Finance

RUSSIA’S DECISION to halt the supply of gas to Bulgaria and Poland has added fuel to an already heated debate in Germany, which is heavily reliant on the commodity. For weeks the country’s economists and officials have argued over just how much a ban on Russian hydrocarbons would harm the economy. Now it seems imaginable that Russia itself could turn off the taps. What toll would an embargo take? A wide body of research, which examines a range of past disruptions, sheds light on the question.The relationships between modern firms are not simple links connecting one producer with another, but a tangle of complex interactions. The breakdown of a seemingly insignificant link in the chain can disrupt firms that are either upstream or downstream of it, causing wider damage. In a paper published in 2019 David Baqaee of the University of California, Los Angeles, and Emmanuel Farhi of Harvard University used a model of complex supply networks to study the oil shocks of the 1970s. Linkages between firms and sectors meant that the overall economic effect was quite a bit larger than the direct impact on sectors that used oil. Recent research on the effect of social distancing on America by Jean-Noël Barrot, then of HEC Paris, and his co-authors finds that ripple effects through production networks accounted for more than half of the total economic impact.Another much-studied instance of disruption is the earthquake that struck north-eastern Japan in 2011. As the worst-hit areas only accounted for less than a twentieth of GDP, local disruption should not have had a noticeable nationwide effect. But it did. In a review Vasco Carvalho of the University of Cambridge and colleagues disentangle the impact on the affected areas from the ripple effects along supply chains, and find that the latter accounted for more than half the hit to Japanese growth.Researchers have also uncovered the types of links and mechanisms that enable shocks to propagate widely. The shutdown of a company altogether is one way in which a jolt can create a much bigger economic hit, according to a paper by Daron Acemoglu of the Massachusetts Institute of Technology and Alireza Tahbaz-Salehi of Northwestern University (as well as another study by Mr Baqaee). That explains why Alan Mulally, then the chief executive of Ford, a carmaker, urged American lawmakers to bail out his competitors during the global financial crisis. Ford feared the collapse of the auto sector’s suppliers, which would cause severe disruptions at its own plants, too.Intimate commercial relationships, such as those within firms, tend to be especially affected, because they are harder to replace. Another study of Japan’s 2011 earthquake by Christoph Boehm of the University of Texas, Austin, and others finds that the American subsidiaries of Japanese firms also suffered, as did their suppliers. Other research also concludes that the more customised the relationship between firms and their suppliers, the bigger the ripple effects. Mr Barrot and Julien Sauvagnat of Bocconi University examine 30 years of American natural disasters and find that disruption to just one supplier leads to a loss in sales for a downstream firm of two to three percentage points, which, considering that most suppliers provide a small portion of a firm’s production inputs, is a sizeable fall.Such findings provide fodder for opponents of an energy embargo in Germany. And some estimates of the impact of an embargo also suggest that the short-term disruptions could be large. Six leading German research institutes conclude that an embargo could lead to a GDP loss for the country of around 1% this year and 5% in 2023. The Bundesbank estimates a hit of 5% in 2022.Yet there are two reasons why things need not be so bad. For a start, just as past experience shows that supply disruptions can have sizeable near-term effects, it also shows that the economy in aggregate has a great ability to adjust. In 2010 China banned the export of rare-earth metals to Japan, one of the world’s biggest users of the minerals. Japanese firms were able to quickly substitute away from previously cheap rare earths and find alternative supplies, according to research by Eugene Gholz of the University of Notre Dame and Llewelyn Hughes of the Australian National University. In a study of the potential effects of a Russian energy embargo on Europe, Rüdiger Bachmann of the University of Notre Dame and his co-authors find that while the hit could be large, it would be partly offset by the economy’s ability to adapt. The overall impact, they reckon, could be in the region of 0.5-3% of GDP.Production, interruptedMoreover, it is within the gift of governments to mitigate the short-term pain of supply disruptions. EU officials, for instance, are mulling stricter sanctions on energy imports from Russia. The more notice firms receive about the measures, which could include a tax on Russian energy, the easier adjusting to them is likely to become. Past episodes suggest that if policymakers do want to change regulations or trade relationships, they should do so consistently and carefully. A liberalisation of Indian trade in the 1990s led to little wider disruption because it was gradual, helping firms adjust. A recent study by Alessandra Peter of New York University and Cian Ruane of the IMF points out that Indian firms were able to find substitutes for inputs.Governments could also take into account the fact that businesses may not do enough to ensure that networks are solid in the near term. Matthew Elliott of the University of Cambridge and others find that firms might invest in the robustness of their supply chains if they have a business case to do so. But they might not seek to ensure the resilience of the wider network, because they do not stand to reap the rewards from such investment. Encouraging firms and households to shift away from using fossil fuels, as a tariff would do, could enhance that resilience. Managed well, Germany’s supply disruptions need not be quite so disruptive. ■Read more from Free Exchange, our column on economics:Does high inflation matter? (Apr 23rd)What bigger military budgets mean for the economy (Apr 16th)China has a celebrated history of policy experiments (Apr 9th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

