Huljich family sell quarter of Pushpay stake for $123.8m; US markets up on better-than-forecast US bank results; UK orders Huawei gear purged from 5G rollout 2027
Better than expected: US markets are closing modestly firmer this morning after America’s biggest banks reported slumps in profits and forecast bad debts linked to the Covid-19 crisis, but they were better than analysts had forecast and some are doing well from buoyant financial market trading on expectations of massive central bank support.
Trading profits: JPMorgan Chase, America’s largest bank, reported a 51 percent fall in second-quarter profits as provisions for credit losses spiked and the shape of the recovery became increasingly uncertain. Although JPMorgan’s business banking division is down sharply, its trading division is thriving as a result of the market recovery.
No go: Wells Fargo has warned it will likely slash its coveted dividend by 80 percent. The poor results were driven by soaring expenses linked to recent scandals within the bank and increased credit costs as the bank prepared for tough times ahead.
No fly: In another sign the resumption of international travel is increasingly precarious, Qantas has cancelled nearly all its international flights (except to NZ) until March of 2021, as the coronavirus pandemic continues to batter air travel.
No Huawei: Prime Minister Boris Johnson ordered overnight that Huawei equipment be purged completely from Britain’s 5G network by the end of 2027. (Reuters) The move will be closely watched by our GCSB, given New Zealand is one of the ‘Five Eyes’ intelligence partners and has relied on British expertise for advice on Huawei, which America has argued is beholden to China’s Government.
Cashing in: Shares in Pushpay Holdings ended their recent dream run yesterday after it was announced that cornerstone investors, the Huljich family, had sold a quarter of its shareholding in the company. The 14.4 million shares were sold on Monday for $123.8 million, or $8.60 per share – a 6.9 percent discount to the closing market price that day of $9.24. Pushpay shares fell sharply at the open in response to the news, ending the day down 8.4 percent at $8.46, having traded as low as $8.16 intraday. It’s shares are up more than 110 percent year-to-date.
Pandemic success story: The donations software developer, which focuses on America’s evangelical churches, has enjoyed significant success during the pandemic due to US church buildings being closed requiring faith communities to use online platforms to attend services and to make donations. Pushpay has estimated it’s pre-tax earnings for the year to March 2021 will be between US$50 million and US$54 million.
Staying in: The Huljich family said the outlook for the company “remained positive”. Peter Huljich will stay on the Pushpay board and the family said they would continue to be the company’s largest shareholder with a combined 15 percent stake.
Property market upbeat: The housing market is showing no signs of negativity with sales volumes the highest for June in four years and prices nationally up 8.6 percent from a year earlier. The Real Estate Institute’s latest data show 6,625 houses were sold in June, up 7.1 percent from a year earlier and up more than 60 percent from May when the lockdown was in place. The market was helped by a 19.7 percent jump in new listings of houses available for sale.
Prices trending higher: The institute’s house price index, excluding Auckland, was up 9.5 percent from June last year and reached new highs through the central North Island, where annual price increases reached as high as 19.4 percent for Manawatu/Whanganui, and on the West Coast and upper South Island. Compared with May, prices nationally were up 0.9 percent and by the same degree in Auckland.
Speed bumps possible: NZIER CEO Bindi Norwell said while the figures were encouraging, the medium term could present a few challenges for the market. “We’ve said it before and it’s important to say it again; this may well be a post-lockdown peak in activity levels. There are concerns that, with the wage subsidies and mortgage holidays ending and an election in September, there may be a potential trough in activity levels in the coming months.”
Loan demand weakens: The Reserve Bank has reported a mixed level of demand for bank lending facilities in the six months ended June, much of it impacted by the coronavirus lockdown. Not surprisingly, demand for residential mortgages and personal loans contracted more than banks’ willingness to provide them, while demand for capital spending loans from business also shrank. However, demand for working capital loans and stand-by facilities rose. Commercial property loans also contracted more than banks’ willingness to lend and banks expect these conditions will continue through to the end of this year, the Reserve Bank said.
