A survey of North American equities heading in both directions
On the rise
Cogeco Communications Inc. (CCA-T) rose 0.6 per cent after it second-quarter financial and subscriber results fell largely in line with the Street’s expectations.
Late Thursday, the Montreal-based company reported revenue of $731-million, narrowly lower than the consensus forecast of $734-million. However, adjusted EBITDA of $347-milllion was $1-million higher than anticipated.
“Overall, the company’s Canadian segment growth rate is benefiting from recent network expansions supporting subscriber loading as well as from the acquisition of Oxio,” said Scotia analyst Maher Yaghi. “Broadband subscriber loading in Canada was healthy as Oxio continued to have success both in and out of home. In the U.S., while broadband loading was negative, we have seen some improvement in the rate of the decline vs recent quarters. We don’t expect however at this stage to see a meaningful return to positive broadband loading given the continued pressure in the US from competitive cable and FWA offerings. FY2024 guidance remains unchanged calling for stable revenues and EBITDA and FCF to decline by 5-15 per cent year-over-year. We believe the guidance remains achievable.”
State Street‘s (STT-N) assets under management for the first quarter rose by nearly 20 per cent helping it post an increase in fee earned from managing clients, the company said on Friday, sending its shares up 2.5 per cent.
State Street services and manages investments for high-net-worth clients that include governments, institutions and investment companies. The bank had record US$4.3-trillion in assets under management (AUM) at the end of the March quarter, up from US$3.6-trillion last year.
However, its quarterly profit fell nearly 16 per cent to US$463-million, or US$1.37 per share, due to a 6-per-cent rise in its expenses, including US$130-million to replenish the Federal Deposit Insurance Corporation’s insurance fund.
In line with broader industry trends, State Street’s net interest income (NII) in the quarter declined 6.5 per cent to US$716-million in the quarter ended March. 31, from a year earlier.
CEO Ron O’Hanley said the bank’s fee revenue growth reflected robust performance across its Global Advisors and Front office solutions businesses, which, along with growth in servicing fees, more than offset lower trading revenues as volatility remained muted.
On the decline
Brookfield Asset Management (BAM-T) slid 1.2 per cent on a Financial Times report it is in advanced talks to acquire a majority stake in private credit manager Castlelake with an investment of more than US$1.5-billion.
The deal would also see Brookfield make a large investment in Castlelake’s funds, the report said, adding that talks between the companies are in the late stage and could still fall apart.
The deal comes at a time when the private capital groups have been struggling to raise funds, and investors in private equity funds are choosing to concentrate their investments with fewer, larger managers.
Castlelake, an alternative investment firm, has about US$22-billion in assets under management and invests in sectors such as specialty finance and aviation, according to the company website.
Corus Entertainment Inc. (CJR.B-T) fell over 26 per cent after it reported a loss attributable to shareholders of $9.8-million in its latest quarter compared with a loss of $15.5-million a year earlier as its revenue fell 13 per cent.
The television and radio broadcaster says the loss amounted to five cents per diluted share for the quarter ended Feb. 29 compared with a loss of eight cents per diluted share in the same quarter last year.
Revenue in what was the company’s second quarter totalled $299.5-million, down from $343.9-million a year earlier.
The drop came as television revenue in the quarter fell to $278.1-million compared with $321.5-million last year, while radio revenue slipped to $21.5-million compared with $22.3-million a year earlier.
On an adjusted basis, Corus says it lost three cents per share in the quarter compared with an adjusted loss of seven cents per share a year earlier.
In its outlook, Corus says it expects a year-over-year decline in television advertising revenue in its third quarter in a range of 10 to 15 per cent. It also says amortization of TV program rights is expected to decline in the quarter by a similar range on a year-over-year basis and that it will continue cutting costs.
MTY Food Group Inc. (MTY-T) plummeted 9.9 per cent in the wake of reporting its first-quarter profit fell compared with a year earlier as its revenue also declined.
MTY chief executive Eric Lefebvre says the results were hurt by reduced consumer spending and extreme weather, primarily in the first six weeks of 2024.
The restaurant franchisor and operator reported a profit of $17.3-million or 71 cents per diluted share for the quarter ended Feb. 29. The consensus projection on the Street was 84 cents.
The result was down from a profit of $18.4-million or 75 cents per diluted share a year earlier.
Revenue for the quarter totalled $278.6-million, down from $286.0-million in the same quarter last year, while same-store sales fell three per cent year-over-year in the first quarter. The Street was expecting $278.7-million.