IT WAS A criminal’s paradise. In June 2020 a firm in Milan secured a €60,000 ($63,300) government loan to cope with the pandemic-induced downturn. But the business did not exist. The Italian government had in fact sent cash to the ’Ndrangheta Mafia of Calabria. The same month six French citizens swindled €12m in unemployment benefits by claiming funds for employees at 3,600 shell companies. A Texan man filed loan applications for 15 made-up firms and pocketed $24.8m in government support.As countries scale back unparalleled emergency-relief programmes there is growing interest in where the funds went. The IMF estimates that since January 2020 governments have doled out $15.5trn in non-health-care spending and loans in response to the covid-19 pandemic. The rush to support households and firms led to poor procurement, messy programmes and inadequate oversight. The best estimates of fraud, so far, are from Britain and America; other countries, where wrong doing may well have been more prevalent, lack audits tracing where the money went. In America at least 4.5% of funding under the CARES Act, the largest pandemic-stimulus bill, went to cheats. Applying that figure globally suggests that nearly $700bn could have ended up in the wrong hands.In Britain fraud and error—losses due to crime and mistaken payments—across five economic-relief schemes exceed £16bn ($21bn), roughly a tenth of the £166bn spent, according to official reports. That tally could well rise: the National Audit Office calculates that fraud from just one of the programmes, the Bounce Back Loan Scheme—whose reported losses account for a quarter of the sum—could reach £26bn, 55% of its total spending, when investigations come to a close.Spending in America was larger—and so was the waste. The Secret Service reckons $100bn has been stolen from the $2.2trn CARES Act. If pre-pandemic fraud levels were sustained, at least $87bn in unemployment insurance—which got a budgetary bump during the pandemic—would have been captured by crooks. Auditors reckon the true fraud rate is much higher.Scams and mismanagement are inevitable in programmes of such a scale. But past stimulus efforts were cleaner. In the decade since the financial crisis, investigators recovered only $57m in fraudulent funds from the American Recovery and Reinvestment Act of 2009, an $840bn stimulus package. Cheats continue to be exposed over time, but even if all cases still being audited are confirmed as criminal, the programme’s fraud rate will reach only 0.6%. Other government schemes lose less, too. The rate of total health-care fraud in America hovers at around 3%. Britain mistakenly overpaid around 1.5% of work and pension benefits a year in the decade to 2019.The covid-19 stimulus waste estimates, by contrast, are alarming—especially as the true extent of fraud could take years to uncover. But some misspending may have been unavoidable. When crisis struck economists urged governments to do whatever it took to avoid colossal damage. Speedy action did just that. America distributed stimulus cheques to 90m people in less than a month. In rich countries real disposable income per person rose by 3% in 2020. That kind of offset might not have been possible with slower, more carefully crafted policies.More scrutiny is coming. In March three dozen Republican senators demanded more transparency about how funds were spent before signing up to more pandemic-related funding. Joe Biden has appointed a chief prosecutor to take down criminals who tried to profit from the pandemic. And some justice is already being served. The French fraudsters were arrested and the Texan creator of fictional firms pleaded guilty to money-laundering. As for the Mafia in Milan? The Italian government caught on and froze their assets. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

