2024-01-12 20:46

NEW YORK, Jan 12 (Reuters) - Rising income expenses pushed the Federal Reserve system deep into a record loss last year, the central bank said in preliminary figures released on Friday. Fed income after expenses came in at a negative $114.3 billion last year, versus $58.8 billion in positive income the year before. The loss was tied to a jump in interest expenses faced by the central bank amid a rate hike campaign aimed at cooling inflation. The Fed paid a mix of financial institutions $281.1 billion last year, versus $102.4 billion in 2022. Meanwhile, interest it earned from bonds the central bank owns totaled $163.8 billion last year, versus $170 billion in 2022. The Fed said operating expenses at the 12 regional banks, which are quasi private institutions overseen by the Fed Board of Governors, stood at $5.5 billion in 2023. The Fed pays banks, financial firms and other eligible money managers interest to park cash on the central bank’s books as part of how it implements monetary policy and controls short-term rates. Aggressive Fed rate increases, starting in the spring of 2022 when the central bank's rate target was at near-zero levels, pushed that rate range to between 5.25% and 5.5% as of the December Federal Open Market Committee meeting, with the collective impact of those action ending the Fed's streak of strong profitability. The Fed funds itself through interest it earns on securities it owns and via services it provides banks. Usually it is profitable and hands excess earnings back to the Treasury as required by law. When it loses money it books what it calls a deferred asset which tallies the loss, which the Fed expects to cover over time before again handing profits back to the Treasury. At the end of last year, the deferred asset stood at $133 billion, and as of Jan. 10, it stood at $136.9 billion. Forecasting how big the loss will be is challenging because it depends on what the Fed does with interest rates, as well as how much further it shrinks its holdings of the bonds it currently earns interest from. The Fed is almost certainly done raising rates based on officials' comments and if markets are right the central bank may be cutting them by spring. Meanwhile, it may also be approaching the end game for balance sheet shrinkage. This could ultimately cap the losses, which until recently some analysts were putting in the $150 billion to $200 billion range. Meanwhile, recent research from the St. Louis Fed said it would likely take the Fed four or so years to cover its loss and start returning money to the Treasury. Losing money doesn't impair the Fed's ability to conduct monetary policy, officials have stressed repeatedly. At the same time, the Fed has yet to face any real political pushback over the losses. https://www.reuters.com/markets/us/fed-reports-steep-paper-loss-2023-amid-surge-interest-expenses-2024-01-12/

2024-01-12 20:31

Jan 12 (Reuters) - Union Pacific (UNP.N) said on Friday a delay in shipments is expected to continue in the states impacted by heavy snow and severe thunderstorms as road closures were disrupting its ability to transport crews to operate trains. The railroad operator said its engineering crews are working to restore operations throughout its network and delays are likely until the weather conditions improve. The company said on Tuesday it expects a 24- to 48-hour delay in shipments along its network in the states of Nebraska, Kansas, Oklahoma, Texas, Iowa, Illinois and Missouri. Airlines across the U.S. on Friday, canceled over 1600 flights caused by a massive storm, which led to power disruptions in 12 states. https://www.reuters.com/world/us/union-pacific-expects-delay-rail-shipments-until-weather-conditions-improve-2024-01-12/

