Business

By Anshuman Daga

SINGAPORE (Reuters) -Singapore’s DBS Group warned inflation and geopolitical uncertainty may impact second-half performance too, after the wealth business of the bank suffered in the latest quarter, though profit beat estimates on rising interest rates.

The quarterly earnings from DBS, Southeast Asia’s largest lender, rounded off a strong reporting season for Singapore banks after local peers OCBC beat estimates and United Overseas Bank flagged further improvement in net interest margins, a key profitability gauge.

“There’s just too much geopolitical uncertainty right now and that’s hard to translate into what does it do to the macro economy,” DBS CEO Piyush Gupta told reporters on Thursday, citing the Russia-Ukraine war and its impact on gas and oil prices, among other factors.

“The big underlying uncertainty is inflation and what will the central banks do to control it, so that’s the second order impact of that. Right now, the market is split on whether you get a deep recession or you get high inflation,” Gupta said.

DBS shares fell as much as 0.9% before paring losses to 0.3% in late afternoon trade in a strong broader market.

The bank’s first-half net interest margin improved to 1.52% from 1.47%, marking the first improvement in three years.

Singapore lenders were expected to report 10 basis points net interest margin expansion in April-June on a quarter-to-quarter basis, the highest over the last eight quarters, outperforming Asian peers, JPMorgan analysts said last month.

Net profit for DBS came in at S$1.82 billion ($1.30 billion) in April-June versus S$1.7 billion a year earlier and compared with an average estimate of S$1.69 billion from five analysts compiled by Refinitiv.

Singapore banks are also benefiting from a rebound in economic activity in the Asian financial hub after the government relaxed most of its COVID-19 restrictions in April.

However, a sharp pullback in global stock markets this year has battered investor sentiment, impacting the large wealth management businesses of banks such as DBS.

The bank said net fee income fell 12% in the second quarter due to lower contributions from wealth management and investment banking that more than offset increases in other fee activities.

DBS said its ongoing stress tests indicated that its asset quality continues to be robust. It maintained its full-year loan growth forecast at mid-single digit percent.

($1 = 1.3801 Singapore dollars)

(Reporting by Anshuman Daga; Editing by Sam Holmes and Muralikumar Anantharaman)

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BIRMINGHAM, Ala. (AP) — A federal oversight board ordered the United Mine Workers of America to pay more than $13 million in compensation to an Alabama coal company where members have been on strike for more than a year, a ruling the union said Wednesday it would challenge.

The National Labor Relations Board said Warrior Met Coal Mining was due some $13.3 million for costs including increased security, damage repair and lost revenues from unmined coal, and individuals were due almost $30,000, mostly for damage to vehicles. Both amounts included interest.

The union, with roughly 1,100 members who went on strike against the Alabama-based company on April 1, 2021, called the NLRB assessment an “outrageous” decision that it planned to fight.

“Is it now the policy of the federal government that unions be required to pay a company’s losses as a consequence of their members exercising their rights as working people? This is outrageous and effectively negates workers’ right to strike. It cannot stand,” international union president Cecil E. Roberts said in a statement.

A company representative did not immediately return an email seeking comment. The NLRB issued the order on July 22.

Both the union and Warrior Met have blamed each other for the prolonged strike, which centers on the company’s mining operations southwest of Birmingham. The two sides have talked as recently as last week, a union spokesman said.

The union is striking at Warrior Met’s No. 4 and No. 7 mines, a preparation plant and a central shop, all in Tuscaloosa County. The union and Warrior Met reached an agreement to end the walkout a few days after it began, but members rebuffed the settlement.

United Mine Workers has said union members gave up money to bring the company out of the Walter Energy bankruptcy six years ago, and workers have sought improved health benefits. Warrior Met contends it offered workers a competitive package that would protect jobs and the company’s future.

In May, Warrior Met reported net income of $146.2 million in the first quarter compared with a loss of $21.4 million for the same period last year. The company said the strike cost it $6.7 million for the quarter because of security and other expenses, and having the mines idle cost $3 million.

