Tourists bustle in front of Huawei’s global flagship store near Nanjing Road Pedestrian Street in Shanghai, China, March 21, 2023.
CFOTO |: Future Publishing | Getty Images:
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China’s economy boomed in the first three months of the year. In the US, regional bank earnings reports weren’t a disaster, but they weren’t a picture of health either.
China’s economy is recovering on several fronts, according to data released Tuesday by the country’s National Bureau of Statistics. Last month, gross domestic product increased, retail sales increased, industrial output increased, and fixed investment increased.
Admittedly, some of those numbers were lower than expected. Investment in real estate fell, indicating that China’s real estate sector is still a weak spot in the country’s economy. Prosecutors may also point to China’s lower-than-expected 0.7% year-on-year rise in March’s consumer price index as a sign that consumption may not be as strong as retail sales suggest.
Indeed, the muted reactions of mainland and Hong Kong stock markets reinforce the idea that the rosy numbers are not as significant as they initially appeared.
Meanwhile, regional US banks began reporting on Monday. It wasn’t the disaster many feared, but it didn’t paint a picture of the industry’s health either.
First, the good news. Charles Schwab’s first-quarter net income rose 14% from a year earlier to $1.6 billion, while its revenue rose 10% to $5.12 billion. Its revenue fell short of Wall Street estimates, but it is quite remarkable that the bank (which also acts as an intermediary) was able to increase its profits, despite the fact that it was one of the financial institutions most affected by the collapse of SVB. Investors thought so, too, sending shares of Charles Schwab up 3.94%.
M&T Bank, with $201 billion in assets (as of 2022), did even better. It beat first-quarter expectations on both the top and bottom lines, sending its stock up 7.78%.
However, other banks also did not perform well. State Street, a custodian bank that holds financial assets such as stocks and bonds, reported a 5% drop in first-quarter net income to $549 million, although its total revenue rose. The report prompted investors to unload State Street shares, which fell 9.18%.
Bank of New York Mellon, another major custodian bank, fell 4.59% after State Street reported its earnings.
Profits aside, all banks that reported on Monday revealed a drop in deposits. At State Street and M&T, they were down about 3%, while Charles Schwab posted an 11% drop in deposits from the previous quarter. However, when juxtaposed against the movement in bank shares, it appears that investors are more concerned about profitability than deposit volume, which could be a promising sign that it is back to business as usual in the sector.
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