2024-07-12 18:00

DENVER, July 12 (Reuters) - Oil and gas activity in the U.S. Midwest and Rockies declined during the second quarter, but is expected to rebound over the next six months, the Federal Reserve Bank of Kansas City said on Friday in a quarterly energy survey. The survey covers companies drilling in Kansas, Colorado, Nebraska, Oklahoma and the northern half of New Mexico. Oil firms operating in those regions on average make a profit at $64 a barrel oil, according to the survey, but need prices to rise to $91 a barrel to substantially increase drilling. Benchmark West Texas Intermediate futures are currently trading around $82.50 a barrel . Gas prices need to be $3.47 per million British thermal units to drill profitably and $4.68 per million Btu to increase activity, participants said. Henry Hub futures are currently around $2.334 per mmBtu. "Gas prices in the Rockies are so low, we're shutting in production," said one unnamed survey respondent. Another said their firm was also planning to reduce output due to historically low natural gas prices. Some 43% of respondents said increased regulations posed the greatest risk to their businesses over the next year, while 29% said slowing economic activity would be the biggest threat. Another 25% said decisions by OPEC+ on production were the greatest risk. Sign up here. https://www.reuters.com/business/energy/oil-gas-activity-us-rockies-midwest-fell-q2-kansas-fed-says-2024-07-12/

2024-07-12 17:55

BRUSSELS, July 12 (Reuters) - The European Union will pressure other countries at this year’s COP29 climate summit to follow through on their pledge to transition away from fossil fuels, a draft of the bloc’s negotiating position seen by Reuters showed. This year's United Nations climate summit in Baku, Azerbaijan, in November, is set to focus on finance, with large economies like the 27-country EU under pressure to agree to commit more money to help poorer nations cope with climate change. The draft seen by Reuters, which could change before EU countries finalise it in October, said the bloc hoped to reach a deal at COP29 on a new global target for climate funding. However, it showed Brussels will also have other demands - including that countries significantly step up their efforts to cut emissions by following through on the deal struck at last year's COP28 summit in Dubai to "transition away from fossil fuels". All countries should work on new national climate pledges "aligned with the 1.5°C target and the energy transition goals that were agreed in Dubai, notably transitioning away from fossil fuels, while tripling renewable energy capacity and doubling annual energy efficiency gains by 2030", the draft said. Countries face an early 2025 deadline to submit new national climate pledges to the UN. Preparatory UN climate talks last month yielded little progress on how countries would act on their agreement to move away from fossil fuels - with European nations and climate-vulnerable island states saying major oil and gas producers had blocked attempts to discuss this. The EU is currently the world's biggest contributor of climate finance. Brussels has said it plans to continue this support - but has argued bigger funding contributions must be paired with stronger actions by other countries to cut the CO2 emissions causing climate change. The EU is also set to push at COP29 for other major economies, like China, to contribute towards the UN climate finance goal, the document showed. Sign up here. https://www.reuters.com/business/environment/eu-push-cop29-followup-deal-curb-fossil-fuels-2024-07-12/