Warrior Met said it produced 1.5 million short tons of coal in the first quarter compared with 2.2 million short tons in the first quarter last year.

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Benchmark U.S. crude oil for September delivery fell $3.76 to $90.66 a barrel Wednesday. Brent crude for October delivery fell $3.76 to $96.78 a barrel.

Wholesale gasoline for September delivery fell 15 cents to $2.91 a gallon. September heating oil rose 3 cents to $3.41 a gallon. September natural gas rose 56 cents to $8.27 per 1,000 cubic feet.

Gold for December delivery fell $13.30 to $1,776.40 an ounce. Silver for September delivery fell 25 cents to $19.89 an ounce and September copper fell 5 cents to $3.47 a pound.

The dollar rose to 134.12 Japanese yen from 133 yen. The euro fell to $1.0154 from $1.0174.

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By Sabrina Valle

HOUSTON (Reuters) – Occidental Petroleum Corp is keeping its total 2022 production guidance at around 1.55 million barrels of oil equivalent per day (boed) despite target reductions in the U.S. Permian basin, Chief Executive Vicki Hollub said on Wednesday.

Occidental reduced its 2022 production outlook in the Permian basin to between 516,000 and 526,000 boed, from 527,000 to 537,000 boed projected in May.

(Reporting by Sabrina Valle; editing by Jonathan Oatis)

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A look at the day ahead in markets from Anshuman Daga

Markets are dealing with dual flashpoints today on inflation and cross-straits tensions.

Fed speakers have put paid to market thinking they will lighten their inflation war while, across in East Asia, China has its warheads trained on Taiwan as Nancy Pelosi hails Taiwan’s free society.

China furiously condemned the trip by the speaker of the U.S. House of Representatives, which marked the highest-level U.S. visit to Taiwan in 25 years.

Geopolitical tensions are simmering as China embarks on an unprecedented six days of military drills surrounding Taiwan. Risks of escalation are mounting, warn security analysts.

For Fed watchers, concerns of faster U.S. rate rises are back on the radar after St. Louis Federal Reserve President James Bullard said rates will need to be ‘higher for longer’ if inflation does not recede.

That came after a trio of Fed officials from across the policy spectrum signalled that they remain resolute on the need to make policy more restrictive.

Traders now see a chance of about 44% that the Fed will hike by another 75 basis points at its next meeting in September. Heightened rate expectations punctured a two-week rally in U.S. equity markets.

On the data front, a slew of services and composite PMIs of developed economies such as Germany, Eurozone, U.K. and the U.S. for July will be released across today.

In the U.S., durable goods orders are expected to grow 1.9% m/m in Jun from 0.8% in the prior month while factory orders likely slowed to 1.2% m/m in Jun from 1.6%.

Asian stocks are stuck in a narrow range on Wednesday, with Japan recovering from two-week lows while Korean and Hong Kong shares edged up.

Key developments that should provide more direction to markets on Wednesday:

Major earnings: Societe Generale, Infineon Technologies, Commerzbank, Yum! Brands and eBay

Key Asian data: July releases of the S&P Global PMIs for Hong Kong, Singapore and India and thee Caixin China Services PMI

(Reporting by Anshuman Daga; Editing by Vidya Ranganathan)

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BERLIN (Reuters) – BMW saw a drop in its automotive margin on earnings before interest and taxes to 8.2% from 15.8% last year as the consolidation of its Chinese joint venture BMW Brilliance dampened earnings, it said on Wednesday.

The carmaker reported a group net profit of 3.05 billion euros ($3.10 billion) from 4.8 billion euros last year.

It confirmed its outlook of 7-9% for the automotive segment but said it expects full-year deliveries to be slightly below last year.

($1 = 0.9823 euros)

(Reporting by Victoria Waldersee)

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By Tom Sims and Marta Orosz

FRANKFURT (Reuters) -Germany’s Commerzbank swung on Wednesday to a bigger-than-expected second-quarter net profit, helped by higher interest rates and increased commission income, and confirmed it was on track to meet its profit target this year.

