Paul Allen, co-founder of Microsoft (NASDAQ:MSFT), died Monday at the age of 65 from complications of non-Hodgkin's lymphoma, according to a statement by his investment firm Vulcan. He was 65 years old.
Allen founded Microsoft in 1975 with Bill Gates. He was diagnosed with non-Hodgkin's lymphoma in 1982, and almost eight months later, doctors said he had beaten the disease.
Eight years after co-founding Microsoft, he officially resigned from the software company..
He became a billionaire in 1990 at the age of 37. Since leaving Microsoft, he had acquired the Portland Trail Blazers, founded Vulcan with his sister, established the Paul G. Allen Family Foundation, founded the Allen Institute for Brain Science, bought the Seattle Seahawks to keep the the NFL team from moving to California, and became a minority owner in the Seattle Sounders MLS team, among other accomplishments.
BlackRock CEO Laurence Fink and Blackstone Group's (NYSE:BX) chief Stephen Schwarzman are skipping Saudi Arabia's business conference, sometimes called "Davos of the Desert," after the disappearance and alleged murder of dissident journalist Jamal Khashoggi.
iShares MSCI Saudi Arabia ETF (NYSEARCA:KSA) closed down 1.8% on Monday.
JPMorgan (NYSE:JPM) CEO Jamie Dimon also decided not to attend, as reported earlier.
Executives from Goldman Sachs Group (NYSE:GS), Bank of America (NYSE:BAC), Citigroup (NYSE:C), HSBC Holdings (NYSE:HSBC), and Standard Chartered (OTCPK:SCBFF) are still scheduled to attend as of midday Monday, according to the Wall Street Journal.
Saudi officials indicated that the event will still proceed; it's set to begin Oct. 23.
Banks and other financial firms have worked for years to develop strong relationships with the Saudi government and its crown prince, Mohammed bin Salman, to get fees as the kingdom starts to move beyond oil and transform into an investment center.
Goldman Sachs (GS +1.1%) Q3 EPS consensus estimate of $5.38, revenue estimate of $8.35B. EPS exceeded consensus in all but one quarter in the past eight quarters. Beats have ranged from 5.4% for Q4 2016 to 29% for Q3 2016. It missed consensus by 0.4% for Q1 2017. The last beat, Q2 2018, was by 28%.
It will be the first earnings release since David Solomon took over as CEO, but reflects the last quarter under Lloyd Blankfein's reign, so investors will be looking for clues how Solomon's strategy for growing the company. They'll also be looking at the company's Marcus online consumer banking operations after reports that it's scaling back on loan-origination targets for next year.
Morgan Stanley (MS +0.5%) Q3 EPS consensus estimate of $1.45; revenue estimate of $9.54B; has exceeded consensus in each of the past eight quarters, with results beating by 9% to almost 29%. Q2 2018 EPS exceeded consensus by 17%.
Its investment-banking business is expected to perform better than its peers, although it's likely to decline on Q/Q basis. Investors will also be looking at how wealth management revenue fares as it's been declining for a few quarters.
BlackRock (BLK) Q3 EPS consensus estimate $6.87; revenue estimate of $3.64B. In the past eight quarters, BlackRock has missed consensus three times, with the most recent miss for Q2 2017, when it fell short by 2.8%. In Q2 2018, BLK beat consensus by 4.7%.
Being an asset manager, flows, of course, are crucial for BlackRock, and in Q2 they were disappointing. Growth in the ETF industry should fuel its iShares business. And while still small, its Aladdin platform platform may become more of a driver down the road.
Checking the end of the presentation slides finds some Q3 details. Among them is a $14.2M after-tax loss on the sale of $495M of securities during the quarter. There's also a $900K after-tax gain on discontinuing cash flow hedge and equity security impairments. Combined these will cut Q3 EPS by roughly $0.41.
Should the Flagship deal be terminated, there could be additional related costs.
Nicely higher earlier in the session, CUBI now flat for the day.
Fidelity Investments announces that it's getting into crypto by starting a new unit, Fidelity Digital Assets Services, to manage digital assets for hedge funds, family offices, and trading firms.