2024-07-12 17:53

July 12 (Reuters) - Citigroup (C.N) New Tab, opens new tab beat Wall Street expectations for second-quarter profit on Friday, boosted by a jump in investment banking, markets and services revenue, but shares fell 2% amid investor worries about expenses, dividends and market share. The third largest U.S. lender reported a profit of $1.52 per share in the three months ended June 30, above analysts' expectations of $1.39, according to LSEG data. Citi had a 7.2% shareholder return in the second quarter, far from its target of 11% to 12%, said Warren Kornfeld, senior vice president in the financial institutions group at Moody’s Ratings. "The results again reflect the services sector's strength. But Citi has challenges in broadening market share and reducing expenses in its other segments." The stronger results come two days after U.S. regulators fined Citi $136 million for making "insufficient progress" in fixing data management problems identified in 2020. Regulators also required the lender to demonstrate it was putting enough resources toward those efforts. During a conference call with analysts, Citigroup CEO Jane Fraser and Chief Financial Officer Mark Mason fielded extensive questions about the bank's share buyback and dividend plans in the context of Citi's regulatory problems. The bank announced potential acquisitions of up to $1 billion in stock over the next quarter and Fraser said regulators did not cap dividend payments to shareholders. The bank's plan to allocate resources to regulatory fixes has not yet been agreed with regulators, Mason and Fraser said. In areas where regulatory work looks like it could face delays, Citi will determine root causes and decide whether more technology spending, additional applications or platform adjustments, or more employees are needed, Mason added. Mason and Fraser explained the bank's problems with the quality of its data and added Citi has unified many systems that collect data for regulatory reporting. But more work is needed to ensure reports that use thousands of data points have good quality data, without needing manual checks from employees. The CFO also said priority is being given to the regulatory reports that are more important to U.S. regulators. Jane Fraser is carrying out a sweeping overhaul in an effort to improve the bank's performance, cut costs and simplify its sprawling businesses. As part of the turnaround, Citi aims to shrink its workforce by 20,000 over the next two years. Revenue in the second quarter came in at $20.1 billion, up 4% from a year earlier, buoyed by a $400 million gain from the conversion and partial sale of Visa stock in May. Citi now breaks out earnings individually for its five businesses — services, markets, banking, U.S. personal banking and wealth, which were previously housed under broader divisions. Investment banking fees jumped 60% in the second quarter to $853 million. The surge comes as a prolonged industry-wide slump in deals finally shows signs of a meaningful recovery. The gains fueled a 38% climb in broader revenue for the banking division to $1.6 billion, which also includes corporate lending. "We see continued strong debt issuance this quarter, good M&A, the IPO market has shown a glimpse of revival and the pipeline ... is quite strong," Mason said on the call. "M&A will potentially play a larger role in the mix in the back half of the year." Citi hired JPMorgan Chase veteran Viswas Raghavan as head of banking earlier this year to revitalize the division catering to multinational corporations. Services revenue increased 3% to $4.7 billion. The unit houses Citi's treasury and trade solutions business, which the company touts as its crown jewel. Fraser and other leaders highlighted their strategy for the services business at an investor day last month. Markets revenue climbed 6% to $5.1 billion, lifted by a 37% jump in equities trading revenue. EXPENSES ON TOP OF GUIDANCE Operating expenses fell 2% to $13.4 billion in the quarter as the bank saved money from the reorganization that simplified its structure. Citi expects full-year expenses to be at the high end of its previously forecast range of $53.5 billion to $53.8 billion, excluding fines from regulators received by the bank this year, Mason said. Rival JPMorgan Chase (JPM.N) New Tab, opens new tab reported a rise in second-quarter profit on Friday, while Wells Fargo's (WFC.N) New Tab, opens new tab net income declined and it missed estimates for interest income. Citi's wealth management division, a key part of Fraser's growth strategy, has yet to grow significantly, with revenue up 2% this quarter to $1.8 billion. The lender's U.S. personal banking revenue grew 6%, reaching $4.9 billion, mainly due to growth in branded cards. Analysts have called 2024 a transitional year for Citi as it becomes leaner under Fraser's turnaround. Investors have also cheered the efforts and rewarded Fraser with a 28% jump in the bank's stock this year, far outperforming closest rivals JPMorgan and Bank of America (BAC.N) New Tab, opens new tab, as well as the broader equity markets (.SPX) New Tab, opens new tab. Sign up here. https://www.reuters.com/business/finance/citi-profit-climbs-investment-banking-surge-services-strength-2024-07-12/

