Credit Suisse will shrink interest rate trading after revenue and profit as its investment bank slid in the third quarter, it said yesterday, further scaling back an area squeezed by strict new regulation and a drop in activity.
Rivals UBS, Deutsche Bank and Barclays are all restructuring their investment banks – less lucrative in volatile post-crisis markets and under fire from regulators insisting banks swap risk for more capital – and some analysts said chief executive Brady Dougan had not gone far enough compared to his peers.
At Credit Suisse, fixed income and bond trading made for 29% of overall revenue last year, compared with 22% before the financial crisis of 2008-09. By contrast UBS said a year ago it planned to cut 10,000 investment bank staff by withdrawing from large parts of fixed income and would focus almost exclusively on private banking.
Credit Suisse’s overall net profit rose to 454mn Swiss francs ($509.1mn) from the year-ago period – when charges linked to its own debt ate into profits – well short of analyst estimates, which averaged 705mn francs. Revenue dipped little more than 1%.
German automotive group Daimler forecast higher fourth-quarter profit after a rejuvenated model range and cost cuts in the core luxury car business helped it to post better than expected results yesterday.
While earnings growth is being driven primarily by the new Mercedes-branded cars that lift sales volumes and reduce harmful price discounts, the company is also improving profitability through the elimination of waste.
The company said it now expects fourth-quarter earnings before interest and tax (EBIT), excluding one-off items, will be higher than last year. From its latest full-year guidance, the implied forecast for the last three months of 2013 is for profit up about 27% year on year to €2.2bn.
Third-quarter group EBIT excluding one-off items rose 15% to €2.23bn ($3.07bn), beating an estimated 2.12bn in a Reuters poll of 12 banks and brokerages.
Daimler’s Mercedes luxury car business expanded its EBIT margin, a benchmark for comparing profitability with rival BMW, by nearly a full percentage point to 7.3%, surpassing expectations of 6.9%.
The 14% gain in third-quarter car sales, the €420mn in Mercedes cost cuts already achieved this year and a stronger final three months would not be enough to offset a disastrous start to 2013, the company conceded.
Ford Motor Co boosted its full-year global profit outlook yesterday, as its European picture brightened and stronger overseas operations sparked better-than-expected third-quarter results.
The No 2 US automaker now expects 2013 pretax profit to top last year’s $8bn and sees losing less money in Europe than in 2012. Chief financial officer Bob Shanks said Ford’s vehicle prices stabilised in Europe in the third quarter and overall auto sales in Europe may see “very, very modest growth” in the near term.
Ford narrowed its losses in Europe to $228mn in the quarter from $468mn a year ago. The performance trounced Wall Street estimates of losses exceeding $400mn.
Excluding the one-time items, Ford reported adjusted earnings of 45 cents per share, 7 cents better than the average estimate of analysts polled by Thomson Reuters I/B/E/S.
Third-quarter net income fell by a little more than one-fifth to $1.27bn, or 31 cents per share, due to nearly $500mn in special charges, including $250mn spent on restructuring Europe.
US weapons maker Raytheon Co yesterday reported higher-than-expected quarterly earnings and raised its full-year forecast, and it cited prospects for landing several big foreign orders later this year.
Chief financial officer Dave Wasjgras told Reuters he was fairly confident about Raytheon’s overall business outlook and that mandatory US military budget cuts required under sequestration were not hitting the defence industry as quickly as initially expected.
He said Raytheon hoped to land orders to sell a Patriot missile defence system to Kuwait, a ground-based air defence system for Oman and a possible Patriot sale to Qatar, as well as some additional US orders.
Raytheon said third-quarter income from continuing operations fell 2.8% to $487mn from $501mn a year earlier. Earnings per share were flat at $1.51, while analysts polled by Thomson Reuters I/B/E/S had forecast $1.33.
Sales dropped 3.4% to $5.8bn.
Raytheon said it expected full-year earnings per share of $5.67 to $5.77 from continuing operations, 16 cents more than its previous forecast and up from $5.65 in 2012.
Ericsson’s turnaround drive was thrown into doubt yesterday as the world’s biggest mobile networks maker missed third-quarter profit forecasts and said sales were coming under pressure in the US and Japan.
A decade-long price war in Ericsson’s industry, launched by Chinese vendors Huawei and ZTE, has already forced suppliers like Nortel and Motorola out of the market.
In a do-or-die effort, struggling Alcatel-Lucent this month announced it was slashing 10,000 jobs – one seventh of its workforce – its sixth restructuring plan since 2006.
Earnings before interest and tax were 4.2bn Swedish crowns ($658mn) in the third quarter, up from 3.1bn a year earlier, including joint ventures, but missing a forecast of 4.5bn in a Reuters poll of analysts.
Sales were 53.0bn crowns, well short of the forecast 55.1bn, and down on last year’s 54.6bn.
Colgate-Palmolive Co posted slightly higher third-quarter earnings yesterday as it spent more on advertising to promote products including new versions of its well-known toothpaste.
The company still expects its annual profit to rise 4.5% to 5.5%, assuming foreign exchange rates remain fairly stable. It is targeting double-digit earnings per share growth for 2014, excluding restructuring charges.
Colgate said it had earned $656mn, or 70 cents per share, up slightly from $654mn, or 68 cents per share, a year earlier.
Excluding restructuring charges, Colgate earned 73 cents per share, matching analysts’ expectations, according to Thomson Reuters I/B/E/S.
Spanish banking giant Santander, the largest in the eurozone by market value, announced yesterday a leap in third-quarter profits as it recovered from big write-offs a year earlier.
