SocGen missed its own promise to pay CEO Oudea last year

(Bloomberg) – Societe Generale SA failed to deliver on its promise to return half of its operating profit to shareholders, even after its fixed-income brokers presented CEO Frederic Oudea with a bigger-than-expected profit.

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Revenue from the purchase and sale of fixed income and currencies rose 56% in the fourth quarter, beating analysts’ estimates and all previous major rivals. This and a strong performance in Financing and Advisory compensated for the weak performance in Equities and Retail France.

But after the Paris-based company suffered a multibillion-euro blow when it exited Russia last year, it decided to keep more of the profits to bolster capital and about 1.8 billion euros through dividends and buybacks. This represents around a third of the underlying profit.

The decision comes at a time when rivals are trying to reward investors as they emerge from years of negative interest rates and below-average profitability. BNP Paribas SA said on Tuesday it would repay 5 billion euros through buybacks as it spends excess cash from the sale of its US unit. It caps another tumultuous year for Oudéa, which put the finishing touches on its legacy before handing over to investment bank boss Slawomir Krupa in May.

The year “marked a pivotal period for the group” as it adapted to “an uncertain and complex environment”, Oudéa said in a statement. SocGen, he said, “is moving decisively into 2023, a year of transition in many ways.”

SocGen announced the results before the start of regular trading in Paris. Shares have underperformed BNP and an index of European banks over the past 12 months.

Revenue from fixed income trading, traditionally a smaller business for the firm than equities, was up 56% year-over-year. That’s better than the average 28% gain for Wall Street’s biggest firms and the 45% rise for BNP. Equities lagged slightly, down 12%.

SocGen’s finance and advisory unit has weathered the slump in business execution that has plagued many of its peers. The business, which includes transaction banking, saw its revenue increase by 17%.

The lender has proposed a cash dividend of €1.70 per share to be paid out of last year’s profits, as well as a €440 million share buyback. If it had paid out half of its underlying annual profit of 5.62 billion euros, that would have been more than its reported net profit.

Such a move could have been difficult to explain to regulators at the European Central Bank, who have urged banks to exercise caution when deciding shareholder payouts given the many risks to the economy. SocGen provided 413 million euros in loans in the fourth quarter, less than analysts had expected but still nearly five times the amount a year ago.

A company spokesman said the payout decision reflected a desire to balance shareholder rewards and balance sheet strength. A key capital metric, called the CET1 ratio, came in at 13.3%, higher than analysts had expected, assuming full implementation of tougher regulatory standards. SocGen plans to return to its regular payment policy in the coming years, the person added.

Chairman Lorenzo Bini Smaghi, who oversees the executive board that decides on payment proposals, has been among the most vocal critics of the ECB’s de facto dividend ban during the Covid-19 pandemic. Led by the former ECB politician, the board even proposed a payment in 2021 after the lender suffered its first loss-making year in decades. In October, he wrote to the central bank protesting officials’ requests to attend bank board meetings, Bloomberg reported.

Oudea, the longest-serving CEO of a major European Union lender, restructured its equity business after pandemic-related losses, allowing the company to rebound with record profits the following year. Russia’s invasion of Ukraine last year brought another challenge, prompting a withdrawal from the country that resulted in a €3.3 billion loss in pre-tax profits.

To strengthen the bank, Oudéa merged the French distribution networks. But local laws that limit lenders’ ability to raise mortgage rates have made it difficult for French lenders to take advantage of higher interest rates as quickly as their competitors in other countries. Domestic retail sales were down slightly year-over-year, with SocGen forecasting further declines this year.

(Adds context to previous dividend decisions in the last three paragraphs.)

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Canada’s Pension Plan CEO John Graham predicts ‘alpha’ investors will outperform over the next decade

John Graham, President and CEO of the Canada Pension Plan Investment Board, speaks during the Annual General Meeting and Convention of the Canadian Chamber of Commerce in Ottawa on October 14, 2022. Sean Kilpatrick/The Canadian Press

With 2023 set to be another volatile year for investors, the managing director of the Canada Pension Plan Investment Board, John Graham, is in a picky mood.

The CEO of the $529 billion pension fund manager sees 2022 – marked by COVID-19 lockdowns, Russia’s invasion of Ukraine, supply chain disruption, high inflation and the rising interest rates – in the rearview mirror.

The new year doesn’t look much easier at first. But in an interview at CPPIB’s Toronto office, Graham predicted that 2023 could mark a shift to a different investment landscape where the pension plan asset manager could leverage its financial clout and its global reach.

He calls it the start of the “alpha decade” – a time when active investors, with the luxury of choice of country, company and asset, should be able to beat benchmarks and to distinguish oneself.