2024-07-12 17:03

WASHINGTON, July 12 (Reuters) - The International Monetary Fund on Friday said gross capital inflows into emerging markets excluding China last year rose to $110 billion or 0.6% of their economic output, the highest level since 2018. The findings, part of the IMF's External Sector Report New Tab, opens new tab on currencies, capital flows and financial imbalances, show some resilience among emerging markets despite sharply higher U.S. interest rates that have drawn funds into dollar assets. The IMF said in the report that emerging markets have seen a decline in the more volatile net portfolio inflows, but net inflows of foreign direct investment (FDI) has been more stable. "This is partly because of stronger fundamentals," the IMF said in a blog posting accompanying the report. "Indeed, many countries are now benefiting from more robust fiscal, monetary and financial policy frameworks, as well as more effective implementation of policies and tools. At the same time, the report said that China saw net capital outflows over the 2022-2023 period, including net negative FDI inflows. "Some of this may reflect multinational firms repatriating earnings. But it also may reflect shifting expectations about Chinese growth and geo-economic fragmentation," the IMF said. Overall, global gross capital inflows declined to 4.4% of global GDP, or $4.2 trillion, in the 2022-2023 period, from 5.8 percent of global GDP, or $4.5 trillion, in 2017-2019. The IMF said this partly reflects a retrenchment of capital flows, with foreigners buying fewer local assets and residents buying fewer assets abroad. But the U.S. benefited strongly from the shifts, accounting for 41% of global gross inflows during the 2022-2023 period, nearly double its 23% share in 2017-2019. The U.S. share of global gross outflows also increased, to 21% from 14% during the same periods. This may reflect increased financial fragmentation, but it also may reflect an unwinding of some tax and regulatory strategies by large multinational corporations. The report also showed that the U.S. dollar's real effective exchange rate was overvalued relative to U.S. GDP by a median of 5.8% in 2023. The euro was undervalued by 1.7%, the yen was overvalued by 1.7% and the yuan was overvalued by 0.7%, the report showed. Sign up here. https://www.reuters.com/markets/imf-says-emerging-market-capital-inflows-recover-2018-levels-2024-07-12/

2024-07-12 15:35

July 12 (Reuters) - Wells Fargo's (WFC.N) New Tab, opens new tab second-quarter profit declined and the lender missed analysts' estimates for interest income on higher deposit costs amid intense competition for customers' money, sending its shares down more than 6%. Net interest income (NII) -- or the difference between what a bank earns on loans and pays out for deposits -- slid 9% to $11.92 billion. Analysts on average had expected $12.12 billion, according to LSEG data. NII could fall 7% to 9% this year, it reiterated on Friday. "At this point in the year, we expect that to be in the upper half of that range, or approximately down 8% to 9%," Wells Fargo's finance chief, Michael Santomassimo, told reporters on an earnings call. He said NII could hit a trough by the end of the year. Higher net interest income was part of the investor "bull thesis" coming into the quarter, so the management's new guidance of NII is likely to pressure the stock, said Citigroup analyst Keith Horowitz in a note. Wells Fargo CEO Charlie Scharf said the U.S. economy remains strong, driven by a healthy labor market, but cautioned risks from higher inflation rate and rates. "The economy is slowing and there are continued headwinds from still elevated inflation and elevated interest rates," he said during the earnings call. Average deposit costs jumped to 1.84% in the second quarter, from 1.13% a year earlier, the bank said. Banks are having to pay more to retain customers who are hunting for greater yields while also dealing with the fallout of higher-for-longer interest rates as borrowers balk at taking out new loans. "Rate expectations continue to change ... We'll hopefully have to see how that plays out and how that translates into action," Santomassimo said. Net income fell to $4.91 billion for the three months ended June 30 versus $4.94 billion, a year earlier. The lender also said it expects 2024 noninterest expense to be about $54 billion, up from its prior forecast of about $52.6 billion. Wells Fargo's profit, however, beat expectations in the second quarter, buoyed by a jump in fees from investment banking. On a per-share basis, the company reported $1.33, compared with LSEG estimates of $1.29. The fourth largest U.S. bank said its net charge-offs -- or the amount of loans that are unlikely to be recovered -- for commercial real estate (CRE) came in at $271 million, or 74 basis points of average loans, predominantly driven by the office segment. The bank has worked to reduce its CRE exposure over the last year as the sector's troubles exacerbated. While it had hiked provisions to cover potential defaults, particularly in the office space, executives have said the CRE portfolios remain manageable. INVESTMENT BANKING BOOST Investment banking was a bright spot for the bank in the second quarter. Rival JPMorgan Chase (JPM.N) New Tab, opens new tab also reported a 25% jump in second-quarter profit on Friday, buoyed in part by rising investment banking fees. Citigroup's(C.N) New Tab, opens new tab profit was boosted by a 60% surge in investment banking revenue in the second quarter. "We continued to see growth in our fee-based revenue offsetting an expected decline in net interest income," Wells Fargo CEO Charlie Scharf said in a statement. Investment banking revenue surged 38% to $430 million for the bank. Under Scharf, Wells Fargo has beefed up its investment banking and trading activities, recruiting some top executives from rivals. Merger and acquisition volumes hit $1.6 trillion globally in the first half of the year, up 20% from a year earlier, Dealogic data showed. Equity capital market volumes climbed 10% during the same period. Still, Wells Fargo remains shackled by a $1.95 trillion asset cap that prevents it from growing until regulators deem it has fixed problems from a fake accounts scandal. The bank still has eight open consent orders after the U.S. Office of the Comptroller of the Currency in February terminated a 2016 punishment. "The numerous internal metrics we track show that the work is clearly improving our control environment. While we see clear forward momentum, it's up to our regulators" to determine when regulatory punishments are lifted," Scharf said Sign up here. https://www.reuters.com/business/finance/wells-fargo-profit-falls-deposit-costs-2024-07-12/

