Societe Generale on Wednesday reported a 64% drop in annual net profits for 2022, weighed on by lower activity in its domestic banking unit, currency effects and increased operating expenses.
The French bank said net income came in at 1.16 billion euros ($1.24 billion) for the final quarter of 2022, bringing its annual profit to 2.02 billion euros. In comparison, the bank had posted 5.6 billion euros in net profit at the end of 2021.
The latest results came in higher-than-expectations. Analysts had estimated a net income of 905 million euros for the quarter and 1.5 billion euros for the full year, according to Refinitiv.
“The Group is confident of being able to reap the benefit of ongoing projects and business developments, confirms its financial guidance for 2025, and is embarking with determination on 2023, a year of transition in many respects,” CEO Fréderic Oudéa said in a statement.
Here are other highlights from the results:
Revenues rose 8% over the year to 28.1 billion euros.
Operating expenses increased by 5.9% over the last 12 months to 18.6 billion euros.
CET1 ratio, a measure of bank solvency, stood at 13.5%, versus 13.1% at the end of the third quarter.
Shares of the French lender are down more than 20% over the last 12 months.
This is a breaking news story and it is being updated.
BNP Paribas reported Q4 2022 and full year earnings.
Miguel Medina | Afp | Getty Images
BNP Paribas reported Tuesday a 7% rise in net income for 2022 and revised up its profit targets.
The French bank said net profit attributable to shareholders came in at 2.2 billion euros ($2.36 billion) for the fourth quarter, taking its full-year profit figure for 2022 to 10.2 billion euros. Analysts had expected a figure of 2.36 billion euros for the quarter and 10.9 billion euros for the year, according to Refinitiv.
Here are other highlights from the results:
Annual revenues rose to 50.4 billion euros versus 46.2 billion euros a year ago;
Operating expenses rose 8.3% from a year ago to 33.7 billion;
CET 1 ratio, a measure of bank solvency, stood at 12.3% versus 12.1% in the previous quarter.
Shares of the French bank are down about 7% over the last year.
“On the strength of this performance and with additional growth potential stemming from the redeployment of capital released by the sale of Bank of the West, combined with the positive impact of the rise in interest rates in 2022, the Group reaffirms the importance and relevance of the pillars of its Growth, Technology & Sustainability 2025 strategic plan and is revising upward its ambitions,” the bank said in a statement.
The French lender said it now aims to grow its net income by more than 9% between 2022 and 2025.
It said it will execute share buybacks each year — particularly in 2023, when its share buyback program will total 5 billion euros. It is planning to pay out a dividend of 3.90 euros.
This is a breaking news story and is being updated.
Inflation in the euro zone eased in the last two months of 2022 but the economic indicator is still well-above the 2% mandate of the European Central Bank.
Jeff Greenberg | Universal Images Group | Getty Images
Inflation in the euro zone dropped for a third consecutive month in January on the back of a significant fall in energy costs.
Headline inflation in the euro zone came in at 8.5% in January, according to preliminary data released Wednesday. In December, the rate was recorded at 9.2%.
Energy remained the biggest cost driver in January, but once more softened from previous levels. Energy charges fell to an estimated 17.2% in January, down from 25.5% in December. However, food costs rose slightly from 13.8% in December to 14.1% in January.
The 20-member region has gone through substantial price increases in 2022, after Russia’s invasion of Ukraine pushed up energy and food costs across the bloc. However, the latest data provides further evidence that inflation has started to ease.
Core inflation, which strips out energy and food costs, stood at 5.2% in December — in line with the previous month.
“The key point is that core inflation was unchanged at a record 5.2% so the ECB will remain very hawkish,” Jack Allen-Reynolds, senior Europe economist at Capital Economics, said via email.
The performance of Europe’s main index over the last 12 months.
“The apparent decline in euro-zone headline inflation in January, from 9.2% in December to 8.5%, came as a big surprise. But we wouldn’t be shocked if it was revised up significantly when the final euro-zone data are released on 23rd February,” he added, citing delays in receiving official data from Germany.
“The upshot is that the larger-than-expected drop in headline inflation won’t deter the ECB from raising interest rates by 50 basis points tomorrow,” Allen-Reynolds said.
