- Italy seek Nations League consistency as Germany continue rebuild
- From boom to budgeting as reality bites for Saudi football
- Stock markets diverge as Hong Kong sinks, oil prices fall
- US trade gap narrowest in five months as imports slip
- Stay and 'you are going to die': Florida braces for next hurricane
- England 96-1 after Salman's century lifts Pakistan to 556
- Hollywood star Idris Elba champions African cinema in Ghana
- Djokovic rolls Cobolli to make Shanghai Masters last 16
- Milan's Hernandez receives two-game suspension after referee rant
- Geoffrey Hinton, soft-spoken godfather of AI
- Ex-Barcelona and Spain great Iniesta retires aged 40
- Duo wins Physics Nobel for 'foundational' AI breakthroughs
- German 'Maddie' suspect could be free in 2025 after cleared of separate sex crimes
- China slaps provisional tariffs on EU brandy imports
- Ex-skipper Skelton eyes Wallabies November return
- Spanish great Iniesta leaves indelible legacy after retirement
- Indian Kashmir elects first regional government in a decade
- Hong Kong stocks crash, oil prices retreat on fading China boost
- Man City accuse Premier League of 'misleading' claims after legal case
- Duo wins Physics Nobel for key breakthroughs in AI
- Agha defies England as Pakistan post 515-8 in first Test
- September second-warmest on record: EU climate monitor
- Pastor wanted by US for sex trafficking to run for Philippine senate
- Mozambican writer Mia Couto dreams future leaders set an 'example'
- German 'Maddie' suspect could be free soon after cleared of separate sex crimes
- China says to take anti-dumping measures against EU brandy imports
- German suspect in 'Maddie' case cleared in separate sex crimes trial
- Israel expands offensive against Hezbollah in south Lebanon
- China stocks rally fizzles on stimulus worries amid Asia retreat
- Bangladesh's Yunus says no elections before reforms
- England strike twice as Pakistan reach 397-6 at lunch in first Test
- China stocks rally peters out on stimulus worries amid Asia retreat
- Taiwan's Foxconn says building world's largest 'superchip' plant
- Kenya's deputy president faces impeachment vote
- N. Korean soldiers 'highly likely' killed in Ukraine: Seoul
- 'Appeals Centre' to referee EU social media disputes
- US Supreme Court to hear 'ghost guns' regulation case
- 'Small' oil leaks detected in Samoa after NZ navy shipwreck
- Nobel literature jury may go for non-Western writer
- At Istanbul church, blessed spring offers hope to Christians and Muslims
- From Bolivia to Indonesia, deforestation continues apace
- Myanmar to send rep to regional summit for first time in three years
- Prabowo set to lead bolder Indonesia on world stage
- Tampa zoo rushes Chompers the porcupine and others to safety as Milton nears
- Shanghai stocks pare early surge on stimulus worries amid Asia retreat
- New Japan PM to hold talks on ASEAN sidelines
- Record number of climbers chase 14-peak dream in Tibet
- Former South Korea clinic for US 'comfort women' to be demolished
- China holds off on fresh stimulus but 'confident' will hit growth target
- Chiefs battle past Saints to stay unbeaten
RBGPF | -0.46% | 60.52 | $ | |
CMSC | 0.04% | 24.58 | $ | |
AZN | -0.21% | 76.71 | $ | |
SCS | -0.47% | 12.89 | $ | |
NGG | 0.18% | 65.6 | $ | |
GSK | -1.07% | 38.22 | $ | |
BTI | -0.09% | 35.17 | $ | |
CMSD | 0.1% | 24.815 | $ | |
RIO | -4.66% | 66.52 | $ | |
RELX | 0.8% | 46.41 | $ | |
BP | -3.59% | 31.99 | $ | |
RYCEF | -0.15% | 6.87 | $ | |
BCC | 0.39% | 141.82 | $ | |
JRI | 0.11% | 13.195 | $ | |
BCE | -0.6% | 33.33 | $ | |
VOD | -0.42% | 9.649 | $ |
US banks see upheaval from Fed shift, Russia challenging economy
Large US banks released a mixed deluge of earnings Thursday, pointing to the continued strength of US households and businesses while warning of rising risks from inflation, geopolitical upheaval and fast-changing monetary policy.
