Anglo-Dutch oil titan Royal Dutch Shell yesterday logged third-quarter net profit of $489mn (€415mn), rebounding after a vast coronavirus-driven loss in the prior three months.
Profit after tax for July-September was boosted by steadier oil prices and contrasted with a vast net loss of $18.1bn in the second quarter, when Shell was slammed by Covid-19.
In the third quarter, Shell was boosted by a modest recovery in global crude demand and the more stable oil market, having taken a colossal $16.8bn charge in April-June.
Crude oil currently stands at just under $40 per barrel, still below the roughly $60 a barrel seen in the third quarter of last year, when the group posted a net profit of $5.9bn.
Despite higher prices, the oil market remains depressed by the coronavirus health emergency which has slammed economic growth and savaged the world’s appetite for oil.
That has in turn sparked thousands of job losses across the energy sector and beyond.
Shell has already announced that it is seeking to axe up to 9,000 jobs or more than 10% of its global workforce in response to fallout from the deadly pandemic.
“Our decisive actions taken earlier in the year have solidified our operational and cash delivery,” said Shell chief executive Ben van Beurden, who oversees 80,000 staff across more than 70 countries.
“The strength of our performance gives us the confidence to lay out our strategic direction (and) resume dividend growth,” he added.
Shell added yesterday that it would increase its shareholder payout by about 4% to 16.65 US cents for the third quarter, and annually thereafter.
The group had stated in September that it was aiming to generate annual savings of between $2bn and $2.5bn via a massive restructuring drive.
Shell warned over the outlook for the fourth quarter amid mounting concern over the pandemic’s resurgence.
Credit Suisse, Switzerland’s second-biggest bank, published a 38% drop in its third-quarter net profit yesterday amid a slowing of its international wealth management activities, missing analyst expectations.
But it acknowledged that its net profit during the third quarter had slumped by more than a third to 546mn Swiss francs ($599mn, €510mn). It stressed though that the comparative quarter in 2019 had been boosted by a 327mn-franc windfall from the sale of its InvestLab fund platform to the Allfunds Group.
The bank’s net revenue was down 2% at 5.2bn Swiss francs.
The results were well below the expectations of analysts polled by Swiss financial news agency AWP, who had anticipated seeing a net profit of 620mn Swiss francs on 5.3bn in revenues during the quarter.
Following the news, the bank saw its share price plunge 5.36% to 8.63 Swiss francs in late morning trading as the Swiss stock exchange’s main SMI index inched up 0.34%.
Credit Suisse’s results were especially dragged down by its international wealth management business, which saw its revenues plunge 20% from a year earlier, due to a drop in investment revenues and “adverse foreign exchange and interest rate movements.”
The investment banking sector, meanwhile, saw revenues swell 11% year-on-year as activities picked up again, especially in Asia.
And the bank’s capital markets segment saw a 52% jump as initial public offerings resumed pace, it said.
The bank said the economic challenges posed by the coronavirus crisis were expected to continue through the fourth quarter and into 2021.
“We would expect this environment to continue to result in elevated levels of transactional and trading activity, across both our wealth management and investment banking businesses, as our clients respond to the macroeconomic uncertainties,” it said.
While the path through the pandemic remained “uncertain”, the bank stressed that it had a significant cash buffer, and said it planned to move forward paying shareholders the second half of the 2019 dividend. It also said it aimed to resume a large-scale share buyback programme early next year.
Standard Chartered posted a smaller-than-expected 40% slide in third-quarter profit as it lowered loan loss expectations linked to the coronavirus pandemic, but warned it would take longer to hit a key profitability target.
Underscoring its improved near-term performance, StanChart said it may resume dividend payments when it releases full-year results in February.
The bank reported credit impairment charges of $358mn for the three months ended September 30, well below the preceding quarter’s $611mn and a consensus estimate of $614mn.
The bank, which had previously targeted a return on tangible equity (ROTE) of 10% by 2021, said in February the goal would take longer and yesterday gave a clearer picture still of how the pandemic had hit efforts to improve profits.
“I would say directionally Covid has probably put us back a couple of years,” chief financial officer Andy Halford told reporters.
StanChart said the results reinforced its view that credit impairments would be lower in the second half of the year than the first, as lenders worldwide report loan losses stabilising.
