Around every sixth employee had lost his job since mid-March.
Washington More than 4.4 million redundant workers applied for unemployment benefits in the United States last week. The government announced on Thursday. The wave of redundancies caused by the measures to combat the corona pandemic continued.
In the five weeks since numerous companies had to close because of the new corona virus, a good 26 million people have now applied for unemployment benefits. About one in six US workers has lost their jobs since mid-March, by far the most violent wave of layoffs since data collection began.
The number of recipients of unemployment benefits has risen to a record 16 million – above the previous high of 12 million in 2010 after the end of the recession triggered by the global financial crisis. The figure of 16 million reflects how many people went through the application process and received recognition – and are now actually receiving money.
In some U.S. states, workers have encountered obstacles to the application process. As part of an aid package adopted in March, freelancers and the self-employed will also receive support. However, many states have not yet approved their applications, so many unemployed are not yet included in the statistics.
Labor economist Aaron Sojourner from the University of Minnesota spoke of a “truly devastating shock for many families and small businesses.”
The government’s job market report is due for April 8. Bank J.P. Economists Morgan expects the loss of 25 million jobs to be reported, nearly three times the number lost during the entire recession triggered by the financial crisis.
More: The US Senate approves a new $ 480 billion stimulus package. Among other things, it provides further help for small and medium-sized companies.
The German money house is accused of years of manipulation.
new York A US lawsuit accuses ten of the world’s largest banks of manipulating the corporate bond market. According to this, the money houses – including Deutsche Bank – have been asking for high prices for almost 14 years, as can be seen from court documents on Tuesday. As a result, investors were financially damaged.
Analysts fear that the corona crisis will spoil the Deutsche Bank boss’s profit targets.
Frankfurt The promise is still there: Christian Sewing actually wants to deliver a small operating profit this year. He put a “black zero” Deutsche Bank boss prospects for investors for 2020 – but that was long before the outbreak of the corona crisis.
According to analysts, this goal has long been a waste. On average, the experts expect a loss before taxes of EUR 1.9 billion for 2020, according to a compilation that the bank has published on its website. The net forecasted minus amounts to over two billion euros.
On April 29, investors will get the first important clues as to how bad 2020 will really be for Deutsche Bank. Then the largest domestic bank presents its first quarter results, usually the strongest in banking. On average, analysts anticipate a comparatively small loss of EUR 35 million for the first three months of this year. However, the experts predict a net loss of 437 million euros. For comparison: In the previous year, the bank still had a bottom line profit of 97 million euros.
The quarterly figures of the large US banks have shown how painful the consequences of the crisis can be. For industry leader JP Morgan, earnings fell in the first three months compared to the previous year by around two thirds to at least $ 2.9 billion. The main reason for the slump was the drastically higher provision for impending credit losses. $ 6.8 billion JP Morgan for that back. With the competitor Wells Fargo there were still 3.2 billion.
Opportunities from the crisis
“Because of the poor profitability, the major German banks cannot afford provisions of this size,” warns a top banker. But that may not be necessary. Stefan Hoops, head of corporate business at Deutsche Bank, hopes that Europe’s banks will come through the corona crisis without major injuries. He also blames structural differences between the United States and Europe for this.
For example, European financial institutions are much less involved in the credit card business, which creates high provisions at the US institutions. For Hoops area, the analysts predict a pre-tax profit of 195 million euros for the first quarter. For the retail customer bank, the earnings forecast is 117 million euros and for asset management 125 million euros.
The area that Sewing cut back significantly in the course of the new strategy has proven to be an opportunity for Deutsche Bank: trading, because the dramatic price fluctuations ensure brisk operation in the trading rooms. As part of the new strategy, Deutsche Bank has largely stepped out of its equity business with large customers.
However, the bank is still one of the market leaders in the business of bonds, foreign exchange and derivatives, their traditional strength. Business with the major investment banks has recently been excellent, especially in currencies. In the Citigroup bond, currency and commodity trading revenues rose 39 percent in the first quarter Goldman Sachs by 33 percent. But there has also been a real boom in the placement of corporate bonds in recent weeks.
In retail, the analysts expect revenues of 1.6 billion euros for the first quarter. For the entire investment bank, the experts expect revenues of 1.9 billion euros and a profit before taxes of 225 million euros after 247 million in the previous year. The investment bank is expected to make the largest contribution to Deutsche Bank’s profit – and to become a stabilizing anchor in the pandemic.