Health check: Demand for loans from dairy farmers shrank sharply, but banks expect demand to pick up in the next six months. The Reserve Bank surveyed 12 banks, including the five largest, in the last two weeks of June. While the central bank normally conducts this survey in March and September, it decided on an out-of-cycle survey to assess the impact of the coronavirus crisis on credit conditions.
Ready to lend: The RBNZ’s index of credit demand for mortgages in the first six months of 2020 contracted by 24 points while the availability of mortgages shrank 8.7 points. It said during the next six months, while banks clearly expect demand to remain weaker than normal with a 21.8-point contraction; their willingness to lend will be almost back to normal with just a 0.9-point contraction.
City state hit hard: Singapore’s economy contracted by a record 41.2 per cent in the second quarter after imposing a lockdown to halt the spread of coronavirus. The restrictions plunged the city-state into its first recession since the GFC in 2008. The quarter-on-quarter decline in GDP was the largest on record, according to preliminary figures from Singapore’s Ministry of Trade & Industry and followed a 3.3 per cent contraction in the first quarter. The economy shrank by 12.6 per cent year-on-year — the largest drop since Singapore’s independence in 1965 — due to lockdown measures. Economists had been expected a fall of 10.5 percent.
Popular bond issue: Australia has raised A$17 billion in its second biggest ever bond auction, with huge demand coming from central banks, asset managers and lending banks globally. The Australian Office of Financial Management (AOFM) and its brokers sold A$17 billion of five-year bonds on Tuesday, having earlier received orders worth A$50.6 billion. The bonds were sold with a 0.25 percent coupon and a 0.495 percent yield to maturity. They were due to settle on July 24 and would mature in November 2025, according to the AOFM.
We’ll take more: The raising underpinned a huge appetite for Australian debt, even at the reasonably thin 0.25 per cent coupon and 0.495 per cent yield and not long after S&P Global Ratings revised Australia’s AAA credit rating outlook to “negative”. Traders believe the government could easily have raised A$20 billion or A$25 billion at about the same price.
‘How I see it’: Here’s how former US Federal Reserve Chair Janet Yellen summed up the current situation in the US in a recent interview: “We’ve got a health crisis causing an economic crisis, but we don’t [yet] have a financial crisis.” Yellen, who served as Fed chairman between 2014 and 2018, admitted that some of the Fed’s actions had taken her by surprise.
Crossing the line: Describing one telling example, Yellen explained that former Fed veterans – including her next door neighbour and predecessor Ben Bernanke, and the former Fed vice chairman Don Cone, who lives two doors down – had been sounded out by an economic consultant for advice about whether the Fed would ever lend to municipal governments.
Rubicon crossed: The group’s unanimous response: “No way”. Yet two days later, the Fed announced it would do just that. Yellen said it was a line she never thought the Fed would ever cross. But she warned that there are limits to the central bank’s firepower, particularly in risky pockets of financial markets such as high yield debt and emerging markets and that investors do not seem to be fully pricing in the downside risks.
Double trouble: US automaker Ford, already under pressure as a result of the current economic downturn, now has a separate PR battle on its hands after employees’ called for the company to get out of the police car sales business. Ford is one of America’s largest producers of police cars. CEO Jim Hackett however has rejected the call saying the automaker can support the Black Lives Matter movement while selling the majority of America’s police cars.
Staff mobilise: In a recent memo to staff, Hackett acknowledged that some Ford employees are urging the company to stop making police cars because of a series of high-profile killings of African Americans by police. A public petition on Change.org has attracted more than 12,000 signatures over the last month, urging Ford to refuse sales and service of cars to police departments “using violent tactics”.
Bad look: The police car that George Floyd was lying next to when he was killed was a Ford. The Ford Interceptor is widely acknowledged as the nation’s best-selling police vehicle, although Ford has not broken out the number of vehicles it has sold. There are no firm figures on its market share, but industry experts believe it to be in the 60 percent range.