It will offer security and storage services, trade execution and client support services.
"Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors," says Abigail P. Johnson, chairman and CEO of Fidelity Investments. "We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use."
The new unit, now a stand-alone business, started in the Blockchain Incubator at Fidelity, which began in 2013. The incubator continues to research and experiment with blockchain and digital assets.
Janet Yellen, who ran the Federal Reserve for four years, says that President Trump's critical remarks about Federal Reserve policy could be damaging to the central bank, Bloomberg reports.
“To politicize it and to undermine that is something that is essentially damaging to the Fed and to financial stability,” Yellen said in Washington at the Mortgage Bankers Association's annual convention.
"Presidents can speak out if they choose to and give their opinions about policy. There’s no law against that, but I don’t think it’s wise," she added.
Still, she doesn't think Trump's criticism of the Fed raising interest rates will change the Fed's actions and she defended her successor, Jerome Powell.
The Fed last increased its benchmark interest rate last month, raising it by 25 basis points to 2.0%-2.25%. It's widely expected to hike interest rates again in December.
The 10-year U.S. Treasury note yield is up 0.8 basis point to 3.16% in midday trading; Financial Select Sector SPDR ETF (NYSEARCA:XLF) -0.09%.
Freddie Mac (OTCQB:FMCC -0.8%) releases new capabilities for automating the assessment of borrower income and assets that allows mortgage lenders to reduce documentation and speed-up the mortgage process.
The new capabilities use third-party expertise of Equifax (EFX +0.3%), FormFree, Finicity, LoanBeam, and Yodlee.
One of the new capabilities is an integrated solution for calculating self-employed borrower income. LoanBeam's technology is available through Loan Product Advisor.
Freddie Mac is also introducing Condo Project Advisor, which allows mortgage lenders to originate loans for condominiums faster and more efficiently.
American Express (AXP -0.3%) deploys Ethoca Eliminator to help merchants reduce time and costs for handling disputes.
With Ethoca Eliminator, American Express can help prevent disputes for U.S.merchants by providing more detailed transaction information in real-time to card members who call customer service when they don't recognize a charge on their account. The platform retrieves transaction information from merchants who are using the tool.
AmEX also plans to offer this capability online in the Q1 2019 so card members can view additional details about their charges made at participating merchants.
Wells Fargo (WFC +1.7%) Home Lending enters an agreement with eOriginal to enable the purchase of eNotes through Wells Fargo Funding, representing a step forward in the "digitization" of the mortgage industry.
An eNote is an electronic version of what traditionally was a paper document. As the evidence of the obligation to repay the mortgage loan, the eNote needs to be stored digitally in a way that ensures it has the same legal enforceability as paper. eOriginal provides this storage capability through its eVault service.
Wells Fargo will begin purchasing eNotes from a select group of lenders, to be followed by a broader market offering throughout 2019.
T. Rowe Price (TROW +0.4%) names David Giroux to the additional position of head of investment strategy.
Giroux is currently chief investment officer of U.S. Equity and Multi-Asset and portfolio manager of T. Rowe Price Capital Appreciation Fund.
Giroux will join the firm's Equity Research Advisory Committee as co-chair. A focus of this group will be to identify areas of controversy or opportunity that the larger market is mispricing or misunderstanding.
Seritage Growth Properties (SRG -1.6%) falls after Sears Holdings (SHLD -14%) files for Chapter 11 bankruptcy.
SRG says non-Sears tenants now represent about 70% of signed lease income, up from 20% at its start.
As of Sept. 30, 2018, Sears Holdings was a tenant in 82 properties under the Master Lease and 20 properties under the JV Master Leases, representing about $61.2M of annual base rent, or 31.4% of all base rent under signed leases.
The 3.5x-4.5x rental uplift SRG has historically achieved upon re-leasing space formerly occupied by Sears Holdings allows it to recover all rental income generated from SHLD by re-leasing only 25%-35% of formerly occupied space and deploying the capital required to bring the rental income online.