Citigroup, Goldman Sachs and Wells Fargo all reported lower profits compared with the year-ago period, when results were boosted by the release of reserves set aside at the outset of the Covid-19 pandemic in case of bad loans.
Executives painted a complex picture of puts and takes as uncertainty from the war in Ukraine complicates an already unpredictable economy that's still grappling with Covid-19 disruptions.
Goldman Sachs Chief Executive David Solomon described a series of "cross currents" coursing through the economy.
"While US unemployment levels are low and wages are increasing, inflation is the highest it's been in decades," Solomon said on a conference call with analysts.
"We're seeing new stress on supply chain and commodity prices and US households are facing rising gas prices as well as higher prices for food and housing. We've also seen an increased risk of stagflation and mixed signals on consumer confidence," he said.
The Federal Reserve's shift to a monetary tightening posture adds to the churn, simultaneously helping and hurting banks.
Wells Fargo, for example, reported higher net interest income reflecting the benefit of being able to charge more for loans.
But the domestic-focused bank, a big player in the US housing market, also experienced its highest quarterly decline since 2003 in the mortgage market as fewer consumers refinance due to higher interest rates.
- Russia exposure -
Citi reported a 46 percent decline in first-quarter profits to $4.3 billion, while revenues dipped two percent to $19.2 billion.
Citi earnings were dragged lower by increased expenses, while its banking operations had a mixed performance.
Chief Executive Jane Fraser cited a difficult geopolitical and macro environment as a factor in weaker investment banking results, while pointing to trade loans and cross-border transactions as areas of strength.
The New York bank, which is more exposed than competitors to Russia, said it set aside a $1.9 billion in reserves related to the invasion.
About $1 billion in the Citi reserves are for direct exposure to Russia, while the $900 million relate to broader economic risks following the invasion, Citi Chief Financial Officer Mark Mason said on a conference call with reporters.
Since the end of 2021, Citi has reduced its overall exposure to Russia from $9.8 billion to $7.8 billion, Mason said.
"There's somewhat of a wait and see how some of this plays out," Mason said of the overall environment.
"Clients are worried about inflation," Mason said. "They're looking at the impacts from rising rates," he added, noting that supply chain woes exacerbated by the Russian invasion.
At Goldman Sachs, profits came in $3.8 billion, down 43 percent from the year-ago period on a 27 percent drop in revenues to $12.9 billion.
Goldman sustained a big drop in revenues from asset management and equity and debt underwriting, offset by a strong activity in some trading divisions amid market volatility.
The results also included a $300 million hit from Russia. Solomon described Goldman's exposure to the conflict as "relatively limited," saying the bank has been focused on reducing exposure.
Wells Fargo, meanwhile, reported profits of $3.7 billion, down 20.8 percent from the 2021 period. Revenues fell 5.1 percent to $17.6 billion.
- Downside risks -
Thursday's deluge of earnings reports comes a day after JPMorgan Chase also reported lower profits. Chief Executive Jamie Dimon described a "very strong underlying economy," but warned that rising interest rates, inflation and the war in Ukraine had lifted the risk of recession.
Wells Fargo Chief Executive Charlie Scharf employed a similar tone, noting that "our internal indicators continue to point towards the strength of our customers' financial position," while warning that Fed efforts to counter inflation will "certainly reduce economic growth," with Ukraine bringing "additional risk to the downside."
But unlike JPMorgan, which added $902 million in reserves in part because of higher recession risk, Wells Fargo released reserves of $1.1 billion on expectations of fewer bad loans due to upheaval from Covid-19.
Shares of Citi rose one percent to $50.67 in afternoon trading, while Goldman Sachs dipped 0.5 percent to $320.40. Wells Fargo slumped 5.2 percent to $46.00.
O.M.Souza--AMWN