Over the past 20 years, Graham says, investors of all persuasions have largely benefited from a series of tailwinds that have benefited the global economy. These included cheap lending rates, low inflation and, in hindsight, a relatively supportive political environment. Combined, these factors have created a rising tide for investors, and passive investing strategies have grown in popularity.

As each of these factors has reversed, investors are reassessing risk, deals are harder to come by, and financing is not always readily available. Investors are suddenly taking more diverse approaches to allocating their money. And with government bonds offering generous yields for the first time in years, “there are options now,” Graham said.

Canada’s largest pension plans are increasingly investing in offshore wind projects

“We see the next decade as the decade of value creation, the decade of alpha,” he said. “Because of this tailwind, simply harvesting market returns has been a very successful strategy over the past 20 years. And right now it’s all about choosing your spots. It’s about choosing the right regions, the right asset classes and the right stocks.

In the long run, he added, “it actually offers the opportunity to build a bit more interesting portfolio.”

The CPP administers funds for the Canada Pension Plan, the main national pension program for Canadian workers, which has approximately 21 million contributors and beneficiaries. Since its inception in 1997, CPPIB has taken an increasingly active management approach, shifting more of its investments into assets such as real estate, infrastructure and private equity in addition to stocks and bonds. public bonds.

The first six months of CPPIB’s fiscal year were challenging, with assets down 4% to $529 billion as of September 30. This is a better result than some relevant benchmarks, as the sell-offs caused some stock markets to fall by double-digit percentages.

Over the past 10 years, CPPIB has returned an average of 10.1% per year.

Prior to being named chief executive in 2021, Graham led CPPIB’s lending business, which includes private loan investments in businesses that are beginning to feel the effects of rising interest rates. Much has been made of the valuation gap between listed assets, which in many cases have fallen sharply, and private assets, which have been slower to adjust. But Mr Graham said the Office has been ‘fairly disciplined’ in assessing its portfolios against the markets and does not expect deep discounts ‘based on what I see now’.

He also said many businesses are responding well to the higher borrowing costs that come with rising interest rates. “So far we haven’t seen a lot of stress to be honest. Many companies are doing well.

Despite the many challenges rocking the markets, he also listed some positive signals that are boosting investor sentiment: a reopening in China after the draconian COVID-19 lockdowns, a gradual drop in inflation, a relatively warm winter in Europe , easing pressure on energy supplies and a strong start to the year for stock markets.

However, Mr Graham said the economic dynamics shaping the global investment landscape are more complicated than they have been in recent years. “There is now a national security lens, a national interest lens, applied to economic and industrial policy. It’s not just about maximizing profits. There are other factors at play,” Graham said.

In this regard, he said it was particularly important to be “a bit surgical” when it comes to prioritizing countries and knowing how to invest there, including which sectors to focus on. The Office has eight offices outside of Toronto, from New York and London to Hong Kong and Mumbai.

“Our appetite for a particular country comes and goes based on the opportunities we see at this point,” Graham said. “For now, we are quite comfortable with our exposure to emerging markets.”


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All talk about the recession is starting to sound more and more like CEO fearmongering


CEOs were cautious when announcing the layoffs that made headlines last week. They blamed one thing above all else: an impending economic downturn.

The CEO of PagerDuty, a cloud computing company, said on January 24 that the organization was cutting 7% of its jobs “to weather the current economic uncertainty” despite the company’s “strong growth” over the past two years and that its growth has improved the operating margin. . Amazon has decided to cut 18,000 jobs “given the uncertain economic climate,” CEO Andy Jassy told employees Jan. 4. Meta CEO Mark Zuckerberg said Nov. 9 that the company would cut 11,000 jobs due to the “macroeconomic slowdown.”

But the question that many economists were asking today (February 3) was: what economic slowdown?

The jobless rate in January was 3.4%, a 50-year low, as the US economy added 517,000 jobs, according to the Bureau of Labor Statistics, more than double the 188,000 economists expected. Apart from the news sector, which includes both technology and media and lost 5,000 jobs last month, almost every other industry added thousands of jobs – or hundreds of thousands in the case of leisure and hospitality businesses.

“I worry that business leaders will look around and see that everyone is taking preventative action, and that’s why they’re also taking preventative action,” says Elizabeth Crofoot, senior economist at Lightcast, a company analysis of employment data. “There is a risk that we are heading into a recession if everyone pulls back a bit.”

