced to 2.80%, the UK gilts to 3.47% and Italian bonds to 4.15%.
The euro inched higher to $1.06, the British pound edged up to $1.21 and the Swiss franc to 92.92 cents.
Brent crude oil increased $1.04 to $74.73 a barrel and the Dutch TTF natural gas price edged up 70 cents to Є43.60 per MWh.
Europe Movers
Credit Suisse AG jumped 19.2% to Sfr 2.02 after the Swiss bank said it will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.
Two days ago, Saudi National Bank, the largest shareholder in the bank said it would not inject additional liquidity in the embattled bank.
The move to provide liquidity to the troubled Swiss bank lifted stocks of other banks in the Euro Area.
Deutsche Bank, BNP Paribas, Societe Generale and Commerzbank added between 2% and 3%.
Siemens Energy AG increased 5.1% to €19.16 after the company completed secondary stock offering and raised €1.259 billion.
The company sold 72.66 million shares priced at 17.32 a share through an accelerated book building process.
The net proceeds from the offering will be used to partially refinance the voluntary cash tender offer for all outstanding shares in Siemens Gamesa Renewable, S.A.
Investec Plc increased 3.5% to 455.30 pence after the wealth management firm estimated higher operating profit in the year ending in March.
United Utilities Group Plc increased 1.0% to 1,064.50 pence after the company said its chief executive Steve Mogford will retire at the end of March.
Centamin Plc fell 5.4% to 101.30 pence despite the gold mining company reporting higher pre-tax profit in fiscal 2022 on rising revenue.
Europe Movers: Centamin, Credit Suisse, Deutz, Investec, Siemens Energy, United Utilities
Bridgette Randall
16 Mar, 2023
Frankfurt
Credit Suisse AG jumped 19.2% to Sfr 2.02 after the Swiss bank said it will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.
Two days ago, Saudi National Bank, the largest shareholder in the bank said it would not inject additional liquidity in the embattled bank.
The move to provide liquidity to the troubled Swiss bank lifted stocks of other banks in the Euro Area.
Deutsche Bank, BNP Paribas, Societe Generale and Commerzbank added between 2% and 3%.
Siemens Energy AG increased 5.1% to €19.16 after the company completed secondary stock offering and raised €1.259 billion.
The company sold 72.66 million shares priced at 17.32 a share through an accelerated book building process.
The net proceeds from the offering will be used to partially refinance the voluntary cash tender offer for all outstanding shares in Siemens Gamesa Renewable, S.A.
Investec Plc increased 3.5% to 455.30 pence after the wealth management firm estimated higher operating profit in the year ending in March.
United Utilities Group Plc increased 1.0% to 1,064.50 pence after the company said its chief executive Steve Mogford will retire at the end of March.
Centamin Plc fell 5.4% to 101.30 pence despite the gold mining company reporting higher pre-tax profit in fiscal 2022 on rising revenue.
Deutsz AG increased 2% to €5.56 after the heavy duty engine and powertrain maker said revenue in the full-year 2022 increased 20.8% to €1.95 billion.
Operating income more than doubled to €82.6 million from €34.1 million, including exceptional item of €6.8 million related to senior management reorganization.
Net income, which was boosted by deferred tax income of €20.5 million in 2022, jumped by 109.9% to €80.2 million from €38.2 million and earnings per share increased to €0.66 from €0.32 in the previous year.
Credit Suisse Bailout Lifted European Markets, ECB Hikes Rates
Bridgette Randall
16 Mar, 2023
Frankfurt
European markets rebounded and closed higher and the European Central Bank announced rate hikes matching expectations.
Benchmark indexes rebounded from one-year lows after bank stocks advanced following the Credit Suisse announcement.
The Swiss National Bank agreed to provide emergency lending of as much as 50 billion Swiss francs or $54 billion after the troubled lender's largest shareholder rejected calls to pump more liquidity.
The move to support the bank lifted banks across Europe and the broader market followed higher. The market mood further improved after several largest U.S. banks agreed to pump $30 billion in deposits in the Los Angeles-based First Republic Bank.
Investors also reviewed the latest rate hike of 50 basis points and the downward revision in inflation and a slight upward revision in economic growth by the European Central Bank.
ECB Hikes Rates by 50 Basis Points
The European Central Bank lifted its key lending rate by 50 basis points and said it is ready to provide more liquidity if banks need it.
"Inflation is projected to remain too high for too long. Therefore, the Governing Council today decided to increase the three key ECB interest rates by 50 basis points,
in line with its determination to ensure the timely return of inflation to the 2% medium-term target," noted the statement released by the European Central Bank.
After the latest rate hike, the deposit rate will increase to 3.0%, the rate on the marginal lending facility will increase to 3.75% and refinancing operation to 3.50%.
The European Central Bank has been raising rates as inflation stays near four-decade high and shows little sign of easing.
The overall inflation in February in the 20-member Euro Area was estimated at 8.5%, significantly higher than the central bank's target level of 2%.
The recent inflation surge was driven by a sharp jump in energy price but now the inflationary forces are fueled by price increase in food, industrial goods and services.
The central bank said inflation in the Euro Area is expected to cool to 5.3% in 2023 and 2.9% in 2024 from 6.3% and 3.4% in December.
and revised higher its baseline estimate of the economic growth from its previous projection in December to 1.0% in 2023.
The economic expansion is expected to gain a slight pace to 1.6% in 2024 and 2025.
President Christine Lagarde was keen to highlight that the recent market turmoil is different from what transpired during the global financial crisis of 2008.
"The euro area banking sector is resilient, with strong capital and liquidity positions.
In any case, the ECB’s policy toolkit is fully equipped to provide liquidity support to the euro area financial system if needed and to preserve the smooth transmission of monetary policy," noted the statement released by the European Central Bank.
Indexes & Yields
The DAX index increased 1.6% to 14,967.10, the CAC-40 index rose 2.0% to 7,025.72 and the FTSE 100 index advanced 0.9% to 7,410.03.
The yield on 10-year German Bunds rose to 2.26%, French bonds advanced to 2.80%, the UK gilts to 3.47% and Italian bonds to 4.15%.
The euro inched higher to $1.06, the British pound edged up to $1.21 and the Swiss franc to 92.92 cents.
Brent crude oil increased $1.04 to $74.73 a barrel and the Dutch TTF natural gas price edged up 70 cents to Є43.60 per MWh.
Europe Movers
Credit Suisse AG jumped 19.2% to Sfr 2.02 after the Swiss bank said it will borrow up to 50 billion Swiss francs ($54 billion) from the Swiss National Bank.
Two days ago, Saudi National Bank, the largest shareholder in the bank said it would not inject additional liquidity in the embattled bank.
The move to provide liquidity to the troubled Swiss bank lifted stocks of other banks in the Euro Area.
Deutsche Bank, BNP Paribas, Societe Generale and Commerzbank added between 2% and 3%.
Siemens Energy AG increased 5.1% to €19.16 after the company completed secondary stock offering and raised €1.259 billion.
The company sold 72.66 million shares priced at 17.32 a share through an accelerated book building process.
The net proceeds from the offering will be used to partially refinance the voluntary cash tender offer for all outstanding shares in Siemens Gamesa Renewable, S.A.
Investec Plc increased 3.5% to 455.30 pence after the wealth management firm estimated higher operating profit in the year ending in March.
United Utilities Group Plc increased 1.0% to 1,064.50 pence after the company said its chief executive Steve Mogford will retire at the end of March.
Centamin Plc fell 5.4% to 101.30 pence despite the gold mining company reporting higher pre-tax profit in fiscal 2022 on rising revenue.