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The following is a summary of top news stories Wednesday.
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COMPANIES
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Credit Suisse reported a ‘disappointing’ set of results for a second quarter that was hit by litigation costs and macro-economic headwinds, as it announced a surprise change at the top. For the second quarter, the Zurich-based financial services firm said net revenue dropped 29% year-on-year to fr.3.65 billion, or $3.79 billion, from fr.5.10 billion. It swung to a pretax loss of fr.1.17 billion, from a pretax profit of fr.813 million, with a net loss of fr.1.59 billion compared to a net profit of fr.253 million. It put aside fr.64 million in credit loss provision, compared to a release of fr.25 million a year prior. For the first half as a whole, net revenue fell 36% to fr.8.06 billion from fr.12.68 billion a year prior. It swung to a pretax loss of fr.1.60 billion from a profit of fr.56 million, and a net loss of fr.1.87 billion from a net profit of fr.1 million. Credit Suisse also announced Chief Executive Officer Thomas Gottstein is set to depart on Monday. Stepping up to lead the company is Ulrich Korner, who currently heads up the asset management business. Gottstein had taken over the role in February 2020 in the wake of the spying scandal that saw former CEO Tidjane Thiam hand in his resignation.
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UniCredit reported a big jump in second-quarter net profit, as net interest income rose by a double-digit percentage and the lender's loan-loss provision was reduced. The Milan-based bank said net profit rose by 67% to €1.48 billion in the second quarter of 2022 from €889 million a year before. Profit was up 24% from €1.19 billion in the first quarter. This was on the back of a 4.9% rise in total revenue to €4.46 billion from €4.25 billion a year ago. UniCredit said the second quarter completed its strongest first half in at least a decade. ‘On the back of our excellent performance and a more supportive interest rate environment, we have improved our 2022 guidance, an important step in the delivery of our three-year plan,’ said Chief Executive Officer Andrea Orcel. UniCredit made a €900 million accrual for a half-year dividend, as part of its plan to return at least €16 billion to shareholders by 2024. It said it completed a €1.6 billion share buyback, equal to 7.4% of its share capital, and has submitted plans for a further €1 billion buyback.
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Lloyds Banking raised its annual guidance against a beneficial backdrop of rising UK interest rates. For the six months to June 30, net income was £8.45 billion, up sharply from £7.56 last year, but pretax profit was £3.66 billion, down from £3.91 billion. Lloyds said it set aside £377 million to cover a possible increase in loan defaults as UK interest rates rise to combat rampant inflation. Underlying profit before the impairment was up 34% to £4.1 billion in the first half, driven by strong net income growth. Lloyds's CET1 ratio - a key measure of a bank's financial strength - stood at 14.7% on June 30, down from 16.7% at the same time last year. Turning to returns, Lloyds declared a 0.80p interim dividend, up 20% from last year and worth £550 million in total. Looking ahead to 2022, Lloyds said its banking net interest margin is now expected to be greater than 280 basis points. It was 2.77% in the first half, up from 2.50% a year before. Lloyds said its return on tangible equity is now seen at 13% in 2022. It was 13.2% in the first half, down from 19.2% a year ago.
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Visa late Tuesday reported third-quarter revenue growth as payments volumes improved, though a litigation provision hurt profit. The San Francisco-based credit card firm's revenue climbed 19% yearly to $7.28 billion in the three months to June 30, from $6.13 billion. However, pretax profit fell 13% to $3.83 billion from $4.39 billion. The payments company posted a $717 million in litigation provisions, compared to a $2 million release a year earlier. Visa said third-quarter payments volumes rose 12%, slowing from a 34% surge a year earlier. Cross-border volumes grew 40%, after a 47% rise a year earlier.
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Pharmaceutical firm GSK revealed a fall in quarterly profit and revenue while its consumer health spin-out Haleon touted an interim revenue growth. In its first earnings report since the listing of Haleon as a separate company earlier this month, GSK said pretax profit fell 16% to £896 million in the second quarter from £1.07 billion a year before, as revenue dropped 14% to £6.93 billion from £8.09 billion. GSK declared a 16.25 pence dividend for the quarter, down 14% from 19p a year ago. Looking ahead, GSK said it expects sales to rise by 6% to 8% in 2022.