More: In the corona crisis, the KfW boss becomes Germany’s most important banker
Dusseldorf Wall Street rose on Thursday. The Dow Jones index closed 0.1 percent lower at 23,537 points. The S&P 500 gained 0.6 percent to 2799 points. The technology index Nasdaq Composite benefited from new ones Record levels on Amazon and Netflix and rose 1.7 percent to 8,532 points.
Both the shares of the e-commerce group and those of the streaming service are currently the winners of the corona crisis. Both stocks hit new all-time highs on Thursday. Amazon skyrocketed at times by more than six percent to a value of up to $ 2456 and closed more than four percent higher. Netflix peaked at more than five percent to just under $ 450 and ended the day up nearly three percent.
Poor US economic data yesterday caused Wall Street to fall. The Dow Jones index closed the trading day with a minus of almost two percent at 23,504 points, the S&P 500 also closed about two percent lower at 2783 points and the Nasdaq slipped about one percent to 8393 points.
Of a bleak report of last week’s US unemployment rate, which was published shortly before the start of the Washington stock exchange, investors are rather unimpressed this Thursday. According to this, 5.245 million Americans have applied for unemployment benefits in the past seven days.
Initial applications are considered a “real-time indicator” of the economic situation, as they are published with a delay of only one week. Analysts interviewed by Reuters had previously forecasted 5.1 million. Influenced by the corona crisis, more than 20 million US citizens have registered as unemployed within four weeks.
“The decline in economic activity is breathtaking,” said chief economist Joel Naroff from Naroff Economics. Economists estimate that the world’s largest economic power may have shrunk by up to 10.8 percent in the first quarter. That would be the sharpest decline since 1947. As of today, US President Donald Trump wants to present a plan for the exit from the “Great Lockdown” for the domestic economy.
Company figures from the United States show the serious consequences of the corona measures. For example, the stock market fluctuations of the past few weeks have caused a sharp drop in profits for asset manager giant Blackrock.
Net income fell 23 percent year-over-year to $ 806 million in the first quarter, the world’s largest asset manager said on Thursday. Assets under management declined nearly $ 1 trillion to $ 6.47 trillion by the end of March compared to the end of 2019.
The US bank Morgan Stanley also released its quarterly figures this Thursday. Accordingly, profits plummeted by almost a third to $ 1.7 billion. Nevertheless, the financial institution scores well compared to the competition.
Opec announced on Thursday in its monthly report that it was facing the economic consequences of the corona crisis expect a drastic drop in oil consumption by 6.8 million barrels a dayt. The oil cartel predicts the weakest demand for Opec oil in about 30 years in the second quarter.
Accordingly, a little less than 20 million barrels a day are likely to be in demand from April to June. For March, experts expect an Opec production volume of 28 million barrels per day with a possible capacity of around 34 million barrels per day.
The development is thus viewed less pessimistically than by experts from the International Energy Agency (IEA). The interest group of industrialized countries announced on Wednesday that it expects demand to collapse this year by 9.3 million barrels a day for the current year.
However, the two major oil producers Saudi Arabia and Russia have expressed their willingness to intervene in the market in a joint declaration. If necessary, this could be done together with the other states of the Opec + group, according to a phone call between Russia’s Energy Minister Alexander Nowak and his Saudi colleague Prince Abdulasis bin Salman. After a previous dispute between Russia and Saudi Arabia, the large oil producers had agreed on a joint cut in production in order to stabilize the oil price.
The US variety WTI returned to its 18-year low in March and fell 1.5 percent to $ 19.58 a barrel (159 liters). The announced reduction in production by the major exporting countries appears massive, said Carlo Alberto De Casa, chief analyst of the brokerage firm ActivTrades. “In view of the collapsed demand, it just isn’t enough.”
Against this background, the papers of shale oil producers like Marathon, Occidental or Apache slipped between five and ten percent. They suffer particularly badly from the current oil spill because, according to experts, they only work profitably from an oil price of around $ 50.
United Airlines titles lost 11.5 percent. The airline warned that the number of bookings was practically zero, and there was no rapid improvement in sight.
However, there were price increases in the health sector. At the top of the leading index, the papers of the health care provider and health insurer UnitedHealth were up almost six percent on their previous day’s strength. Abbott Laboratories’ quarterly numbers in the S&P 500 rose by more than five and a half percent. They were clearly better than expected, JPMorgan analyst Robbie Marcus said. He continues to see the pharmaceutical company as one of those companies better positioned to face both the Covid 19 crisis and a possible recession.
After a slump of just over 17 percent the previous day, Bed Bath & Beyond has now risen by 18 percent. The retailer, which specializes in kitchen, bathroom and living equipment, presented its quarterly report the day before the market closed. The numbers were better than feared.
