High afternoon awaits for Credit Suisse as European bank earnings
by Shawn Johnson October 24, 2022 in News
High afternoon awaits for Credit Suisse as European bank earnings
(Bloomberg) — Europe’s top investment banks are taking center stage this week in an earnings season that’s swamped by the fallout from the war in Ukraine, runaway inflation and flamboyant central banks. The European Central Bank is taking another massive hike in interest rates this week as investors increasingly focus on how high it will eventually go. UBS AG will launch on Tuesday, followed by Deutsche Bank AG on Wednesday. The results of Barclays plc will be closely followed as the political turmoil continues in Britain. Rishi Sunak appeared close to becoming Britain’s next prime minister after former Prime Minister Boris Johnson withdrew from the contest late on Sunday. The most awaited announcement on Thursday is a major change by Credit Suisse Group AG. Aside from finances, Volkswagen AG looks set to end the week, as analysts ponder whether its profit guidance can withstand supply-chain headwinds.
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Next week highlights:
TUESDAY: UBS (UBSG SW) REPORTS AT 6:45 AM CET. Strong trading results from US counterparts bodes well for Swiss bellwethers, according to Bloomberg Intelligence, with the caveat that US banks’ results were largely driven by fixed income while UBS’s business is geared more toward equities. Comments on wealth client activity levels in Asia “will be a measure of business health”, write BI’s Alison Williams and Neil Sips. The bank’s shares fell in July when it reported second-quarter results, which saw wealthy clients stay on edge and institutional investors pulling in funds amid a global sell-off. Analysts can ask about any planned acquisitions after the bank ended its $1.4 billion purchase of US robo-advisory Wealthfront earlier this year.
Wednesday: Deutsche Bank (DBK GY) scheduled to be held at 7:00 AM CET. The US dollar’s gains should support the euro’s fixed-income trading results, according to BI. Deutsche Bank earns the most from fixed income among its global counterparts, with businesses accounting for around 25% to 30%. Chief Financial Officer James von Moltke last month guided for full-year revenue at the high end of his €26 billion ($25.4 billion) to €27 billion target range. Deutsche Bank’s cost base may also take into account after the lender scrapped cost targets in July amid rising inflation, litigation spending, bank fees and the war in Ukraine. Bloomberg reported Thursday that the bank has fired several core and advisory staff at its investment bank out of fear of dealing with a recession. One expense that could also come under scrutiny is a bonus as the European Central Bank pressures lenders it supervises to exercise restraint. Germany’s No. 1 lender is also in the final stages of a turnaround plan unveiled in 2019 by chief executive Christian Seich.
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Barclays (BARC LN), set to report at 7:00 a.m. in London, should “easily achieve” the top end of its 2022 net interest margin guidance, according to BI’s Jonathan Tice and Lento Tang. The firm would like to reassess its £16.7 billion ($18.8 billion) cost outlook for the year as it moves through a costly paperwork in the US. Tyes and Tang say the prospect of a hike in UK mortgage rates and highly anticipated loan losses is “increasingly worrying and will undoubtedly take time on analyst calls.”
Read more about next week’s UK bank earnings: UK banks face a double-edged sword of profit from rate hikes
Thursday: Credit Suisse (CSGN SW)’s moment of truth will take place at 6:45 a.m. in Zurich. The bank has promised an update on its strategy review, which could include the sale of its US asset management arm as well as its securitized products group. Bloomberg has reported that Credit Suisse is seeking to bring in an outside investor to fund spinoffs of its advisory and investment banking businesses. BI’s Williams & Sipps wrote that the restructuring of Credit Suisse has put pressure on the bank’s trading and dealmaking charges. How it will shape a new that will win back investor confidence is the biggest of many unknowns hanging on the bank. It’s a $4 billion question, or $9 billion, depending on who’s guessing.
Friday: Volkswagen (VOW3 GY) expects quarterly results to be published at 7:30 am. BI analysts expect the company’s adjusted Ebit margin to potentially be coming in at the low end of its targeted 7% to 8.5% corridor, with an impact of an estimated €. The 5 billion raw material hit in 2022 is expected to materialize in the second half of the year. Several one-time items will affect the reported Ebit, including €200 million in the cost of the Porsche IPO and a €300 million employee bonus associated with the deal.
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