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Haleon reported £5.19 billion in revenue in the first half of 2022, up from £4.58 billion a year before. All product categories grew in revenue, with Respiratory Health rising the most to £683 million from £455 million a year ago, up 50%. Haleon expects 6% to 8% in organic growth in 2022, saying price increases will offset cost inflation. Regarding its outlook for 2022, Haleon said: ‘Strong growth, Pfizer Inc synergies, pricing and ongoing supply efficiencies, will largely offset standalone costs, continued investment, inflationary cost pressure and the impact of Russia and Ukraine.’ Haleon completed its demerger from GSK on July 18. The consumer business previously had been 68% owned by GSK and 32% by US peer Pfizer.
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Reckitt Benckiser swung to interim profit due to lower operating costs. The Slough, England-based hygiene and home products maker swung to a pretax profit of £1.69 billion in the first half of 2022, from a loss of £1.94 billion a year before. Net operating expenses fell 60% to £2.26 billion from £5.64 billion. Net revenue grew to 4.4% £6.89 billion from £6.60 billion. Reckitt reported that brands ‘less sensitive to Covid dynamics’ recorded low double-digit revenue growth in the period. These represent around 70% of its portfolio. Reckitt recommended an interim dividend of 73 pence, unchanged year-on-year.
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British American Tobacco suffered a sharp drop in profit as a result of rising costs, with a boost from New Categories revenue proving too small to light up its interim performance. For six months to June 30, the London-based cigarettes, tobacco and other nicotine products maker said pretax profit fell 30% to £3.06 billion from £4.38 billion at the same time last year as expenses swelled. Operating costs by jumped 49% to £5.09 billion from £3.41 billion over the reporting period. Revenue was 3.7% higher at £12.87 billion from £12.18 billion, led by growth in New Categories. Cigarettes and tobacco heating products volumes dropped 3.1% to 314 million, dragged down mainly by the decline in US tobacco industry. In February, BAT announced it had declared an interim dividend of 217.8 pence, payable in four equal quarterly instalments of 54.45p in May, August, November and February 2023.
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Adidas lowered its outlook for 2022 as a result of a slower than expected recovery in Greater China for the year to date, as a result of continued Covid-related restrictions. The Herzogenaurach, Germany-based sports clothing and equipment maker now expects the region to suffer a double digit decline in revenue, offsetting strong momentum in Western markets and a return to growth in Asia-Pacific. For the year, Adidas now expects currency-neutral revenue growth to be in the mid to high-single digits, compared to the lower end of the 11% to 13% guidance range. Gross margin meanwhile is expected to be 49%, instead of 50.7%, due to a less favourable market mix.
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LVMH Moet Hennessey Louis Vuitton posted a strong performance for the first half of 2022, reporting double-digit growth from all business segments in spite of a disrupted environment. For the six months ended June 30, the Paris-based luxury good firm said profit from recurring operations rose 34% to €10.24 billion from €7.62 billion the same period a year before, while diluted earnings per share rose to €12.99 from €10.52. This was on revenue which grew 28% year-on-year to €36.73 billion from €28.67 billion.
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Smurfit Kappa reported a ‘strong’ half-year performance as profit rose significantly on a double-digit revenue jump and robust margins. For the six months ended June 30, the Dublin-based corrugated packaging company increased pretax profit by 86% to €769 million from €413 million a year ago. Revenue rose 36% to €6.39 billion from €4.68 billion. Further boosting profit, its Ebitda margin improved to 18.4% from 16.7%. Smurfit Kappa declared an interim dividend of 31.6 cents per share, up 8% on the 29.3 cents paid out a year before, reflecting ‘the confidence in the quality of our business and its future prospects’.
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Miner Rio Tinto cut its interim dividend following a fall in first-half profit, hurt by weaker iron ore prices. For the six months to June 30, revenue fell to $29.78 billion from $33.08 billion last year, and pretax profit slumped to $12.32 billion from $18.05 billion. Rio Tinto declared an interim dividend of 267.0 US cents, down from 376.0 cents last year. The miner said operations and growth projects continue to be hurt by the ‘high unplanned absences’, tight labour markets, rising input costs and supply chain disruptions. ‘We continue to monitor areas of uncertainty in the short to medium term, namely the evolving situation with the war in Ukraine and potential further Russian sanctions, rising inflation and COVID-19 related disruptions,’ Rio said.
