Aurelia Butler

(Reuters) -U.S. mid-sized banks’ profits would remain under pressure for most of 2024, Wall Street analysts said, as higher deposit costs and muted loan growth drag their earnings. Regions Financial (NYSE:RF), Huntington Bancshares (NASDAQ:HBAN) and Fifth Third Bancorp (NASDAQ:FITB) joined peers in reporting smaller first-quarter profits on Friday, due to a steep fall in their interest income. Net interest margin, a key measure of banking profitability that takes into account earnings from interest on loans and payments on deposits, also contracted across regional lenders for the second straight quarter.Most mid-sized U.S. banks are expecting a decline in net interest income (NII) this year, as elevated interest rates have stymied loan activity while efforts to retain customers from chasing better returns elsewhere have pushed up deposit costs.”I think we’ve got another quarter of down in net interest income to get through before we see some recovery in the second half and this higher-for-longer is kind of a double edged sword for banks in terms of interest rates,” said Stephen Biggar, analyst at Argus Research.”We need to see a downward trajectory in rates to see improvement in loan growth.” On Friday, Regions Financial, Fifth Third Bancorp and Huntington Bancshares kept their outlook for 2024 interest income decline unchanged.Rivals KeyCorp (NYSE:KEY) and Comerica (NYSE:CMA) also maintained their forecasts for NII decline this year, when they reported lower first-quarter profits earlier this week. “The broader higher-for-longer rate environment will continue to challenge net interest income for regional banks, with some institutions facing declines due to higher funding costs or changes in deposit mix and pricing,” said Theresa Paiz-Fredel, senior director, Fitch Ratings. Hotter-than-expected inflation has raised fears of borrowing costs staying higher for longer, which has pushed borrowers on the sidelines and discouraged them from taking out long-term debt such as home mortgages.”Loan growth remains very weak,” analysts at Piper Sandler said in a note earlier this week. The brokerage added that total industry loans grew just 2.2% in the second week of April.Last week, strong economic data led to analysts pushing back rate-cut expectations to the back half of the year, further clouding the outlook for a meaningful recovery in the mortgage market. Several banking executives have said they were actively working to lower expenses to counter interest income headwinds. The pressure on profits has also been a drag on industry stocks. The KBW Regional Banking Index, which tracks a basket of major U.S. regional lenders, has fallen 14.2% this year, underperforming the benchmark S&P 500’s 5% gain. More

Conflict escalation in the Middle East following Iran’s attack on Israel also dampened risk appetite.According to LSEG data, investors offloaded a net $21.15 billion worth of U.S. equity funds, the most in a week since Dec. 21, 2022.Federal Reserve Chair Jerome Powell, commenting on recent U.S. inflation trends, indicated on Tuesday that the central bank could continue its restrictive monetary policy if inflation remains elevated.U.S. large-cap equity funds suffered $11.59 billion worth of net selling, the biggest outflow in a week since Feb. 7. Small-, multi- and mid-cap funds saw net disposals of $2.71 billion, $2.13 billion and $526 million, respectively, during the week.U.S. investors offloaded consumer discretionary, healthcare, and gold & precious metal funds worth a net $701 million, $651 million and $447 million, respectively, but purchased around a net $281 million worth of financial sector funds. U.S. bond funds recorded a weekly outflow of $3.83 billion, the largest net selling since mid-December.Investors withdrew a net $2.36 billion from U.S. taxable bond funds and $1.47 billion from municipal bond funds.U.S. short/intermediate government & treasury, and short/intermediate investment-grade funds attracted about $805 million and $284 million worth of net inflows, respectively.Money market funds saw $118.1 billion worth of net selling, the biggest weekly outflow since at least July 2020. More