In a note to clients last week, Morgan Stanley had said that “a 50 basis point hike in February seems like a done deal, with the Council discussion to centre on the size of rate hikes in March and beyond.”
Market participants will be looking for clues on the central bank’s next steps. The main ECB rate is currently at 2%, but market expectations suggest an increase to 3.5% by the end of the first six months of the year, according to Reuters.
“Investors will be looking ahead to whether Christine Lagarde doubles down on previous signals for another half-percent hike in March and what words she uses to describe any future additional tightening,” Tom Hopkins, portfolio manager at BRI Wealth Management, said Wednesday via email.
Unemployment in the euro zone seemed steady at 6.6% in December . This is in line with the previous two monthly readings and also reduces fears of a significant recession in the euro zone.
Data released Tuesday showed a better-than-expected growth activity in the euro zone at the end of 2022 — despite economic contractions in Germany and Italy, the euro zone grew 0.1% in the fourth quarter of last year.
European stocks are are having a good year so far. The benchmark Stoxx 600 is up around 7% since the beginning of 2023 — its strongest start in over 26 years, according to Bernstein’s analysis. That’s better than the S & P 500 , which returned 5.8% in the same period. While the underperformance has been marginal, the outlook for U.S. stocks is decidedly more muted — Wall Street is still wary of a recession. European stocks are therefore worth a look in the near term, according to Bernstein, which expects more upside for them. “We think there is still moderate upside. The region is still trading at a discount to its average historical multiple, both in absolute and relative terms. It is still cheaper than usual vs. the U.S,” Bernstein’s analysts, led by Sarah McCarthy, wrote in a note on Jan. 24. The bank added that there’s more room for “positive earnings surprises” in Europe than in the United States, given lower earnings expectations for the former. On top of that, share buyback yield is higher in Europe than the U.S. for the first time ever, according to Bernstein. Stock picks One of Bernstein’s top plays is low leverage stocks, which the bank defines as stocks with a low net debt to equity ratio. “Our macro analysis shows that European low leverage can outperform when leading indicators are predicting recessions and also when interest rates are rising, as is the case presently,” Bernstein strategist Mark Diver wrote on Jan. 19, adding that low leverage stocks have returned an annualized average 8.7% in past European recessions, he added. The bank’s top overweight-rated picks in this area are Publicis Group , LVMH Moet Hennessy , L’Oréal , Equinor and Airbus . Barclays is also “tactically overweight” on Europe compared with the U.S. because it views the region’s stocks as under-owned and cheap. It named seven “conviction stock ideas with catalysts” in the coming quarters, which it said has average potential upside of 25%. Finnish oil refiner Neste makes the bank’s list, given the bank’s view of a global shortage of renewable diesel to support product prices until at least 2024. Barclays also likes German energy firm RWE for its “undervalued” renewables growth pipeline. “We believe investors are overlooking RWE’s transformation into Europe’s third-largest renewables player, particularly related to its renewables growth pipeline,” Barclays’ analyst Rob Bate wrote on Jan. 20. Also making Barclays’ list is Telefonica Deutschland . The bank said it believes the company can deliver low-to-mid single digit revenue growth that will translate into rising free cashflow, which will in turn support the company’s dividend payouts. Morgan Stanley named several stocks to buy ahead of a hotly anticipated earnings season in Europe. They include Universal Music Group , whose share price the bank expects to rally into earnings season, as well as French hospitality group Accor , which Morgan Stanley expects to deliver a strong fourth quarter and beat consensus estimates. Other picks include SAP, Teleperformance and Elis. Bank of America has a number of European picks with exposure to higher Chinese consumer spending and improving overall demand in light of China’s reopening. Dutch tech investment group Prosus NV derives 80% of its revenue from China, giving it the highest sales exposure by a long mile, according to Bank of America. Other stocks with more than 30% revenue exposure to China include BMW , Standard Chartered , HSBC , Infineon Technologies , Porsche and Swatch . — CNBC’s Michael Bloom contributed to reporting