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BASF reported a rise in interim earnings and sales, leading the German chemical producer to upgrade its full-year sales guidance despite cautioning on higher raw material and energy prices. In the second quarter of 2022, BASF posted sales of €22.97 billion, up 16% from €19.75 billion the previous year. The firm said this was primarily due to significant price increases in almost all its segments. Net income in the quarter stood at €2.09 billion. This represented a 26% increase against the previous year's figure of €1.65 billion. ‘Despite the continued high raw materials and energy prices, we again achieved strong earnings in the second quarter,’ said Chair Martin Brudermuller. As a result, the firm raised its full-year sales outlook to between €86 billion to €89 billion, up from between €74 billion to €77 billion.
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Alphabet recorded a second quarter profit fall, as it missed top- and bottom-line consensus. In the second quarter to June 30, revenue improved 13% year-on-year to $69.69 billion from $61.88 billion. The revenue figure came in below a CNN cited forecast of $69.9 billion. In addition, growth slowed markedly from a 62% surge in the second quarter of 2021. Pretax profit declined 14% to $19.01 billion from $21.99 billion a year earlier. Basic earnings per share fell 12% to $1.22 each, lagging a CNN cited forecast of $1.27.
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Microsoft saw a strong rise in revenue in the final quarter of its financial year, thanks to continued strong Cloud demand. In the three months to June 30, net income increased slightly to $16.74 billion from $16.46 billion a year prior. Diluted earnings per share improved to $2.23 from $2.17. Revenue in the fourth quarter rose to $51.87 billion from $46.15 billion. During the quarter, the tech giant noted extended production shutdowns in China led to a ‘deteriorating PC market’ and resulted in a $300 million hit to Windows revenue. It also saw a $100 million reduction in LinkedIn revenue on a fall in news advertising.
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Twitter is planning a shareholder vote to approve Elon Musk's takeover of the social media platform - despite the tech billionaire's attempts to back out of the deal. Twitter has scheduled a special meeting on September 13 at which shareholders will be asked to vote on a proposal to adopt the merger plan, according to documents filed with the US Securities and Exchange Commission. Musk announced a bid to buy Twitter for around $44 billion in April. After some initial resistance from Twitter, the company's board of directors reached a takeover agreement with the Tesla boss.
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MARKETS
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Stock markets were rising globally on Wednesday, with the Nasdaq Composite index in New York called to open 1.6% higher, while the dollar was mixed. The second-quarter earnings season was in full flow in the US and Europe, and investors also were awaiting a key US interest rate decision on Wednesday. The Federal Open Market Committee will conclude its two-day policy meeting and announce its decision at 1900 BST. This will be followed by a press conference with Fed Chair Jerome Powell at 1930 BST. A second successive 75-basis-point rate hike, taking the funds rate to 2.25% to 2.50%, is widely expected.
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CAC 40: up 0.4% at 6,238.67
DAX 40: up 0.1% at 13,115.60
FTSE 100: up 0.5% at 7,339.90
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Hang Seng: closed down 1.1% at 20,670.04
Nikkei 225: closed up 0.2% at 27,715.75
S&P/ASX 200: closed up 0.2% at 6,823.20
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DJIA: called up 0.5%
S&P 500: called up 1.0%
Nasdaq Composite: called up 1.6%
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EUR: up at $1.0148 ($1.0120)
GBP: up at $1.2077 ($1.2021)
USD: firm at JP¥136.70 (JP¥136.63)
Gold: up at $1,723.44 per ounce ($1,717.77)
Oil (Brent): down at $105.00 a barrel ($105.24)
(currency and commodities changes since previous London equities close)
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ECONOMICS AND GENERAL
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US President Joe Biden has still not decided whether to end some trade tariffs on China ahead of a phone call expected this week with his Chinese counterpart Xi Jinping, a senior official said Tuesday. John Kirby, spokesman for the National Security Council, said the administration believes the tariffs imposed during a trade war under former president Donald Trump are not working, but that Biden has yet to settle on a next move. ‘He wants a review of the tariffs that are in place to make sure that they are aligned with our strategic economic priorities, that they're in our best national interests, and quite frankly, the best interests of the American people, but he hasn't made a decision,’ Kirby told reporters.
