2024-10-15 19:53

Files to raise up to $25 bln via stock and debt offerings S&P, Fitch say offerings could help preserve credit rating Company also enters $10 bln credit agreement Offering may imply short-term liquidity worse than thought, analyst says Oct 15 (Reuters) - Boeing (BA.N) , opens new tab set out to shore up its sagging finances on Tuesday, announcing plans to raise up to $25 billion through stock and debt offerings and a $10 billion credit agreement with major lenders amid a production and regulatory crisis. It was not clear when and how much the planemaker would eventually raise, but analysts estimate Boeing needs somewhere between $10 billion and $15 billion to maintain its credit ratings, which are now just one notch above junk. Boeing has lurched from crisis to crisis this year, kicking off on Jan. 5 when a door panel blew off a 737 MAX jet in mid-air. Since then, its CEO departed, its production has been slowed as regulators investigate its safety culture, and in September, 33,000 union workers went on strike. The company is looking to shore up its finances with a cash-and-debt raise as it faces the possibility that its credit rating will be lowered after three straight quarters of burning through cash. The strike is costing roughly $1 billion a month , opens new tab, according to one analyst estimate, and to reduce costs the planemaker has also said it would cut 17,000 jobs. The company's shares were up 2.1% on Tuesday. S&P Global and Fitch warned of a downgrade last month. The ratings agencies said on Tuesday that the stock and debt sales could help preserve Boeing's investment-grade rating. "The supplemental credit facility also seems like a sensible precaution," S&P Global's Ben Tsocanos said. However, some analysts were not convinced. "We take the vagueness and breadth of the shelf announcement and the need for the temporary financing as implying that the banks are struggling to sell this issue to potential investors or lenders," said Agency Partners analyst Nick Cunningham, who suspended his recommendation and price target for Boeing's shares. Boeing said on Tuesday it had not drawn on the new $10 billion credit facility, arranged by BofA, Citibank, Goldman Sachs and JPMorgan, or its existing revolving credit facility. "These are two prudent steps to support the company's access to liquidity," Boeing said, adding that the potential stock and debt offerings will provide options to support its balance sheet over a three-year period. On Monday, Emirates Airlines President Tim Clark became the first senior industry figure to articulate fears over Boeing's ability to tackle its worst-ever crisis intact. "Unless the company is able to raise funds through a rights issue, I see an imminent investment downgrade with Chapter 11 looming on the horizon," Clark told the Air Current, an aviation industry publication. Boeing will use the funds for general corporate purposes, according to paperwork filed with the U.S. markets regulator on Tuesday. The planemaker had cash and cash equivalents of $10.89 billion as of June 30. MATURING DEBT The company and the Machinists union, which represents the striking workers in the U.S. Pacific Northwest, are yet to reach an agreement over a new contract and talks have become increasingly heated. U.S. Acting Labor Secretary Julie Su met with Boeing and the union in Seattle on Monday in a bid to break the deadlock. The planemaker was already reeling due to a regulator-imposed cap on production of its MAX jets after the mid-air cabin-panel blowout in January. Boeing has $11.5 billion of debt maturing through Feb. 1, 2026, and has committed to issuing $4.7 billion of its shares to acquire Spirit AeroSystems (SPR.N) , opens new tab and assume its debt. Boeing delivered 33 jets in September, down from 40 in August, as it slipped further in the delivery race with rival Airbus (AIR.PA) , opens new tab. Sign up here. https://www.reuters.com/business/aerospace-defense/boeing-files-registration-statement-securities-stock-sale-up-25-bln-2024-10-15/

