FT : Credit Suisse warns of first-quarter loss as legal provisions balloon

Credit Suisse warns of first-quarter loss as legal provisions balloon
The fallout from Russia’s invasion of Ukraine will also hit the bank’s results

Credit Suisse has warned it expects a first-quarter loss after a sharp increase in its legal provisions, the latest blow to the Swiss bank that has struggled to draw a line under multiple crises in recent years.

The bank said on Wednesday that it would set aside a further SFr600mn (£484mn) for litigation provisions in the first quarter, taking the total to about SFr700mn, for what it described as developments in legal matters that started more than a decade ago.

Alongside the much higher legal provisions, Credit Suisse said that the fallout from Russia’s invasion of Ukraine would leave it with about SFr200mn of “negative revenues and provisions for credit losses”.

The bank did not provide details of the litigation covered by the provisions, but the increase comes less than a month after Bidzina Ivanishvili, the former prime minister of Georgia, won a long-running legal case against it.

Credit Suisse at the time said it could be forced to pay more than $500mn following the loss. The bank will report its first-quarter results on April 27.

>>> Stoxx 600 Pre-Market Indications

  • Lanxess (LXS TH) +4.4%
    • Lanxess Prelim 1Q Adjusted Ebitda Beats Estimates
  • Norsk Hydro (NOH1 TH) +2.2%
    • Watch European Miners as Iron Ore Gains on Shipments Forecasts
  • Anglo American (NGLB TH) +1.9%
    • Watch European Miners as Iron Ore Gains on Shipments Forecasts
  • Just Eat Takeaway (T5W TH) +1.5%
    • Just Eat Takeaway Is Exploring Strategic Actions for GrubHub (1)
  • Enagas (EG4 TH) +1.4%
  • L’Oreal (LOR TH) +1.3%
    • L’Oreal Sales Jump as Shoppers Buy Perfume, Pricey Creams (1)
  • Adyen (1N8 TH) +1.2%
  • Covestro (1COV TH) +1%
  • BASF (BAS TH) +1%
  • Rio Tinto (RIO1 TH) +1%
  • Sartorius (SRT3 TH) -0.5%
  • ASML (ASME TH) -0.6%
    • ASML Forecast Misses Estimates After Constraints Outweigh Demand
  • Rheinmetall (RHM TH) -0.9%
    • Leonardo Has Most Scope to Outperform in Defense: Morgan Stanley
  • Ryanair (RY4C TH) -1.1%
  • HelloFresh (HFG TH) -1.5%
    • Watch Europe’s Lockdown Stocks After Netflix Loses Customers
    • Just Eat Takeaway Is Exploring Strategic Actions for GrubHub (1)
  • Delivery Hero (DHER TH) -1.7%
    • Watch Europe’s Lockdown Stocks After Netflix Loses Customers
    • Just Eat Takeaway Is Exploring Strategic Actions for GrubHub (1)
  • Vestas (VWSB TH) -2.3%
  • Siemens Energy (ENR TH) -3.9%
    • Siemens Energy Warns of Deepening Losses on Ukraine War
  • Siemens Gamesa (GTQ1 TH) -5.1%
    • Siemens Gamesa Sells Renewable Portfolio to SSE for $626 Million