(Reuters) -Wall Street’s main indexes eyed a flat open on Friday as initial jitters about an escalation in the Middle East conflict subsided, while Netflix (NASDAQ:NFLX) dropped after forecasting current-quarter revenue below estimates.Explosions echoed over an Iranian city on Friday in what sources described as an Israeli attack, but Tehran played down the incident and indicated it had no plans for retaliation – a response that appeared gauged towards averting a region-wide war.”Once the details were released, the markets were relieved and as you can see, the markets are off their lows,” said Peter Cardillo, chief market economist at Spartan Capital Securities.”As far as the conflict is concerned, that is always going to be a worry factor for the market. The earnings are more of a fundamental than the geopolitical concerns.”Netflix slumped 6.4% in premarket trading following the streaming video pioneer’s lackluster second-quarter forecast.Shares of other streaming services providers such as Walt Disney (NYSE:DIS) and Roku (NASDAQ:ROKU) retreated 0.7% and 1.2%, respectively.The S&P 500 and the Nasdaq closed lower for the fifth straight session on Thursday, as economic data and comments from Fed officials suggested that the U.S. central bank was unlikely to cut interest rates in the near future.Federal Reserve policymakers have coalesced around the idea of keeping borrowing costs where they are until perhaps well into the year, given slow and bumpy progress on inflation, and a still-strong U.S. economy.Equities were rattled this week as investors readjusted their expectations over by how much the Fed would cut rates this year, with both the S&P 500 and the blue-chip Dow poised for a third weekly decline, while the Nasdaq was set for its fourth consecutive weekly loss, if current trend holds.Money markets are now pricing in about 39 basis points (bps) of cuts from the central bank this year, down from around 150 bps seen at the beginning of 2024, according to LSEG data.U.S. stocks suffered an outflow of $4.1 billion in the latest week, according to Bank of America’s weekly ‘Flow Show’ report, their largest two-week outflow since December 2022.The CBOE Volatility index, also known as Wall Street’s “fear gauge”, was last up 0.61 points at 18.61 after breaching the psychologically important level of 20 earlier in the session. At 8:31 a.m. ET, Dow e-minis were down 3 points, or 0.01%, S&P 500 e-minis were up 1.75 points, or 0.03%, and Nasdaq 100 e-minis were down 15.25 points, or 0.09%. Shares of Paramount Global jumped 8.3% after a person familiar with the matter told Reuters that Sony (NYSE:SONY) Pictures Entertainment and Apollo Global Management (NYSE:APO) are discussing making a joint bid for the company.Procter & Gamble (NYSE:PG) slipped 1.6% after the consumer goods giant missed third-quarter net sales estimates.Ulta Beauty (NASDAQ:ULTA) fell 1.4% after Jefferies downgraded the cosmetics retailer to “hold” from “buy”. More

JOHANNESBURG/WASHINGTON (Reuters) – Incomes in Sub-Saharan Africa are falling further behind the rest of the world amid a “tepid” economic recovery, the International Monetary Fund (IMF) said on Friday, warning of risks from geopolitics, domestic instability and climate change.The IMF earlier this week said the region’s economy would grow 3.8% this year, up from 3.4% in 2023, as it begins to emerge from four years of shocks, from the COVID-19 pandemic to Russia’s invasion of Ukraine and rising global interest rates.”When accounting for population growth, the income gap with the rest of the world is widening,” the fund said in its biannual Regional Economic Outlook report, launched during its Spring Meetings this week in Washington.It noted that other developing countries saw real income per person more than triple since 2000, while they grew 75% in Sub-Saharan Africa and 35% in developed countries.However, there were some positive developments.”Two-thirds of the countries are already experiencing acceleration in growth; diversified and fairly broad-based growth,” said Abebe Selassie, director of the IMF’s African Department, said in an interview with Reuters in Washington.Many of the more diversified economies had already enjoyed some growth recovery since the pandemic, he added. INFLATION FALLINGEconomic conditions have started to ease for many countries this year, with Ivory Coast, Benin and Kenya issuing international bonds and median inflation falling to 6% in February from almost 10% a year earlier, the IMF said.But political instability is rising and denting investor confidence, it said, pointing to junta-led states Burkina Faso, Mali and Niger leaving the Economic Community of West African States (ECOWAS) and 18 elections across the region this year.Devastating droughts last year in the Horn of Africa and currently in southern Africa, as well as cyclones and floods, have also increased the region’s struggles.South Africa is set to grow just 0.9% this year, a slight increase from 0.6% in 2023, amid ongoing rolling power cuts and problems with the country’s railways and ports, the IMF said, adding that “electoral uncertainties” could derail ongoing energy sector reforms.Africa’s most industrialised economy holds an election on May 29, in which the ruling African National Congress (ANC) party could lose its majority for the first time since the end of apartheid in 1994.West Africa’s largest economy, Nigeria, is set to grow 3.3% this year, as it struggles with high inflation amid painful currency and subsidy reforms.In its northern neighbour Niger, meanwhile, growth is predicted to rocket from 1.4% last year to 10.4%, as oil exports ramp up. More

