WFC Reports Q1 $1.05 v $0.97e, R$20.6B v $20.5Be
*GERMAN 10-YEAR YIELD DROPS BELOW 1.50%, FIRST TIME SINCE JUNE 7
JPMorgan Chase misses by $0.12, misses on revs (57.40 )
Reports Q1 (Mar) earnings of $1.28 per share, excluding non-recurring items, $0.12 worse than the Capital IQ Consensus Estimate of $1.40; revenues fell 8.5% year/year to $22.99 bln vs the $24.04 bln consensus. Net income was $5.3 billion, down $1.3 billion from the prior year. The decrease was driven by lower net revenue and higher provision for credit losses, partially offset by lower noninterest expense.
- Net revenue was $23.9 billion, down $2.0 billion, or 8%, compared with the prior year. Noninterest revenue was $13.0 billion, down $1.8 billion, or 12%, compared with the prior year.
- Net interest income was $10.9 billion, down $202 million, or 2%, compared with the prior year, reflecting the impact of lower loan yields and lower trading and investment securities balances, predominantly offset by higher investment securities yields, lower long term debt and deposit interest expense.
- JPM reiterates it will increase its Q2 common stock dividend from the current $0.38 per share to $0.40 per share; the Firm repurchased $0.4 billion of common equity in the first quarter and is authorized to repurchase $6.5 billion of common equity through the first quarter of 2015.
- Fortress balance sheet
- Maintained Basel III Tier 1 common of $156 billion, or 9.5%
- High Quality Liquid Assets ("HQLA") of $538 billion
- Firm Supplementary Leverage Ratio ("SLR") of 5.1% including the impact of the U.S. NPR announced this week.
- The Firm's return on tangible common equity for the first quarter of 2014 was 13%, compared with 17% in the prior year.
- Net income was $1.9 billion, a decrease of $650 million, or 25%, compared with the prior year, due to lower net revenue and higher provision for credit losses, partially offset by lower noninterest expense. Net revenue was $10.5 billion, a decrease of $1.2 billion, or 10%, compared with the prior year. Net interest income was $7.0 billion, down $183 million, or 3%, driven by spread compression in Credit Card, Auto and Consumer & Business Banking, and by lower mortgage warehouse balances, largely offset by higher deposit balances. Noninterest revenue was $3.4 billion, a decrease of $972 million, or 22%, driven by lower mortgage fees and related income. The provision for credit losses was $816 million, compared with $549 million in the prior year and $72 million in the prior quarter.
- Mortgage originations were $17.0 billion, down 68% from the prior year and 27% from the prior quarter. Mortgage Banking net income was $114 million, a decrease of $559 million from the prior year, driven by lower net revenue and lower benefit from the provision for credit losses, partially offset by lower noninterest expense. Net revenue was $1.6 billion, a decrease of $1.1 billion compared with the prior year.
- Mortgage Servicing pretax loss was $270 million, compared with a pretax loss of $101 million in the prior year, reflecting a higher MSR risk management loss, largely offset by lower expenses.
- Card, Merchant Services & Auto net income was $1.1 billion, a decrease of $190 million, or 15%, compared with the prior year, driven by lower net revenue and higher provision for credit losses. Net revenue was $4.5 billion, down $209 million, or 4%, compared with the prior year. Net interest income was $3.3 billion, down $202 million compared with the prior year, predominantly driven by spread compression in Credit Card and Auto.
- Net income was $2.0 billion, down 24% compared with $2.6 billion in the prior year. These results primarily reflected lower revenue, partially offset by lower noninterest expense. Net revenue was $8.6 billion, down 15% compared with $10.1 billion in the prior year. Excluding the impact of a debit valuation adjustment ("DVA") gain of $126 million in the prior year, net revenue was down 14% from $10.0 billion in the prior year, and net income was down 22% from $2.5 billion in the prior year.
- Banking revenue was $2.7 billion, down 8% from the prior year.
- Investment banking fees were $1.4 billion, up 1% from the prior year. The increase was driven by higher advisory fees of $383 million, up 50% from the prior year on strong wallet share of completed transactions, as well as higher equity underwriting fees of $353 million, up 29% from the prior year on higher industry-wide wallet levels. These were partially offset by lower debt underwriting fees of $708 million, down 22% from the prior year reflecting lower industry-wide volumes of high-yield bond underwriting and loan syndications.