MTY Group franchises and operates restaurants under more than 90 different banners in Canada, the United States and internationally.
Calgary-based Paramount Resources Ltd. (POU-T) dipped 2.3 per cent with the premarket announcement it has sold 6 million common shares of NuVista Energy Ltd. (NVA-T) in a block trade for aggregate cash consideration of $75-million.
The disposition represents 2.91 per cent of outstanding NuVista shares reported by the TSX as of April 11. Prior to the transaction, Paramount had direct ownership and control of 37.25 million shares, representing 18.05 per cent outstanding shares.
“The purpose of the Transaction was to monetize a portion of Paramount’s investment in NuVista Shares,” it said in a release.
JPMorgan Chase’s (JPM-N) profit rose 6 per cent in the first quarter, although its shares dropped 6.5 per cent after the bank’s forecast for its income from interest payments came in below analysts’ expectations.
High borrowing costs have helped lenders boost net interest income (NII), or the difference between what banks earn on loans and pay out for deposits.
However, banks are factoring in the possibility of cuts in interest rates by the U.S. Federal Reserve later this year.
JPMorgan, the biggest U.S. bank by assets, also added billions of dollars of loans to its balance sheet after acquiring failed First Republic Bank in May last year, fueling its interest income further.
CEO Jamie Dimon, however, stuck to his cautious tone, despite growing optimism in the last several months about a soft landing for the economy.
“Many economic indicators continue to be favorable. However, looking ahead, we remain alert to a number of significant uncertain forces,” he said in a statement.
Those include “unsettling” global conflicts, persistent inflationary pressure and quantitative tightening, Mr. Dimon said.
The bank expects full-year NII, excluding trading, of US$89-billion, depending on market fluctuations. That is up from a previous estimate of US$88-billion but lower than the US$90.68-billion analysts had expected, according to LSEG.
Despite the fall in shares, analysts believe that this was yet another “solid” quarter from JPMorgan.
“The bank’s financials looked very encouraging,” said Octavio Marenzi, CEO of management consultancy firm Opimas, adding that the only negative was the increase in non-interest expenses.
The lender also earmarked US$725-million to replenish a government deposit insurance fund, less than the US$3-billion it set aside at the end of last year.
JPMorgan was among the banking giants that made up the bulk of contributions to the Federal Deposit Insurance Corp fund, which was drained when three regional lenders failed last year.
Profit was US$13.42-billion, or US$4.44 per share, for the three months ended March 31, compared with US$12.62-billion, or US$4.10 per share, a year earlier.
“Consumers remain financially healthy, supported by a resilient labour market,” Chief Financial Officer Jeremy Barnum said.
JPMorgan’s succession plans have been in focus for months, especially after Morgan Stanley and Lazard named new CEOs.
Contenders for the top job include Jennifer Piepszak and Troy Rohrbaugh, recently appointed co-CEOs of JPMorgan’s expanded commercial and investment bank, and Marianne Lake, CEO of consumer and community banking.
“We do not have any reason to believe that Dimon will depart in the immediate future,” said Brian Mulberry, client portfolio manager at Zacks Investment Management.
“There is a lot of speculation around him being offered some kind of Cabinet position in a new administration but neither candidate nor Dimon have given any indication that the rumor is even remotely plausible right now.”
Citigroup’s (C-N) first-quarter profit fell 27 per cent but beat market expectations on Friday, while taking a US$483-million charge tied to CEO Jane Fraser’s sweeping reorganization.
Net income fell to US$3.4-billion, or US$1.58 per share, in the three months ended March 31, the bank said on Friday. That compares with US$4.6-billion, or US$2.19 per share, a year earlier.
“Last month marked the end to the organizational simplification we announced in September,” Fraser said in a statement. “The result is a cleaner, simpler management structure that fully aligns to and facilitates our strategy.”
Shares in the third-largest U.S. lender gave back early gains and lost 1.7 per cent.
CFO Mark Mason said the headcount reduction of 7,000 will appear in data over the next few quarters as the average notice period for laid-off employees was about 90 days.
The lender expects an annual savings of US$1.5-billion from overhaul, it said in an investor presentation.
The bank also paid US$251-million into a Federal Deposit Insurance Corp (FDIC) fund that was drained last year after three regional lenders failed.
Excluding one-time items, Citi’s adjusted profit of US$1.86 per share sailing past Wall Street expectations of US$1.23 each, according to LSEG data.