The return to profit at Germany’s No. 2 bank is a victory for CEO Manfred Knof, who joined the company at the start of 2021 to carry out a 2 billion euro restructuring programme involving hundreds of branch closures and 10,000 job cuts to get back on a sustainable path.

Net profit of 470 million euros ($478.60 million) for the three months through end-June compares with a loss of 527 million euros a year earlier. Analysts had on average expected a profit of 370 million euros, according to a consensus forecast published by Commerzbank.

Investors have been watching earnings reports of major lenders in Europe for signs that a weaker economy, higher interest rates and the war in Ukraine are weighing on their operations and outlooks.

Some of them, including rival Deutsche Bank, have reported surprisingly strong quarterly reports but voiced concerns about the economic outlook.

Germany’s banks are at the centre of a geopolitical storm because the country is particularly dependent on Russian energy and its economy will be hit hard by any supply shortages.

“We are well equipped for upcoming challenges,” said Bettina Orlopp, chief financial officer of Commerzbank.

The bank said that it took charges of 228 million euros in the quarter related to the war in Ukraine, and that it had on hand 564 million euros for any further war-related effects or impact from energy supply disruptions.

Commerzbank reiterated that it would maintain its profit target of more than 1 billion euros for the full year, though it slightly raised its cost target to 6.4 billion euros from 6.3 billion euros.

During the same period last year, the German lender generated a loss due to its restructuring and after a write-off to end an outsourcing project.

Niklas Kammer, an analyst with Morningstar, said ahead of the earnings that profitability “remains challenging” for Commerzbank.

“The competitive German banking market leaves little opportunity for Commerzbank to significantly outearn its cost of equity,” he said.

($1 = 0.9820 euros)

(Reporting by Tom Sims and Marta Orosz; Editing by Rachel More and Muralikumar Anantharaman)

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WASHINGTON (AP) — A House oversight panel on Tuesday subpoenaed gunmaker Smith & Wesson for documents on the manufacture and sale of AR-15-style semi-automatic rifles after its CEO refused to appear for a hearing on the firearms frequently used in mass shootings.

The House probe found that five major gunmakers took in a combined total of $1 billion in revenue from the weapons over the last decade, and they were at times marketed as a way for young men to prove their masculinity even as they became a “weapon of choice” for mass shooters.

A mass shooting that killed seven people and injured three dozen others at a July 4 parade in the Chicago suburb of Highland Park was carried out with Smith & Wesson’s M&P 15 semi-automatic rifle.

CEO Mark P. Smith originally agreed to testify last week before the Committee on Oversight and Reform along with the heads of two other companies, but pulled out five days before, Democratic Chair Carolyn Maloney of New York said in a statement. The company also hasn’t provided all the information and documents, including data about the sales of its AR-15-style firearms, asked for in its investigation into gun manufacturers, she said. The subpoena also seeks the Massachusetts company’s internal communications around mass shootings.

The company didn’t immediately respond to an email seeking comment.

The hearing with gun executives came shortly before the House passed legislation to revive a ban on certain semi-automatic weapons, including the AR-15, the first vote of its kind in years. But the measure is expected to stall in the Senate, with Republicans solidly opposed.

Gunmakers say the weapons themselves aren’t to blame for mass shootings, which are on the increase but rare overall. Gun-rights supporters argue the firearms are also popular with many people who buy them for self-defense and have a right to own them under the Second Amendment.

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NEW YORK (AP) — The crypto division of the online brokerage Robinhood will pay a $30 million penalty to New York state for failing to comply with regulations governing money laundering and cybersecurity, the state’s Department of Financial Services announced Tuesday.

The department said an examination of Robinhood Crypto’s operations from Jan. 24, 2019, through Sept. 30, 2019, found that the company’s compliance with banking regulations had not kept up with its growth.

“As its business grew, Robinhood Crypto failed to invest the proper resources and attention to develop and maintain a culture of compliance—a failure that resulted in significant violations of the Department’s anti-money laundering and cybersecurity regulations,” Adrienne A. Harris, superintendent of the state’s Department of Financial Services, said in a news release.