IT IS EASY to forget that the world’s second-biggest economy is still an emerging market. China’s global clout, its technological prowess in certain fields, and even its low bond yields all distinguish it from the typical member of its asset class. But in at least one respect China resembles a classic emerging market: it retains a palpable fear of floating its currency. Instead China keeps a close eye on the yuan’s value against the dollar and a basket of its trading partners’ currencies, limiting any sharp movements.For most of the past year, it worried that the yuan would float too high. China’s largely successful efforts to stamp out the early variants of covid-19 kept its factories open and its borders closed. That allowed its exports to boom, putting upward pressure on the yuan, even as outbound tourism and other services imports suffered, removing a source of downward pressure. The yuan rose sharply against the basket of trading partners’ currencies and gently against the dollar, which was itself strong.Now China’s fight against the pandemic is instead contributing to the currency’s sudden weakness. Lockdowns stringent enough to hamper manufacturing have been imposed on Shanghai and other cities accounting for over 9% of GDP, according to Gavekal Dragonomics, a consultancy. China’s economic figures for April will “certainly be disastrous”, it says. The war in Ukraine has contributed to outflows from China’s bond and equity markets, as foreigners reassess the risks of investing in countries at geopolitical loggerheads with the West. And as America has lost its fear of the virus, its economy has overheated, forcing the Federal Reserve to raise interest rates. In April the nominal yield on ten-year Treasuries briefly exceeded that on Chinese bonds for the first time since 2010. (Real yields remain much higher in China, where consumer-price inflation is only 1.5%, compared with 8.5% in America’s larger, more “mature” economy.)A weaker yuan is both a reflection of these challenges and one way to cope with them. It will in particular help to shore up China’s exports. But the central bank is not prepared to let the currency be dominated by market forces. It bears the scars of past falls in the yuan, which took on a momentum of their own. On April 25th it said it would cut the amount of reserves banks are required to hold from 9% of their foreign-exchange deposits to 8%. That will release some dollars to the market, alleviating pressure on the yuan. The move also signals the central bank’s displeasure at the speed of its currency’s descent.China’s currency worries may deter the central bank from cutting interest rates to revive growth. That will leave its economy more dependent than ever on fiscal stimulus. At a meeting of the powerful Central Committee for Financial and Economic Affairs on April 26th, Xi Jinping, China’s president, called for more investment in infrastructure, from rural roads and urban drains to smart electricity grids and artificial-intelligence platforms. Citigroup, a bank, forecasts that infrastructure spending could grow by 8% this year. But according to Natixis, another bank, China will not meet its (increasingly forlorn) growth target of around 5.5% unless infrastructure investment grows by almost 18%. Even a conventional emerging market with vast infrastructure needs would struggle to boost spending by that much. China’s fear of floating has inhibited its monetary response to its economic woes. And that has raised fears of its floundering. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

IN 1988 STEVE GUTTENBERG, a comic actor, appeared on a British talk show. At one point he was asked why he had not appeared in “Police Academy 5”, having starred in the earlier films. He replied that, in his view, all the important philosophical questions had been addressed in the first four movies.This brings us to the more serious business of investing, and a sequel of a very different kind. Ten years ago Antti Ilmanen, a finance whizz, published “Expected Returns”, a brilliant distillation of investment theory, practice and wisdom. His latest book, “Investing Amid Low Expected Returns”, is an update, taking in a decade’s worth of additional research and data. Mr Ilmanen has read all the books and papers, sorting the good stuff from the junk. He has a gift for explaining clearly and concisely the lessons of this research for investors. The new book is as invaluable a resource as the old one. If it has a fault, it is that it does not quite address all the important philosophical questions. A sequel may be necessary.Start, though, with a recap of the expected-returns framework. There are two sources of return on an investment: income and capital gain. The income on, for instance, a government bond is the interest (or “coupon”) paid once or twice a year. Bond prices and yields move inversely. So when interest rates fall, as they did for much of the past four decades, bond investors enjoy a capital gain. In essence a capital gain of this kind brings forward future returns. You get the income now you were going to get later. But as yields fall ever lower the scope for further capital gains becomes more limited. So low yields imply low expected returns. This bond-like logic holds for other assets—equities, property, private equity and so on. Dividend and rental yields have fallen in response to the secular fall in interest rates. Owners of all kinds of assets have experienced windfall gains. But today’s low yields imply low expected returns in the future.What now? As Mr Ilmanen sees it, low expected returns can materialise through either “slow” or “fast” pain. In the slow-pain scenario, assets remain expensive and investors receive desultory bond coupons, equity dividends and rental receipts for years on end. In the fast-pain scenario yields revert to their higher historical averages. This implies a spell of brutal capital losses followed by fairer returns thereafter. The choice is between well-heeled stagnation and a crash.Mr Ilmanen is too much of an epistemological sceptic to put all his chips on one scenario. He is also too careful an analyst to miss that low inflation made the high-asset-price, low-yield 2010s what they were. Many of the factors that kept a lid on inflation in that decade—globalisation, efficient supply-chain management, tight fiscal policy, an expanding global workforce—are now attenuating or unwinding. Mr Ilmanen’s hunch is that the 2020s will see something of a reversal of the investment trends of the preceding decade. But he generally eschews investing on hunches.Faced with lower expected returns, investors have three courses of action: they can take more risk to reach for higher returns; they can save more; or they can accept reality and play the hand they have been dealt as well as they can. The first approach may increase returns but also makes them more uncertain. Saving more means sacrificing today for the sake of tomorrow, a highly personal choice. Understandably, Mr Ilmanen’s focus is on the third approach. He sets out a chapter-by-chapter analysis of various investment assets and styles. He advises how to put them together in a truly diversified portfolio. Along the way, he explains why market timing is a snare (you end up taking too little risk); what the true appeal of private equity is (not superior returns); and why portfolio insurance will not save you (it is too expensive in the long run).There are shortcomings. A quarter of the 500+ references are from authors affiliated with AQR Capital Management, Mr Ilmanen’s employer. This weighting gives the book a less independent air than “Expected Returns”. Readers would have benefited greatly from a chapter on the implications of low expected returns for different sorts of savers. The fast-pain scenario, for instance, is surely preferable for young savers, to whom the book is dedicated. Perhaps this and other gaps will be filled in “Expected Returns III”. Even Mr Guttenberg has been teasing fans with the prospect of “Police Academy 8”. The big philosophical questions are never truly settled.Read more from Buttonwood, our columnist on financial markets:A requiem for negative government-bond yields (Apr 23rd)The complicated politics of crypto and web3 (Apr 16th)Bonds signal recession. Stocks have been buoyant. What gives? (Apr 9th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Woman holds smartphone with Meta logo in front of a displayed Facebook’s new rebrand logo Meta in this illustration picture taken October 28, 2021.
Dado Ruvic | Reuters