With agency material.
More: Here you can find out how the German stock market developed on Thursday.
As a bond house, Pimco has benefited greatly from the boom in this asset class in recent years.
Frankfurt A cartel of silence dominates the European fund market. None of the big asset managers want to talk about the massive escape of investors from the products. In March, customers in Europe withdrew a total of 232 billion euros from funds because of the corona panic in the markets – more than ever before.
The number is based on the latest estimates from the rating agency Morningstar for the Handelsblatt. It is significantly higher than the data published a little more than a week ago. “The number should also continue to rise because we still lack information from some funds,” says Morningstar analyst Ali Masarwah.
Dusseldorf Weak economic data unsettles US investors and pushes prices on Wall Street. The US standard value index Dow Jones starts trading 2.2 percent down at 23,423 points. The technology-heavy Nasdaq loses 1.6 percent to 8,549 points and the broad S&P 500 is almost 2.3 percent weaker at 2,781 points.
During the lecture, export data from China and a slight decline in corona deaths had given investors hope. But now the US economic data are disillusioning.
Because in March the US industry cut its production more than it has since 1946. The companies produced 6.3 percent less goods than in the previous month, as the central bank (Fed) announced in Washington on Wednesday. Overall production – to which utilities and mining also contribute – shrank by 5.4 percent.
“A clear recovery is not to be expected in April, as the number of infections in the USA continues to rise and the lockdown continues,” said Heleba economist Patrick Boldt.
The consumption data also cause pessimism. US retailers’ sales fell 8.7 percent in March from the previous month due to the corona crisis, the Department of Commerce said in Washington on Wednesday. This is the sharpest decline since statistics began in 1992.
Consumers were reluctant to buy clothing and cars, while the food and beverage business grew 25.6 percent. But: “The panic purchases in grocery stores cannot compensate for the spending cuts we are experiencing in other areas,” says economist Tim Quinlan of Wells Fargo Securities explained.
Private consumption contributes around two thirds to the gross domestic product of the world’s largest economy and is therefore the pace for the economy. The International Monetary Fund (IMF) expects the US economy to collapse by 5.9 percent this year.
Because of weak US economic data, the dollar index rose 1.1 percent.
US banks’ profits collapse
The corona crisis also hits the US banks hard. Because the financial institutions have to arm themselves against bad loans with provisions worth billions, the profits of Goldman Sachs, Bank of America and Citigroup almost halved.
The US investment bank Goldman Sachs’ profit fell 49 percent to $ 1.12 billion in the first quarter, the institute said on Wednesday. Provisions for bad loans quadrupled to $ 937 million at the end of March, from $ 224 million a year earlier. The papers are currently trading at minus 1.1 percent.
Bank of America net income decreased 49 percent to $ 3.5 billion in the first quarter. The share is 5.6 percent in the red. Citigroup’s earnings slumped 46 percent to $ 2.5 billion in the first quarter, and paper lost 4.7 percent.
JP Morgan already started the quarterly season on Tuesday, together with Wells Fargo. At both US banks, billions of loan loss provisions had plummeted profits. Morgan Stanley presents numbers on Thursday.
America’s banks suffer three times in the corona crisis: from the slump in the economy, which has largely come to a standstill. Among credit defaults and high provisions that they have to cover for future defaults. And under the key rate that the US Federal Reserve (Fed) set back in the first quarter in an emergency measure back to the range of 0 to 0.25 percent to support the economy as much as possible. With agency material.
More: Read also how the German stock market developed on Wednesday.
Bank of America suffered a slump in profits due to high provisions for bad loans.
New York, Charlotte The profit of the US investment bank Goldman Sachs has halved in the Corona crisis due to impending credit defaults and increased costs. Earnings fell 49 percent to $ 1.12 billion in the first quarter, the institute said on Wednesday.
In contrast, earnings decreased only one percent to $ 8.74 billion, due to the increased trade in stocks and bonds during the recent stock market turmoil. Net interest income grew as customers overdrawn their accounts and charged their credit cards more.
Provisions for bad loans quadrupled to $ 937 million at the end of March, from $ 224 million a year earlier. According to Goldman CEO David Solomon, the group is well equipped to help its customers and society to recover from the crisis.
The economic standstill in the Corona crisis also affects them Bank of America hard. Because of high provisions for bad loans, net income decreased 49 percent to $ 3.5 billion in the first quarter, the US money house said on Wednesday.
As before JP Morgan and Wells Fargo Bank of America is preparing for high credit losses due to the virus pandemic. The institute increased bad debt provisions by $ 3.6 billion to $ 4.8 billion.
