A New York Community Bank stands in Brooklyn, New York City, on Feb. 8, 2024.
Spencer Platt | Getty Images
New York Community Bank on Wednesday posted a quarterly loss of $335 million on a rising tide of soured commercial loans and higher expenses, but the lender’s stock surged on its new performance targets.
The first-quarter loss, equal to 45 cents per share, compared to net income of $2.0 billion, or $2.87 per share a year earlier. When adjusted for charges included merger-related items, the loss was $182 million, or 25 cents per share, deeper than the 15 cents per share loss estimate from LSEG.
“Since taking on the CEO role, my focus has been on transforming New York Community Bank into a high-performing, well-diversified regional bank,” CEO Joseph Otting said in the release. “While this year will be a transitional year for the company, we have a clear path to profitability over the following two years.”
The bank will have higher profitability and capital levels by the end of 2026, Otting said. That includes a return on average earning assets of 1% and a targeted common equity tier 1 capital level of 11% to 12%.
Otting took over at the beleaguered regional bank at the start of April after an investor group led by former Treasury Secretary Steven Mnuchin injected more than $1 billion into the lender.
Shares of the bank jumped 15% in premarket trading.
This story is developing. Please check back for updates.
Santander Bank saved 50 million euros ($53.6 million) in the first quarter as the bank leaned into its tech investments for added efficiency. “Our proprietary and unique global technology capabilities have already generated 63 basis points in efficiency savings so far [this year],” Santander Chief Executive Hector Grisi said today during the Madrid-based bank’s Q1 […]
The HSBC Holding logo is being displayed on a smartphone with HSBC visible in the background in this photo illustration taken in Brussels, Belgium, on February 20, 2024.
Jonathan Raa | Nurphoto | Getty Images
HSBC beat market expectations in its first quarter earnings report on Tuesday, and announced the surprise departure of Group Chief Executive Officer Noel Quinn.
Revenue came in at $20.8 billion, up 3% from the same period a year ago and compared with the median LSEG forecast for about $16.94 billion.
Pretax profit in the January to March period came in at $12.65 billion, falling about 2% from a year ago when profit before tax came in at $12.89 billion. Still, that figure beat the $12.61 billion estimates by analysts’ forecasts compiled by the bank.
Profit after tax income decreased to $10.84 billion — lower than the $11.03 billion seen in the first quarter of 2023.
HSBC, Europe’s largest bank by assets, has approved a first interim dividend of 10 cents per share, as well as a special dividend of 21 cents per share, following the completion of the sale of its banking business in Canada.
The company also announced the retirement of Quinn, who has been in that position for nearly five years.
“The Board would like to pay tribute to Noel’s leadership of the Company. Noel has had a long and distinguished 37-year career at the Bank and we are very grateful for his significant contribution to the Group over many years,” said Group Chairman Mark Tucker.
“During his tenure, HSBC has delivered record profits and the strongest returns in over a decade,” said Aileen Taylor, group company secretary and chief governance officer in HSBC.
Quinn will remain as Group CEO as the bank begins the process of searching for his successor. HSBC said he has agreed to remain available through to the end of his 12-month notice period — which ends on April 30, 2025 — to support the transition.
Here are the other highlights of the bank’s first quarter financial report card:
Net interest margin, a measure of lending profitability, decreased to 1.63% — compared with 1.69% a year ago.
Common equity tier 1 ratio — which measures the bank’s capital in relation to its assets — was 15.2%, compared with 14.8% in the fourth quarter of 2023.
Basic earnings per share came in at $0.54, slightly higher than $0.52 in the same period a year ago.
HSBC also reiterated its outlook for 2024, saying it remains unchanged from the guidance in February.
The bank continues to target a return on average tangible equity “in the mid-teens” for 2024, with banking net interest income of at least $41 billion, subject to global interest rate conditions.
HSBC said its CET1 capital ratio is expected to be within its medium-term target range of 14% to 14.5%, while its dividend payout ratio is targeted to be 50% for 2024, excluding material notable items and related impacts.
Following the results, shares of HSBC in Hong Kong gained 1.56%, on pace for its seventh straight day of gains.