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The EU's foreign policy chief said he has submitted a draft text of a deal on Iran's nuclear programme, urging parties to accept it or ‘risk a dangerous nuclear crisis’. It comes after Iran warned on Monday it would not be rushed into a ‘quick’ deal reviving its faltering 2015 nuclear accord with world powers, as negotiations in Vienna remain deadlocked. Writing in the Financial Times, the EU's top diplomat Josep Borrell said: ‘This text represents the best possible deal that I, as facilitator of the negotiations, see as feasible. ’It is not a perfect agreement, but it addresses all essential elements and includes hard-won compromises by all sides‘.
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The mood among German consumers has plunged to an all-time low, a key survey showed, as the fallout from the war in Ukraine has Europe's biggest economy bracing for a painful recession. Pollster GfK's forward-looking barometer fell to minus 30.6 points for August, the lowest level since its records began in 1991, following a revised July reading of minus 27.7 points.
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Sentiment among consumers in Italy worsened because of a fall in manufacturing and services components in July, according to the latest estimate released by the Italian national statistics office, Istat. The consumer confidence index was down to 94.8 points from 98.3 points in June, missing market expectations of 96.6. The statistics office noted a deterioration across most consumer confidence index components. Expectations on the general economic situation as well as opportunities to build up savings in the future worsened.
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Italy is preparing new measures to help mitigate soaring inflation, funded from €14 billion in higher-than-expected tax revenues, the government said Tuesday. The plan comes just days after Prime Minister Mario Draghi's coalition government collapsed last week, triggering his resignation and elections scheduled for September 25. Like many other nations, the eurozone's third-largest economy has been battling a spike in consumer prices in recent months, notably in the cost of energy. Economy & Finance Minister Daniele Franco told a cabinet meeting Tuesday that Italy's debt is due to be about €14.3 billion lower than expected in 2022, due to an increase in tax revenues in the first six months.
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The Australian consumer price index hit 6.1% in the June quarter, representing a 21-year high, new data from the Australian Bureau of Statistics showed on Wednesday. The annual CPI inflation figure in June accelerated to 6.1% from 5.1% in March - the highest recorded since 2001. This was mainly due to higher dwelling construction costs and automotive fuel prices. New dwelling prices recorded their largest annual rise since the series commenced in the June 1999 quarter. Price rises continue to be driven by high levels of building construction activity combined with ongoing shortages of materials and labour. Automotive fuel prices rose for the eighth consecutive quarter. This is as a result of an oil price shock caused by the Russian invasion of Ukraine last quarter, coupled with the ongoing easing of Covid-19 restrictions strengthening global demand.
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UK shop price inflation hit a record high in July, figures from the British Retail Consortium showed on Wednesday, with rampant food prices leading the way. UK shop prices surged 4.4% yearly in July, picking up speed from a 3.1% rise in June, according to latest BRC-NielsenIQ tracker. July's growth rate was ahead of the 12- and six-month averages of 1.5% and 2.8%, respectively. It was the chunkiest shop price inflation rate since the series began in 2005. Food inflation quickened to 7.0% in July from 5.6% in June. Fresh food inflation alone surged to 8.0% from 6.2%. Ambient food inflation accelerated to 5.7% from 4.8%.
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Rail passengers in the UK were suffering fresh travel chaos on Wednesday when thousands of workers walked out on strike, crippling services across the country. Disputes in the bitter row over jobs, pay, pensions and conditions are worsening, with more strikes due in the coming days, and a wave of industrial action planned next month on the railways and London Underground. Only around one in five trains will run on Wednesday, on around half the network, with some areas having no trains all day. Picket lines were being mounted outside railway stations as members of the Rail, Maritime & Transport union at Network Rail and 14 train operators went on strike.
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