2024-10-15 19:49

World Bank can multiply U.S. development aid several times, Banga says Trump backed $13 billion capital increase for World Bank World Bank's development lending can develop overseas markets for U.S. companies-Banga WASHINGTON, Oct 15 (Reuters) - World Bank President Ajay Banga on Tuesday said former President Donald Trump understands the value of international financial institutions and how their lending can lead to expanded markets for American companies overseas. Banga struck a sanguine tone when asked in a Reuters NEXT Newsmaker interview about the potential consequences for the World Bank should Trump win the Nov. 5 presidential election. Trump has been a frequent critic of multilateral institutions and their climate change efforts, while proponents of the conservative Republican Project 2025 agenda , opens new tab have argued in favor of U.S. withdrawal from the World Bank and International Monetary Fund. But Trump has frequently distanced himself from Project 2025. "President Trump was the one who actually authorized a capital increase in the IBRD (International Bank for Reconstruction and Development) when he was in the office," Banga said, referring to the World Bank's main lending arm. "At the end of the day, he understands the value, if you can put it in the terms that make sense for what he's trying to get done, for his administration's policies," he added. Trump's administration backed a $13 billion World Bank capital increase in April 2018 that boosted China's shareholding and voting power, but that came with lending reforms that raised borrowing costs for China and other middle-income countries. DEVELOPING MARKETS Banga said Trump knows there are very few other institutions that can take $1 of government money and multiply it four or 10 times for development lending that can help develop new markets for U.S. and other international companies. "And he understands the power of leverage in delivering greater value for that dollar," Banga said. "At the end of the day, if by doing the right development overseas, we can help to drive markets for American companies, that's great. If we can help to ensure that European companies benefit, that Indian companies benefit, this is good because it creates the links that you want." The World Bank's work to create jobs in borrowing countries also can help prevent future migration and refugee crises, said Banga, an Indian-born American citizen and former Mastercard CEO who was nominated to the World Bank's top job by President Joe Biden. "And so I think finding ways to ensure that we as a bank can answer the cause of development in different parts of the world is something that transcends one administration or the other," Banga added. Sign up here. https://www.reuters.com/world/banga-says-trump-understands-value-international-financial-institutions-2024-10-15/

2024-10-15 18:53

Loonie hits its weakest since Aug. 6 at 1.3838 Canada's annual inflation rate slows to 1.6% Chances of a 50-basis-point cut rise to 74% Price of U.S. oil settles 4.4% lower TORONTO, Oct 15 (Reuters) - The Canadian dollar steadied near a 10-week low against its U.S. counterpart on Tuesday, as investors raised bets on an outsized interest rate cut by the Bank of Canada after domestic data showed inflation falling below the central bank's 2% target. The loonie was trading nearly unchanged at 1.3796 to the U.S. dollar, or 72.48 U.S. cents, after touching its weakest intraday level since Aug. 6 at 1.3838. It follows nine straight days of declines for the currency, one day short of its longest losing streak since May 2017. Canada's annual inflation rate slowed more than expected to 1.6% in September as gasoline prices tumbled. "It's a close call, but we suspect that the big improvement in inflation, the still-high unemployment rate, and the still-sour consumer and business sentiment will be enough to prompt the Bank of Canada to opt for a 50 bp (basis point) rate cut later this month," Doug Porter, chief economist at BMO Capital Markets, said in a note. "After all, the BoC has dovishly signalled that they are now more concerned about downside risks to the economy and the possibility that inflation may drop too low." Investors see a 74% chance the BoC lowers its benchmark interest rate by half a percentage point at a policy decision on Oct. 23, up from roughly 50% before the data. It would be the first move greater than 25 basis points since the BoC's easing campaign began in June. Adding to headwinds for the loonie, the price of oil , one of Canada's major exports, settled 4.4% lower at $70.58 a barrel after a media report said Israel would not strike Iranian nuclear and oil sites, easing fears of a supply disruption. Canadian bond yields moved lower across the curve, with the 10-year down 7.2 basis points at 3.141%. Sign up here. https://www.reuters.com/markets/currencies/canadian-dollar-holds-near-10-week-low-after-inflation-miss-2024-10-15/