“Citigroup’s 1Q results were healthy and demonstrated that the company continues to make progress on its transformation,” said Ian Lapey, portfolio manager at Gabelli Funds, which hold shares in the bank.
Revenue fell 2 per cent on a reported basis to US$21.1-billion in the first quarter. Excluding one-off items such as the sales of businesses last year, it was higher in the quarter.
It forecast revenue between US$80-billion to US$81-billion for 2024, about 1.8 per cent to 3 per cent higher than US$78.5-billion in 2023.
The bank still faces challenges, including regulatory problems and an unsettled workforce. In February, Reuters reported U.S. regulators asked Citigroup for urgent changes to the way it measures default risk of its trading partners.
Citi is working to fix problems laid out in two enforcement actions from the U.S. Federal Reserve and the Office of the Comptroller of the Currency from 2020.
The consent orders direct the bank to repair deficiencies in its risk management, data governance and internal controls.
BlackRock (BLK-N) reported record assets under management (AUM) of about US$10.5-trillion in the first quarter and posted a 36-per-cent jump in profit on Friday as a rebound in global equity markets boosted its investment advisory and administration fees.
Global equity markets rallied in the first quarter as expectations grew that the world’s major central banks were done with monetary policy tightening and would pivot to rate cuts, resulting in a jump in AUM. The company’s AUM jumped 15 per cent in the first quarter from a year earlier, while investment advisory and administration fees, typically a percentage of AUM and BlackRock’s chief source of revenue, climbed nearly 8.8 per cent to US$3.63-billion.
Shares of the world’s largest asset manager closed down 2.9 per cent in Friday trading.
However, total net inflows fell to US$57-billion from US$110-billion a year earlier. Inflows continue to be soft as clients sit on the sidelines waiting for interest rate cuts to begin before dipping back into risky assets.
Analysts expect asset management industry flows to re-accelerate after interest rate cuts begin, as that would incentivize the movement of cash piles currently on the sidelines into risky assets.
The company’s total revenue jumped 11 per cent to US$4.73-billion in the quarter, driven by higher performance fees and technology revenue as well the impact of higher markets on average AUM.
BlackRock provides investment management and technology services to retail and institutional clients globally that includes sovereign wealth funds, insurance companies, and large corporations among others.
Its technology revenue jumped about 10.9 per cent to US$377-million, reflecting sustained demand for its Aladdin investment management platform.
Net income for the company rose to US$1.57-billion, or US$10.48 per share, in the three months ended March 31, from US$1.16-billion, or US$7.64 per share, a year earlier.
Wells Fargo (WFC-N) finished down 0.4 per cent after its profit fell 7 per cent in the first quarter on Friday as it became more costly to pay customers for deposits and demand from borrowers declined.
Still, adjusted profit of US$1.26 per share came ahead of analysts’ estimates of US$1.11, according to LSEG data, helped by a nearly 5-per-cent revenue growth in its banking unit.
The bank’s net interest income (NII) -- the difference between what it earns on loans and pays out for deposits -- fell 8 per cent to US$12.23-billion.
NII was hurt by higher interest rates on funding costs, including the impact of customers moving to higher yielding deposit products, as well as lower loan balances, the bank said.
“It’s certainly challenging these days to forecast NII, given all of the volatility that we’ve seen across a lot of the different data points, as well as some of the uncertainty that’s out there relative to how our clients are going to behave,” finance chief Michael Santomassimo told reporters on a call.
The bank reiterated on Friday that its NII could fall 7 per cent to 9 per cent this year.
The shifting U.S. interest rate outlook is an important factor that will drive banks’ future profits. U.S. consumer prices increased more than expected in March, leading financial markets to anticipate that the Federal Reserve would delay cutting rates until September.
Higher rates had boosted lenders’ earnings as they brought in more money from interest payments, but that benefit waned in the first quarter of 2024.
The increased interest rate have also made it more costly for banks, prompting them to pay more to keep deposits from customers who are seeking higher yields.
Tighter monetary policy could also crimp borrower demand and dampen economic activity, including Wall Street dealmaking.
Wells Fargo also paid US$284-million into a Federal Deposit Insurance Corp fund that was drained last year after three regional lenders failed.
Wells Fargo’s stock has climbed about 15.2 per cent so far this year, compared with a 10.4-per-cent gain in the S&P 500 Banks Index , which tracks large banks.
With files from staff and wires
David Leeder