Correction: This story has been updated to accurately reflect that HSBC’s first quarter revenue for 2024 was 3% higher than a year ago. That figure was misstated due to an editing error.
European banks BNP Paribas and Deutsche Bank plan to pull back on expenses this year as they lean into their tech investments. “We are maintaining our cost discipline,” Deutsche Bank Chief Executive Christian Sewing said during the $578 billion bank’s first-quarter earnings call April 25. “2023 marked the peak of our investments, but we continue […]
Alphabet CEO Sundar Pichai is confident that Google will find a way to make money selling access to generative AI tools. Microsoft CEO Satya Nadella says his company is already doing it.
Both companies reported better-than-expected quarterly sales and profit on Thursday. And the stock prices of both soared on the results, with Alphabet further buoyed by its new plans to buy back more shares and issue its first-ever dividend.
But the near-term fortunes of Microsoft and Google, at least as far as their generative AI efforts are concerned, look different under the hood and in the comments of their executives. How investors, workers, and potential customers perceive the rivals’ dueling efforts could determine which gets the better chunk of the hundreds of billions of dollars in spending expected to flow to such software in the coming years.
In a call with financial analysts on Thursday, Nadella touted that Microsoft now has 1.8 million customers for GitHub Copilot, a generative AI tool that helps engineers write software code. That’s up from 1.3 million customers a quarter ago.
Among Fortune 500 companies, 60 percent are using Copilot for Microsoft Office 365, a virtual assistant that uses generative AI to help workers write emails and documents, and 65 percent are using a Microsoft Azure Cloud service that enables them to access generative AI software from ChatGPT-maker OpenAI. “Azure has become a port of call for pretty much anybody who is doing an AI project,” Nadella said. The $13 billion dollars Microsoft has invested in OpenAI has certainly helped win those clients.
The buzz of interest in AI services helped drive revenue for Microsoft’s biggest unit–cloud services–up by seven percentage points compared to a year ago, and Microsoft’s overall sales rose 17 percent to nearly $62 billion. It also gained cloud market share, Nadella added. The number of $100 million cloud deals that Microsoft landed increased 80 percent during the quarter compared to the same period a year ago and $10-million deals doubled.
Alphabet’s Pichai’s had milestones to boast about too. He told analysts in a separate call that more than 1 million developers are using Google Cloud’s generative AI tools and that 60 percent of generative AI startups backed by investors are Google Cloud customers. Generative AI is also boosting the ad campaigns of Google’s advertising clients.
On Google’s core business of search, Pichai didn’t share revenue figures related to experiments to summarize query results using generative AI. By providing more direct answers to searchers, Google could end up with fewer opportunities to show search ads if people spend less time doing additional, more refined searches. The types of ads Google does show also could have to shift.
While Pichai said the tests show that users exposed to generative AI-powered search are doing more searches, they are also potentially less profitable for Google because the underlying technology to power more advanced searchers is costlier than operating its longstanding systems.
Picahi expressed little concern on either front. “We are very, very confident we can manage the cost of how to serve these queries,” he said. “I am comfortable and confident that we’ll be able to manage the monetization transition here as well. It will play out over time.”
Alphabet’s overall sales rose 15 percent to nearly $81 billion.
It spent about the same about the same amount—-around $12 billion—as Microsoft investing in infrastructure like servers and datacenters last quarter. But the results and comments on Thursday suggest that Microsoft is further along in delivering a payoff.
For now, shareholders are giving both companies leeway. At the close of Thursday, Microsoft shares were up 35 percent over the past year, and Alphabet 51 percent over the past year. They are both at or near all-time highs. But if customers keep flocking to Copilot and the prospects for Gemini and Google search don’t grow more clear, the trendlines soon could diverge.
IBM plans to acquire cloud services provider HashiCorp for $6.4 billion in cash. HashiCorp has expertise in deploying multi- and hybrid-cloud infrastructures for enterprise clients, and the combination of the companies will “bolster our leading IT automation platform to address the sprawling complexity of AI-driven application and infrastructure growth,” Chief Executive Arvind Krishna said during […]
Meta Platforms CEO Mark Zuckerberg speaks about the Facebook News feature at the Paley Center For Media in New York on Oct. 25, 2019.