As stocks continue their rally, several major financial institutions are now predicting a significant downturn in global markets. The S & P 500 index has risen by more than 10% since its lows in October last year. In Europe, the STOXX 600 has increased by more than 15% over the same period. But, according to some investment banks, those gains are now at risk as they fear the lagged effects of monetary tightening are likely to hit earnings and cause compression in profit margins this year. .STOXX 1Y line Here are five of the biggest calls made so far: Bank of America: STOXX 600 down 20% by Q2 The Wall Street bank believes that the current strength in the stock market is not sustainable, and there could be a bear market by the second quarter of this year. We expect Euro area and U.S. growth to weaken to recessionary levels in response to harsh monetary tightening. Equities are far away from pricing this scenario, having been buoyed by the recent strength in the hard data due to companies working down their order backlogs. If growth weakens, in line with our projections, as the overshoot of hard data relative to new orders fades and underlying demand continues to weaken in response to monetary tightening, this would be consistent with around 20% downside for the Stoxx 600 to 365. – Jan. 20 GMO, S & P 500 down 20% to 3,200 by Dec. Chairman of GMO, Jeremy Grantham, who predicted a bear market last year, said shares prices are currently supported by the “positive influence” of the so-called presidential cycle. However, the notable investor expects the S & P 500 to fall to 3,200 “and spend at least some time below it this year or next.” The pricking of the supreme overconfidence bubble is behind us, and stocks are now cheaper. But because of the sheer length of the list of important negatives, I believe continued economic and financial problems are likely. I believe they could easily turn out to be unexpectedly dire. I believe therefore that a continued market decline of at least substantial proportions, while not the near certainty it was a year ago, is much more likely than not. – Jan. 24 UBS: STOXX 600 down 8% to 410 by Dec. The Swiss bank also sees potential for an 8% decline to 410 (SXXP) due to declining earnings/margin expectations. We think the market significantly underprices downside risks. With yields and global growth risks expected to remain elevated for most of this year, we don’t expect a material valuation rebound beyond what we have already seen this year. – Jan. 11 JP Morgan: STOXX 600 up 3% to 465 by Dec. The American investment bank has a more mixed outlook. JPMorgan strategists said the current market rally would likely start fading in the first quarter of 2021 as the catalysts that pushed stocks up since October — peaking bond yields, inflation, and the U.S. dollar — have all been factored into the market. JPMorgan believes the market will remain flat by the end of the year. We believe that the current market rally will start fading as we move through Q1. The stock market is behaving as if we were in an early cycle recovery phase, but the Fed has not even concluded hiking yet. While January still offers favourable seasonals, and the current investor positioning is far from heavy, both of which support stocks for the time being, we believe that one should be using potential gains over the next weeks in order to reduce exposure. – Jan. 23 Barclays: STOXX 600 up 6% to 475 by Dec. The U.K. headquartered investment bank Barclays is bullish on the European stock index. It expects the STOXX Europe 600 to end the year higher by 6% from current levels. It points toward data that shows hedge funds were reducing their net short positions in stocks, which removes downward pressure, to base its view. Short interest has halved from the Q4 highs for E.U. equities, but is still elevated in the U.S. Macro [hedge funds] have turned outright long equities, and their exposure is close to 12m highs, yet still below average. Long-short funds have also reduced short positions, but their net exposure remains low too. Buying of Europe equity ETFs by U.S. investors has also picked up, but overall positioning on the region remains far more cautious than positive consensus sentiment on the region suggests. – Jan. 25
A trader works on the trading floor at the New York Stock Exchange (NYSE), January 5, 2023.
Andrew Kelly | Reuters
U.S. stocks have fallen far short of their global peers over the past three months, a rarity in recent years, and analysts expect this divergence to widen over the course of 2023.
As of Tuesday morning, the Russell 3000 benchmark for the entire U.S. stock market was up by 6.3% over the three-month period since October 24, while the S&P 500 was up 4.62%.
Weaker U.S. retail sales and industrial production figures last week cemented the view that the U.S. economy is slowing, while the growth picture in Europe, Asia and various emerging markets has improved notably.
In a research note Friday, Barclays European equity strategists highlighted that activity momentum in Europe and the U.S. is decoupling, which is “unusual,” with positive data surprises in Europe such as a rebound in PMI (purchasing managers’ index) and ZEW economic sentiment readings.