2024-01-12 19:53

Jan 12 - Citigroup (C.N) said it would cut 20,000 jobs over the next two years, acknowledging a "clearly disappointing" quarter marred by one-off charges that resulted in a $1.8 billion loss. Shares of the bank - which is in the middle of a multi-year effort to cut bureaucracy, increase profits and boost a stock that has lagged peers - are up more than 1%. "The fourth quarter was very clearly disappointing," CEO Jane Fraser told analysts. "We know that 2024 is critical." The lender will reduce its global workforce of 239,000 by 20,000 - or roughly 8% of staff - through 2026, including layoffs from the sweeping reorganization, Chief Financial Officer Mark Mason told reporters. Citi will also no longer count 40,000 jobs when it spins off and lists its Mexican consumer unit Banamex in an eventual initial public offering, eventually aiming to reach a staffing level of 180,000 employees, Mason said. Still, some analysts said results from the third-largest U.S. lender by assets appeared strong when the one-off charges were excluded. "Citigroup's earnings looked awful with a big loss of $1.8 billion, but the bank's underlying business showed resilience," said Octavio Marenzi, CEO at management consultancy firm Opimas. The loss was driven by $3.8 billion in charges disclosed in a filing on Wednesday that included reorganization expenses, a reserve related to currency devaluations and instability in Argentina and Russia and a $1.7 billion payment to replenish a government deposit insurance fund. The bank expects to report between $700 million and $1 billion in charges this year related to severance costs and the reorganization. "Whenever an industry or company goes through these types of reductions, it’s tough on morale," Mason told reporters. The staffing cuts will not affect revenue growth, he said. During the week of Jan. 22, the bank will announce more organizational changes, according to a memo to staff seen by Reuters. Efforts to simplify its structure will be largely completed this quarter, saving $1 billion and eliminating about 5,000 mostly managerial roles, Fraser said. 'CAN THEY EXECUTE?' Rivals JPMorgan Chase (JPM.N) and Bank of America (BAC.N) on Friday reported lower quarterly profits, while Wells Fargo outperformed on cost cuts. Citi's revenue fell 3% to $17.4 billion in the quarter from a year earlier. It was the first time the bank broke out earnings for its five businesses -- services, markets, banking, U.S. personal banking and wealth, which were previously housed under broader divisions. Revenue from markets, or the trading division, dropped 19% to $3.4 billion from a year earlier. It was dragged lower by a 25% plunge in fixed income revenue from sluggish rates and currency markets, as well as losses from Argentina. In contrast, banking revenue climbed 22% to $949 million, led by higher investment banking fees for debt capital markets and advisory work that offset a slide in corporate lending. In U.S. personal banking, revenue climbed 12% to $4.9 billion, lifted by retail banking and credit cards. But consumers have begun to show signs of stress, prompting Citi to set aside more money to cover losses on souring loans. "The restructuring announced two months ago was a long time coming," said Chris Marinac, director of research at Janney Montgomery Scott. "The question comes down to: Can they execute on this restructuring in terms of really being able to grow the core business? The jury is still out." https://www.reuters.com/business/finance/citi-swings-18-billion-loss-slew-charges-2024-01-12/

2024-01-12 19:51

Jan 11 (Reuters) - Rental firm Hertz Global Holdings (HTZ.O) is selling about 20,000 electric vehicles, including Teslas, from its U.S. fleet about two years after a deal with the automaker to offer its vehicles for rent, in another sign that EV demand has cooled. Hertz will instead opt for gas-powered vehicles, it said on Thursday, citing higher expenses related to collision and damage for EVs even though it had aimed to convert 25% of its fleet to electric by 2024 end. CEO Stephen Scherr had last year at the JPMorgan Auto Conference flagged headwinds from higher expenses for its EVs, particularly Teslas. Hertz even limited the torque and speed on the EVs and offered it to experienced users on the platform to make them easier to adapt after certain users had front-end collisions, he said. Shares of the company, which also operates vehicles from Swedish EV maker Polestar among others, fell about 4%. Tesla's (TSLA.O) stock was down about 3%. Hertz also expects about $245 million in charges related to depreciation expenses from the EV sale in the fourth quarter of 2023. BUMPY ROAD FOR EV GROWTH Its decision underscores the bumpy road EVs have hit as their sales growth slows, causing carmakers like General Motors (GM.N) and Ford (F.N) to scale back production plans. Morgan Stanley analyst Adam Jonas said in a note Hertz's move was another sign that EV expectations need to be "reset downward". While consumers enjoy the driving experience and fuel savings (per mile) of an EV, Jonas said there are other "hidden costs to EV ownership". "Expenses related to collision and damage, primarily associated with EVs, remained high in the quarter," Hertz said in a regulatory filing on Thursday. The company, which had earlier planned to order 100,000 Tesla vehicles by 2022 end and 65,000 units from Polestar over five years, said it would focus on improving profitability for the rest of its EV fleet. German rental car company Sixt said in December it had not purchased Tesla vehicles since 2022 and was selling its fleet of Teslas "as part of our regular de-fleeting process". It still plans to offer a range of electrified vehicles and "stick to our goal to electrify 70-90 percent of our rental fleet in Europe by 2030", it said on Thursday. USED-EV PRICES DROP Meanwhile, wholesale used-EV prices fell for most of 2023 as prices for new EVs fell and inventories of unsold electric vehicles rose, according to Cox Automotive data. Cox forecast before Hertz's decision that used-EV prices would decline more than overall used vehicle prices in 2024. "While 20,000 cars isn't a large number in the total used vehicle market, it does mean Hertz will be taking a major loss on each of these sales while further contributing to the trend of falling used EV values," iSeeCars.com analyst Karl Brauer said. Hertz is selling some Tesla Model 3 for as low as about $20,000, nearly half the purchase price for the cheapest variant of the compact sedan, its used car website showed. It lists more than 700 EVs on sale, including BMW's i3, Chevrolet's Bolt and Tesla's Model 3 and Model Y SUVs. https://www.reuters.com/business/autos-transportation/hertz-sell-about-20000-evs-us-fleet-2024-01-11/

