BMW posts steep drop in profit as global trade tensions weigh on bottom line
German high-end carmaker BMW yesterday posted a steep drop in quarterly profit as new emissions tests, global trade tensions and costly recalls weighed on the bottom line.
The Munich-based group said net profit between July and September slumped 24% year-on-year to €1.4bn ($1.6bn), falling short of analyst expectations. Third-quarter revenues rose 4.7% to €24.7bn, supported by brisk demand for the group’s vehicles which include the compact Mini and luxury Rolls-Royce. The group had already issued a rare profit warning in September when it was forced to lower its full-year outlook in the face of a series of setbacks.
Chief among them was the introduction of tough new EU emissions tests known as WLTP, which sent rival carmakers scrambling to shift non-compliant models before the September 1 deadline with considerable discounts offered to buyers. This resulted in “unexpectedly intense competition”, BMW said. The group has also been impacted by US President Donald Trump’s festering trade row with China, which has seen both sides impose tit-for-tat tariffs, and his threats to place steep duties on auto imports from the European Union. “The ongoing international trade conflicts had the effect of aggravating the market situation and feeding consumer uncertainty,” said BMW, which owns factories in Europe, the US and China.
The automaker likewise felt the pinch from a mass recall of diesel-powered cars over a fire risk, for which it had to set aside €679mn in the third quarter.
Dutch lender ABN Amro aims to increase dividend payouts to more than half of its net profits after strong economic growth in its domestic market pushed up earnings in the third quarter. A higher dividend would benefit the Dutch government which remains the bank’s largest shareholder after a bailout a decade ago. ABN Amro returned to the stock market in 2015 but the state retains 56% of the shares and hasn’t sold any in over a year.
Net profit in the latest quarter was €725mn ($830mn), compared with €673mn a year earlier and €589mn expected by analysts in a Reuters poll. This put ABN on track to meet its earlier promise of increasing shareholder payouts, while keeping its capital buffers well above minimally required levels. ABN Amro has set aside 60% of its net profit over the first nine months of the year for dividends, as it aims to increase the payout to shareholders from the 50% ratio reached last year, it said yesterday.
“This 60% is an indication of the direction of our thinking”, CFO Clifford Abrahams told reporters.
Credit Agricole is on track to meet its financial targets after it reported higher third-quarter profits, the French bank’s chief executive said yesterday. Net profit rose 3.2% to €1.10bn ($1.26bn) topping the €1.03bn expected by analysts in a poll by Inquiry Finance for Reuters.
Revenue rose 5% to €4.80bn, short of the €4.86bn expected by analysts.
“The results are serious and the fruit of our structural prudence,” chief executive Philippe Brassac told reporters. He said the bank had already met some of its financial targets for 2019 and was on track to meet the others.
Kepler Cheuvreux analysts expect Credit Agricole to reach its 2019 net profit target this year. Montaigne Capital fund manager Pierre Willot, whose portfolio does not include Credit Agricole shares, said the bank’s results had been flattered by a drop in provisions.
German reinsurer Munich Re returned to profit in the third quarter and affirmed its guidance for 2018, recovering from a spate of natural catastrophes a year ago.
Net profit came to €483mn ($553mn), it said yesterday, compared with a €1.44bn loss in the yearearlier period and analyst consensus for a €456mn profit. “This good Q3 result puts us on track to achieve our profit target for 2018 - despite a series of major natural catastrophes still continuing in the fourth quarter,” Chief Financial Officer Joerg Schneider said. Munich Re aims to post a 2018 full-year profit of €2.1bn to €2.5bn. The group’s return to profit came despite a series of natural catastrophes in the third quarter, including Hurricane Florence in the United States and Typhoon Jebi in Japan.
Commonwealth Bank of Australia, the country’s biggest lender by assets and market value, posted a 5.7% fall in first-quarter cash profit on slowing loans growth and higher funding costs.
The unaudited result comes as Chief Executive Matt Comyn is to be questioned later this month at a powerful misconduct inquiry that has exposed failings in Australia’s banking sector, damaging CBA’s brand and costing it hundreds of millions of dollars in remediation charges and legal expenses. Cash profit, a measure that excludes one-off and non-cash accounting items, fell to A$2.50bn ($1.81bn) for the three months ended September 30, the bank said in a limited trading update yesterday. That compares with A$2.65bn a year ago that included profits from its life insurance unit. Those profits have been excluded in the latest quarter because the unit is being sold.
The profit fall came as higher short-term interest rates impacted net interest margins, a key gauge of bank profitability that CBA did not quantify. Compared to the average cash profit in the previous half, earnings were 3% higher.