Unseasonably warm weather in northern Europe and the faster-than-expected Covid-19 reopening in China have offered relief to the European outlook, even if many economists still expect a mild recession.
Comparison chart of U.S. stocks versus European and global peers.
Meanwhile, the opposite is unfolding stateside, where data indicates a sharper slowdown but inflation has also shown signs of a sustained downward trend, leading markets to hope for an end to the Federal Reserve‘s aggressive interest rate-hiking cycle.
“In the past two months or so, equities and bonds have both cheered the early signs of disinflation and softening growth, as they reinforced the peak rates narrative, but the ‘bad data is good news for equities’ mantra seems over now in the U.S.,” Barclays strategists said.
“The rally is losing steam in equities, while it is gathering pace in bonds. This is starting to resemble a classic recession playbook, with investors selling equities to buy bonds.”
By contrast, Europe appears to be in a “sweet spot” right now, the British bank believes, with disinflation hopes pushing yields lower and economic sentiment receiving a boost from falling energy prices and China’s reopening, pushing up stocks.
“We started the year [overweight] Europe vs. U.S. and think the former offers better value, the potential to see flows reallocated towards the region, and arguably more positive growth risks, at least short term,” said Barclays Head of European Equity Strategy Emmanuel Cau.
“However, if the macro situation in the U.S. were to deteriorate more, history suggests the decoupling between the two markets may not last long.”
Stephen Isaacs, chairman of the investment committee at Alvine Capital, told CNBC on Monday that central to Europe’s resurgence versus the U.S. was the diminishing fear that energy prices would stay high, or perhaps spiral out of control.
This was borne out in recent portfolio flows data released by French bank BNP Paribas, which showed that as gas prices declined, foreign investors returned to euro zone stocks in October and November for the first time since February 2022.
Isaacs also noted that although the conversation around higher interest rates usually focuses on the negative implications for economic growth, they also mean savers are generating income.
“Where do we find most savers in broad terms? Places like Germany, northern Europe, so I think these again are some of the little factors people have forgotten,” he said.
“Tourism, again, a big plus for Europe, and then finally the fact that European assets have been undervalued and under owned for some time.”
Although the performance gap between Europe and the U.S. had grown considerably in recent years, Isaacs suggested that the U.S. market’s orientation toward large cap growth stocks and tech compared to the makeup of many European markets — which are more heavily weighted in consumer staples, financials and other value stocks — means the tide is turning.
“I do think that in Europe, areas like financial services, European banks are still trading at big discounts to book value, so there’s some obvious discounts, obvious value there,” he added.
While market bets are increasing for the Fed to end its tightening cycle soon, and possibly even begin to cut rates by the end of the year in the face of sluggish growth and falling inflation, the European Central Bank is expected to remain hawkish, with the bank guiding for a terminal policy rate of 3.5-4%.
A stock trader looks at his monitors at the stock exchange in Frankfurt, Germany.
Kai Pfaffenbach | Reuters
LONDON — European markets are on course for their worst year since 2018 as Russia’s war in Ukraine, high inflation and tightening monetary policy hammered risk assets around the world.
The pan-European Stoxx 600 index started the last trading day of 2022 down more than 12% since the turn of the year, its worst performance since a 13.24% annual decline in 2018. The European blue chip index enjoyed a bumper 2021, jumping 22.25% on the year.
Morning trade on Friday saw the U.K.’s FTSE 100 slide 0.3%, the CAC 40 down 0.6% and the German DAX lower by 0.5%. The Stoxx 600 was down 0.4%.
Economies around the world began the year still trying to emerge from the Covid-19 pandemic, with persistent lockdowns in China and other lingering supply bottlenecks forming what was now infamously mischaracterized by the U.S. Federal Reserve in 2021 as “transitory” inflationary pressure.
The cost-of-living crisis arising from soaring energy bills for businesses and consumers eventually began to weigh on activity, while the Fed and other major central banks were forced to tighten monetary policy with aggressive hikes to interest rates in order to rein in inflation.