Lower provisions helped StanChart report an underlying pretax profit for the third quarter of $745mn, above the $502mn average of analysts’ forecasts compiled by the bank.
StanChart, which is focused on Asia, Africa and the Middle East, also struck a positive note when forecasting client demand, saying it expected improvement next year on the back of a faster-than-expected economic recovery in key markets including China and India.
“Lower interest rates continue to impact income but we remain well-positioned to meet our financial targets, albeit with some delay,” chief executive Bill Winters said in the earnings statement.
StanChart said last month it would merge several businesses and cut its number of senior executives.
StanChart said it was focusing on generating more fee-based income, particularly from financial markets and wealth management businesses, where it was seeing increased client demand, to offset the impact of low interest rate.
Lloyds Banking Group
Britain’s Lloyds Banking Group said yesterday that it rebounded into the black in the third quarter, boosted by an “encouraging” recovery in business demand and lower impairments linked to coronavirus.
Profit after taxation hit £688mn ($894mn, €761mn) in the three months to September, after a net loss of £461mn in the second quarter on Covid-19 fallout, LBG said in a statement.
The group had suffered a net loss of £238mn in the third quarter of 2019 when its performance had been hurt by the credit insurance mis-selling scandal.
Lloyds said that it took an extra £301mn charge linked to virus fallout in the reporting period.
“The impact of the coronavirus pandemic on the global economy and on people and businesses within the UK has been unprecedented.
We remain focused on working together with the government and our regulators to ensure that we continue to support our customers in this challenging time,” said chief executive Antonio Horta-Osorio.
Annual writedowns linked to the coronavirus pandemic would be at the lower end of its previous forecast range of £4.5-5.5bn, it predicted.
However, Lloyds was cautious about the outlook due to the deadly second wave of infections and Britain’s ongoing attempts to reach a Brexit trade deal with the European Union.
“The outlook remains highly uncertain given the second wave of coronavirus, government response including social distancing measures and the end of the furlough scheme, together with the ongoing Brexit negotiations,” the bank said.
From next month, the UK government waters down its so-called furlough jobs support scheme that has helped keep millions of people in employment during the pandemic.
Lloyds noted that the health crisis had boosted demand for its digital products, as many customers work from home and avoid shopping on the nation’s high streets.
“The pandemic has accelerated many trends around ways of working and digital adoption and our long-run investment in digital propositions has positioned the group well to continue to support our customers,” said Horta-Osorio.
“As a result, the number of digital users continued to increase, the proportion of products sold digitally is rising and customer satisfaction is at record levels.
Our digital proposition and focus on technological change will remain a priority as we accelerate our transformation.”
Australia’s ANZ became the country’s last major bank to walk away from thermal coal investments yesterday, delivering a fresh blow to a sector facing export market upheaval and widespread public hostility.
The bank said that from 2030 it would no longer finance thermal coal mines or coal-fired power stations, joining Australia’s other “big four” banks who have already made similar commitments.
Coal has long been a mainstay of the country’s resource-dependent economy.
Exports were worth almost US$50bn in 2018 – or more than 3% of gross domestic product, according to central bank research.
But despite heavy government support, the coal industry’s foundations appear increasingly wobbly.
In the last few months major customers – most notably China, Japan and South Korea – have all vowed to reach net-zero carbon emissions by the middle of this century.
That is likely to mean reduced dependence on fossil fuels, particularly coal, which accounts for almost half of global carbon dioxide emissions.
Prime Minister Scott Morrison’s conservative government has slow-peddled measures to tackle climate change, conspicuously avoided any national commitment to being carbon neutral and vowed continued support for fossil fuels – including greenlighting new coal mines – despite strong public opposition.
After historic bushfires and prolonged drought, a poll released this week by The Australia Institute showed four in five Australian are concerned by climate change and only 12% back Morrison’s plans for a gas-led Covid recovery.
But investors like ANZ are increasingly voting with their feet.
“We are in a unique position, through our lending decisions, to support customers and projects that reduce emissions as well as support economic growth,” ANZ said yesterday.
“That is why we’ve announced important changes to our carbon policy, supporting the transition to a net zero emissions economy by 2050.”