Seritage says it has almost $1.0B of cash on hand and committed capital to fund development activity and operations.
The REIT started in 2015 when it bought 235 properties and 31 joint ventures interests from Sears Holdings. At that time, under a master lease pact, Seritage leased back all but 11 of those properties to SHLD.
Evercore ISI analyst David Motemaden sees a 10% or lower chance that plaintiff hedge fund Mosten will win its lawsuit against Manulife Financial (NYSE:MFC).
MFC +0.8% in premarket trading.
Sees as unlikely that Canadian court would rule against the life insurer and possibly risk the financial stability of the Canadian life insurance industry.
Any monetary damages that Manulife would have to pay aren't likely to be "significantly adverse," he Motemaden writes. Large damages would hurt existing policy holders and may set a precedent where 2,500 contracts outstanding could be transferred to third parties.
Case may be decided by end of the year. However, an appeal is likely and it may eventually go to the Supreme Court of Canada.
Unless there's a settlement, case may go on for a few years; likely to overhang on shares for "foreseeable future."
Wells Fargo (NYSE:WFC) shares may be due for "another run" after the stock's recent retreat has it trading at a 10% discount to it peers, writes Macquarie's David Konrad; rating upgraded to outperform.
Konrad sees "meaningful" expense savings over next two years with buybacks pacing better than its peers.
WFC should also benefit from "encouraging signs from consumers" as well as a good outlook for credit vs. its peers as it's de-risked its loan portfolio.
Kimco Realty (NYSE:KIM) says it expects to benefit from considerable mark-to-market and long-term redevelopment opportunities following Sears Holdings' bankruptcy filing this morning.
Overall exposure is limited to to 14 leases, representing 0.6% of annualized base rent and 1.9% of Kimco's total gross leasable area.
“Today’s announcement may afford us the long-awaited opportunity to recapture boxes with significant mark-to-market potential in our core markets, and sparks several new redevelopment opportunities within our portfolio,” said Conor Flynn, Kimco’s Chief Executive Officer.
The 14 Sears/Kmart leases have an average base rent of $5.25 per square foot, compared with Kimco's portfolio average of $15.95.
Regulators may vote as soon as next week on removing federal oversight from Prudential Financial (NYSE:PRU) -- the last remaining nonbank firm with the "systemically important financial institution" designation, The Wall Street Journal notes.
That wouldn't be a surprise move, as it's been expected at some point since the beginning of the Trump administration. As recently as 2016, four nonbank firms were SIFI designated (AIG, GE Capital and MetLife have since been removed).
The Financial Stability Oversight Council's Tuesday agenda has a closed-door discussion of “an update on the annual re-evaluation of the designation of a nonbank financial company" which must be Prudential.
Nine of the council's 10 voting members are Trump appointees.
With rising interest rates hurting stock and bond prices, there's one asset that's outperforming almost every asset class this month--corporate loans, especially leveraged loans.
Leveraged loans have increased to $1.2T this year, exceeding the amount of outstanding junk bonds for the first time, the Wall Street Journal reports.
Leveraged loans made to companies with less than investment-grade ratings (or junk) have increased among investors because they pay relatively high interest that moves with benchmark interest rates, thus insulating loans from rate increases by the Fed.
Stocks and bonds, meanwhile, have been pulled down by concern over interest rates this week.
Though Treasury inflation-protected securities usually rise in value with interest rates, they have actually declined this year because there's been little change in inflation expectations even as the Fed raises rates.
CME Group (CME -0.5%) gets antitrust clearance from the U.S. Department of Justice for its proposed acquisition of NEX Group (OTCPK:NXGPF).
The transaction still needs to be cleared by the UK Competition and Markets Authority and remains subject to the sanctioning by the U.K. Court. CME still expects to close the purchase by the end of this year.
Cincinnati Financial (CINF -1.4%) estimates Q3 results will include pretax catastrophe losses of about $120M.
The estimate represents an impact on Q3 combined ratio of about 9.5-10.00 percentage points based on estimated property casualty earned premiums, above its 10-year historical average contribution of cat losses to combined ratio of 5.6 percentage points for Q3.