Santander’s net profit rose to €1.055bn ($1.46bn) in the third quarter, nearly nine times the €122mn profit reported a year earlier.
At this time last year, it had to set aside €1.14bn in provisions against doubtful property-related assets in Spain.
Santander’s net banking income fell 15.5% to €6.285bn over the same period.
Over the first nine months of 2013, Santander posted a net profit increase of 77% from the same period last year to €19.66bn. Net banking income dropped 13.9% to €19.66bn.
Swiss industrial group ABB beat expectations for third-quarter profit and said it would seek closer co-operation between its businesses and push ahead with cost cuts to boost growth.
Presenting his first results since taking over as chief executive in mid-September, Ulrich Spiesshofer said better collaboration between ABB’s divisions should help improve performance in uncertain markets.
ABB, which makes products as varied as power grids for utilities, robots and transformers used on electric trains, hopes that expanding services such as maintenance and technical support will help shield its business from economic cycles.
Cost control and an improving early-cycle business, which includes products like industrial robots and circuit breakers, lifted ABB’s net profit 10% to $835mn in the quarter, beating the average forecast for a 4% rise.
Revenue rose 8% to $10.54bn, also beating estimates.
South Korean auto giant Hyundai Motor Co posted a modest profit gain following third consecutive quarters of decline as strong sales in China and Brazil countered lacklustre performances at home and in the US.
The 3.9% year-on-year growth in the quarter ended September puts Hyundai Motor on a recovery track, although rising competition and a firming local currency are obstacles that it would still have to overcome.
Hyundai Motor, once a stellar performer in the global auto industry, has seen its US market share shrink as a weaker yen gives Japanese cars a leg-up. The South Korean firm is also being squeezed by the growing popularity of BMW and Volkswagen models in its home market in the wake of bilateral trade deals.
Hyundai Motor, the world’s fifth-biggest carmaker along with affiliate Kia Motors Corp, said yesterday net profit rose to 2.3tn won ($2.18bn) in July-September. That was slightly above an average forecast of 2.17tn won, according to Thomson Reuters I/B/E/S.
South Korea’s Posco cut its 2013 sales target by 3% yesterday as the world’s fifth largest steelmaker struggles to win orders away from Asian rivals also scrambling in an oversupplied market.
Posco posted its steepest quarterly fall in operating profits so far this year for the July-September period, hit by declining sales and a prolonged slump in steel prices. Profits fell by nearly half to a lower-than-forecast 443bn won ($419.5mn)
Sales also fell in the third quarter. Posco said it now expected sales for the year to reach 31tn won, down from a previous forecast of 32tn won.
The economic slowdown in the world’s largest steel consumer China and the financial crisis in Europe have weakened steel demand and prices, hitting hard Asian steelmakers like POSCO and Chinese rival Baosteel.
South Korea’s LG Electronics Inc, the world’s No 2 TV maker, reported its lowest quarterly profit for 2013 yesterday as its mobile business slipped into the red due to the cost of marketing its latest smartphone.
LG tried to strike a blow against mobile industry leaders Samsung Electronics Co Ltd and Apple Inc in August with the lavish launch in New York of its G2 handset, and plans to follow up with a curved phone in the coming weeks. But earnings may remain under pressure for the remainder of the year thanks to slow TV shipments, even though the G2 phone will contribute more to the company’s bottom line in the October-to-December period after a full quarter of sales.
Third-quarter operating profit rose 27% to 218bn won ($206mn), below a consensus forecast of 306bn won by Thomson Reuters I/B/E/S. The July-to-September earnings compared with 171bn won a year ago and 479bn won in the second quarter.
The world’s third biggest smartphone manufacturer said its handset operation made an 80bn won loss, versus a 4bn won loss a year ago and a 61bn won profit in the second quarter.
General Dynamics Corp, the maker of Gulfstream business jets and US Navy warships, reported higher earnings and operating margins for the third quarter despite a dip in revenue, and nudged its full-year earnings forecast higher.
Chief executive officer Phebe Novakovic said the better-than-expected results allowed General Dynamics to increase its guidance for full-year earnings per share by five cents to between $6.90 and $7.00. It earned $6.48 per share in 2012.
The company said quarterly net earnings rose 8.5% to $651mn from $600mn a year earlier, while revenues fell 1.7% to $7.93bn. Earnings per share rose 8.2% to $1.84 from $1.70.
Revenues were largely in line with Wall Street estimates, but earnings beat expectations from analysts polled by Thomson Reuters I/B/E/S, who had forecast EPS of $1.68.
AT&T Inc has posted net income that was a penny ahead of Wall Street expectations on wireless profit margins that were better than some analysts expected.
While revenue was slightly behind analyst estimates, investors kept the shares steady in late trading because the results were roughly in line with expectations.
In order to continue growth, AT&T has said it would consider making acquisitions in Europe, despite misgivings from some investors, but it declined to give an update on this consideration on Wednesday.
AT&T, the No 2 US mobile service provider reported 363,000 net postpaid subscriber additions in the quarter, which was better than its year-ago growth and slightly ahead of expectations from eight analysts for over 344,000.
AT&T reported a third-quarter profit of $3.81bn, or 72 cents, per share compared with $3.63bn, or 63 cents, per share in the year-ago quarter.
Excluding unusual items, the company earned 66 cents per share in the third quarter compared with analyst estimates of 65 cents, according to Thomson Reuters I/B/E/S.
Source: Gulf Times, Caye Global