Drew Angerer | Getty Images News | Getty Images
Mark Zuckerberg‘s net worth plunged by $18 billion Thursday after comments from the Meta CEO on the company’s earnings call sent its stock price to its steepest decline since October 2022.
Meta beat expectations on revenue and profit but delivered a lighter-than-expected revenue forecast. Zuckerberg told investors that the company would continue to spend billions of dollars investing in areas such as artificial intelligence and the metaverse, even though Meta counts on advertising for 98% of its revenue.
“We’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it,” Zuckerberg said on the call.
Zuckerberg owns around 345 million Class A and B shares. With the stock falling by $52.12 on Thursday, the value of his stake sank by about $18 billion to $152 billion by the close of trading.
The 39-year-old programmer founded the company in his Harvard dorm room in 2004, and rebranded it from Facebook to Meta in 2021, signaling to investors his plan to focus on the nonexistent metaverse.
Meta’s Reality Labs division, which houses the hardware and software for developing the metaverse, has posted cumulative losses of $45 billion since 2020, when the company first separated the unit in its financials.
Meta said it plans to spend $35 billion to $40 billion on capital expenditures this year, an increase from its prior forecast.
Zuckerberg’s fortune has swung up and down through the years, as his company’s stock has been particularly volatile. His net worth fell by around $100 billion in 2022. In early 2023, he announced Meta would embark on a “year of efficiency,” a move that helped the stock price triple for the year, bringing Zuckerberg’s net worth up with it.
Thursday wasn’t the worst day ever for Zuckerberg’s bank account. In early 2022, he lost almost $30 billion in a single day, when his company’s stock price tumbled 26% on weak earnings and disappointing guidance.
Deutsche Bank shares were 6% higher on Thursday afternoon after the German lender reported a 10% rise in first-quarter profit, beating expectations amid an ongoing recovery in its investment banking unit.
Net profit attributable to shareholders was 1.275 billion euros ($1.365 billion) for the period, ahead of an aggregate analyst forecast of 1.23 billion euros for the period, according to LSEG data.
Deutsche Bank said this was its highest first-quarter profit since 2013. It also marks the bank’s 15th straight quarterly profit.
Group revenue rose 1% year-on-year to 7.8 billion euros, which the bank attributed to growth in commissions and fee income, along with strength in fixed income and currencies. The revenue print also came in ahead of an analyst forecast of 7.73 billion euros, according to LSEG.
Revenues at its investment bank increased 13% to 3 billion euros, following a 9% slump through full-year 2023 which had dragged down overall profit. The performance restores the division as Deutsche Bank’s highest-earning unit on growth in financing and credit trading revenue.
Other first-quarter highlights included:
Net inflows of 19 billion euros across the Private Bank and Asset Management divisions.
Credit loss provision was 439 million euros, down from 488 million in the fourth quarter of 2023.
Common equity tier one (CET1) capital ratio — a measure of bank solvency — was 13.4%, compared to 13.6% at the same time last year.
“There’s momentum in the businesses, actually across all four businesses, and we do think it’s sustainable,” Deutsche Bank Chief Financial Officer James von Moltke told CNBC’s Annette Weisbach on Thursday.
“We’re delivering on our commitments on costs and capital returns in the quarter.”
Germany’s biggest lender reported net profit of 1.3 billion euros in the prior quarter and of 1.16 billion euros in the first quarter last year.
In 2023, the bank announced it would cut 3,500 jobs over the coming years, as it targets 2.5 billion euros in operational efficiencies to boost profitability and increase shareholder returns.
Mark Zuckerberg, CEO of Meta testifies before the Senate Judiciary Committee at the Dirksen Senate Office Building on January 31, 2024 in Washington, DC.
Alex Wong | Getty Images
Mark Zuckerberg started Meta‘s earnings call by talking about artificial intelligence. Then he moved onto the metaverse, touting his company’s headsets, glasses and operating system. He spent almost the entirety of his opening remarks focused on the many ways Meta loses money.
Investors weren’t into it. Meta shares tumbled as much as 19% in extended trading on Wednesday, wiping out more than $200 billion in market cap. The drop came despite Meta reporting better-than-expected profit and revenue for the first quarter.