Estimate for catastrophe losses include $92M for Hurricane Florence, including about $7M for its reinsurance assumed operations known as Cincinnati Re.
CINF estimates Q3 property casualty combined ratio 96%-98%, including the effect of catastrophe losses. The ratio also reflects net favorable reserve development on prior accident years for the company's commercial casualty line of business.
Hurricane Michael is expect to affect Q4 2018 results, but the company can't predict its magnitude yet since many damaged areas are not yet accessible.
Cheaper valuations, a decent earnings seasons, and favorable seasonality may fuel a year-end stock rally, according to a note written by Morgan Stanley analysts led by Andrew Sheets.
“Earnings season may give some respite from the very ‘macro’ storylines of Fed policy, trade tensions and poor market liquidity,” they wrote.
Though the report considers the stock-rally scenario "plausible," growth shares are likely to continue their underperformance. And this year is on pace to record the highest frequency of unusually large moves since the financial crisis, the report says
In midday Friday trading, S&P 500 +0.1%, the Nasdaq +0.7%, and the Dow is off 0.1%.
Wells Fargo (WFC +1.4%) CFO John Shrewsberry highlights the company's cost-cutting in the bank's Q3 results. However, the company's expenses for equipment and advertising rose Y/Y, likely related to the company's push in technology and its ad campaign to improve its image in the wake of a scandal involving accounts that were opened without customers' permission.
"Our positive operating leverage reflected the benefit of the transformational changes we are making at Wells Fargo, including our focus on reducing expenses," he said in a statement.
Q3 total noninterest expense decreased 1.5% to $13.76B from $13.98B in Q2 and down 4.1% from $14.35B in the year-ago quarter.
Commission and incentive compensation at $2.43B in Q3 fell 8.1% from Q2 and is down 4.9% from a year ago.
Wells Fargo cut back on outside professional services--that expense fell 14% to $761M Q/Q, down 20% Y/Y.
Headcount declined, with active full-time equivalent team members at 261,700, down 1% from Q2 and 2% from a year ago.
Areas where costs increased: Employee benefits expenses of $1.38B, up 11% from Q2 and up 7.7% Y/Y; equipment expenses up 15% to $634M vs. Q2 and up 21% Y/Y; FDIC and other deposit assessments increased 13% Q/Q to $336M; advertising and promotion expenses at $223M, though down slightly from $227M in Q2, is up 63% Y/Y.
Eaton Vance (NYSE:EV) assets under management nudge up to $459.8B as of Sept. 30, 2018 from $453.2B at July 31, 2018, the close of its third fiscal quarter.
By investment mandate, equity AUM $124.8B vs. $122.5B; fixed income $77.8B vs. $76.8B; floating-rate income $43.9B vs. $43.0B; alternative $12.8B vs. $13.5B; portfolio implementation $118.4B vs. $115.0B; and exposure management $82.1B vs. $82.4B.
Wells Fargo (NYSE:WFC) rises 2.0% in premarket trading even as Q3 EPS, adjusted for redemption of preferred stock, fell short of consensus by three cents.
Q3 EPS was $1.13, excluding the effect of Series J preferred stock redemption, EPS would have been $1.16. That compares with 98 cents in Q2 and 83 cents a year ago.
"We saw positive business trends in the third quarter, including growth in primary consumer checking customers, increased debit and credit card usage, and higher year-over-year loan originations in auto, small business, home equity and personal loans and lines," says CFO John Shrewsberry.
Q3 net interest income $12.6B, up $31M from Q2 and up 1% from a year ago; net interest margin 2.94% improved 1 basis point from Q2 and up 8 bps from a year earlier.
Total average loans of $939.5B, fell $4.6B from Q2; commercial loans fell $1.2B from June 30, 2018, predominantly from a $2.8B decline in commercial real estate loans, partly offset by $1.5B growth in commercial and industrial loans.
Total average deposits $1.3T, down $5.0B from Q2.
Net loan charge-off rate 0.29% vs. 0.26% in Q2 and 0.30% a year ago.