However, CEO Brian Moynihan emphasized that the company is well prepared for an impending recession: “We ended the quarter with higher liquidity reserves than we started”.
In the three months to the end of March, the bank increased its net income by one percent to just under $ 22.8 billion. While net interest income fell two percent, income from investment banking increased, among other things, thanks to higher fee income in the corporate bond business and higher income from securities trading, which picked up in the wake of the corona virus pandemic.
Also the Citigroup is preparing for high credit losses due to the Corona crisis. As a result, earnings plunged 46 percent in the first quarter to $ 2.5 billion, the major US bank said on Wednesday.
By contrast, earnings rose 12 percent to $ 20.7 billion thanks to flourishing stock and bond trading. “Our first quarter result was significantly impacted by the Covid 19 pandemic,” said chief executive Michael Corbat.
Citigroup topped up bad debt provisions by nearly $ 5 billion.
More: Industry leader JP Morgan and Wells Fargo’s numbers provide a first glimpse of the damage the virus is causing to the economy and Wall Street.
Bank of America suffered a slump in profits due to high provisions for bad loans.
new York The profit of the US investment bank Goldman Sachs has halved in the Corona crisis due to impending credit defaults and increased costs. Earnings fell 49 percent to $ 1.12 billion in the first quarter, the institute said on Wednesday.
In contrast, earnings decreased only one percent to $ 8.74 billion. Provisions for bad loans quadrupled to $ 937 million at the end of March, from $ 224 million a year earlier.
View of the Dax curve in the Frankfurt trading hall.
Dusseldorf The leading German index rose by almost 1.3 percent from trading and closed the day at 10,696 counts. So that is the Dax currently not to brake
However, there was no trading on the Xetra platform for more than four hours. The reason for the interruption was a technical problem with the electronic trading system T7, said a spokesman for the German stock exchange. “An error in the internal communication of the trading system triggered the problem.”
Denver, Frankfurt The corona virus has ended the series of successful US banks. After years of record profits, the large institutes are now in crisis mode. The profit from JP Morgan Chase, America’s largest bank, slumped 69 percent in the first quarter to $ 2.9 billion, the lowest since 2013. At Wells Fargo, the institute with the most small and medium-sized corporate customers, saw its profit drop 89 percent to $ 653 million.
Compared to the competition from Europe, the US banks have had one decisive advantage so far: they have left the financial crisis much faster and benefited from tax cuts and a booming labor market, especially under US President Donald Trump. That filled their coffers: JP Morgan made a profit of a good $ 36 billion in 2019 alone – more than ever before a bank.
However, because the social network in the USA is much thinner than in Europe, the corona crisis is now taking hold much faster: applications for unemployment benefits have risen since mid-March like never before. The 22 million jobs that have been created since the financial crisis could have been wiped out in the past four weeks, believes Torsten Slok, chief economist at German bank.
The banks are also feeling this. The corona crisis hits them three times over: the dormant economy, high loan loss provisions and lower key interest rates, which the Federal Reserve cut to almost zero in March.
JP Morgan has now had to significantly increase loan loss provisions. It rose to $ 8.3 billion. A year ago it was 1.5 billion. Return on equity, an important measure of bank profitability, fell from 16 percent to four percent.
“It is extremely difficult to predict whether loan loss provisions will be sufficient,” says Octavio Marenzi from Opimas, the capital market consultancy. Finally, another wave of layoffs is imminent – with the risk that fewer and fewer Americans or companies in need of help can service their loans. “That could mean a loss for the bank in the second quarter,” believes Marenzi. It would be the first quarterly loss since the 2008 financial crisis.
Fear of a severe recession
JP Morgan CEO Jamie Dimon had already sent a letter to shareholders in early April warning that the bank would not be immune to the serious economic consequences of the corona crisis. On Tuesday, he assumed a “fairly severe recession” and spoke of “unprecedented challenges” in the opening quarter, which is usually the strongest for banks over the course of the year.
Dimon, who is working full-heartedly after an emergency heart operation at the beginning of March, advocated reopening the US economy as soon as possible, “but it has to happen in a way that is safe,” he said in a conference call with journalists clear.
The extent to which the crisis will affect credit quality also depends on how quickly the government’s many bailout programs take effect, stressed JP Morgan’s chief financial officer Jennifer Piepszak. The first consumer checks in the amount of $ 1200 have been sent to consumers, as the tax authority told IRS at the weekend.
