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Wall Street banks’ profits slide as economic clouds loom, some beat forecasts

Oct 14 (Reuters) – Profits slid at Wall Street’s biggest banks in the third quarter as they braced for a weaker economy while investment banking was hit hard, but investors saw a silver lining with some banks beating estimates.

JPMorgan Chase & Co (JPM.N), Morgan Stanley (MS.N), Citigroup Inc (C.N) and Wells Fargo & Co’s (WFC.N) showed a slide in net income after turbulent markets choked off investment banking activity and lenders set aside more rainy-day funds to cover losses from borrowers who fall behind on payments.

“We’re in an environment where it’s kind of odd,” said JPMorgan Chief Executive Officer Jamie Dimon, who said that while the bank was “hoping for the best, we always remain vigilant and are prepared for bad outcomes.”

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Central banks globally have been battling surging inflation which is expected to cause an economic slowdown. The Federal Reserve has raised the benchmark interest rate from near zero in March to the current range of 3.00% to 3.25% and signaled more increases.

Rising rates tend to buoy bank profits, but the broader risk of an economic downturn sparked by high inflation, supply-chain bottlenecks and the war in Ukraine could weigh on future earnings.

On a conference call, Dimon said U.S. consumers remained strong and he wasn’t predicting a recession but “there are a lot of headwinds out there.”

Money that people have in their checking accounts will “deplete probably by sometime midyear next year” while they are contending with headwinds like inflation, higher rates and higher mortgage rates, he cautioned.

Banks set aside more money in preparation for a hit from a potential economic slowdown. JPMorgan set aside $808 million in reserves, Citi added $370 million to reserves and Wells had a $385 million increase in the allowance for credit losses.

Still, shares of JPMorgan and Wells Fargo gained strongly, up 2.5% and 3.7% respectively while Citi gained 1.2% as the profit falls were not as deep as feared.

JPM also said it hopes to be able to resume stock buybacks early next year, although other banks were less bullish with Citi saying buybacks continue to be on hold and Wells Fargo saying it continues to be prudent about buybacks.

“JPMorgan delivered a solid set of results, from top to bottom,” Susan Roth Katzke, an analyst at Credit Suisse, wrote in a note. “At least equally as important is the evidence of preparedness to manage through whatever turn the macro takes; expect the latter to be in focus.”

JPMorgan reported a 17% drop in third-quarter profit to $9.74 billion, although that was less than had been feared. Wells Fargo posted a 31% decline to $3.53 billion but it also beat expectations. And Citi reported a 25% drop to $3.5 billion which also beat expectations.

“Most of these banks are making more spread income now than ever because of the change in interest rates,” said Chris Marinac, Director of Research at Janney Montgomery Scott. “And this was the first quarter where you had the full effect of the Fed, because the Fed increased a little bit in May.”

JPMorgan said net interest income rose 34% to a record $17.6 billion, up 34%.

“Generally banks obviously seem to be benefiting from a higher rate environment, and we’ve obviously seen banks able to earn, in terms of revenues, on higher interest rates,” said Eric Theoret, global macro strategist at Manulife Investment Management.

Marinac said investors would want to see banks build reserves at this point in the economic cycle.

“They’re bracing for a hard landing, because they’re building the reserves,” said Marinac. “But that’s not necessarily a bad thing.”

While a number of the banks managed to beat expectations, Morgan Stanley reported a 30% slump in profit to $2.49 billion which missed estimates. Its shares fell 5%.

Morgan Stanley’s earnings showed that investment banking revenue more than halved to $1.3 billion with declines across the bank’s advisory, equity and fixed income segments.

Reuters Graphics

James Gorman, Chairman and Chief Executive Officer of Morgan Stanley, said his firm’s performance was “resilient and balanced in an uncertain and difficult environment.”

Corporations’ interest in mergers, acquisitions and initial public offerings dried up, particularly hitting banks strong in investment banking. Global M&A lost ground in the third quarter with volumes in the United States plummeting nearly 63% as the rising cost of debt forced companies to postpone big buyouts.

While banks were optimistic they could weather the likely tougher economy ahead, some observers were concerned about the long term outlook for growth.