>>> TradeGate Pre-Market Indications

DAX:
  • Covestro (1COV TH) +1.4%
  • BASF (BAS TH) +1.3%
    • CalPERS Backs BASF on 9 of 9 Proposals at April 29 AGM
  • HeidelbergCement (HEI TH) +1.1%
  • Vonovia (VNA TH) +1%
  • Mercedes (MBG TH) +0.9%
    • Europe Car Sales Plunge 19% as War Wipes Out Recovery Prospects
  • Delivery Hero (DHER TH) -0.9%
    • Watch Europe’s Lockdown Stocks After Netflix Loses Customers
    • Just Eat Takeaway Is Exploring Strategic Actions for GrubHub (1)
  • HelloFresh (HFG TH) -1.4%
    • Watch Europe’s Lockdown Stocks After Netflix Loses Customers
    • Just Eat Takeaway Is Exploring Strategic Actions for GrubHub (1)
MDAX:
  • Lanxess (LXS TH) +5.4%
    • Lanxess Prelim 1Q Adjusted Ebitda Beats Estimates
  • Jungheinrich (JUN3 TH) +1.5%
  • Aroundtown (AT1 TH) +1.3%
  • Evotec SE (EVT TH) +0.8%
  • Commerzbank (CBK TH) +0.8%
  • Aixtron (AIXA TH) -0.5%
  • Rheinmetall (RHM TH) -0.7%
    • Leonardo Has Most Scope to Outperform in Defense: Morgan Stanley
  • Siemens Energy (ENR TH) -3.2%
    • Siemens Energy Warns of Deepening Losses on Ukraine War
SDAX:
  • Traton (8TRA TH) +2.3%
  • Cewe Stiftung (CWC TH) +1.8%
  • Schaeffler (SHA TH) +1%
  • Deutsche PBB (PBB TH) +0.9%
  • Heidelberger Druck (HDD TH) +0.9%
  • SAF-Holland SE (SFQ TH) +0.6%
  • flatexDEGIRO (FTK TH) -0.5%
  • Nordex (NDX1 TH) -2.1%

>>> What to look at today - 20th of April 2022

Most Asian stocks rose Wednesday and a selloff in Treasuries paused as investors evaluated the economic outlook amid high inflation, a hawkish Federal Reserve and China’s Covid challenges. Japan helped an Asia-Pacific equity gauge climb for the first session in four. China wavered after its banks held lending rates, disappointing investors looking for a cut to support an economy sagging under Covid lockdowns.  U.S. equity futures retreated amid an after-hours slump in Netflix Inc. on poor subscriber numbers. That tempered some of the optimism from a rally in the S&P 500 index ahead of the streaming giant’s results. Treasuries edged up, paring a tumble from Tuesday. But they remain under longer term pressure from hardening expectations of sharp Federal Reserve policy tightening. Chicago Fed President Charles Evans said interest rates will probably exceed the neutral level in the campaign to damp price pressures. The dollar declined and the yen revived after a prolonged slump. The yen remains the weakest performer in the Group of 10 this year on the policy contrast with the U.S.: the Bank of Japan offered to buy an unlimited amount of bonds to contain yields, underscoring its desire for loose monetary settings.  US After Hours NFLX -26% falls big on earnings as net subs fel for first time in a decade; dragging down many streaming names; IBM +1.8% up bit on earnings

Nikkei +0.91% Hang Seng +0.82% CSI -0.45% Shanghai -0.21% Shenzen -0.37%

Eur$ 1.0815 CNH 6.4158 CNY 6.3980 JPY 128.58 GBP 1.3034 CHF 0.9509 RUB 80.2448 TRY 14.6526 WTI$ 103.38 GOld 1944.75 -0.27% BTC 41.330 ETH 3083

S&P -0.39% Nasdaq -0.82% EuroStoxx +0.53% FTSE +0.18% Dax +0.57% SMI +0.27%

Macro :
- Le Pen Upset Would Be as Big a Shock to Markets as Brexit Vote
- JPMorgan’s Kolanovic Says Time Is Right to Buy Growth and Value
- U.K. Payroll Tax Hike Will Harm Investment and Hiring, Firms Say