Net income by segment:
Community Banking $2.82B vs. $2.50B in Q2 and $1.88B a year ago.
Wholesale Banking $2.85B vs. $2.64B in Q2 and $2.31B a year ago.
Wealth and Investment Management $732M vs. $445M in Q2 and $719M a year ago.
ROE 12.0% vs. 10.6% at Q2 end and 9.0% at Q3 2017 end.
Book value per common share $37.55 vs. $37.41 in prior quarter and $36.92 a year ago.
Citigroup (NYSE:C) climbs 2% in premarket trading after Q3 EPS of $1.73 beat consensus of $1.68 and compares with $1.42 a year ago; net income rose to $4.62B from $4.49B in Q2 and $4.13B a year ago.
“Our results this quarter showed solid year-over-year revenue growth across many of our businesses, including Fixed Income, Treasury and Trade Solutions, Securities Services, the Private Bank, and our consumer franchise in Mexico," says Citi CEO Michael Corbat.
Effective tax rate 24% vs 34% a year ago.
Net income by segment:
Global Consumer Banking $1.57B, up 23% Q/Q, up 34% Y/Y.
Institutional Clients Group $3.12B, down 3% Q/Q, up 2% Y/Y; fixed income revenue $3.20B, up 4% Q/Q and 9% Y/Y.
Corporate/Other loss $67M, compares with $13M loss in Q2 and $83M loss in Q3 2017.
Q3 return on average common equity 9.6% vs. 9.2% in Q2 and 7.3% in Q3 2017; common equity Tier 1 capital ratio 11.8% vs. !2.1% in Q2 and 13.0% a year ago.
Book value per share rose to $72.88 vs $71.95 in Q2 and $78.81 a year ago.
End-of-period loans $675B, up 3% Y/Y, ex-forex up 4%; end-of period deposits $1.0T, up 4% Y/Y, ex-forex up 5%.
Q3 total cost of credit $1.97B, up 9% Q/Q, down 1% Y/Y.
Aflac's (NYSE:AFL) offering of ¥53.4B (par value) in yen-denominated notes consists of ¥29.3B of 1.159% senior notes due 2030, ¥15.2B of 1.488% senior notes due 2033, and ¥15.2B of 1.750% senior notes due 2038.
Sees using net proceeds for general corporate purposes.
KKR (NYSE:KKR) will acquire Quadion LLC, d.b.a. Minnesota Rubber and Plastics, from Norwest Equity Partners, its second acquisition of a middle-market business in the industrial sector being funded through KKR's Americas XII Fund.
Terms of the deal weren't disclosed; expected to close by year-end.
Fully committed financing was led by sole arranger KKR Capital Markets and is being provided by Crescent Mezzanine Partners and PSP Investments Credit USA LLC.
MRP makes engineered elastomer and thermoplastic solutions for medical, water, industrial, and other end markets.
JPMorgan Chase (NYSE:JPM) rises 1.4% in premarket trading after Q3 EPS $2.34 beats consensus of $2.26. Its Consumer & Community Banking unit drew in record net new money and the bank saw double-digit growth in card sales and merchant-processing volume.
Compares with $2.29 in Q2 and $1.76 a year earlier.
Net interest in come of $14.1B rose 7% driven by impact of higher rates, which includes lower Markets net interest income, as well as loan and deposit growth.
Average core loans (excluding Corporate & Investment Bank) up 2% Q/Q and up 6% Y/Y.
Provision for credit losses of $948M fell from $1.21B in Q2 and $1.45B a year ago; decrease driven by Consumer portfolio, largely reflecting net reserve releases in current period compared with a net build a year earlier.
Q3 return on common equity 14%, unchanged from Q2, and up from 11% in Q3 2017.
Q3 effective tax rate on a reported basis was 21.6% vs. 29.6% a year earlier.
Net income by segment:
Consumer & Community Banking $4.09B, up 20% from Q2, up 60% Y/Y.
Corporate & Investment Bank $2.63B, down 18% from Q2, up 3% Y/Y.
Commercial Banking $1.09B, flat from Q2, up 24% Y/Y.