Zuckerberg appeared ready for the sell-off.
“I think it’s worth calling that out, that we’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it,” Zuckerberg said. He cited past efforts like short-video service Reels, Stories and the transition to mobile.
Meta generates 98% of its revenue from digital advertising. But to the extent Zuckerberg talked about ads, he was looking to the future and the ways the company could potentially turn its current investments into ad dollars. In discussing Meta’s effort to build a “leading AI,” Zuckerberg said, “There are several ways to build a massive business here including scaling business messaging, introducing ads or paid content into AI interactions.”
He spent more time talking about Meta Llama 3, the company’s newest large language model, and the recent rollout of Meta AI, the company’s answer to OpenAI’s ChatGPT.
Zuckerberg then moved onto potential opportunities for expansion within the mixed-reality headset market, like a headset for work or fitness. Meta opened up access to the operating system that powers its Quest headsets on Monday, which Zuckerberg said will help the mixed-reality ecosystem grow faster.
He also talked up Meta’s AR glasses, which he called “the ideal device for an AI assistant because you can let them see what you see and hear what you hear.”
The Ray-Ban Meta Headliner smart glasses.
Jake Piazza | CNBC
In the meantime, Meta’s Reality Labs unit, which houses the company’s hardware and software for development of the nascent metaverse, continues to bleed cash. Reality Labs reported sales of $440 million for the first quarter and $3.85 billion in losses. The division’s cumulative losses since the end of 2020 topped $45 billion.
Zuckerberg has bought himself some time.
Meta’s stock price almost tripled last year and, as of Wednesday’s close, was up 40% in 2024. It reached a record $527.34 in early April.
After a brutal 2022, during which the company lost about two-thirds of its value, Zuckerberg appears to have regained the confidence of Wall Street.
The driver for the rally has been a cost-cutting plan that Zuckerberg put in place early last year, when he told investors that 2023 would be the “year of efficiency.” The company slashed headcount and eliminated unnecessary projects in an effort to become a “stronger and more nimble organization.”
Zuckerberg said Wednesday that the company will continue to operate efficiently, but that shifting existing resources to investments in AI will “grow our investment envelope meaningfully.”
Capital expenditures for 2024 are anticipated to be in the $35 billion to $40 billion range, an increase from a prior forecast of $30 billion to $37 billion “as we continue to accelerate our infrastructure investments to support our artificial intelligence (AI) roadmap,” Meta said.
Zuckerberg said he expects to see a “multiyear investment cycle” before Meta’s AI products will scale into profitable services, but noted that the company has a “strong track record” in that department.
Meta CFO Susan Li echoed Zuckerberg’s remarks and said the company needs to develop advanced models and scale products before they will drive meaningful revenue.
“While there is tremendous long-term potential, we’re just much earlier on the return curve,” Li said.
Even before the call began, investors were trimming their holdings. That’s because Meta issued a light revenue forecast for the second quarter, overshadowing the first-quarter beat.
As the stock plunge intensified, Zuckerberg told investors that if they’re willing to come along for the ride, they may well be rewarded.
“Historically, investing to build these new scaled experiences in our apps has been a very good long-term investment for us and for investors who stuck with us and the initial signs are quite positive here too,” Zuckerberg said. “But building a leading AI will also be a larger undertaking than the other experiences we’ve added to our apps and this is likely going to take several years.”
Wall Street pointed higher early Wednesday as investors pore over more corporate earnings data ahead of an important inflation update later in the week.
Futures for the S&P 500 were up 0.2% before the bell and futures for the Dow Jones Industrial Average were virtually unchanged. Futures for the tech-heavy Nasdaq were up nearly 0.7%.
Tesla jumped 11.6% in off-hours trading, recovering some of its recent losses after the electric car maker said it would accelerate production of new, more affordable vehicles. Investors were looking for some sign that Tesla will take steps to stem its stock’s slide this year.
Boeing shares were boosted 3.1% even as the aircraft manufacturer said Wednesday that it lost $355 million on falling revenue in the first quarter. Boeing has faced increasing scrutiny over the safety of its planes and accusations of shoddy work from whistleblowers.