2024-07-12 13:07

July 12 (Reuters) - Australia's BHP (BHP.AX) New Tab, opens new tab on Friday reached a deal with Brazilian miner Vale (VALE3.SA) New Tab, opens new tab to split equally the cost of any damages related to proceedings in Britain over a 2015 dam collapse that killed 19 people , while denying liability for related claims. BHP Group (UK) Ltd and its parent BHP are defendants to a group action claim in the English High Court, brought by more than 600,000 claimants seeking damages for the Fundão Dam failure in 2015. BHP and Vale will each pay 50% of any amount potentially payable to the claimants in the UK proceedings, the Netherlands proceedings, and others in Brazil covered in the agreement, the company said on Friday. It reinforces the framework agreement signed in 2016 for BHP Brasil and Vale to each contribute 50% to the funding of the Renova Foundation, which was set up to ensure full and fair remediation for the damages caused by the dam collapse. "BHP believes the English Proceedings are unnecessary because they duplicate matters already covered by the existing and ongoing work of the Renova Foundation and legal proceedings in Brazil," the company said. BHP will continue to defend the UK proceedings and does not consider that it is liable to the related claimants, it added. More than 720,000 Brazilians are suing the two companies over the collapse of the dam, which was owned and operated by their Samarco joint venture. In March, a new claim was filed against Vale and the Dutch subsidiary of Samarco in the Netherlands in which BHP is not a defendant, BHP said. Since the UK proceedings were not brought against Vale, BHP had filed for a contribution claim against Vale in December 2022, which has now been withdrawn due to the new agreement. "The effect of the agreement is that should BHP ultimately be found to have any liability to the claimants in the UK claims, or should Vale ultimately be found to have any liability to the claimants in the Netherlands, such liability would be shared equally between BHP and Vale," Vale said in a separate statement. ($1 = 0.7714 pounds) Sign up here. https://www.reuters.com/markets/commodities/bhp-vale-reach-agreement-over-2015-brazil-dam-collapse-proceeding-uk-2024-07-12/