Keep an eye on :
- ASML NA : ASML 2Q Net Sales Forecast Misses Estimates
- BAVA DC : Bavarian Starts Phase 3 Trial of RSV Vaccine in Older Adults
- CABK SM : CaixaBank's 5% MDA Buffer Above BBVA, Santander; May Drop to 3%
- CSGN SW : Credit Suisse Signals First-Quarter Loss on Russia, Legal (1)
- BN FP : Danone 1Q Like-for-Like Sales Beats Estimates
- DBK GY : Deutsche Bank Investor Proposes No Confidence Vote in CEO at AGM
- DSM NA : Avient Buys DSM Protective Materials, Enterprise Value EU1.44b
- DUFN SW : Dufry-Autogrill Deal May Well Work If Valuation Is Right: React
- DUFN SW : Dufry Gets New 8.5 Year Contract at Sofia International Airport
- GBLB BB : GBL Buys Majority Stake in Sanoptis From Telemos Capital
- EDF FP : EDF Finds Signs of Corrosion on Four More Reactors During Checks
- EDP PL : EDP Says 1Q Power Generation Rises 3% Y/y, Hydro Output Drops
- EQT SS : EQT Sets Hard Cap for EQT X Fund at EU21.5b
- TKWY NA : Just Eat Takeaway Considers Selling Grubhub as Sales Slump
- LXS GY : Lanxess Prelim 1Q Adjusted Ebitda Beats Estimates
- DRLCO DC : Maersk Drilling Sells Jack-Up Rig to Ades for $42.5 Million
- NFLX US : Netflix Plans Lower-Priced Service With Ads, Marking Big Shift
- OR FP : L'Oreal 1Q Like-for-Like Sales Beats Estimates
- SHEL LN : Shell Withdraws Staff From Russia Projects as Exit Plan Begins
- SSE LN : Siemens Gamesa Renewable Confirms Sale of Wind Projects to SSE
- ENG GY : Siemens Energy Prelim 2Q Revenue Misses Estimates
- SGRE SM : Siemens Gamesa Renewable Confirms Sale of Wind Projects to SSE
- TEP FP : Teleperformance 1Q Like-for-Like Sales Beats Estimates
- TWTR US : Musk Willing to Invest $10b-$15b Own Cash for Twitter: NYP
- VPK NA : Vopak 1Q Revenue EU324.1M Vs. EU300.1M Y/y
- ROSE SW : Zur Rose 1Q Sales CHF493.4M Vs. CHF502.7M Y/y

>>> Europe : Brokers Upgrades & Downgrades - 20th April 2022

>>> Up
* Akastor Raised to Buy at ABG; PT 12 kroner
* Avis Budget Raised to Equal-Weight at Barclays; PT $245
* DNB Bank Raised to Equal-Weight at Morgan Stanley; PT 225 kroner
* Intercos Raised to Buy at Jefferies; PT 16 euros
* Leonardo Raised to Overweight at Morgan Stanley; PT 11.80 euros
* Randstad Raised to Neutral at JPMorgan; PT 55 euros
* Roche Raised to Hold at Intron Health; PT 350 Swiss francs
* SSE PT Raised to 2,200 pence from 1,900 pence at Morgan Stanley

>>> Down
* Dassault Aviation Cut to Equal-Weight at Morgan Stanley
* Leifheit Cut to Hold at Berenberg; PT 26.20 euros
* Netflix Cut to Neutral at Piper Sandler; PT $293
* Netflix Cut to Sell at Pivotal; PT $235
* Novo Nordisk Cut to Hold at Intron Health
* PRS REIT Cut to Hold at Berenberg; PT 115 pence
* Rheinmetall Cut to Equal-Weight at Morgan Stanley; PT 211 euros
* Synthomer Cut to Hold at HSBC; PT 310 pence
* Thales Cut to Equal-Weight at Morgan Stanley; PT 110 euros

>>> Initiation
* Amazon Assumed Buy at Citi; PT $4,100
* Cint Rated New Hold at Handelsbanken
* DoorDash Rated New Buy at Citi; PT $155
* Expedia Assumed Neutral at Citi; PT $200
* Meta Platforms Assumed Buy at Citi; PT $300
* Snap Assumed Buy at Citi; PT $50
* Vitesco Rated New Neutral at Oddo BHF; PT 40 euros
* Xilam Animation Rated New Outperform at Oddo BHF; PT 53 euros