- Treasury Services revenue was $1.0 billion, down 3% compared with the prior year driven by lower trade finance revenue as well as the impact of business simplification initiatives.
- Lending revenue was $284 million, a decline from $498 million in the prior year primarily due to lower gains on securities received from restructured loans.
- Markets & Investor Services revenue was $5.9 billion, down 18% from the prior year.
- Fixed Income Markets revenue of $3.8 billion was down 21% from the prior year on weaker performance across most products and lower levels of client activity compared to a stronger prior year. Equity Markets revenue of $1.3 billion was down 3% compared with the prior year, on lower derivatives revenue. Securities Services revenue was $1.0 billion, up 4% from the prior year primarily driven by higher net interest income on higher deposits and higher asset-based custody fees. Credit Adjustments & Other revenue was a loss of $197 million driven by losses on net credit valuation adjustments ("CVA") as well as losses, net of hedges, related to funding valuation adjustments/DVA; prior year revenue was a gain of $99 million, mainly driven by DVA. Return on equity was 13% on $61.0 billion of average allocated capital.
- Net income was $578 million, a decrease of $18 million, or 3%, compared with the prior year, reflecting an increase in noninterest expense and lower net revenue, partially offset by a lower provision for credit losses. Net revenue was $1.7 billion, a decrease of $22 million, or 1%, compared with the prior year.
- Net income was $441 million, a decrease of $46 million, or 9%, from the prior year, reflecting higher noninterest expense, largely offset by higher net revenue. Net revenue was $2.8 billion, an increase of $125 million, or 5%, from the prior year.
- Book Value per Share $54.05 compared to $53.25 in Q4.
- Tier 1 Capital ratio 12.1%, Q4 11.9%;
- Total Loans $730 bln compared to $738 bln in Q4;
- Loan to deposit ratio 57% compared to 57% in Q4.
Japan PM Abe to See BOJ Kuroda This Month—Sources Plan Comes as Associates Warn Japan's Economy Could Face Danger
TOKYO—Japanese Prime Minister Shinzo Abe recently told people close to him that he is planning to see Bank of Japan Gov. Haruhiko Kuroda this month to discuss monetary policy, people familiar with the matter said.
Mr. Abe's plan comes as many of his close associates warn that Japan's economy could face danger if policy makers underestimate the potential damage from a higher sales-tax rate that went into effect April 1. The best way to fight headwinds from the tax rise would be for the BOJ to expand its monetary easing program, they say.
It wasn't clear in what setting Mr. Abe planned to see Mr. Kuroda, but if the two hold an official one-on-one meeting, it would mark the first since December last year. Before the December meeting, the two held such a meeting in June 2013. They regularly see each other in group settings, such as meetings to discuss the government's monthly economic reports.
The first of the BOJ's two policy board meetings this month ended Tuesday. The people familiar with the matter said Mr. Abe expressed his intention to see Mr. Kuroda by the time the BOJ holds its next policy-board meeting, scheduled for April 30.
Based on local media accounts of Mr. Abe's daily schedule, the two haven't met in recent days. They could also meet privately without an announcement. A representative of Mr. Kuroda declined to comment. A spokeswoman for the prime minister's office said she wasn't aware of any planned meeting.
Pressure on the BOJ has increased this week after comments by Mr. Kuroda rejecting imminent easing steps helped send Tokyo stock markets tumbling. The yen's value has also rebounded, making Japanese exports less price competitive.
"If there is any unexpected economic pullback, monetary policy will be the one to play the leading role," Etsuro Honda, a close economic adviser to Mr. Abe, said in a recent interview with The Wall Street Journal.
Any direct talks between Messrs. Abe and Kuroda could fuel the guessing game over whether and when the central bank will expand easing steps. A majority of economists say the bank will act this year, most likely in the summer. The BOJ has pledged to generate 2% inflation by spring 2015.
Mr. Abe himself has been one of the leading voices favoring a reflationary policy that relies heavily on the BOJ flooding banks with cash. A group of economists led by Nobuyuki Nakahara, a former Bank of Japan policy board member, visited Mr. Abe's office earlier this month, spending more than 90 minutes with him. Mr. Nakahara is among those urging aggressive BOJ action.