ANZ Bank also announced yesterday that its post-tax profit had plunged 40% after setting aside billions to cover loans unlikely to be repaid because of the coronavirus pandemic.
The bank reported profits of A$3.58bn ($2.52bn) for the full year ending September 30, attributing the lower return to credit impairment charges of A$2.74bn before tax.
A further A$815mn was set aside to cover expected virus-related lending losses in Asia.
The bank said about 119,000 home loans across Australia and New Zealand were deferred during the crisis, with roughly 40,000 remaining frozen as at October 15 and another 11,000 requesting an extension.
Brazil’s state-run oil giant Petrobras announced on Wednesday it reduced its losses in the third quarter of the year, the company’s third negative result in a row due to the global economic meltdown caused by the coronavirus pandemic.
The Rio de Janeiro-based firm posted a net loss of $236mn for the period from July to September, well below its losses of $417mn in the second quarter and $9.7bn in the first quarter.
In the third quarter of 2019, the company posted a profit of $2.3bn.
According to the company, third quarter losses occurred due to financial expenses, despite higher sales volumes of oil and oil by-products as well as higher Brent oil prices.
The third quarter was also marked by a recovery in demand for oil derivatives in Brazil, with 18% growth in sales volumes over the last quarter.
Petrobras added that a high level of exports was maintained in the third quarter, noting that crude oil exports to China returned to pre-Covid levels.
The company was severely impacted by quarantine measures put in place due to the coronavirus crisis that caused a drop in world demand for crude.
According to the company, the sector suffered its worst crisis in 100 years.
Mexican state energy giant Pemex on Wednesday reported its first quarterly profit in two years despite a plunge in world oil prices due to the coronavirus pandemic.
Pemex, the biggest company in Latin America’s second-largest economy, reported net earnings of 1.4bn pesos ($66mn) for the three months to September.
The profit, which Pemex said was mainly thanks to returns on financial derivatives and foreign exchange earnings, compared with a loss of 87.9bn pesos in the third quarter of 2019.
Revenue fell by 31.8% to 239bn pesos, hit by weaker demand “due to the decline in economic activity as a result of Covid-19 and by the worldwide drop in prices,” the company said.
In a further indication of the tough business environment, Pemex said its debt rose to $110.3bn, from $107.2bn in the second quarter.
The company has faced years of declining production and needs to invest to boost its output.
Finnish telecoms equipment maker Nokia more than doubled its profits in the third quarter as its new chief executive promised yesterday to do “whatever it takes” to become the 5G market leader.
On his first results day since taking the reins of the Finnish networks giant in August, Pekka Lundmark vowed to beat rivals Ericsson and Huawei in the 5G market.
“In those areas we choose to compete, we will play to win,” he told reporters. “We will do whatever it takes to lead in 5G and we are ready to invest more.”
Despite a “disappointing” 7.0% fall in sales, in part due to poor services performance, Nokia posted a €193mn ($227mn) net profit for the three months to September, up from €82mn in the same period last year.
The operating margin — which measures underlying profit as a proportion of sales — rose to 9.2% from 8.4% a year earlier.
But Nokia downgraded its 2020 outlook, lowering projected earnings per share by two cents to €0.23 in part due to difficulties in the North American market.
For 2021, operating margin was forecast at between seven and 10%.
This quarter, Nokia passed the milestone of 100 5G deals, although the company still trails Ericsson and Huawei in the race to deploy next-generation super-fast networks.
However, European and US restrictions on Chinese-made equipment in 5G networks, introduced this year, have allowed Nokia to win contracts in Britain and Finland, among others, in recent weeks to replace Huawei equipment.
Nokia also said that factory closures earlier in the year due to the coronavirus pandemic cost it around €200mn, but that it expects to save €250mn across the whole year in travel and personnel expenses.
Music streaming giant Spotify said yesterday that its number of monthly active users passed the 300mn-mark in third quarter, even as it plunged back into the red.
Spotfity said in a statement that the number of monthly active users rose by 29% to 320mn in the three months to September, of whom 144mn were paying subscribers, an increase of 27%.
Spotify, headquartered in Stockholm but listed on the New York Stock Exchange, is hoping to reach between 340-345mn monthly active users and 150-154mn paying subscribers by the end of the year.