Check out the companies making headlines in Thursday premarket trading.
Meta — Shares of the Facebook parent soared more than 16% in premarket trading after the tech company reported better-than-expected quarterly earnings. Daily active users, which declined in the fourth quarter for the first time, bounced back a bit and topped analysts’ expectations, according to StreetAccount. The rally came despite a revenue miss. Shares were down 48% on the year heading into the results.

Teladoc — Teladoc’s stock price cratered 43% after the telehealth company reported an earnings miss, as well as disappointing revenue guidance. Teladoc reported a loss of $41.58 per share and generated revenues of $565.4 million. Analysts surveyed by FactSet were expecting a loss of 60 cents per share, and revenues of $568.7 million.
McDonald’s — Shares of the restaurant chain gained 2% in premarket trading after first quarter revenue came in higher than expected. McDonald’s reported first quarter revenue of $5.67 billion versus the $5.59 billion expected by analysts, according to Refinitiv. The company saw same store sales growth of 3.5% in the U.S. and even higher in international markets.
Southwest Airlines — The airline stock rose more than 3% in premarket trading after the company delivered an optimistic outlook. Southwest said it expected its second quarter revenue to be up 8% to 12% from the same period in 2019, prior to the pandemic.  For the first quarter, the company reported a loss of 32 cents per share, slightly wider than the 30 cents expected by analysts, according to Refinitiv. First-quarter revenues came in slightly ahead of expectations.
PayPal — The payment’s company saw shares rise 3.4% in early trading after it beat revenue estimates for the first quarter and posted a slight increase in payments volume. The stock price got a lift despite issuing weak guidance for the second quarter and full year.
Eli Lilly — The drug maker’s shares gained 3.4% in premarket trading after the company reported results from a clinical trial showing its obesity drug tirzepatide helped patients lose up to 22.5% of their weight. Eli Lilly also reported better-than-expected earnings and revenue for the first quarter and boosted its full-year revenue guidance.