Boeing’s CEO said the company is in “a tough moment,” and its focus is on fixing its manufacturing issues, not the financial results.
Automaker Ford and Facebook owner Meta report their most recent quarterly financial results after the bell Wednesday.
In Europe at midday, Germany’s DAX was up 0.3% and the CAC 40 in Paris rose 0.4%. In London, the FTSE 100 rose 0.6%.
In Asian trading, Japan’s benchmark Nikkei 225 gained more than 900 points, or 2.4%, to close at 38,460.08.
Shares in computer chip company Renesas Electronics Corp. jumped 10.5%, while rival Tokyo Electronic surged 7.1%.
Investors are watching to see how Japan’s central bank and its Finance Ministry react to prolonged weakness in the yen, which has been trading at its lowest level in 34 years, at a policy meeting that begins Thursday.
The U.S. dollar rose to 154.99 Japanese yen on Wednesday from 154.82 yen late Tuesday. The euro fell to $1.0688 from $1.0699.
“Market participants will be closely monitoring updates for any indications of how the Bank of Japan might address foreign exchange pressures during this week’s policy meeting,” Anderson Alves of ActivTrades said in a commentary.
Shares in Greater China also rallied.
The Hang Seng in Hong Kong added 2.1% to 17,176.31, while the Hang Seng Tech Index gained 3.4%. Chinese artificial intelligence company Sensetime Group’s shares surged 31.2% after it released the latest version of its SenseNova generative AI model on Tuesday.
The Shanghai Composite index climbed 0.8% to 3,044.82.
Taiwan’s Taiex gained 2.7%.
In South Korea, the Kospi added 2% to 2,675.75, led by a 4% gain in heavyweight Samsung Electronics.
Australia’s S&P/ASX 200 index was unchanged at 7,683.00 following the release of a fifth consecutive quarter of decelerating inflation, with the consumer price index in the first quarter easing to 3.6% from previous 4.1%.
On Friday, the government releases its monthly consumer spending report, which contains a measure of inflation that’s closely watched by the Federal Reserve.
Top officials at the Fed warned last week they may need to keep interest rates high for a while in order to ensure inflation is heading down to their 2% target. That was a big letdown for financial markets, dousing hopes that had built after the U.S. central bank signaled earlier that three interest-rate cuts may come this year.
Lower rates had appeared to be on the horizon after inflation cooled sharply last year. But a string of reports this year showing inflation has remained hotter than expected has raised worries about stalled progress.
In energy markets, U.S. benchmark crude lost 35 cents to $83.01 per barrel in electronic trading on the New York Mercantile Exchange. Brent crude, the international standard, gave up 25 cents to $87.14 per barrel.
On Tuesday, the S&P 500 climbed 1.2% to 5,070.55, pulling further out of the hole created by a six-day losing streak. The Dow Jones Industrial Average rose 0.7% to 38,503.69, and the Nasdaq composite jumped 1.6% to 15,696.64.
Elon Musk, CEO of Tesla and owner of social media site X, formerly known as Twitter, attends the Viva Technology conference dedicated to innovation and startups at the Porte de Versailles exhibition center in Paris, France, on June 16, 2023.
Gonzalo Fuentes | Reuters
Tesla reported a 9% drop in first-quarter revenue on Tuesday, the biggest decline since 2012, and missed analysts’ estimates, as the electric vehicle company weathers the effect of ongoing price cuts.
The stock jumped in extended trading after CEO Elon Musk told investors that production of new affordable EV models could begin sooner than expected.
Here’s what the company reported compared with what Wall Street was expecting, based on a survey of analysts by LSEG:
Earnings per share: 45 cents adjusted vs. 51 cents expected
Revenue: $21.30 billion vs. $22.15 billion expected
Revenue declined from $23.33 billion a year earlier and from $25.17 billion in the fourth quarter. Net income dropped 55% to $1.13 billion, or 34 cents a share, from $2.51 billion, or 73 cents a share, a year ago.
The drop in sales was even steeper than the company’s last decline in 2020, which was due to disrupted production during the Covid-19 pandemic. Tesla’s automotive revenue declined 13% year over year to $17.38 billion in the first three months of 2024.
