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Top German lender Deutsche Bank AG surprised analysts by reporting profit during the third quarter as it continues to try to resolve the mortgage debacle confronting it.
The embattled bank revealed in a statement from Frankfurt Thursday that its net income for the third quarter was €278 million ($303 million), significantly beating analysts’ expectations. It had reported a loss of €6.01 billion during the same period a year earlier as a result of write-downs of its investment-banking and other assets’ value.
Analysts polled by Bloomberg News provided an average estimate of €394 million in loss for the quarter.
Net revenue in the quarter was €7.5 billion, 2.2 percent up from the figure for the same quarter a year ago. Trading revenue jumped 10 percent to $2.6 billion, mainly propelled by debt and currencies.
Revenue from debt and currency trading surged by 14 percent to reach $2.07 billion, surpassing analysts’ average estimate of €1.68 billion.
The surprise profit is the result of aggressive cost-cutting efforts by Chief Executive Officer John Cryan. The 55-year-old has cut jobs and sold risky assets in a bid to boost profitability and available funds. He has also suspended dividends.
However, Cryan feels his efforts at restructuring are being overlooked as a result of concerns over a hefty fine from the U.S. Department of Justice in connection with mortgage securities mis-selling.
“We continued to make good progress on restructuring the bank,” Cryan said in the release. “However, in the past several weeks, these developments were overshadowed by the attention around our negotiations concerning the residential mortgage-backed securities matter in the U.S. This had an unsettling effect.”
The Deutsche Bank CEO said aggressive effort is being put into seeing that the securities matter is resolved “as soon as possible.”
The bank revealed on Thursday that the Justice Department probe has weighed on its business volumes and the outflows of some assets. Last month, Cryan was forced to dismiss reports that the foremost German bank would be hit with a fine of $14 billion by the DOJ.
Investors are concerned over whether it has sufficient capital to cover possible losses and deal with regulatory requirements that may come as part of the probe.
Deutsche Bank shares have shed about 41 percent in 2016, more than twice the overall slump in the Stoxx Europe 600 Banks index. The stock is also the fourth-poorest performer on the Bloomberg Europe Banks and Financial Services Index.
The European lender made additional provision of €501 million for litigation costs during the third quarter, lower than the €650 million predicted by some analysts.
Earnings have been adversely affected by low and negative interest rates. These have especially impacted the profitability of the retail banking division. Sources also say increased concerns over the bank’s capital base have contributed to some hedge funds and other clients reducing their involvement with it in recent months.
Last October, Cryan promised to cut 9,000 jobs as part of his restructuring plan. But a major investor recently said that the total cuts need to be doubled to boost earnings, as reported by Bloomberg.
With the national economy improving at a sluggish rate and more consumers returning to pre-recession norms, you wouldn’t believe that Americans would be in dire straits at this point in the recovery.
Well, you would be wrong, at least according to a new government report.
According to the Federal Deposit Insurance Corporation (FDIC), more New Mexican households are underbanked, unbanked and using alternative financial services like payday loans, checking cashing and money orders. And this data is troubling many officials who view this to be a concerning trend.
The study discovered that the number of underbanked New Mexican households – those that have a checking account but often use alternative financial services – has jumped to 26.9 percent last year, up from 22.5 percent in 2013. Albuquerque did experience a decline from 24.4 percent to 21.6 percent.
Among those who are unbanked – those who do not have a checking or savings account at all – decreased from 10.9 percent in 2013 to 9.4 percent in 2015. Albuquerque also saw a decline: 11.1 percent to 8.6 percent.
Moreover, in New Mexico, the Hispanic population is much more likely to be underbanked or unbanked than other ethnicities. The FDIC survey found that nearly one-third (31.4 percent) of Hispanic households in the state were underbanked, compared to 18.7 percent of white households. The figures are relatively high in Albuquerque: 28.3 percent to 15.1 percent.
Payday loans often come with high fees and interest rates that eat away at customers’ incomes, especially earners that come from impoverished neighborhoods and homes.
Martin Gruenberg, the Chairman of the FDIC, said in a statement that the problem of underbanked and unbanked Americans needs to be addressed because the long-term health of the financial system and national economy is at risk.
By encouraging more Americans to sign up for checking and savings accounts at traditional financial institutions and prevent them from using payday loans and auto title loans, you can help “consumers build assets and create wealth, makes them less susceptible to discriminatory or predatory lending practices, and can provide a financial safety net against unforeseen circumstances.”
Mercedes Garcia, a senior MasterCard executive, told the Albuquerque Journal that she attributes language barriers, a lack of community outreach and zero consumer education as reasons for these numbers.
“Not many banks take the time to translate their program materials into Spanish. It’s the right thing to do, and it’s a huge business opportunity,” said Garcia. “In some communities, the belief is still that cash is king. But our economy is becoming more and more cashless, and not being a part of that can create financial issues that can last generations.”
Payday loans have become a serious issue in the United States as the Consumer Financial Protection Bureau (CFPB) has attempted to crack down on the short-term, high-interest industry.
Critics argue that these alternative financial products send consumers into endless debt cycles. Proponents aver that payday loans are an essential tool for households that do not have access to traditional forms of credit or bank accounts.
Leading weapons and aerospace company Lockheed Martin Corp. expects a jump in its sales next year as a result of higher military spending, both within and outside the United States.