>>> Call
* JPMorgan’s Kolanovic Says Time Is Right to Buy Growth and Value
* L’Oreal’s 1Q Beat May Be Not Enough to Move the Shares, RBC Says
* Teleperformance Beat on Solid Growth, Covid Boost: Deutsche Bank

>>> US After Hours Summary: NFLX -26% falls big on earnings as net subs fel for

After Hours Summary: NFLX -26% falls big on earnings as net subs fel for first time in a decade; dragging down many streaming names; IBM +1.8% up bit on earnings

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: FULT +4.8%, WTFC +3.7%, OMC +3.6%, IBM +1.8%, MATX +0.9%, FHN +0.4%, REXR +0.4%, LRN +0.1%

Companies trading higher in after hours in reaction to news: GTE +5% (announces corporate update), RGTI +1.7% (COO departs), BODY +1.1% (CFO to depart), RKLB +0.9% (selected by HawkEye 360 to launch three Electron missions), SLCA +0.7% (to increase some prices), FTI +0.2% (awarded significant integrated EPCI contract by Wintershall Dea)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: NFLX -26%, HLLY -9.8% (guides Q1 net revs above consensus; also 6.5 mln share offering by selling stockholder), PACW -2.9%, IBKR -2.1%, MRTN -0.1%

Companies trading lower in after hours in reaction to news: ROKU -5.9% (in sympathy with weak NFLX earnings), PARA -5.6% (in sympathy with weak NFLX earnings), DIS -4.8% (in sympathy with weak NFLX earnings), TEVA -4.3% (FDA issues response letter for for TV-46000/mdc-IRM), FUBO -3.8% (in sympathy with weak NFLX earnings), WBD -3.8% (in sympathy with weak NFLX earnings), AMZN -1.3% (in sympathy with weak NFLX earnings), FISV -1.3% (FISV and EFX announce data partnership), TBK -0.4% (announces executive mgmt reorganization), LMT -0.3% (awarded $400 mln Navy contract), EFX -0.1% (FISV and EFX announce data partnership)

>>> US Close Dow +1,45% S&P +1,61% Nasdaq +2,15% Russell +2,04%

Closing Stock Market Summary

The S&P 500 rose 1.6% on Tuesday in a relatively broad-based advance. The Dow Jones Industrial Average (+1.5%) kept pace with the benchmark index while the Nasdaq Composite (+2.2%) and Russell 2000 (+2.0%) outperformed with roughly 2% gains.

Ten of the 11 S&P 500 sectors closed higher with gains ranging from 0.6% (utilities) to 2.9% (consumer discretionary). The exception was the energy sector (-1.0%) amid pronounced weakness in oil ($102.07/bbl, -6.11, -5.7%) and natural gas ($7.17/MMBtu, -0.63, -8.0%) prices. 

The broader gains helped the benchmark index close back above its 50-day moving average (4416) after a flat open. 

The muted start transpired amid another increase in interest rates, lackluster reactions to earnings reports, and a view from St. Louis Fed President Bullard (FOMC voter) that the fed funds rate should be at 3.50% by the end of the year.

The fed-funds-sensitive 2-yr yield rose 11 basis points to 2.58% while the 10-yr yield rose five basis points to 2.91% after flirting with 1.93% in the wake of better-than-expected housing starts and building permits data for March. The U.S. Dollar Index increased 0.2% to 101.00. 

The stock market had plenty of reasons to stay cautious, but the counterintuitive price action suggested the rally keyed off a contrarian mindset. To be fair, the lower oil prices likely helped, as did less-hawkish commentary from Chicago Fed President Evans and Atlanta Fed President Bostic, both of whom are not FOMC voters this year. 

Shares of Johnson & Johnson (JNJ 183.08, +5.42, +3.1%) hit a fresh all-time high, putting the focus on the company's EPS beat instead of its below-consensus FY22 EPS guidance. Fellow Dow component Travelers (TRV 176.16, -9.06, -4.9%) fell 5% despite beating top and bottom-line estimates. 

