— U.S. Retail Sales Fall Again; Citigroup Profits Unexpectedly Rise; Japanese Investors Lose $700M in Credit Suisse; BlackRock AUM Expands to $9 Trillion; Top Schwab Shareholder Sells $1.4B Stake; Blackstone Sells $263M Industrial Portfolio; JPMorgan Profits Surge 52%
1. U.S. Retail Sales Fall Again
According to data released today by the U.S. Department of Commerce, U.S. retail sales in March fell 1% month-on-month, much steeper than February’s revised 0.2% drop, dragged down by persistent inflation and high lending rates.
Excluding energy and autos, total retail sales dropped 0.3%, which was better than expected.
Out of 13 retail categories in March, 8 saw declines, led by gas stations, general merchandise, and electronics. The report showed that auto and gas station sales fell 1.6% and 5.5% respectively, the biggest drops since April 2020.
The new data further illustrates that U.S. household spending continues to weaken, the broader economy remains under pressure, and inflation remains stubbornly high.
A decline in retail sales suggests that product prices may fall, aiding the Fed’s fight against inflation.
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2. Citigroup Profits Unexpectedly Rise
In Q1, Citigroup’s net profit unexpectedly rose, primarily due to fixed-income trading revenue outweighing sharply increased post-hike costs.
According to Citi’s earnings, total profits from fixed income, currency, and commodity trading rose 4% to $4.5 billion. Loan loss provisions more than doubled to $2 billion, the highest since 2020, but customer deposits remained steady at around $1.33 trillion.
Citigroup’s net profit rose 7% in the first quarter to $4.6 billion, with adjusted EPS at $1.86, beating analysts’ forecast of $1.65.
CEO Jane Fraser stated that the company demonstrated strong operational performance and revenue growth, as well as disciplined cost control.
Citigroup’s fixed-income traders posted their third-best performance in nearly a decade.
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3. Japanese Investors Lose $700M in Credit Suisse
The recent crisis at Credit Suisse led to a total write-down of its riskiest AT1 bonds.
Sources revealed that a group of high-net-worth clients who purchased the bonds through Japan’s largest bank, Mitsubishi UFJ Financial Group Inc. (MUFG), lost a total of $717 million.
The fallout from Credit Suisse extended far beyond MUFG’s clients, but their losses underscored the far-reaching impact of a major investment bank collapse.
MUFG is currently investigating the financial advisors who sold the AT1 bonds to assess whether clients were sufficiently informed.
AT1 bonds carry extremely high risk, as they can be written down during emergencies. Many investors believe they were treated unfairly and are preparing to sue.
AT1 bonds carry high risk, and MUFG is investigating whether its financial advisors properly briefed clients.
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4. BlackRock AUM Expands to $9 Trillion
According to a statement from BlackRock today, the firm recorded $110 billion in net inflows in Q1, driven by the collapse of several U.S. banks. Of that, $103 billion flowed into BlackRock’s ETFs and mutual funds.
CEO Larry Fink disclosed that over $40 billion poured into BlackRock’s cash management products in March alone, largely due to investor concerns over regional bank stability. The influx into money market funds and ETFs created many new opportunities for the firm.
Today, BlackRock shares rose 3.6%, and its year-to-date decline narrowed to 1.9%.
BlackRock’s range of ETFs and mutual funds is increasingly attractive to investors in the current market.
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5. Top Schwab Shareholder Sells $1.4B Stake
GQG Partners, one of Charles Schwab’s largest shareholders, recently sold its entire $1.4 billion stake, citing concerns over paper losses in Schwab’s bond portfolio.
Florida-based GQG was among Schwab’s top 15 shareholders, holding about 1% of shares.
GQG’s international head Mark Barker told the Financial Times that although Schwab is not facing a material crisis, market fears over the banking sector have spread substantially.
Since early March, Schwab’s stock has fallen by one-third.
Many Schwab clients have shifted large amounts of cash into money market funds, reducing interest income.
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6. Blackstone Sells $263M Industrial Portfolio
Link Logistics, a Blackstone subsidiary, recently sold an industrial real estate portfolio in Southern California. The portfolio includes 45 buildings in Los Angeles and Orange County, totaling 851,000 square feet.
CBRE announced the deal but did not disclose the amount. However, property records suggest the deal was worth approximately $263 million, or $308 per square foot.
In July 2022, Link acquired the portfolio as part of its $7.6 billion acquisition of PS Business Parks. The buildings range from 7,580 to 31,918 square feet and are currently 98% leased.
CBRE Vice Chairman Mike Longo noted that small, short-term leased, high-credit-quality properties are very valuable since shorter leases allow landlords to adjust rent more frequently.
Compared to office buildings, high-quality industrial properties can maintain occupancy rates above 90%.
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7. JPMorgan Profits Surge 52%
JPMorgan Chase reported today that Q1 net profit surged 52% to $12.6 billion, primarily driven by its consumer division.
Net interest income jumped 49% year-on-year to $20.8 billion. The bank now expects full-year revenue to hit $81 billion, up from its previous forecast of $74 billion.
CEO Jamie Dimon noted that both the U.S. economy and consumer spending remain relatively healthy, though the firm is closely watching market risks.
In Q1, total deposits rose to $2.38 trillion, as failures of smaller banks like SVB drove capital into major banks.
JPMorgan set aside $1.1 billion in loan loss provisions to guard against potential deterioration.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.