Sales will grow by roughly 7 percent to $50 billion in 2017, the company said in a statement on Tuesday. This rise is expected to be driven by orders for F-35 jet fighters and missile defense systems.
The projected boost in sales will also be contributed to by the Sikorsky helicopter business, which Chief Executive Marillyn Hewson acquired from United Technologies Corp. in a $9 billion deal.
“Their outlook for 7 percent revenue growth next year is pretty impressive,” Bloomberg Intelligence aerospace and defense analyst Douglas Rothacker said, as reported by the Denver Post. “Granted, not many have given 2017 outlooks yet, but I think you’d be hard-pressed to find a defense contractor generating growth like that.”
Orders for the F-35 jets by America’s allies, such as the U.K. and Japan, will likely boost exports to roughly 30 percent of Lockheed Martin sales over the coming four years, reaching an amount double that of four years ago.
Hewson has embarked on restructuring of the world’s largest defense contractor over the past year. The company has increased its stake in the nuclear deterrent program of the U.K. by 18 percent, while selling its information technology division to Leidos Holdings Inc. The company’s CEO wants it to focus more on aircraft and missiles.
The F-35 fighter jets constitute a major contributor to the sales and profit of Lockheed Martin and other defense contractors. They make up about a fifth of sales by the Bethesda, Maryland-based weapons company.
The production of the jets has been slowed by funding and other challenges, with this delaying their entry into service in the U.S. Fuel tank issues have slowed deliveries and caused some aircraft to be grounded.
On an investor call, Lockheed Martin Chief Financial Officer Bruce Tanner disclosed that production issues are not likely to be resolved before next year.
The leading defense contractor is reportedly locked in negotiations with the Pentagon, which is believed to be seeking for better deals on the F-35. Cash from operations would exceed $5.7 billion if talks with American defense officials are concluded this year, the company said.
Lockheed Martin’s sales during the third quarter rose 15 percent to $11.55 billion, beating analysts’ estimate of $11.5 billion. Profit jumped to $2.4 billion, or $7.93 a share, up from $865 million or $2.77 a share a year ago.
The company has forecast very strong full-year results. It expects sales for 2016 to reach $46.5 billion, rising from an earlier expectation of between $46 billion and $46.2 billion. Profit for the year is now expected to come in at $12.10 per share, up from earlier estimate in the rangeof$11.15to$1.45 a share.
Lockheed shares gained 7.4 percent to $249.26 on Tuesday, making the company the biggest gainer on the Standard & Poor’s 500 Index. It was reportedly the highest intraday rise since April 2009.
For the 11th quarter in a row, South Korean automaker Hyundai Motors has reported a decline in profits, impaired by weakening sales and labor strikes in its home country.
The automaker, together with sister company KIA Motors Corp., reported on Wednesday that operating profit for the quarter ended Sept. 30 slid to 1.07 trillion won ($943 million). That was a drop of about 29 percent. The figure missed average estimate of 1.22 trillion by analysts polled by Bloomberg.
Net profit for the quarter also missed analysts’ estimates, slumping for the 11th straight quarter. It declined by roughly 10 percent to 1.06 trillion won ($935 million), compared to analysts’ expectations of around 1. 3 trillion won in a survey by Reuters.
Earnings for the period were the least since the largest South Korean car maker started implementing international financial reporting standards in the first quarter of 2010, according to Fox News.
Following a number of work stoppages that began in July, the world’s fifth-largest automaker was hurt by its first full-scale labor strike over wage issues last month. The work interruption cost the Korean company around 140,000 vehicles, the value of which is estimated at roughly 3 trillion won.
An agreement was reached between Hyundai management and its workers’ union earlier this month to resolve what has been described as the automaker’s worst-ever labor face-off in South Korea.
The effect of the labor dispute was compounded by declining vehicle sales, both home and abroad. Hyundai said sales during the quarter dropped to 22.1 trillion won ($19.5 billion), a fall of 8 percent. Sales during the first nine months of 2016 dropped 2 percent from a year earlier.
The Seoul-based company said it expects hard times ahead in both advanced and emerging markets. This contributed to its announcement Tuesday that around 1,000 executives will see a 10 percent reduction in their pay, starting from this month.
Deliveries declined in South Korea and Hyundai’s second-biggest market, United States, by 19 percent and 12 percent respectively. However, sales in the automaker’s biggest market, China, rose 20 percent.
Demand in South Korea has been especially weakened by the expiration of tax breaks on new vehicle purchase back in June.
Overall, Hyundai said global shipments during the third quarter slumped to 1.085 million vehicles, a fall of 3 percent from the same period a year ago.
Shares of the company were down almost 2 percent following the announcement of the quarterly results.
A stronger domestic currency contributed to reduce the value of earnings from abroad. The Korean won has appreciated by more than 7 percent against the American dollar during the 12-month period ended September. This has also hurt the company’s competitiveness in the global market.
HI Investment & Securities Co. Koh Tae-bong told Bloomberg that Hyundai will move to improve sales by making new vehicle models available in 2017.
Hyundai expects current business uncertainty to persist for sometime due to a slowdown in developed markets and a decline in emerging markets.
The automaker replaced the heads of its China and South Korean operations earlier in the month as part of a move to guard against further market-share losses in the major markets.