Musk said on the call that the company plans to start production of new models in “early 2025, if not late this year,” after previously expecting to begin in the second half of 2025. Musk also touted Tesla’s investments in artificial intelligence infrastructure, and said the company is in talks with “one major automaker” to license its driver assistance system, which is marketed in the U.S. as the Full Self-Driving, or FSD, option.
In its shareholder deck, Tesla reiterated a pessimistic outlook for 2024, telling investors that “volume growth rate may be notably lower than the growth rate achieved in 2023.”
Prior to the 11% jump after hours, Tesla shares were down more than 40% this year, reaching their lowest since January 2023, on concerns about weak deliveries, competition in China and the company’s ongoing price cuts. Earlier this month, Tesla reported an 8.5% year-over-year decline in vehicle deliveries for the first quarter.
The company said in the deck that it’s accelerating the launch of “new vehicles, including more affordable models,” that will “be able to be produced on the same manufacturing lines” as Tesla’s current lineup. Tesla is aiming to “fully utilize” its current production capacity and to achieve “more than 50% growth over 2023 production” before investing in new manufacturing lines.
Also in the deck, Tesla showed off screens of a robotaxi-based ride-hailing service. The company has been promising a self-driving vehicle for years without delivering on Musk’s promise.
Sales growth across EVs is slowing, and Tesla and key rivals have been slashing EV prices to try to spur demand. Tesla’s gross profits plummeted 18% in the first quarter, partly due to price cuts this year.
After discussing operational challenges in the first quarter, including Red Sea supply chain disruptions, Musk said on the call that, “We think Q2 will be a lot better.”
Tesla said total sales included revenue from earlier sales of its FSD option. The release of a feature called Autopark in North America allowed the company to recognize the deferred revenue.
Chris Redl, autos analyst at Siena Capital, estimates that Tesla recognized as much as $700 million in deferred revenue in the quarter from FSD. That’s roughly 4.3% of Tesla’s automotive revenue after stripping out regulatory credits.
Tesla embarked on a massive restructuring this month, with two executives, Drew Baglino and Rohan Patel, resigning. Musk said last week in a companywide memo that the automaker was cutting more than 10% of its global workforce.
Capital expenditures rose to $2.77 billion, up 34% from a year earlier.
Free cash flow turned negative in the quarter, with the company reporting a deficit of $2.53 billion. A year ago, Tesla reported free cash flow of $441 million, a number that reached $2.06 billion in the fourth quarter. Tesla attributed the negative figure to a $2.7 billion buildup in inventory and $1 billion in capital expenditures on “AI infrastructure.”
Revenue in Tesla’s energy division increased 7% to $1.64 billion, while services and other revenue rose 25% to $2.29 billion compared to the same period last year.
Musk was asked on the earnings call if he has any intention to leave Tesla given his many jobs, including leading SpaceX, controlling X (formerly Twitter) and running other businesses.
Musk didn’t provide an answer, but said he spends the majority of his time at work, rarely even takes off a Sunday afternoon and will work to make sure Tesla is “very prosperous.”
At the conclusion of the call, Tesla’s Martin Viecha, vice president of investor relations, said that he’s leaving the company in a couple months after seven years. Musk thanked him.
Correction: A prior version of this story had an incorrect figure for automotive sales.
For years, both Fifth Third and Huntington have been eyeing growth opportunities outside of their home bases in the Midwest.
Bloomberg
Higher-for-longer interest rates are dampening commercial loan demand at regional banks, but Texas expansions are helping two midsize lenders, Fifth Third Bancorp and Huntington Bancshares, to lasso middle-market clients.
The Ohio-based banks are seeing more stability from business clients in the Lone Star State than in some other parts of their footprints, Fifth Third and Huntington leaders said Friday on first-quarter earnings calls. Fifth Third has been building a middle-market banking operation in major metro areas of Texas for the last five years, and Huntington recently tapped a Texas market president in Dallas to cultivate its local commercial business.
While the Southeast, including the Carolinas and Florida, has been core to both banks’ growth plans, lending in the land where everything’s bigger has been helping them offset the negative impacts of economic uncertainty at a time when the near-term interest rate outlook remains unknown.