2024-01-12 19:49

NEW YORK, Jan 12 (Reuters) - Fourth-quarter earnings for S&P 500 companies overall are expected to have increased 4.4% from a year earlier, LSEG data showed on Friday, just as results from four of the country's biggest banks kicked off the latest U.S. earnings season. That increase is down from a 5.2% gain estimated on Dec. 22, and it follows a 7.5% rise in the third quarter and a 2.8% fall in the second quarter of last year, based on LSEG data. The third quarter of 2023 "marked the beginning of an earnings recovery, which is forecasted to reaccelerate throughout 2024," UBS equity strategist Jonathan Golub and his team wrote in a note this week. However, revisions for fourth-quarter estimates have been weaker than the historical trend, he wrote. Analysts expect S&P 500 earnings to rise by 11% in 2024 after increasing just 2.9% in 2023, based on LSEG data Major U.S. banks reported lower profit on Friday in a quarter hit by special charges and job cuts. The banks - JPMorgan (JPM.N), Wells Fargo (WFC.N), Bank of America (BAC.N), and Citigroup (C.N) - also said that American consumers remained resilient, although defaults on consumer loans began returning to pre-pandemic levels. Even as its quarterly profit fell, JPMorgan reported its best-ever annual profit and forecast higher-than-expected interest income for 2024. Among companies due to report next week are Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Travelers Cos (TRV.N). https://www.reuters.com/markets/us/fourth-quarter-us-earnings-seen-up-44-reporting-period-kicks-off-2024-01-12/

2024-01-12 19:44

TRIPOLI, Jan 12 (Reuters) - Protesters who have threatened to shut down two oil and gas facilities near the Libyan capital Tripoli have extended the deadline by 24 hours for talks with mediators, a spokesman for the group said on Friday. Protesters have threatened to shut down the facilities, with one group campaigning against corruption issuing a 72-hour ultimatum that ended on Friday. The two facilities are the Mellitah complex and the Zawiya refinery. Mellitah is a joint venture between Libya's National Oil Corporation (NOC) and Italy's Eni (ENI.MI). If the complex is closed, that would disrupt the supply of gas through the Greenstream pipeline between Libya and Italy. Salem Mohamed, the spokesman for the protesters, a group called the Corruption Eradication Movement, said that they decided to extend the deadline to continue negotiations with the six-person mediation team. "There was a consensus during the negotiations on our demands, except one point - the dismissal of NOC chairman Farahat Bengdara," Mohamed added. “If they do not return to us with an agreement on our all demands, especially the dismissal of Bengdara and the cancellation of all his decisions, we will close the Mellita complex and Zawiya refinery on Saturday afternoon.” It was unclear whether the protesters have the capacity to close the two facilities. Libya's oil sector, the country's major source of income, has been a target for local and broader political protests since the toppling of Muammar Gaddafi in a NATO-backed uprising in 2011. The Zawiya refinery, with a capacity of 120,000 barrels per day (bpd), is connected to the country's 3000,000 bpd Sharara oilfield. Sharara was closed by protesters from the Fezzan region in the south last week to demand "better services" for the region. That had forced NOC to declare force majeure in the field production and suspended the supply of crude oil to Zawiya terminal, NOC said. https://www.reuters.com/world/africa/libya-oil-facility-protesters-shutdown-deadline-extended-by-24-hours-2024-01-12/