2024-10-15 18:16

Oct 15 (Reuters) - Progressive Corp (PGR.N) , opens new tab said on Tuesday its third-quarter profit more than doubled, driven by strong demand for personal auto insurance policies. Encouraged by expectations of a soft landing, individuals and businesses are spending on insurance policies despite higher prices. Wage growth and a relatively strong labor market have also given confidence to customers to buy policies. Net income of the insurer rose to $2.33 billion, or $3.97 per share, in the three months ended September 30, compared with $1.12 billion, or $1.89 per share, a year ago. The company had 29.3 million personal insurance policies in force, 15% higher than last year. Net premiums written jumped 25% to $19.46 billion, while its combined ratio was 89%, versus 92.4% last year. A ratio below 100% means the insurer earned more in premiums than it paid out in claims. Progressive also said it incurred catastrophe losses of $563 million in September related to Hurricane Helena. The company expects its vehicle business to incur catastrophe losses of nearly $325 million in October due to Hurricane Milton. The Mayfield Village, Ohio-based company's shares have risen about 58.1% in 2024 as of last close, compared with a 22.9% gain in the benchmark S&P 500 (.SPX) , opens new tab index. Sign up here. https://www.reuters.com/business/finance/progressives-quarterly-profit-more-than-doubles-strong-insurance-demand-2024-10-15/

2024-10-15 16:47

UnitedHealth expects pressure from government-supported health insurance businesses Shares of rivals Humana, CVS Health, Elevance, and Centene also fell UnitedHealth's third-quarter medical costs exceeded Wall Street estimates Oct 15 (Reuters) - UnitedHealth Group (UNH.N) , opens new tab provided a 2025 profit forecast below Wall Street estimates on Tuesday as it expects pressure across its government-supported health insurance businesses, and its shares fell 8%. The largest U.S. health insurer forecast a profit of as much as $30 per share. That upper end was below analysts' estimates of $31.18 per share, according to LSEG data. UnitedHealth set next year's forecast "more conservatively than is typical" due in part to payment cuts from the government for Medicare plans and low state payment rates for Medicaid plans for low-income people, CEO Andrew Witty said in a conference call with analysts. The company said it would provide a more detailed forecast in December. Demand for healthcare services under the government's Medicare plans for people aged 65 years and older or those with disabilities has surged since late last year as many older adults opted for procedures they had delayed during the COVID-19 pandemic. The company, along with other health insurers, has faced elevated medical costs as a turnover in people enrolled in Medicaid left insurers with more sick patients. "Although (UnitedHealth) historically guides conservatively initially, we believe today's guidance is reflective of the uncertain industry and cost trend backdrop," Mizuho analyst Ann Hynes said in a note. The insurance bellwether's comments also dragged down shares of rivals Humana (HUM.N) , opens new tab, CVS Health (CVS.N) , opens new tab, Elevance (ELV.N) , opens new tab and Centene (CNC.N) , opens new tab around 2% to 5%. The forecast also factored in hospitals seeking higher reimbursements from insurers, which Chief Financial Officer John Rex said the insurer was "actively addressing." UnitedHealth's third-quarter medical costs exceeded Wall Street estimates as the company paid out more due to persistently high demand for healthcare services while receiving lower reimbursements on government-backed plans. The company also trimmed the higher end of its 2024 adjusted profit forecast by 25 cents to $27.75 per share, partially due to a hit of 10 cents per share related to the February cyberattack on UnitedHealth's technology unit, Change Healthcare. The company now sees a business disruption impact of $705 million, or about 75 cents a share, this year from the hack that caused massive payment and other disruptions across the United States. UnitedHealth issued billions of dollars in loans to providers affected by the hack and incurred costs related to notifying customers of the breach. Change is also working to add new customers after losing business to smaller rivals while it was incapacitated. Despite the rise in medical costs, UnitedHealth beat Wall Street estimates for adjusted profit by 15 cents due to increased memberships across its businesses. Sign up here. https://www.reuters.com/business/healthcare-pharmaceuticals/unitedhealth-beats-quarterly-profit-estimates-2024-10-15/

