PacWest shares fell as much as 60 percent in after-hours trading in New York amid talks to bail out the US regional bank.
The bank has instructed boutique investment banker Piper Sandler to help him explore strategic options including a sale, according to Bloomberg.
Shares of US regional Western Alliance Bank also fell as much as 38 percent in after-hours trading as investors remain concerned about the worst banking crisis since 2008.
It comes after the Federal Deposit Insurance Corporation (FDIC) took over First Republic Bank on Monday before securing a sale to JPMorgan.
Just six weeks ago, Backoist said it boosted its access to liquidity by raising $1.4 billion through a lending facility from Apollo-backed investment firm Atlas SP Partners.
The reason for the banking turmoil was the collapse of Silicon Valley Bank, Signature Bank and cryptocurrency-focused lender Silvergate in March.
Read the latest updates below.
08:16 a.m
PacWest insists deposit inflows aren’t ‘out of the ordinary’
Backwest Bancorp said deposits had increased since March and confirmed it was in talks with several potential investors.
The California-based lender is seeking to calm markets after a 60 percent rout in equities made it a new focal point for concern about the health of US regional lenders. She said in a statement:
The bank did not see unusual inflows of deposits following the sale of First Republic Bank and other news.
Our cash flow remains strong and has exceeded our unsecured deposits.
Shares in the bank fell after US trading hours on Wednesday after Bloomberg reported that it was considering strategic options including selling.
Baquist added, “Recently, the company has been approached by several potential partners and investors – discussions are ongoing. The company will continue to evaluate all options to maximize shareholder value.”
08:10 a.m
Upcoming sales drop as shoppers grapple with inflation
Next sales fell less than expected in the first quarter as cash-strapped shoppers juggled rising fashion and household bills.
The clothing and homewares stall said full-price sales fell 0.7 percent in a weak start to the year.
Although the decline in sales was less than expected, Next maintained a pessimistic outlook and said sales were likely to decline by 5% in the second quarter, in part due to cooler weather and lower demand for weddings and other events.
It comes as the cost-of-living crisis shows little sign of abating and shoppers are having to deal with rising food, rent, mortgage and energy bills.
The retailer, which has been raising the prices of its clothing to help offset rising input costs, is a pioneer of the retail sector in the UK with hundreds of stores and a successful website.
Shares have risen 7 percent in the past year and are up 0.6 percent in early trading today.
08:03 a.m
Markets are temporary when open
It was a mixed start to the day in the markets as traders digested the US Federal Reserve’s quarter-point interest rate hike – and amid banking turmoil in America.
The FTSE 100 started the day barely 0.1 a piece lower at 7768.41 while the FTSE 250 started the day flat at 19359.34.
07:56 am
Shell’s earnings renew calls for an appropriate windfall tax
Shell’s better-than-expected earnings renewed calls for tougher taxes on oil companies.
Shadow chancellor Rachel Reeves said: “Shell reported profits of £7.6bn in the first quarter, but the Conservatives are refusing to impose a proper windfall tax on the oil and gas giants to freeze council tax this year, as is Labour.
“We will deal with the cost of living crisis, and put workers first.”
Liberal Democrat leader Sir Ed Davey said:
Energy giants like Shell should not be able to turn a huge profit while families across the country struggle to make ends meet.
Shell’s recent earnings show once again the urgent need to impose a strong windfall tax on the energy majors.
Rishi Sunak’s refusal to plug the sudden loopholes of the big energy companies shows just how disconnected this conservative government is from the struggles families are facing today.
TUC General Secretary Paul Nowak said the government needed to “put an end to energy violence”.
He added, “These exorbitant profits raise the question – will the government have the backbone to properly tax the energy giants?”
07:51 a.m
Shell’s profits in the first quarter are higher than when Russia first invaded Ukraine
After Shell reported higher expected earnings, Interactive Investor’s chief investment officer Victoria Scholar offered this analysis:
Shell reported first-quarter profit of $9.65 billion, beating analysts’ expectations of $8.14 billion and higher than its first-quarter 2022 profit of $9.13 billion when Russia first invaded Ukraine.
The oil giant kept its share buyback program unchanged at $4 billion over the next three months.
Strong trading amid volatile pricing environments in Europe and America helped Shell earnings beat analysts’ expectations and offset the impact of weak oil and gas prices and lower refining margins.
Its chemical results also improved on the back of better margins thanks to lower utility and raw material costs.
Unlike BP, Shell has maintained a share buyback program, returning more cash to shareholders. Over the past year, shares in Shell have risen about 5 percent, which is less than BP’s performance, which was up more than 18 percent as of Wednesday’s close.
Soaring profits for Shell and BP have raised questions about whether the oil giants, which benefited from last year’s commodity boom in the wake of the outbreak of war in Ukraine, should pay more windfall taxes to redistribute excess profits to essential government services.
The counterargument is that those profits may not last, especially with weak underlying oil prices amid sluggish global demand. During Covid, for example, oil prices fell sharply, resulting in an annual loss for Shell in 2020 of about $20 billion.