Texas, Florida and North Carolina have all consistently seen a rise in gross domestic product, population and company relocations in the last five years, priming them for financial institutions’ expansion plans.
“Texas has been a really nice story for us,” Fifth Third CEO Tim Spence said on the bank’s earnings call. “It’s a really nice complement to the strong commercial banking team that we built out in California a few years back, in terms of expanding the middle-market footprint. So we expect to see growth in that area.”
The $214.5-billion Fifth Third first planted a flag in Texas more than a decade ago with an energy vertical, and it began augmenting its middle-market business in earnest in 2019, focusing on Houston and Dallas. The company now employs some 175 folks in the state, with a concentration in commercial and industrial loans, Spence said.
Huntington’s operation in Texas is much newer and smaller. The $193.5 billion-asset bank unveiled its Texas expansion plans in February, but it’s already seeing results in the form of both loans on the books and a burgeoning pipeline for future credits.
Huntington Chairman and CEO Steve Steinour recently visited Dallas, where the Columbus, Ohio-based bank planted its initial Texas office.
“I really like our new colleagues,” who are led by market president Clint Bryant, Steinour said Friday in an interview. He added that the Texas economy is “booming.”
Huntington is eyeing a gradual statewide expansion as it solidifies its footing. Its business plan calls for serving Texas middle-market clients with revenues under $1 billion.
Huntington announced in October that it would enter 2024 in expansion mode. Since then, it has launched an expansion into the Carolinas and established verticals in fund finance, healthcare and Native American banking.
Texas is the most recent initiative, but Huntington may not be done. The company is open to adding new bankers and capabilities, Steinour said Friday on a conference call with analysts.
To date, the new markets and verticals have produced a loan pipeline “approaching $2 billion,” as well as a sizable deposit portfolio, Chief Financial Officer Zach Wasserman said on the conference call. “The early traction has been really positive,” he said.
Huntington announced quarterly net income totaling $419 million Friday, a 30% year-over-year decline that it attributed to higher funding costs. On the plus side, Huntington reported solid year-over-year growth in loans and deposits, and executives said that they expect both trends to continue throughout 2024.
The bank reiterated previously stated guidance calling for full-year 2024 deposit growth in the 2% to 4% range, with Wasserman suggesting the end result would be nearer the top end.
In a similar vein, Steinour labeled Huntington’s commercial loan pipeline “very robust,” adding that it grew each month during the quarter ending March 31. The company’s 2024 guidance targets loan growth in the 3% to 5% range.
Approximately 40% of the first-quarter loan and deposit growth that Huntington reported originated in its new markets and verticals, according to Wasserman.
Investors appeared to view Huntington’s results in a positive light. Shares closed up about 1% at $13.28 Friday.
Fifth Third beats estimates
While Fifth Third’s end-of-period loan balances were down 1% from the prior quarter to $117 billion, middle-market loan demand in Texas, along with longer-term geographic priorities like Tennessee, the Carolinas, Kentucky and Indiana was a bright spot, Spence said.
Overall, the bank brought in $480 million of net income in the first quarter, down 2% sequentially. The bank beat analysts’ estimates on net interest income, expenses and fees. Its stock pricewas up 6% Friday, to $36.25.
Piper Sandler analysts wrote in a note that most investors expected Fifth Third to soften its 2024 performance expectations, but by maintaining its guidance and logging a “better-than-expected” first-quarter performance, the bank’s earnings report “looks like a win.”
Fifth Third Chief Financial Officer Bryan Preston said on the call that the Cincinnati-based bank expects its full-year average total loans to be down 2% from 2023, but that commercial and consumer balances should increase in low-single-digit percentage points by the end of the fourth quarter.
Spence added that any loan growth will likely be driven by taking market share. Fifth Third’s middle-market clients aren’t pessimistic per se, but they also aren’t leaning forward on merger-and-acquisition or inventory-building opportunities, he said.
“The places where we are expecting to see growth in the second half of the year are the places where we made investments to be able to do it,” Spence said.
In 2023, Fifth Third’s middle-market loan production was split 50-50 between its Midwest markets, including Chicago, and other parts of the country. The latter geographies include the Southeast markets, plus Texas and California.