A recession, according to the National Bureau of Economic Research (NBER), is a “substantial decline in economic activity” that spans all sectors and lasts more than a few months and is officially identified by the agency. But many of the data points the NBER uses to call a recession, including job growth and gross domestic product, have been strong lately. U.S. gross domestic product grew 2.9% in the fourth quarter of 2022, following a 3.2% growth rate in the third quarter. And in December 2022 there were 11 million vacancies, the government said earlier this week, more than in any of the previous four months.

That said, by most standard measures, the US economy is doing well. And the parts that seemed weak are directly related to how CEOs feel. About 98% of CEOs surveyed by the Conference Board said they expected a recession in the United States at the start of the fourth quarter of 2022. The reasons for this are not entirely clear, but could relate to how the federal government has responded to recent inflation.

Many economists cite inflation as a reason to worry about a recession because the Federal Reserve will raise interest rates to fight inflation, which will increase the cost of borrowing. But inflation is also a sign that the economy is strong enough. Inflation, broadly defined, occurs when too much money drives out too few goods; in recent months, wealthy American consumers have spent so much money that businesses have been unable to keep up. (CEOs have also likely contributed to inflation by raising prices.) The Federal Reserve responded last year by raising interest rates at the fastest pace since the 1980s. That makes borrowing more expensive. – for consumers who might want to buy cars or houses, but also for large companies.

And that might help explain the CEO’s scare tactics a little better. Interest rates are at their lowest since around 2010, making borrowing costs extremely low for businesses. Rising interest rates have made borrowing more expensive for businesses, while a tight labor market has forced them to raise wages. According to Bureau of Labor statistics, workers earned an average of $33.03 an hour in January, up from $31.63 a year ago.

As a result, companies are “not ready to take the same risks as before,” says Crofoot.

CEOs have been rewarded for their risk aversion in recent months. Amazon’s stock price rose 25% after the job cuts announcement, helped in part by this week’s report that the company posted 9% revenue growth in the fourth quarter to 149, $2 billion. In its latest earnings report, Meta also reported higher earnings than analysts expected. The stock price is 75% higher than it was on Nov. 9 when the layoffs were announced.

Around 11,000 Meta employees may have lost their jobs, but Mark Zuckerberg’s net worth has also recovered as a result. He is now worth about $70 billion, according to Bloomberg, about $20 billion more than in November, when he warned of an economic slowdown.


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Apple stock rallies despite fear of a sentence from CEO Tim Cook

Apple (AAPL) CEO Tim Cook and his right-wing CFO Luca Maestri confided in their in-house Wall Street economist during the tech giant’s conference call Thursday night.

After a rare loss of revenue for Apple, Cook and Maestri used a variation of the phrase “tough economy” seven times during the earnings call. Both are unusual for the mighty Apple.

“The macroeconomic environment over the last quarter has been significantly more challenging than 12 months ago,” Maestri told analysts.

Shares of Apple – which fell significantly in premarket trading on Friday – nevertheless rebounded on Friday.

The economic challenges highlighted by Cook were evident in Apple’s earnings.

Apple revenue overview

  • Income: $117.1 billion vs $121.1 billion expected

  • Adj. earnings per share: $1.88 vs $1.94 expected

  • iPhone Earnings: $65.7 billion vs $68.3 billion expected

  • Mac Earnings: $7.7 billion vs $9.72 billion expected

  • iPad Earnings: $9.4 billion vs $7.7 billion expected

  • Bearing capacity: $13.4 billion vs $15.3 billion expected

  • Services: $20.7 billion vs $20.4 billion expected

  • Won : 1) Chinese demand seems to be accelerating; 2) $50 billion plus cash on the books; 3) Supply bottlenecks are almost over.

  • Is missing: 1) No sales guidance renewed for the March quarter; 2) negative executive tone on the economy; 3) Weak wearable sales due to the economy.

Despite the rare failures and the cautious tone of Cook & Co., the bulls on the street are sticking to the stock.

The collective sentiment is that everyone knew the quarter would be weak as the Chinese economy slowly reopens and US consumers spend more cautiously. In turn, Apple’s last quarter for the iPhone and Mac maker this year could be as bad as it gets.

Or bet the cops.

“The bears will quickly report negative revenue growth, but we note that at constant exchange rates, revenues and outlook are stable, which is significantly better than other consumer electronics companies with billions of devices. Apple assets and an installed iPhone base, which is estimated. to over 1.2 billion),” Citi analyst Jim Suva said in a note to clients.

Suva – who will discuss Apple on Yahoo Finance Live on Friday – issued a buy rating on the stock.

Apple CEO Tim Cook introduces the new iPhone 14 during an Apple event at its headquarters in Cupertino, California, U.S., September 7, 2022. REUTERS/Carlos Barria

Yahoo finance Dan Howley contributed to this story.

Brian Soci is an independent publisher and Anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.

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