—— Citadel Securities Revenue Falls 35%; US Stock Market Recovery May Set Record Pace; AI Cryptocurrency Doubles on First Day; Credit Suisse Fined $387 Million; 30 Courtyard Hotels Default on Loans; Adidas Resumes Yeezy Sales; LVMH Sponsors Paris Olympics
1. Citadel Securities Revenue Falls 35%
Sources revealed that Citadel Securities earned $2.73 billion in revenue in the first half of the year, down from $4.2 billion a year ago, marking a 35% year-over-year decline. The firm has maintained over $1 billion in quarterly revenue for 14 straight quarters.
Last year, rising rates, recession fears, and the Russia-Ukraine war triggered huge trading volatility and profits, but this year, as volatility eased, trading revenue growth slowed — US banks earned $57.3 billion in trading revenue in the first half, down 8.3% year-over-year.
As a market maker, Citadel Securities accounts for nearly one-fifth of all US stock trades. Last year, it profited $7.5 billion by using algorithms to capture small price differences in trades.
In the second quarter, Citadel paid out $500 million in equity dividends.
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2. US Stock Market Recovery May Set Record Pace
Today, the S&P 500 rose further and is now just 260 points away from its level before the bear market started two years ago. Over the past 10 weeks, the US stock market has risen in 8 weeks. If the rally continues, it could mark the fastest stock market recovery since WWII.
Fueled by job growth and stronger-than-expected consumer spending and corporate earnings, $10 trillion has flowed into US stocks over the past nine months. The S&P 500 is now 27% above its October 2022 low, and just 5% below its January 2022 peak.
If the S&P 500 hits a new peak in September, the recovery would be twice as fast as the previous 12 bull-bear cycles.
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3. AI Cryptocurrency Doubles on First Day
Worldcoin, the cryptocurrency co-founded by OpenAI CEO Sam Altman, doubled to $3.58 on its first trading day before retreating to $2.52.
Today, Worldcoin’s trading volume reached $145 million.
According to project rules, Worldcoin has a maximum supply of 10 billion tokens, but only 143 million were issued today.
Worldcoin is not available for trading in the US, as it does not meet regulatory requirements.
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4. Credit Suisse Fined $387 Million
Due to Credit Suisse Group AG’s failure to properly manage counterparty credit risk during dealings with collapsed Archegos Capital Management, its new parent UBS must pay $387 million in penalties.
Of this amount, $269 million will go to the Federal Reserve, and $112 million to the UK’s Prudential Regulation Authority (PRA).
The PRA said Credit Suisse failed to learn from past failures and did not address previously raised concerns.
The Federal Reserve stated Credit Suisse lacked sufficient oversight and experienced staff, and did not implement proper counterparty risk controls.
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5. 30 Courtyard Hotels Default on Loans
According to special servicer reports, 30 Courtyard by Marriott hotels owned by Cerberus Capital Management and Highgate failed to make two months of interest payments, on loans totaling $415 million.
Trepp data showed that hotel CMBS delinquency rates rose to 5.35% in June, up from 4.4% six months ago.
After Hurricane Ian and Tropical Storm Nicole, insurance costs for the hotel portfolio surged. Marsh McLennan reported that commercial property insurance prices rose 17% in Q1.
Barclays analyst Lea Overby said the defaults were shocking, mainly caused by soaring insurance costs, even though only three hotels are located in hurricane-prone Florida.
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6. Adidas Resumes Selling Yeezy Products
German sportswear giant Adidas AG announced that its 2023 operating loss might reach $499 million, much smaller than previously expected.
After severing ties with Kanye West, Adidas had initially planned to write off all Yeezy inventory, but eventually decided to resume sales.
Besides Yeezy products, other product lines also performed better than anticipated.
In Q2, Adidas’ sales hit €5.34 billion, beating expectations, and gross margin rose 0.6% to 50.9%.
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7. LVMH Sponsors Paris Olympics
LVMH, Europe’s most valuable company, announced it will become a premium sponsor of the 2024 Paris Summer Olympics, joining top French companies Orange SA, Air France-KLM, and Carrefour.
In recent years, many LVMH brands have sponsored major sports events — Hublot, for example, has long sponsored the FIFA World Cup.
CEO Bernard Arnault stated that sponsoring the Olympics will help elevate France on the global stage. LVMH’s jewelry brand Chaumet will design the Olympic and Paralympic trophies, while Hennessy will provide beverages.
This marks the first time that LVMH will sponsor an event as a full group.
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This content is sourced from Financial Times, Bloomberg, and The Real Deal, among other financial news outlets.