JP Morgan has currently paid out $ 9 billion from the $ 350 billion Paycheck Protection Program (PPP) through which banks provide government-backed loans to small and medium-sized businesses. But there are delays everywhere and time is short. Even healthy medium-sized companies in the USA have hardly any reserves to cope with severe sales losses for more than two months.
Many corporate customers stretched their credit lines in the first quarter, totaling $ 50 billion, Dimon said. In March, the bank extended more than $ 25 billion in additional loans to businesses. The demand for new credit cards also increased. “In March alone, we opened half a million new accounts for our credit card customers,” said Dimon. But high risk provisions are necessary for the rapidly growing credit card business. Therefore, the profit in the consumer business fell particularly sharply at 95 percent.
The crisis is putting the banks in a dilemma. They emphasize that they are there for their customers, especially in difficult times. At the same time, they don’t want to take on too high risks. After all, the extent of the slump is still not foreseeable.
Wells Fargo profit collapses
Wells Fargo is also facing this problem and is already feeling the effects of the corona crisis clearly. Profits shrank to $ 653 million from $ 5.9 billion a year earlier. Revenue plummeted 18 percent to $ 17.7 billion. The San Francisco institute also significantly increased loan loss provisions to be prepared for a wave of loan defaults: it is now around four billion dollars, an increase of more than three billion dollars compared to the previous year. Another $ 950 million was spent on write-downs on securities.
“We have taken extensive steps to help customers, employees and communities. For our customers, we have, among other things, suspended foreclosures for residential properties, cut fees and granted deferrals of payments, ”emphasized bank boss Charlie Scharf, who has headed the crisis-ridden institute since the end of October.
More than 1.3 million private and corporate customers benefited from the fee suspensions alone. The latter also claimed over $ 80 billion in loan commitments in March alone. The bank’s foundation is also donating $ 175 million for food, housing and health care to victims of the crisis, Scharf said.
With the current figures, Wells Fargo is particularly susceptible to the severe economic downturn expected by US economists. A look at the estimates shows how badly the bank failed to meet analysts’ expectations in the first quarter. The analysts had expected an average profit of 38 cents per share – in the end, the value was one cent.
The West Coast Bank is hit by the crisis at a particularly delicate time. Wells Fargo is still struggling with the aftermath of a gigantic reputation scandal. For years, employees had created bogus accounts for customers without their knowledge in order to meet internal growth targets and earn premiums. CEO Tim Sloan crashed over the scandal in 2019; the bank hired Scharf as an external cleaner. It was only in February that Wells Fargo reached an agreement with the investigating authorities to pay a $ 3 billion fine to settle most of the scandal.
Wells Fargo, the bank with the largest number of small and medium-sized companies, is overwhelmed by the flood of government loan requests. The Fed mitigated an existing growth stop for the bank, which now enables it to lend significantly more government-backed loans. But Wells Fargo has repeatedly asked its customers to apply for the loans at other companies as well, because the bank’s capacities are simply overloaded.
Only securities trading is booming
Lay this Wednesday Goldman Sachs, Bank of America and Citigroup their quarterly results. Analysts expect a similar picture: slump in profits and high risk provisions. However, like JP Morgan, the institutions will benefit from strong securities trading. The industry leader reported record sales of $ 7.2 billion. Turnover from equity trading increased by 28 percent in the turbulent markets, bond trading even increased by 34 percent.
JP Morgan also posted a record for new issues with high credit ratings. Companies are very keen to provide themselves with sufficient liquidity, said Dimon. Therefore, many would not only have drawn their lines of credit, but would also have obtained fresh money on the capital market.
JP Morgan, like other institutions, is holding on to the dividend for the time being and bought back $ 6 billion in shares by mid-March. The major banks then jointly announced that they would not buy back shares until the end of the second quarter.
Sheila Bair, the former chief of US deposit insurance, had also called for no bonuses and dividends. However, this is not yet an issue in the US, even though a number of institutions in Europe have already suspended the dividend. The Goldman Sachs CEOs, Morgan Stanley, Bank of America and Citigroup recently pledged not to shake the dividend.
In his letter to shareholders, JP Morgan boss Dimon at least admitted that the distribution could be canceled in “an extreme situation”, such as a 35 percent drop in economic performance. However, the bank’s economists are currently anticipating a less dire scenario.
All in all, Dimon, the longest-serving head of a large US bank, was full of drive. His emergency operation did not change his plans to run the bank for several years, he emphasized. He is “dazzling”, likes to work and, with a view to the corona pandemic, he hopes that “we as a society will learn what we can do better”.
More: US economist Rogoff warns of “crisis of a new dimension”.