Pinterest — Shares for the image sharing company surged more than 8% on the back of better-than-expected earnings Wednesday. Pinterest reported adjusted earnings of 10 cents per share and revenues of $575 million. In comparison, analysts polled by Refinitiv expected earnings of 4 cents per share on revenues of $573 million.
Caterpillar — Shares of the global construction machine maker slid more than 1% despite Caterpillar beating top- and bottom-line estimates during the first quarter. The company earned $2.88 per share excluding items on $13.59 billion in revenue. Analysts were expecting the company to earn $2.60 per share on $13.4 billion in sales, according to estimates compiled by Refinitiv.
Qualcomm — Shares rallied roughly 7% premarket after a better-than-expected quarterly report. Qualcomm posted adjust earnings per share of $3.21 on revenue of $11.16 billion. Analysts were expected a profit of $2.95 per share on revenue of $10.63 billion, according to StreetAccount.
ServiceNow — ServiceNow shares jumped more than 8% following the company’s first-quarter earnings report. The platform-as-a-service provider earned $1.73 per share on an adjusted basis and posted $1.72 billion in revenue. Wall Street was expecting $1.70 per share and $1.70 billion in revenue, according to data from StreetAccount.
— CNBC’s Yun Li, Tanaya Macheel, Hannah Miao, Jesse Pound and Pippa Stevens contributed reporting.

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Central African Republic lawmakers voted unanimously to pass a bill legalizing crypto.
Bitcoin will be considered legal tender alongside the regional Central African CFA franc.
The CAR is the second nation in the world to make bitcoin legal tender. El Salvador did so last year.

Bitcoin is a volatile asset, and has been known to swing more than 10% higher or lower in a single day.
Jakub Porzycki | Nurphoto | Getty Images

The Central African Republic has become the second country in the world to adopt bitcoin as official currency, after El Salvador took the same step last year.
Lawmakers in the CAR’s parliament voted unanimously to pass a bill legalizing bitcoin and other cryptocurrencies, according to a statement from the presidency.

Bitcoin will be considered legal tender alongside the regional Central African CFA franc.
Obed Namsio, chief of staff to President Faustin-Archange Touadera, called the move “a decisive step toward opening up new opportunities for our country,” according to Reuters.

The CAR is rich in diamonds, gold and other valuable minerals, but ranks as one of the world’s poorest and least-developed countries.
Roughly 71% of CAR’s 5.4 million inhabitants were living below the international poverty line in 2020, according to the World Bank. And just 11% of the CAR’s population have access to the internet.
The country, which is landlocked in the heart of Africa, has been gripped by political instability and violence for years.

The move to consider bitcoin legal tender received praise from the crypto community, and was hailed as another step toward mainstream adoption of cryptocurrencies.
But it can also be viewed as controversial. There were protests in El Salvador after the country introduced the Bitcoin Law, and the country faced criticism from the International Monetary Fund.
The IMF has urged El Salvador to drop bitcoin as legal tender, raising concerns over the risks it poses to financial stability and consumer protection.

Read more about cryptocurrencies from CNBC Pro

Bitcoin is a notoriously volatile asset, which raises questions about its role as a standard method of payment. It was last trading at around $39,686 Thursday, down 6% in the last 24 hours. The cryptocurrency has lost around 42% of its value since an all-time peak above $68,000 in November.
Many Western governments have raised the alarm about the potential use of cryptocurrencies by Russia to evade sanctions amid the country’s invasion of Ukraine.
CAR is a close ally of Russia, with Russian mercenaries having provided direct assistance to the government, according to the UN.

Experts suggested the move could help small countries like the CAR reduce their dependence on the U.S. dollar for global trade.
Ransu Salovaara, CEO of crypto platform Likvidi, noted that the dollar has been the global oil currency since the 1950s.
“Oil dependence is a major issue now, because of the Ukraine and the SWIFT banking ban, so global, unstoppable cryptocurrencies like bitcoin can really shine,” he added.

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Chinese telecommunications giant Huawei reported a nearly 14% drop in first quarter revenue from a year ago as its consumer business remained under pressure from U.S. sanctions.
Apple and Huawei were the only major smartphone brands in China to post a decline in sales in the first quarter from the prior quarter, data from Counterpoint Research showed.
Overall smartphone sales in China across brands fell by 14% in the first quarter from a year ago, the data showed.

Huawei’s smartphone business has struggled under U.S. sanctions that restrict it from buying chips and other components from key suppliers.
Costfoto | Future Publishing | Getty Images

BEIJING — Chinese telecommunications giant Huawei announced Thursday that first quarter revenue fell by nearly 14% from a year ago, while its profit margin more than halved.
“Our consumer business was heavily impacted, and our [information and communications technology] infrastructure business experienced steady growth,” Ken Hu, Huawei’s rotating chairman, said in a statement. “In 2022, we still face a challenging and complicated business environment.”