07:43 a.m
Shell profits amounted to 7.6 billion pounds in the first three months of 2023
The company said oil giant Shell made nearly $1.7 billion (£1.4 billion) in profits more than experts had expected in the first three months of the year.
The company joined rival BP in reporting results that beat expectations this week.
Shell said its adjusted profit rose 5.7% compared to the same quarter last year, to $9.6bn (£7.6bn).
The company said that compared to the last three months of 2022, it experienced unfavorable tax movements, and the price at which it was able to sell oil and gas fell.
However, Shell said it was able to offset some of that by reducing operating expenses and increasing its chemicals and products trading business.
Like rival BP, Shell’s results immediately prompted calls for the government to take a tougher line against the oil majors. Alexander Kirk, activist at Global Witness, said:
Despite the starkly evident inequality at the heart of our energy system, government appears to be making the same mistakes again.
The simple fact is that the windfall tax didn’t work, and new evidence shows that, through loopholes in the UK tax system, UK taxpayers pay billions in tax rebates to oil and gas companies.
07:32 a.m
Vodafone and CK Hutchison unveil £15 billion combined mobile operator
Vodafone and CK Hutchison are said to be preparing a £15 billion UK deal that would create Britain’s largest mobile operator.
The deal will value the combined entity’s equity at around £9 billion, with debts of £6 billion, according to the Financial Times, and it will have around 28 million customers.
The prospectus added that the parties are expected to unveil the merger later this month following the appointment of Margherita Della Valle as Vodafone’s new chairwoman.
07:03 am
5 things to start your day
Good morning.
Bacoist shares fell 50 percent in after-hours trading in New York amid talks to bail out the US regional bank.
The bank has instructed boutique investment banker Piper Sandler to help him explore strategic options including a sale, according to Bloomberg. It comes after the Federal Deposit Insurance Corporation (FDIC) took over First Republic Bank on Monday before securing a sale to JPMorgan.
5 things to start your day
1) He urges the mayor to stop slandering Britain’s high wages | UK-US boardroom pay disparity ‘understood’
2) Broadcasters say coverage of the coronation includes anti-monarchy views | The chiefs pledge to be “representatives” of modern Britain
3) The Federal Reserve raises the US interest rate to the highest level in 16 years despite the banking crisis | The decision to continue raising interest rates came despite weeks of turmoil in financial markets that saw the collapse of three US banks in the past two months.
4) What is the US debt ceiling and what would it mean if it was not raised? | The government runs the risk of being unable to meet its public spending commitments
5) Airbnb encourages people to stay with strangers to save money on holidays | The vacation rental company is returning to its roots with single room rentals
What happened overnight
Wall Street stocks fell on Wednesday after the Federal Reserve raised its benchmark interest rate by another quarter of a percentage point as widely expected, extending the central bank’s most aggressive hiking cycle since the 1980s.
The Dow Jones Industrial Average ended a choppy session, down 0.8%, at 33,414.24.
The broad-based S&P 500 fell 0.7 percent to 4,090.75, while the technology-rich Nasdaq Composite lost 0.5 percent, at 12,025.33.
Bond yields fell after Federal Reserve Chairman Jerome Powell indicated that the central bank will adopt a wait-and-see approach to further interest rate hikes after confirming the 10th consecutive increase.
The benchmark yield on the 10-year Treasury fell to 3.36% from 3.44% late Tuesday.
The two-year yield, which moves further based on Fed expectations, fell to 3.88% from 3.99%.
By Thursday morning, global stock markets fell while the Japanese yen rose in reaction to the Fed’s policy statement and signs of stress at another US regional bank.
US bank Backwest Bancorp reported problems overnight, reminding investors of the precarious health of some banks despite assurances from regulators about containing the crisis that began with the collapse of Silicon Valley and Signature Bank in March.
The Federal Reserve raised interest rates by a quarter of a percentage point and signaled it might pause further hikes, giving officials time to assess the fallout from bank failures, wait for a political solution to the US debt ceiling, and keep an eye on inflation.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, in trade weakened by Japanese holidays this week.
China’s main index opened lower as mainland markets bounced back after the Labor Day holiday but rebounded, led by state-owned enterprises.
Investors are increasingly convinced that central banks across Asia will follow the Fed in quickly closing this policy tightening cycle and are preparing to cut interest rates later this year.
Australia, which acts as a proxy for risk sentiment across the region, snuck in a surprising rate hike less than 40 hours before Powell & Co. delivers what could be the last of the cycle. Overnight swaps show that investors expect a quick end to the Australian dollar’s rally.
Malaysia made one rate hike for the year less than half a day ahead of the Fed. Philippine policymakers said last week that they are ready to lower their inflation expectations, which means less pressure to stay on the tightening path.
For Indonesia and South Korea, which have already halted their hiking campaigns, cuts may be closer. Bloomberg Economics sees Indonesia falling before year-end amid resilient rupiah, and the country’s two-year bond yields fell in Wednesday’s session to their lowest since February. Traders are betting that Korea can lower within 12 months.
There is an exception: New Zealand’s central bank saw interest rates raised again on May 24 before pausing for the remainder of 2023.
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