“What happened this year was driven by the Fed. Quantitative tightening, higher interest rates, they were pushed by inflation, and anything that was liquidity driven sold off — if you were equities and bond investors, came into the year getting less than a percent on a ten-year treasury which makes no sense,” Patrick Armstrong, chief investment officer at Plurimi Wealth LLP, told CNBC’s “Squawk Box Europe” on Friday.
“Next year I think it’s not going to be the Fed determining the market, I think it’s going to be companies, fundamentals, companies that can grow earnings, defend their margins, probably move higher,” he said.
Subscribe to CNBC PRO for exclusive insights and analysis, and live business day programming from around the world.
—CNBC’s Natasha Turak contributed to this article.
The central bank caught markets off guard by tweaking its yield curve control (YCC) policy to allow the yield on the 10-year Japanese government bond (JGB) to move 50 basis points either side of its 0% target, up from 25 basis points previously, in a move aimed at cushioning the effects of protracted monetary stimulus measures.
In a policy statement, the BOJ said the move was intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions.”
The central bank introduced its yield curve control mechanism in September 2016, with the intention of lifting inflation toward its 2% target after a prolonged period of economic stagnation and ultralow inflation.
The BOJ — an outlier compared with most major central banks — also left its benchmark interest rate unchanged at -0.1% on Tuesday and vowed to significantly increase the rate of its 10-year government bond purchases, retaining its ultra-loose monetary policy stance. In contrast, other central banks around the world are continuing to hike rates and tighten monetary policy aggressively in an effort to rein in sky-high inflation.
The YCC change prompted the yen and bond yields around the world to rise, while stocks in Asia-Pacific tanked. Japan’s Nikkei 225 closed down 2.5% on Tuesday afternoon. The 10-year JGB yield briefly climbed to more than 0.43%, its highest level since 2015.
By midafternoon in Europe, the U.S. dollar was down 3.3% against the surging yen. The yen’s rally saw the currency notch the biggest single-day gain against the U.S. dollar since March 1995 (27 years, eight months, 20 days), according to FactSet currency data.
U.S. Treasury yields spiked, with the 10-year note climbing by around 7 basis points to just below 3.66% and the 30-year bond rising by more than 8 basis points to 3.7078%. Yields move inversely to prices.
Shares in Europe retreated initially, with the pan-European Stoxx 600 shedding 1% in early trade before recovering most of its losses by late morning. European government bonds also sold off, with Germany’s 10-year bund yield up almost 7 basis points to trade at 2.2640%, having slipped from its earlier highs.
“The decision is being read as a sign of testing the water, for a potential withdrawal of the stimulus which has been pumped into the economy to try and prod demand and wake up prices,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown.
“But the Bank is still staying firmly plugged into its bond purchase program, claiming this is just fine tuning, not the start of a reversal of policy.”
That sentiment was echoed by Mizuho Bank, which said in an email Tuesday that the market moves reflect a sudden flurry of bets on a hawkish policy pivot from the BOJ, but argued that the “popular bet does not mean that is the policy reality, or the intended policy perception.”
“Fact is, there is nothing in the fundamental nature of the move or the accompanying communique that challenges our fundamental view that the BoJ will calibrate policy to relieve JPY pressures, but not turn overtly hawkish,” said Vishnu Varathan, head of economics and strategy for the Asia and Oceania Treasury Department at Mizuho.
“For one, there was every effort made to emphasize that policy accommodation is being maintained, whether this was in reference to intended as well as potential step-up in bond purchases or suggesting no further YCC target band expansion (for now).”
The Bank of Japan noted in its statement that since early spring, market volatility around the world had risen, “and this has significantly affected these markets in Japan.”
“The functioning of bond markets has deteriorated, particularly in terms of relative relationships among interest rates of bonds with different maturities and arbitrage relationships between spot and futures markets,” it added.
The central bank said if these market conditions persisted, it could have a “negative impact on financial conditions such as issuance conditions for corporate bonds.”
Luis Costa, head of CEEMEA strategy at Citi, indicated on Tuesday that the market move may be an overreaction, telling CNBC there was “absolutely nothing stunning” about the BOJ’s decision.
“You have to take this BOJ measure in the context of a positioning in dollar-yen that was obviously not expecting this tweak. It’s a tweak,” he said.