Fifth Third Bank saved $15 million in the first quarter, partly driven by deploying automation throughout its operations. “Expenses are well controlled … driven by savings realized through process automation and our focus on value streams,” Chief Executive Tim Spence said during the bank’s first-quarter earnings today. The bank reported noninterest expense, which includes tech […]
Huntington Bancshares joined mega-banks in growing digital adoption during the first quarter, citing increases in digital and mobile usership and in digital logins. During the quarter, Bank of America, Citizens Financial Group, JPMorgan Chase and Wells Fargo all reported digital usership growth. The $189 billion bank’s investment in technology and data in the quarter contributed […]
KeyCorp’s optimistic forecast for 2024 represented a marked change from last year, when its focus was largely on balance-sheet restructuring and expense control.
Kim Raff/Bloomberg
KeyCorp Chairman and CEO Chris Gorman said the $187.5 billion-asset company is “clearly playing offense,” despite his view that the country is likely to fall into a recession.
High interest rates and market volatility have left a number of companies in a wait-and-see mode, Gorman said Thursday on a conference call with analysts.
“I am not seeing a lot of people making significant investments in property, plants and equipment, and I’m not seeing people make significant investments in inventory, in technology and in people,” said Gorman, who has led the Cleveland-based Key since May 2020. “Rates clearly have an impact [and] uncertainty as to the path and direction of the economy is also a factor.”
Against that cautious economic outlook, Key reported an outsize $101 million provision for loan losses, even after reporting only $81 million in charge-offs — 29 basis points of average loans — for the quarter ending March 31. Key also reiterated its full-year guidance, which envisions net charge-offs ranging from 30 to 40 basis points of average loans.
The $20 million reserve build “was completely proactive,” Gorman said on the conference call. “I am of the mindset that we are in [a] higher-for-longer” interest rate environment. “As a consequence, we have been stressing all of our portfolio.”
“My view is we probably will have a recession,” Gorman added.
Gormon’s comments match the tone set by JPMorgan Chase CEO Jamie Dimon, who said last week that chances of a tougher economy “are higher than other people think.”
Gorman’s prognosis for Key itself is considerably more optimistic than his macro outlook.
The company reported first-quarter net income of $183 million, driven by net interest income totaling $886 million. While the net interest income figure represents a 20% year-over-year decline, Key expects spread revenue to grow throughout the remainder of 2024, and to eclipse $1 billion in the final quarter of the year, beating the fourth quarter 2023 result by about 10%.
“We continue to confirm our ability” to reach that target, Chief Financial Officer Clark Khayat said on the conference call. “This first quarter of 2024 reflects the low point for net interest income.”
Net interest income, which is generally a bank’s largest revenue source, is calculated by subtracting funding costs from overall interest income.
Key’s forecast for 2024 represents a marked change from last year, when its focus was largely on balance-sheet restructuring and expense control. Gorman called 2023 a “reset” year for Key. Its 2024 outlook, by contrast, was well received by analysts.
“It looks like the story’s favorable drivers for the remainder of the year and beyond all remain intact,” Piper Sandler analyst Scott Siefers wrote in a research note.
Investor response on Thursday was muted. Key’s share price rose 3% by midday, though it yielded those gains as the day progressed. Shares closed down by 0.4% at $14.38.
Noninterest income was probably the brightest spot in Key’s quarterly report. At $647 million, it was up 6% year over year, driven by strong results in investment banking, wealth management and mortgages. Investment banking generated $170 million of revenue during the quarter ending March 31, with Gorman projecting as much as $650 million for all of 2024. “There’s no reason we can’t get back to that level of growth,” he said.
“I am encouraged by the strong, broad-based results we saw in our capital markets business,” Gorman said.
Key’s asset quality remains solid, despite upticks in net charge-offs and nonperforming assets, Gorman said. The company performed what he termed a “deep dive” on loans likely to be impacted the most in a higher-for-longer interest rate scenario, covering more than 80% of commercial non-investment grade credits.
The review determined that more than 90% of Key’s criticized commercial loans remain current in payments. It “confirmed our view that there would be low loss content in these loans,” Gorman said.
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