2024-10-15 16:09

Investment banking fees jumped 18% Confidence among clients led to more debt, equity issuance Shares up almost 2% Oct 15 (Reuters) - Bank of America's (BAC.N) , opens new tab third-quarter profit dropped as it paid more to customers to hold their deposits, but its earnings beat estimates, driven by investment banking and trading. The gains echoed those at rival JPMorgan Chase (JPM.N) , opens new tab, Goldman Sachs (GS.N) , opens new tab and Citigroup (C.N) , opens new tab, which also benefited from better conditions for dealmaking as client sentiment improved. Investment banking fees jumped 18% compared with a year earlier to $1.4 billion as increasing confidence among clients spurred them to issue more debt and equity. "Our customers' deposit balances and asset quality are healthy, and we believe we have good opportunities to grow," Chief Financial Officer Alastair Borthwick told journalists. Regarding investment banking, Borthwick said, "We feel pretty good looking forward. We've got a good pipeline." CEO Brian Moynihan called the earnings "solid," citing growth in investment banking, asset management fees and sales and trading revenue. He predicted that the bank's interest income will start to improve after it reaches a trough this quarter. A revival in mergers and acquisitions also boosted BofA's advisory fees, while the Federal Reserve's interest rate cut last month could spur even more dealmaking. Shares were up almost 2% in midday trading. BofA's underwriting income jumped 39.7% in the quarter, while syndication fees rose 31%. Moynihan said last month that he expected investment banking revenue to be broadly steady. "With capital markets driving the revenue upside, we expect more muted upside in the stock," wrote David George, an analyst at Robert W. Baird. Sales and trading revenue jumped 12% to $4.9 billion, the 10th consecutive quarter of year-on-year growth, as equities climbed 18% while fixed income, currencies and commodities rose 8%. Equities trading was bolstered by buoyant markets. Stocks rallied in the third quarter as investors speculated that the Federal Reserve would cut interest rates and spur economic activity. Wealth and investment management revenue climbed 8% to $5.8 billion and saw client balances jump 18% to $4.2 trillion thanks to rising market valuations and client flows. "The bank seems to be saying that things are getting better for them and all the challenges that they have faced in the last couple of years are easing," said Dave Ellison, a portfolio manager at Hennessy Funds, which holds BofA stock. NII SEEN GROWING BofA's net interest income (NII) - the difference between what a bank earns on loans and pays out on deposits - fell 3% to $14 billion in the third quarter from a year earlier. But it climbed 2% from the second quarter, marking an inflection point as the bank focuses on growing NII from here, Borthwick said. The bank expects its NII to be at $14.3 billion or more in the fourth quarter, executives said. "That's going to set us up quite well" for 2025, Borthwick said, as the bank reacted quickly to the Fed' rate cut. "We put ourselves in a good position to grow from here," Borthwick said. Chris Kotowski, an analyst at Oppenheimer, welcomed the NII guidance. It's "a step in the right direction, and we're optimistic that the uptrend can continue," he wrote in a note. Banks have been paying out higher interest rates amid intense competition for deposits to prevent customers from fleeing to lucrative alternatives such as money market funds. BofA's provision for credit losses climbed to $1.5 billion in the quarter from $1.2 billion a year earlier. Higher interest rates are pressuring borrowers and increasing risks of defaults, prompting banks to build bigger provisions for cover for such loan losses. Still, U.S. consumer credit is "pretty good," while loan delinquencies and defaults have flattened out as expected, Borthwick said. The second-largest U.S. bank's net income fell to $6.9 billion, or 81 cents per share, from $7.8 billion, or 90 cents per share, a year earlier. Analysts on average expected BofA to earn 77 cents per share, according to estimates compiled by LSEG. Sign up here. https://www.reuters.com/business/finance/bofa-profit-drops-weaker-interest-income-2024-10-15/