Separately, airline stocks extended their recent outperformance following the removal of the mask mandate for airline travel and public transportation. The U.S. Global Jets ETF (JETS 22.11, +0.60) rose 2.8% today. 

Reviewing Tuesday's economic data:

  • Housing starts increased 0.3% month-over-month in March to a seasonally adjusted annual rate of 1.793 million units (consensus 1.750 million) while permits increased 0.4% month-over-month to a seasonally adjusted annual rate of 1.873 million.
    • The key takeaway from the report is that the upside was driven entirely by multi-unit activity. Starts for single-family homes and permits for single-family homes were down 1.7% and 4.8% month-over-month, respectively, reflecting the challenges builders are facing with supply chain issues, rising costs for land and labor, and the dent in homebuyer confidence and affordability that has stemmed from rising mortgage rates.

Looking ahead, investors will receive Existing Home Sales for March, the April Beige Book, and the weekly MBA Mortgage Applications Index on Wednesday.

  • Dow Jones Industrial Average -3.9% YTD
  • S&P 500 -6.4% YTD
  • Russell 2000 -9.6% YTD
  • Nasdaq Composite -13.0% YTD

WSJ : Goldman’s CEO Is Paying Himself Like a Private-Equity Chief

Goldman’s CEO Is Paying Himself Like a Private-Equity Chief
David Solomon and his top deputies will get a slice of profits from the bank’s private-investment funds

David Solomon is giving himself a raise.

The Goldman Sachs Group Inc. chief executive and a tight circle of lieutenants are taking a cut of profits from the firm’s private investment funds, according to people familiar with the plans. The perk could be worth hundreds of millions of dollars over the next several years to those executives, the people said, multiples of their annual pay depending on how those funds do.

The perk risks angering both shareholders and the Goldman fund managers out of whose pockets the money will come.

Wall Street executives are enormously wealthy by almost any measure. Mr. Solomon made $35 million last year, in line with the CEOs of other big U.S. banks. But when new fortunes are being minted in technology, cryptocurrencies and NFTs, their paydays are starting to pale in comparison.

They are being outshone even in their own backyard by private-equity firms and hedge funds, whose executives have ridden hot markets over the past few years to huge pay packages. KKR’s co-CEOs were paid more than $500 million last year. Mr. Solomon’s 2021 pay was half of what his predecessor, Lloyd Blankfein, made at his pre-2008 peak.

Unique among banks, Goldman is a big player in private investing. The firm has $426 billion of its own money and that of clients invested in corporate buyouts, loans, real estate and stakes in other investment funds. It is in the middle of another big fundraising push.

In the past, the profits from those investments—known in the industry as carried interest—were split evenly between Goldman and the executives actually managing the funds, a common enough setup that ensures everyone has some skin in the game.

Going forward those executives will receive just 35%, the people said. Ten percent will be shared with Goldman’s roughly 400 partners, part of a push to restore the prestige of a title that once guaranteed stratospheric wealth but has dimmed. Five percent will go into a pool for Mr. Solomon and his closest deputies, the people said—fewer than a dozen people.

This isn’t the first time Mr. Solomon has gotten creative in efforts to juice his pay. Late last year he sought to secure a personal share of the profits from blank-check companies Goldman was planning to launch, according to people familiar with the matter. That attempt, earlier reported by Bloomberg, delayed the vehicles’ launch long enough that the SPAC market fizzled. They haven’t gone forward.

Goldman is already facing potential backlash on executive pay. Glass Lewis, which advises big shareholders on corporate-governance matters, is recommending a nonbinding vote against the bank’s pay policies at its annual meeting in two weeks. Glass Lewis took issue with one-time stock grants doled out last fall of as much as $30 million for Mr. Solomon and as much as $20 million for his deputy, John Waldron.

Another shareholder adviser, ISS, recommended a vote in favor.