Switzerland’s largest bank UBS yesterday posted a 53% rise in second quarter profits, in its first results since agreeing to plead guilty to fraud as part of the Libor manipulation case.
The bank brought in profits of 1.2bn Swiss francs ($1.25bn, €1.1bn), with strong performances from its wealth management, corporate and investments units.
The bank said it had showed “resilience” in the face of economic uncertainty and rising costs caused by a strong Swiss franc, among other headwinds.
“I am pleased with the quarter. We maintained our momentum despite ongoing market challenges,” chief executive Sergio Ermotti said in a statement.
The US department of Justice in May dropped charges against UBS as part of a probe into currency rigging, granting it conditional immunity for co-operating with authorities.
But as part of its deal with US officials, a 2012 non-prosecution agreement in connection with Libor interest rate manipulation was revoked.
UBS agreed to plead guilty to one count of wire fraud in the Libor affair, pay $203mn in fines and accept a three-year probation.
Both UBS and analysts had predicted that the fines would not have a meaningful impact on second quarter results.
UBS had been fined the equivalent of $1.5bn in 2012 by US, British and Swiss regulators for its role in the massive misconduct in the setting of the Libor rate, a global reference that affects products from student loans to mortgages.
Executives at the bank have blamed the misconduct in the Libor matter on an isolated number of employees.
Concerning the rigging of the foreign exchange market, six major global banks have been fined a total of almost $6bn.
The Swiss bank said that as of June 30 it had 2.4bn Swiss francs set aside as provisions to cover future litigation costs, down from just over 2.7bn Swiss francs at the end of March.
Bankia
Bankia reported an 11.5% increase in first-half profit yesterday and said it was preparing a new business plan to see it through to 2018, when the bailed-out bank should be out of state hands.
The Spanish government, which still holds 61% of the group, is aiming to recoup most of the €22.5bn ($25bn) poured into Bankia after a 2008 property crash.
It wants to sell out by 2017, but only if it can to do so profitably. Bankia’s shares are hovering below the €1.35 the state bought in at. “The fact Bankia ... (is) evolving well puts the group on course to making progress in returning the aid,” Bankia’s Chief Executive Jose Sevilla said at a news conference.
Sevilla gave few details of the bank’s new business plan, but said it would focus on shareholder value and guidance on dividends and would be ready in early 2016.
Tens of thousands of ordinary Spaniards lost money when Bankia was listed on the stock market in 2011. It then had to be rescued less than a year later.
Since then Bankia has focused on stabilising its business. Profits have improved, rising 11.5% in the first half to €566mn, beating forecasts. The increase was helped by lower bad loan provisions, which fell 29% from a year earlier. This offset weaker revenue from lending. Bankia is now close to meeting profitability goals, which were a condition of its bailout.
Along with its Spanish peers, Bankia’s profits have improved as the losses from the country’s real estate collapse fade. But the banks are struggling to make money in Spain because competition to lend to customers has put pressure on margins.
Analysts at Citi said in a note this could be one of the main worries for Bankia.
Valeo
French car parts maker Valeo raised its profit outlook yesterday, playing down the impact of a Chinese market slowdown after a record first-half order intake boosted by demand for driving-assistance and fuel-saving technologies.
Net income rose 34% to €344mn ($379mn), it said, as sales kept up the 15% growth of the first quarter to reach €7.298bn for January-June.
But Valeo shares tumbled in a broader market selloff, with investors cashing in on a robust recent performance that had seen the stock gain 31% over 12 months.
Helped by a weaker euro, sales outstripped the €7.183bn expected by analysts, based on the mean of 16 estimates polled by Thomson Reuters.
Valeo, the maker of fuel-saving stop-and-start engine technologies and automated parking systems, is well placed to benefit from tightening limits on carbon dioxide emissions and increasingly autonomous vehicles.
Orders rose 18% to a record €10.7bn, reflecting the “success of technologies developed by the group for CO2 emissions and intuitive driving”, Chief Executive Jacques Aschenbroich said.