The company reported 131 billion yuan ($20.63 billion) in revenue for the first quarter. That’s down by 13.9% from the same period last year, and a more than 27% decline from the fourth quarter of 2021.
First quarter profit margin of 4.3% was less than half the 11.1% reported a year earlier.
Hu said the quarterly results were in line with the company’s expectations and that Huawei has increased its investment in research and development.

Huawei’s smartphone business has struggled under U.S. sanctions. The Trump administration put the company on a blacklist that restricts it from buying critical components such as advanced semiconductors from U.S. suppliers.
Smartphone sales in China across different brands fell by 14% in the first quarter from a year ago, according to Counterpoint Research.

Huawei logged the worst decline out of seven brands, ranking sixth by market share and with sales plunging by 64.2% from a year earlier, the report showed. The company’s smartphone sales in China also fell by 12% from the prior quarter.
Apple was the only other company on the list to post a quarter-on-quarter sales decline in China, down by 23%, according to Counterpoint. However, the iPhone maker’s China sales still grew by 4.4% in the first quarter from a year ago.

Looking to other businesses

Huawei has emphasized hiring talent and developing other business lines to counter the impact of falling smartphone sales.
In particular, while the company said it will not build its own cars, Huawei has entered the hot electric car market by incorporating its HarmonyOS operating system and other technology into cars manufactured by traditional Chinese auto brands.
Rotating chairman Hu said earlier this week that at least two more car models using Huawei technology would be launched this year. The first car to use HarmonyOS was the Aito M5, which began deliveries earlier this year.
Huawei said its research and development team for smart autos has reached 5,000 people, and that the company’s investment in auto tech-related operations reached $1 billion last year.

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Barclays said last month that it had sold $15.2 billion more in U.S. investment products — known as “structured notes” — than it was permitted to.
The bank said Thursday that it had postponed its share buyback program indefinitely and set aside a provision of £540 million as a result of the issue.
It comes as the bank reported first-quarter net profit attributable to shareholders of £1.4 billion ($1.76 billion), above analyst expectations of £644 million, according to Refinitiv data.

A branch of Barclays Bank is seen, in London, Britain, February 23, 2022.
Peter Nicholls | Reuters

LONDON — Barclays on Thursday said it had suspended its planned share buyback program on the back of a costly trading error in the U.S.
It comes as it reported expectation-beating profit for the first quarter, as strong investment banking performance helped drive income growth.

The British bank announced last month that it had sold $15.2 billion more in U.S. investment products — known as “structured notes” — than it was permitted to. Barclays said Thursday that it had postponed its share buyback program indefinitely and set aside a provision of £540 million as a result of the issue, which is currently being investigated by U.S. regulators. The bank had originally said it expected a hit of £450 million.
“Barclays believes that it is prudent to delay the commencement of the buyback programme until those discussions [with the SEC] have been concluded,” the bank said in its earnings release Thursday.
“Barclays remains committed to the share buyback programme and the intention would be to launch it as soon as practicable following resolution of filing requirements being reached with the SEC and the appropriate 20-F filings having been made.”

Earnings

Barclays reported first-quarter net profit attributable to shareholders of £1.4 billion ($1.76 billion), above analyst expectations of £644 million, according to Refinitiv data. It marks an 18% decline from the first quarter of 2021, when net profit came in at £1.7 billion.
Group income rose 10% year-on-year to £6.5 billion, driven by strong corporate and investment banking earnings during a spike market volatility.

“Our income growth was driven partly by Global Markets, which has been helping clients navigate ongoing market volatility caused by geopolitical and economic challenges including the devastating war in Ukraine, and by the impact of higher interest rates in the US and UK,” CEO C. S. Venkatakrishnan said in a release accompanying the results.
Other highlights for the quarter:

Total operating expenses increased to £4.11 billion, up from £3.58 billion in the first quarter of 2021, due to the rise in litigation and conduct charges resulting from the U.S. trading error.
CET1 ratio, a measure of bank solvency, came in at 13.8%, down from 15.1% in the final quarter of 2021.
Return on tangible equity hi 11.5%, down from 14.7% in the same quarter of last year, and the bank said it will continue to target RoTE of more than 10%.

The results come after a turbulent end to 2021, with long-time CEO Jes Staley resigning in November following an investigation by regulators into his relationship with Jeffrey Epstein. He was replaced by Venkatakrishnan.
Shares are down by nearly 22% so far this year amid wider concerns over interest rates, inflation and a slowdown in growth.
This is a breaking news story, please check back later for more.

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