At the same time, the streaming service said it booked a net loss of €101mn ($118mn) in the June-September period, down from a net profit of €241mn a year earlier. In contrast to many companies, Spotify said it managed to escape much of the economic impact of the coronavirus pandemic, a trend that is set to continue.
European aircraft maker Airbus said yesterday that one-off charges related to the deep job cuts announced earlier this year pushed it deep into the red in the third quarter.
Airbus said in a statement that it booked a net loss of €767mn ($900mn) in the period from July to September, compared with profit of €989mn a year earlier.
Operating or underlying profit fell by 49% to €820mn and revenues declined by 27% to €11.2bn, the statement said. Earnings were hit by a restructuring charge of €1.2bn related to the decision to axe 15,000 jobs.
And while Airbus said that uncertainty resulting from the coronavirus pandemic prevented it from issuing any earnings forecast for the whole year, it was confident it had stopped the cash haemorrhage seen earlier this year.
Chief executive Guillaume Faury said that “after nine months of 2020 we now see the progress made on adapting our business to the new Covid-19 market environment.
With global air traffic not expected to return to 2019 levels until 2023 or 2025, Airbus said it had scaled down the rate of production of its A320, A220, A330 and A350 planes.
In the nine months to September, aircraft deliveries have fallen by about 40%, with a shortfall of about 20% in the third quarter alone.
Samsung Electronics’ net profit jumped by almost half in the third quarter, it reported yesterday, as the South Korean giant’s mobile and chip businesses were boosted by US sanctions against Chinese rival Huawei.
The world’s biggest memory chip maker said profits in July-September climbed 48.8% year-on-year to 9.36tn won ($8.3bn), beating expectations according to Bloomberg News.
But the company warned that profits in the current quarter are projected to decline, with chip demand weakening and competition intensifying in the smartphone and consumer electronics market.
The firm is the flagship subsidiary of the giant Samsung Group, by far the biggest of the family-controlled conglomerates that dominate business in the world’s 12th largest economy, and it is crucial to South Korea’s economic health.
The figures come a day after the burial of late chairman Lee Kun-hee – who turned the firm into a global powerhouse – and as the coronavirus wreaks havoc with the world economy. But despite the pandemic hammering many economies, South Korea returned to growth in the third quarter, driven by a better-than-expected exports performance.
A US ban on foreign companies providing Huawei with US-origin technology, which came into effect on September 15 – cutting off essential supplies of semiconductors and software needed for making smartphones and 5G equipment – also provided a boost.
The firm’s memory business also benefited from the feud after Huawei rushed to stock up on Samsung-made semiconductors before the US restrictions kicked in.
That segment “posted solid earnings as healthy demand for mobile and PC products led to higher-than-expected shipments, outweighing the impact of lower memory chip prices”, the firm said in a statement.
Operating profit rose 58.7% to 12.35tn won. Sales rose 8% to 66.96tn won – a record for any quarter. But the firm’s immediate prospects may not be quite so rosy.
Samsung warned its smartphone sales for October-December were expected to decline because of “subsiding effects from new flagship model launches”, while higher marketing spending in the face of intensifying competition “is also likely to weigh down profit”. Earlier this year, the firm was dethroned by Huawei from its long-held position as the world’s biggest smartphone maker as the Chinese economy recovered from the coronavirus.
Samsung Electronics still leads the global DRAM chip market, with a 43.5% share in April-June according to market researcher TrendForce.
Server DRAM chips enjoyed a boost as the pandemic prompted working from home and online classes - but were now experiencing “significant oversupply”, it said in a report.
“Therefore, contract prices of server DRAM products continue to descend to new lows,” it went on, forecasting a 13-18% drop in the fourth quarter.
Lim at Counterpoint said: “The situation in the semiconductor market including servers market is likely not so good, thus there is a lot of uncertainty.
Server demand is also decreasing.
Samsung Electronics’ chairman Lee Kun-hee died on Sunday, six years after being left bedridden by a heart attack, when his son and heir Lee Jae-yong took over as de facto leader, although officially he has remained vice-chairman. The family face the prospect of paying billions of dollars in inheritance taxes.
Complicating the firm’s succession plans, the son is currently being retried over a sprawling corruption scandal that could see him return to prison. He is not being held in custody during the proceedings but a guilty verdict could deprive the firm of its top decision-maker.
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