But China, where auto-market growth is slowing, accounted for a quarter of the new business, underscoring the industry’s vulnerability to an Asian slowdown.
Valeo is winning more business with domestic Chinese brands that have been gaining ground on foreign competitors, Aschenbroich said: “So there is no negative impact on our Chinese sales or margins.” The company pledged to beat its 7.4% first-half operating margin in the rest of the year, effectively lifting the 2015 goal. Valeo had previously targeted a “slight increase” on last year’s 7.2%.
Ryanair
Ryanair raised its annual passenger growth target to 14% yesterday, saying it would drive capacity by using summer profits and falling fuel prices to reduce fares in the winter.
But its share price fell 3% after it disappointed some investors by not boosting its profit guidance for the year after strong summer bookings, saying it was “too early in the year” to change it.
Profit for the three months to the end of June, the first quarter of the company’s financial year, was €245mn, up 25% year on year, and just short of a €249mn forecast in a company poll.
The Irish airline, already Europe’s largest by passenger numbers, expects the winter cuts to help lift its annual traffic to 103mn passengers, up from a target of 100mn that it gave eight weeks ago, marking growth of 10%.
The airline typically cuts fares in the winter, but a fall in fuel prices per passenger of 7% and a planned 15% capacity increase in the six months to March will increase pressure on rivals.
“We’re going to use some of the slightly better (first-half) performance ... to pass on very aggressive pricing so that we fill 15% capacity growth in the second half instead of 10 %,” Chief Executive Michael O’Leary said in a video statement.
Ryanair said its profit after tax for the year to the end of March 2016 would be at the higher end of the company’s forecast of €940mn to €970mn given in late May. It said it was being cautious due to poor visibility.
Canon
Japan’s Canon cut its earnings outlook for the full year and reported a 16% fall in quarterly profit as consumers, increasingly in the habit of taking photos with their smartphones, bought fewer compact digital cameras.
The world’s largest camera maker said yesterday its second-quarter net profit fell to ¥68bn ($552mn) compared with ¥81bn a year earlier. Analysts on average expected ¥65bn, according to Thomson Reuters data.
The firm said it now expects full-year profit of ¥245bn rather than the 255bn it forecast three months ago.
Canon has been trying to offset weak growth in cameras with investments in new businesses. Earlier this year it offered to buy video surveillance firm AXIS AB for $2.7bn.
“Despite firm sales in Japan, interchangeable-lens digital cameras continued to face severe conditions in other regions while sales volume for digital compact cameras decreased in most regions compared with the same period of the previous year,” Canon said in a statement.
It also said the weak yen was inflating operating costs. It expects the dollar to trade at an average of 125 yen for the rest of the year instead of 120 yen forecast three months ago.
Shares of Canon fell 0.75% ahead of the earnings release, compared with a 0.95% fall in the broader market.
Philips
Rising sales of medical equipment helped drive a 12% increase in second quarter net profit at Dutch electronics manufacturer Philips, the company said yesterday.
The net profit attributable to shareholders of €272mn ($301mn) was accompanied by a 20% jump in sales to €5.97bn compared with the same period a year earlier.
The operating profit of €501mn as measured by earnings before interest, tax and amortisation (EBITA) beat the average of 415mn euros forecast by analysts surveyed by Bloomberg.
“We are encouraged by the continuing improvement in our operational results in the second quarter of 2015, driven by strong comparable sales growth in Healthcare...” Philips chief executive Frans van Houten said in a statement.
While overall sales rose by 3% on a comparable basis, sales of medical equipment climbed by 8%.
Van Houten said he was pleased with the company’s performance, but added “we are increasingly concerned about the global macro-economic environment, particularly in China, Russia and Latin America.”
Nevertheless, he said Philips expects to turn in modest sales growth this year and improve its operational performance in both 2015 and 2016. Philips, which sold its first light bulb a few years after it was founded in 1891, has for the past dozen years focused on medical equipment, and which now accounts for 43% of sales.
“The healthcare market has increased rapidly and there is a lot of excitement” about new technologies, van Houten told AFP in a telephone interview later.