JPMorgan Chase and Co Reports Q1 $1.28 v $1.41e, R$23.9B v $24.6Be
Early premarket gappers
Gapping up: HRB +7.3%, BOFI +6.1%, APP +6.1%, CERE +5.3%, NEPT +4.6%, ZNGA +2.2%, IRBT +1.9%, DDD +1.7%, INFY +1.4%, ADS +1.3%, DIS +1.3%, VISN +1.2%, WTT +0.8%, GILD +0.8%
Gapping down: NTN -27.4%, DWCH -23.9%, NQ -11.6%, AVD -10.5%, VJET -10.2%, TTMI -3.8%, YGE -3.6%, GLOG -3.5%, ARMH -2.8%, GPS -2.4%, ALU -1.8%, AJG -1.5%, ASML -1.2%, NOK -1.2%, TSLA -1%, BBL -0.9%, SCHW -0.6%
Gapping down: NTN -27.4%, DWCH -23.9%, NQ -11.6%, AVD -10.5%, VJET -10.2%, TTMI -3.8%, YGE -3.6%, GLOG -3.5%, ARMH -2.8%, GPS -2.4%, ALU -1.8%, AJG -1.5%, ASML -1.2%, NOK -1.2%, TSLA -1%, BBL -0.9%, SCHW -0.6%
Have we seen this movie before in EMFX?
There was a similar rally in EMFX last October (see chart below), when the US was in the midst of government shutdown. September non-farm payroll was delayed. S&P fell and VIX spiked with the debt ceiling breach looming. Surprisingly EMFX actually strengthened with risk aversion. Why was that?
It appeared EMFX was trading more to rates volatility than to the VIX. The rally came on the heels of the Fed’s non-taper decision on September 18. Simply the lack of data points (because of the shutdown) was enough to embolden investors to reach for yield. And no data points meant tapering could be delayed. Between October 1 (first day of shutdown) to October 9 (low in S&P), the best performing EM currencies were ZAR, TRY, IDR, MYR, INR, and the worst were ILS, RUB, MXN, and PEN. Clearly there was a bias for carry. And what ended the rally? The debt ceiling resolution on the 17th. And that’s because NFP was due to be released shortly after the federal government re-opened.
This time around the NFP didn’t come in as strong as some in the market expected. Coupled with weaker equities, some investors began to cast doubt on the growth story in the US. Equity vols are rising, but the higher VIX has not prevented EMFX from rallying. EMFX has been taking cue from rates vols instead. Stealing a page from last October, investors are happy to go after yield in the current “data vacuum” until just before next month’s tier-one data.
[cid:image002.jpg@01CF530A.89255FA0]
+------------------------------------------------------------------------------+
BFW 04/11 10:33 *VOLKSWAGEN SAYS SEK200-SHR FOR SCANIA IS FINAL; SCANIA DROPS
+------------------------------------------------------------------------------+
Volkswagen Says SEK200-Shr for Scania Is Final 2014-04-11 10:42:44.836 GMT
By James Ludden April 11 (Bloomberg) -- VW will not increase offer, co. says in e-mailed statement. * Scania drops 3.7%
Link to Company News:{SCVB SS <Equity> CN <GO>} Link to Company News:{VOW GR <Equity> CN <GO>}
For Related News and Information: First Word scrolling panel: {FIRST<GO>} First Word newswire: {NH BFW<GO>}
To contact the editor responsible for this story: James Ludden at +44-20-7673-2645 or jludden@bloomberg.net
RV/Special situation: Perry Ellis (PERY US)
Initiating BUY RATING PERY: US$ 14.25; target (initial): US$ 18.00
PERY owns and manages a portfolio of over 30 apparel and accessory brands with Perry Ellis as the key premium brand of the company. PERY’s brand portfolio targets a range of market segments from luxury market to sports market. PERY’s products are sold via a combination of channels ranging from department stores to online outlets. Despite having some key premium brands, PERY continues to lag behind Ralph Lauren (RL) and PVH (owner of Calvin Klein and Tommy Hilfiger) on margins. The consensus expects the operating margins for both RL and PVH in 10%-15% range while for PERY it is around 4.5%. PERY’s margins are depressed by low brand power vis-à-vis RL and PVH, dilution by weaker performing brands and heavy promotional activity both by PERY’s customers and PERY to address the weak retail sales volume. We believe that this situation could be turned-around and PERY has scope to expand its margins. First, PERY is already in the process of divesting underperforming brands in its portfolio and focusing its effort heavily on Perry Ellis, Rafaella sportswear businesses, and golf-lifestyle business. This together with the general recovery in the economic conditions should help PERY’s margins. Secondly, we note that an aggressive expansion in the license business could expand the margin significantly. Although the license segment generates ~3% of total revenue, it contributes to ~46% of the EBITDA. PERY could drive further revenue growth via licensing its brands in under penetrated markets such as Europe, Latin America, and Asia. In FY2014 (period ended Feb 1, 2014), license income grew by ~9.4% vis-à-vis a ~6% drop in brand sales. PERY is undervalued on a relative value basis and we estimate a fair value of ~$18.0 for PERY. On DCF basis, we value PERY at around $16.5 a share. Although we do not see any short-term positive catalysts, we believe that PERY is a buy given our view that it will re-rate positively over the medium term. FULL REPORT ATTACHED