Department of Financial Services officials said Robinhood Crypto improperly certified to the state that it was in compliance with transaction-monitoring and cybersecurity regulations despite its deficiencies in those areas. Additionally, the officials said, the company failed to provide a dedicated phone number for consumer complaints on its website, as is required.

In addition to paying the $30 million penalty, Robinhood Crypto will be required to retain an independent consultant who will evaluate the company’s regulatory compliance, the officials said.

Cheryl Crumpton, associate general counsel for Robinhood Markets Inc., said in a statement, “We are pleased the settlement in principle reached last year and previously disclosed in our public filings is now final. We have made significant progress building industry-leading legal, compliance, and cybersecurity programs, and will continue to prioritize this work to best serve our customers.”

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First Report: Israel’s Ramon Airport Set To Open To Palestinian Passengers

A pilot program will see the first charter plane fly to Turkey with only Palestinian passengers mainly from the southern West Bank.

An Israeli plan permitting Palestinian travelers to fly out of one of its airports has received official approval. A first charter flight of passengers from the West Bank is set to leave from Ramon International Airport near Eilat in southern Israel later this month.

Amir Assi, of Al-Amir Group, told The Media Line that after meeting with Israeli civil administration officials on Monday he was given the nod to advertise for a pilot program to fly the first charter plane to Antalya, Turkey for only Palestinian passengers mainly from the southern West Bank.

“For the plan to succeed and (to ensure) the security concerns are addressed, we chose to allow travelers to carry with them the minimum,” Assi said.

The first charter flight will take place on Sunday, August 21.

Assi explains that the focus to find travelers at first will be on Bethlehem and Hebron in the southern West Bank, because the distance is relatively shorter to the remote airport.

It’s unclear yet if Palestinians from the Gaza Strip will be included in the pilot program.

“Travelers will experience the same steps that passengers go through when they leave through Allenby Bridge,” according to Assi, whose company makes connections between tourists from the Palestinian Authority and the rest of the Arab world.

Palestinians crossing the Allenby Bridge checkpoint connecting Jordan and the West Bank first must go through several Israeli security checkpoints.

The only outlet for the Palestinians is Queen Alia Airport in Jordan, but first they have to travel through Israeli-run border crossings to Jordan, which operate under limited hours, and are usually packed with travelers.

“To speed up the process, travelers are asked to take with them small pieces of luggage, but they can come back with large suitcases,” he said.

Assi, who also serves as a consultant for several airlines, says he has been working on the initiative for more than a year, insisting that it will benefit Palestinians by saving them money.

“When a Palestinian leaves through Jordan, sometimes they have to spend a night before catching a flight, now they can flight directly to their destination,” Assi said.

Sources tell The Media Line that the Palestinian Authority has been informed of the Israeli plan, but it has not responded officially to the news, and has yet to say if the PA will participate.

Palestinian Authority Prime Minister Mohammad Shtayyeh has demanded the opening of al-Quds Airport in Qalandia in the West Bank and the removal of all obstacles in order to allow people and goods to move freely to and from the Palestinian territories.

He called on Israel to open al-Quds Airport to the Palestinians in what appears to be a direct rejection of the proposal to allow Palestinians to fly out of Ramon Airport.

Initially, news of the Israeli proposal received mixed reviews. While those in favor of the plan say it will benefit Palestinians, those who oppose the plan are demanding their own airport.

Talaat Alawi, head of With Dignity – the National Campaign for Palestinian Freedom of Movement, told The Media Line that “Palestinian citizens have the right to decide for themselves. No one decides for him.”

Booking will be done through Palestinian tour operators in the West Bank. Passengers will meet in one centralized location before boarding charter buses, and then will have to go through an Israeli checkpoint for a security check before the long ride to the airport, along with a security escort.

Ramon International Airport, which opened in January 2019, has struggled to attract airlines and passengers, and Israeli officials are hoping this plan will inject new life into the airport.

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