Asset & Wealth Management $724M, down 4% Q/Q, up 7% Y/Y.
Corporate loss of $145M vs loss of $136M in Q2 and income of $78M in Q3 2017.
CEO Lou Conforti notes the company is actively planning redevelopment or is in discussions for 24 of its 28 "at-risk" department store spaces (which includes Sears exposure).
WPG's Sears exposure has fallen by 78% (or 47 locations) since 2015. Revenue from Sears accounts for 0.8% of total annualized rent for the total portfolio.
Conforti: "We need to disabuse the farcical notion of a Sears bankruptcy filing (whether or not it comes to fruition) will come as a surprise to us. We have taken the appropriate financial, operational and strategic measures, and as a result regard such events as an opportunity.”
About $300M-$350M of capital has been set aside to retrofit the previously mentioned 28 spaces over a 3-5 year period.
IIBK shareholders will receive 0.5 FIBK share per IIBK share, representing an implied purchase price of $22.73 per share based on Oct. 5 closing price, or an aggregate value of $181.3M, including a $5.4M cash consideration for option holders.
The CMYF holders will get 0.3784 FIBK class A common share per CMYF share, representing a purchase price of $17.20 per share, or an aggregate value of $21.5M.
FIBK sees the deals adding 3% to annual EPS in the first full year after the acquisition and beyond. The company also sees recovering minimal tangible book value dilution from the transaction in less than two years.
Consolidated-Tomoka Land (CTO) acquires the fee simple interest in eight single-tenant retail ground leases adjacent to the St. Johns Town Center mall in Jacksonville, FL, for about $32.3M.
The ground leases--on 10.45 acres--all have rent escalations during the initial term, most of which are every five years, and have a weighted-average remaining term of about 15 years.
Transaction is expected to be part of a 1031 like-kind exchange associated with land sales and possibly the recycling of certain multi-tenant income properties.
As a result of this transaction, Consolidated-Tomoka's income property portfolio has a total of 45 properties with aggregate net operating income of $32.6M and a weighted average lease duration for single-tenant income property portfolio of about 9.7 years.
Coinbase (COINB), one of the largest crypto exchanges, has seen the number of monthly U.S. customers trading on its platform declining 80% in the December 2017-September 2018 timespan, according to a study by Tribe Capital. During that period, Bitcoin lost about 60% of its value.
The Tribe findings jibe with another study, from Diar Ltd., that says Coinbase's U.S. dollar volume sank 80% from Q4 2017 to Q3 2018.
In a different, but related, development, Coinbase is shutting its index fund to re-focus on a new retail offer, The Block reports, citing a person familiar with the matter. The fund attracted fewer clients and raised less funds than expected.
Instead, Coinbase is starting a new feature called "Coinbase Bundle" that allows users to buy a bundle of coins listed on its exchange with a starting investment of as little as $25.
Banks' Q3 earnings season kicks off tomorrow with JPMorgan(JPM -2%), Citigroup (C -0.4%), Wells Fargo (WFC -0.2%), and PNC Financial (PNC -1.7%) all set to report before the bell.
Analysts will be looking at loan growth, technology expense, and continuing effects of tax reform. Expectations for trading unit performance are subdued.
Here's a look at their track records in terms of earnings surprise.
JPMorgan Q3 EPS consensus estimate is $2.26. Though the bank has beat earnings expectations since Q1 2016, the size of the earnings surprise has been narrowing to 3.15% in Q2.
Citigroup's expected to earn $1.68 per share; Its quarterly earnings have exceeded consensus since Q2 2015. For the past four quarters the percentage of the beat has sequentially declined to 4.5% in Q2 2018 from 7.6% in Q3 2017.
Wells Fargo Q3 EPS consensus estimate stands at $1.19. It's missed consensus twice in the past eight quarters. In Q2 2018, EPS fell short of consensus by 3.6%.
PNC Financial is expected to earn $2.73 per share. In the past eight quarters, it matched once (Q1 2018) and missed once (by 1.2% in Q1 2016). PNC beat by 5.4% in Q2 2018.