(Reuters) -American Express’s first-quarter profit vaulted past Wall Street estimates on Friday, driven by an affluent customer base that increased spending as recession fears ebbed. Amid a turbulent landscape in which concerns over the financial well-being of lower-income consumers have troubled several lenders, American Express (NYSE:AXP)’s clientele has shielded the company from significant impact and left it largely unscathed by the challenges that hurt others in the industry.The New York-based company reported a profit of $3.33 a share for the three months ended March 31, sailing past analysts’ average expectation of $2.96 a share, according to LSEG data. “We’re seeing a lot of growth, especially on the consumer side,” Chief Financial Officer Christophe Le Caillec told Reuters on a call. Gen Z and millennial customers accounted for more than 60% of new account acquisitions globally in the quarter, the company reported. Net Interest Income (NII), the difference between income earned on loans and paid out on deposits, grew 26%, to $3.77 billion, while billed business rose 6%, to $367 billion in the first quarter. While most U.S. lenders have expressed optimism about the resilience of American consumers so far, 11 rate hikes by the Federal Reserve over the last two years have made them susceptible to default risks and they have responded by raising provisions. AmEx built $1.3 billion in provisions for the first quarter, compared with $1.1 billion a year earlier. Still, the credit card giant has been immune to changes in spending and has downplayed worries of an economic slump for the last two years, bucking a larger trend of consumer softness expectations. For the full year, the company maintained prior revenue growth expectations of 9% to 11% and a profit forecast of $12.65 to $13.15 a share, it said in a statement. More

Outflows were also fuelled by escalating geopolitical tensions in the Middle East following Iran’s attack on Israel on Saturday.Investors pulled a net $23.48 billion from global equity funds during the week, their largest weekly net withdrawal since mid-December 2022, data from LSEG showed.Federal Reserve Chair Jerome Powell, addressing recent economic data on Tuesday, indicated that stronger than expected U.S. inflation figures over the past three months did not provide a strong basis for changing monetary policy soon.Concurrently, the yield on the benchmark 10-year U.S. bond climbed to a five-month high of 4.696% during the week, diminishing the attractiveness of mega-cap growth stocks and their associated mutual funds.Regionally, U.S. equity funds saw $21.15 billion of outflows during the week, the biggest weekly net selling since December 2022.European equity funds saw a net $5.39 billion of withdrawals, while Asian funds attracted a net $1.94 billion of purchases.Consumer discretionary and healthcare sectors both saw weekly net sales of nearly $800 million each. Investors also sold out of tech as well as gold and precious metals funds to the tune of $585 million and $582 million, respectively. They bought a net $943 million of financials sector funds.Bond funds, meanwhile, attracted $965 million, the smallest weekly net inflow since December 2023.Investors pulled a net $3.93 billion from riskier high-yield bond funds, the most in a week since February 2023. In contrast, government bond funds attracted $1.7 billion in a 12th successive week of net inflows.Money market funds saw $139.44 billion of net selling, the largest weekly outflow since at least July 2020.Among commodities, precious metal funds remained out of favour for the second week in a row as they lost $549 million on a net basis. Energy funds, however, saw $201 million worth of net purchases.Data covering 29,598 emerging market funds showed a net outflow of $2.94 billion from bond funds during the week, the most in 12 weeks. Equity funds saw about $962 million of net outflows. More