Makor Capital 11 Menachem Begin St., 26th FL Ramat Gan 52681 Israel
Tel +972 3 5453 768 Fax +972 3 7162 680
Research Disclaimer This publication has been prepared by Makor Capital Limited (“Makor Capital”) and is intended for professional or qualified investors only. Makor Securities LLP (“Makor Securities”)is distributing this material to its clients who are Eligible Counterparties or Professional Clients under FSA Rules. It may also be disseminated to persons who are Investment Professionals within the meaning of the Financial Services and Markets Act 2000 (Financial Promotion) order 2005. In the United States Makor Capital only distributes this material to major US institutional investors (as that term is defined in Rule 15 a-6 of the Securities and Exchange Act of 1934) and to SEC registered broker-dealers or banks acting in a broker –dealer capacity” If you do not fall into any of these categories you should disregard it.
This research material is a marketing communication. It is not investment research and has not been prepared in accordance with legal requirements designed to promote the independence of investment research. It is not subject to any prohibition on dealing ahead of the dissemination of investment research. It has not been produced by Makor Securities.
This material does not take into account the particular investment objectives, financial situation or needs of individual clients or other recipients. Before acting on this material, clients and other recipients should consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. This material should not be construed in any circumstances as an offer to sell or solicitation of any offer to buy any security or other financial instrument, nor shall it, or the fact of its distribution, form the basis of, or be relied upon in connection with, any contract relating to such action. This material is produced by research providers which Makor Securities believes to be reliable, but Makor Securities does not warrant or represent (expressly or impliedly) that it is accurate, complete, not misleading or as to its fitness for the purpose intended and it should not be relied upon as such. Opinions expressed will be the current opinions of those producing the research as of the date appearing on this material only. We expect those producing the material in this report to update it on a timely basis but can give no undertaking that they will do so and regulatory compliance or other reasons may prevent them from doing so (or us from disseminating updated material).
Members and employees of Makor Securities LLP, employees of Makor Capital, Makor Capital Markets and any firm producing this material (including Alternative Investment Management Research SA (“AIM&R”),) may from time to time have long or short positions in securities, warrants, futures, options, derivatives or other financial instruments referred to in this material. For Makor Securities, this information is set out in our Conflicts of Interest Policy which is available on request. Policies for the production of research from research providers (including AIM&R) are available on request. Unless otherwise stated, share prices provided within this material are as at the close of business on the day prior to the date of the material. Neither the whole nor any part of this material may be duplicated in any form or by any means. Neither should any of this material be redistributed or disclosed to anyone without prior consent. This material is issued for general information and discussion purposes only. None of Makor Securities, Makor Capital, Makor Capital Markets nor AIM&R accepts liability whatsoever for any direct, indirect or consequential loss or damage of any kind arising out of the use of all or any of this material.
The services, securities and investments discussed in this material may not be available to, nor are suitable for all investors. Investors should make their own investment decisions based upon their own financial objectives and financial resources and it should be noted that investment involves risk, including the risk of capital loss. Past performance is no guide to future performance. In relation to securities denominated in foreign currency, movements in exchange rates will have an effect on the value, either favourable or unfavourable.
Entities
Makor Securities LLP is authorised and regulated by the Financial Services Authority (FSA registration number 556034) of Dover House, 34 Dover Street, London W1S 4NG. Makor Capital, company number 514456466, is incorporated in Israel and is a 100% held subsidiary of Makor Holdings Pte Ltd incorporated in Singapore. Makor Capital Markets SA, company number CH-660.2.999.011-0 is incorporated in Switzerland and is also a 100% held subsidiary of Makor Holdings Pte Ltd. AIM&R is incorporated in Switzerland; company number CH-660.1.533.997-8