Japanese inflation is projected to come in at 3.7% annually in November, according to a Reuters poll last week — a 40-year high, but still well below the levels seen in comparable Western economies.
Costa said the Bank of Japan’s move was not geared toward combating inflation but addressing the “infrastructure and the dynamics of JGB trading” and the gap in volatility between the trade in JGBs and the rest of the market.
Goldman Sachs says the current rally in global stocks is temporary, forecasting a market bottom in 2023. The Wall Street bank said it had arrived at the forecast after some of its “typically consistent” indicators of a market bottom had yet to be reached. “We continue to think that the near-term path for equity markets is likely to be volatile and down before reaching a final trough in 2023,” the analysts said in their “2023 Outlook: Bear with it” note to clients on Nov. 21. The investment bank said that while valuations had fallen this year, they had mostly done so in response to rising interest rates. In addition, the bank noted that investors haven’t yet priced in earnings losses from a recession. “Valuations in equities have fallen a long way since the beginning of this year, but this doesn’t mean to say they are cheap,” the analysts said. By December 2023, Goldman Sachs expects the S & P 500 to rise to 4,000 points — that’s just 0.9% higher than Friday’s close. The bank sees the Stoxx Europe 600 increasing by 4% to 450 points by the end of next year. This year, the S & P 500 has fallen by over 15% to 3965 points, while the Stoxx Europe 600 has declined by around 8.5% to 432 points. Goldman’s prediction is similar to Morgan Stanley’s call on the S & P 500. Its Chief U.S. Equity Strategist Mike Wilson expects the S & P 500 to rise to 3,900 by the end of next year. Wilson said the S & P 500 will “probably make a new low” sometime in the first quarter of next year , adding that the “low 3000s is a really good range to think about for the low for this bear market.” Goldman said it was more concerned over the potential “damage” from the speed of interest rate hikes this year — from 0.25% to 3.75%-4% — than the actual rate. In 2021, markets had priced in just two 0.25 percentage point rate hikes this year. A significant rally in stock markets would indicate that financial conditions have eased. However, Goldman’s analysts are concerned that this may be premature and would likely lead to more rate hikes from the Federal Reserve. The investment bank also says it’s unclear how long interest rates will remain elevated. It is forecasting no cuts to interest rates before 2024. “Even in the event that there is a ‘soft landing’ in the economy – particularly in the U.S., as our economists forecast – interest rates may well stay higher for longer than the market is pricing,” analysts led by Peter Oppenheimer, Goldman’s chief global equity strategist, said. “The downside risks to equities may be moderate, but on a relative basis the hurdle rate suggests a high bar for equities, leaving little room for a re-rating.”
UBS on Tuesday reported a net income of $1.7 billion for the third quarter of this year, slightly above analyst expectations, with the Swiss bank citing a challenging environment.
Analysts had expected a net profit of $1.64 billion, according to Refinitiv data. UBS reported a net income of $2.3 billion a year ago.
The Swiss lender had missed expectations in the last quarterwhen it posted a net profit of $2.108 billion. The bank said at the time the second quarter had been “one of the most challenging periods for investors in the last 10 years” due to high inflation, the war in Ukraine and strict Covid-19 policies in Asia.
UBS said Tuesday these factors continued to be in investors’ minds in the third quarter.
“The macroeconomic and geopolitical environment has become increasingly complex. Clients remain concerned about persistently high inflation, elevated energy prices, the war in Ukraine and residual effects of the pandemic,” Ralph Hamers, CEO of UBS, said in a statement.
Other highlights for the quarter include:
Revenues hit $8.3 billion, down from $9.1 billion a year ago.
Operating expenses dropped to $5.9 billion, from $6.2 billion a year ago.
CET 1 capital ratio, a measure of bank solvency, reached 14.4% versus 14.9% a year ago.
Its investment banking division saw revenues down by 19% with the lower performance in equity derivatives, cash equities, and financing revenue being offset by revenues in foreign exchange. The Global Wealth Management division also reported lower revenues, down by 4% year-on-year.
However, Personal and Corporate Banking revenues rose over the same period on more beneficial rates from the Swiss National Bank.
