U.S. Debt Ceiling Bill Passes

Author

Faro Capital
June 02, 2023

Good Morning,

This week the S&P500 hit a 40-week high of 4,231. Yesterday U.S. stocks closed higher due to the positive effect of the debt limit bill passing. ISM data showed manufacturing in the U.S. dropped and prices followed suit. Eyes are still on the Fed to see where rates are heading in the near future. People are trying to figure out if the Fed is going to hike, pause hikes, skip then pause, or pause entirely.

Canadian stocks rose higher following U.S. stocks. With Q1 GDP higher by a tad than expectations are helping lower bearish sentiments about the economy. Gold miners led the rally as gold prices increased. Glencore announced its intent to acquire Teck resources.

 Brazil stocks rose yesterday as positive GDP data came out and U.S passed their debt bill. Brazil’s GDP grew 1.9% in Q1 2023, better than expected

Markets: Before the Open

Top News Stories

Canada

  • Selwyn Crittendon will be named chief executive of Ikea Canada (BNN)

  • Franklin Templeton buys Putnam Investments for $925M (BNN)

  • National Bank Reported Q2 earnings lower vs last year (BNN)

  • Carlos Leitão has been appointed to the Bank of Canada’s board of directors (BNN)

  • Quebec attracted $6B of foreign direct investment in year ended March 31, which represents a 30% increase y/y (MG)

  • Laurentian Bank reported a 17% drop in Q2 profits and a raise in their dividend (BNN)

  • TransCanada’s North Baja pipeline has got approval by FERC (MB)

U.S.

  • Microsoft makes a deal with CoreWeave for A.I. computing (CNBC)

  • Private Payrolls increased by 278K in May (CNBC)

  • Macy’s cut full year outlook (CNBC)

  • Pentagon inked a deal to buy starlink satellite internet terminals for use in Ukraine (CNBC)

  • Lucid announced a $3B capital raise from Saudi public wealth fund (CNBC)

  • American Airlines raises outlook due to strong demand & lower fuel costs (CNBC)

  • Debt ceiling bill passes the house, goes to the senate (CNBC)

  • Nvidia crossed the $1T market cap this week (CNBC)

  • Bacardi is seeking to acquire Illegal Mezcal (MB)

Argentina

  • Newmont to invest $540M in its Cerro Negro gold mine (BAT)

Brazil

  • PR firm Patria raises $118M in SmartFit share offering (USN)

  • Lula stated Brazil will not give in to EU-Mercosur deal (BAT)

  • Qatar lifted restrictions of Brazilian beef (RIO)

  • Brazil’s GDP grew 1.9% in Q1 2023 (RIO)

  • Brazil’s public sector accounts surplus drop 47% in the four months of 2023 (RIO)

  • Fitch ratings warned that listed companies at risk for default has doubled (RIO)

Chile

  • Copper production has dropped last month (BBG)

  • Chile seeks to start lithium negotiations with Albemarle (USN)

  • Chiles economy shrunk more than anticipated (RIO)

 Colombia

  • Nubank to raise investments by $160M by 2025 (USN)

  • Q1 Mining exports are the highest it’s been in 14 years, rose 32% y/y (PORT)

  • Car sales drooped 30.1% in May (PORT)

  • Unemployment rate hit 10.7% in April 2023 (PORT)

  • Three departments reported almost half of Colombia’s GDP, Bogotá, Antioquia, Valle del Cauca (PORT)

  • Natural gas production dropped 6.54% in April (ELT)

  • List of banks with the top earnings of Q1 2023 (ELT)

Dominican Republic

  • Central Bank cuts its TPM rate by 50 bps to 8% (ELD)

Panama

  • Exports grew 28.6% in January 2023, copper and bananas led exports (LAE)

  • Panama exports first shipments of ginger to Spain (LAE)

Peru

  • Peru could issue Sol Bonds after this weeks $2.5B deal (BBG)

Mexico

  • Femsa to sell stake in Jetro for $1.4B (USN)

  • Mining sector saw a 63% drop in Q1 2023 (MB)

  • Ualá acquires ABC Capital Bank (MB)

  • Mexico’s public sector realized a 4.5% rise in April 2023 (MB)

  • Remittances in April grew 6.3% y/y (ELF)

  • Banxico rose GDP growth estimates for 2023 from 1.6% to 2.3% (ELF)

Uruguay

  • Tether to mine bitcoin in Uruguay with renewable energy (CNBC)

  • Uruguay and Mexico agree on Canola Grain exports (MB)

Insights

Canadian Bank Earnings

Scotia Bank

1) Q2 2023 Results (Missed Analyst Estimates)

Revenue:

Estimate – C$8.01B

Actual – C$7.93B

EPS:

Estimate: 1.77

Actual: 1.70

2) Earnings Highlights

  • Net Income of $2.15B in Q2 2023 vs $2.74B Q2 2022

  • EPS of $1.70 Q2 2023 vs $2.18 Q2 2022

  • Quarterly dividend increase of 3 cents to $1.06 per share

  • Provision for credit losses grew from $219M to $709M Y/Y

  • CET1 capital ratio was 12.3%, approx. 80 bps increase from last quarter

  • Tier 1 capital ratio was 14.1%, approx. 90 bps increase from last quarter

  • Leverage ratio was 4.2%, remains in line from last quarter

Make up of Net Income: $2.159B

1. Canadian Banking - $1.06B

2. International Banking - $665M

3. Global Wealth Management - $356M

4. Global Banking and Markets - $401M

5. Other – Loss $323M

TD Bank

1) Q2 2023 Results (Missed Analyst Estimates)

Revenue:

Estimate: C$12.86B

Actual: C$12.54B

EPS:

Estimate: 2.14

Actual: 1.94

2) Earnings Highlights

  • CET1 capital ratio was 15.3%

  • Completed the acquisition of Cowen

  • Terminated First Horizon merger, payed $225M for the cancelation

  • Canadian Personal & Commercial Banking net income grew 4% y/y

  • U.S. retail net income grew 3% y/y

  • Wealth Management & Insurance net income dropped 16% y/y

  • Wholesale banking net income dropped 58% y/y

CIBC

1) Q2 2023 Results (Beat Analyst Estimates)

Revenue:

Estimate: 1.63

Actual: 1.70

EPS:

Estimate: C$5.69B

Actual: C$5.70B

2) Earnings Highlights

  • Revenue grew 6% y/y

  • CET1 Capital Ratio was 11.9% vs 11.6% in Q1 2023

  • ROE was 14.5%

  • Leverage ratio was 4.2%

  • Liquidity coverage ratio was 124%

  • Provisions for credit losses grew 44% y/y

Make up of Net Income: $1.6B

1. Canadian Personal & Business Banking - $637M

2. Canadian Commercial Banking & Wealth Mgmt - $452M

3. U.S. Commercial Banking & Wealth Mgmt - $55M

4. Capital Markets - $497M

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