“Against the backdrop of economic headwinds, the solid earnings reports from this morning will quickly pass into the rearview mirror,” said Peter Torrente, KPMG US National Sector Leader for Banking and Capital Markets. “Worries of inflation, which shows little sign of slowing down, are casting a long shadow on future outlook.”

Torrente said while banks’ revenues reflect the benefit of rising interest rates and persisting loan demand, the buildup in loan loss provisions also reflects the uncertainty in the road ahead.

“Next quarter and beyond, credit risk, loan growth, and deposit balances will be key areas to monitor in the banking industry,” Torrente said.

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Reporting by Saeed Azhar and Lananh Nguyen and Davide Barbuscia in New York, Noor Zainab Hussain, Niket Nishant, Mehnaz Yasmin, Sweta Singh and Manya Saini in Bengaluru
Writing by Megan Davies
Editing by Lananh Nguyen, Mark Potter, David Gregorio and Chizu Nomiyama

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Crew members killed in Ukraine cargo plane crash in northern Greece

ATHENS, July 17 (Reuters) – A Ukrainian cargo plane carrying munitions from Serbia to Bangladesh crashed near the city of Kavala in northern Greece late on Saturday, killing the crew members on board, Serbian authorities and Meridian airline said on Sunday.

Drone images from the scene showed smouldering debris from the Antonov An-12 aircraft strewn in fields. Greek authorities said there were eight crew members on board and a Ukrainian foreign ministry spokesman said they were all Ukrainian citizens.

Ukrainian-based airline Meridian, which operated the aircraft, said all the crew members were killed in the crash. read more

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Serbia’s defence minister said the plane was carrying 11.5 tonnes of products, including mortar and training shells, made by its defence industry. The buyer of the cargo was the defence ministry of Bangladesh, he said.

Denys Bogdanovych, Meridian’s general director, confirmed Serbia’s account of events. “This is not related to Ukraine or Russia,” Bogdanovych told Reuters by telephone.

Witnesses said the aircraft came down in a ball of flames before exploding on impact in corn fields around midnight local time. Earlier the pilot had reported engine trouble and had requested an emergency landing.

Greek authorities could not provide information on the aircraft’s cargo or the crew. The special disaster response unit and army experts were dispatched to the scene, while local authorities issued a ban on people moving in the area.

Serbia’s defence minister Nebojsa Stefanovic said the cargo included illuminating mortar shells and training shells. It had taken off at 1840 GMT Saturday from Nis in Serbia.

“The plane carried 11.5 tonnes of products made by our defence industry. The buyer was the Bangladesh defence ministry,” Stefanovic said.

He said the plane’s cargo was owned by Serbian company Valir, a company registered to perform foreign trade activities of armament military equipment and other defence products.

Greek state TV ERT said the aircraft’s signal was lost soon after the pilot requested an emergency landing from Greek aviation authorities due to an engine problem.

Amateur video footage uploaded on ertnews.gr showed the aircraft in flames descending fast before hitting the ground in what appeared to be an explosion.

“I wonder how it didn’t fall on our houses,” one witness, Aimilia Tsaptanova, told reporters. “It was full of smoke, it had a noise I can’t describe and went over the mountain. It passed the mountain and turned and crashed into the fields.”

A senior source at Jordan’s civil aviation regulatory commission denied initial reports that the plane was headed to Jordan. The source said that its flight itinerary included a stopover in Jordan’s Queen Alia international airport at 9:30 pm (0630 GMT), to refuel, state news agency Petra reported on Sunday.

It was also due to stop in Riyadh and Ahmedabad in India before heading to Dhaka, Serbia’s defence minister said.

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Reporting by Renee Maltezou, Ivana Sekularac, Tom Balmforth, Max Hunder, Michele Kambas, Thanasis Elmazis, and Yasmin Hussein; Editing by Raissa Kasolowsky and Jane Merriman

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Chlorine gas leak kills 12, injures 251 at Jordan port

June 27 (Reuters) – At least 12 people died and 251 were injured in a chlorine gas leak from a storage tank at Jordan’s Aqaba port, officials and state media reported on Monday.

The leak came after a tank filled with 25 tonnes of chlorine gas being exported to Djibouti fell while being transported, officials said.

A video posted on state television’s Twitter page showed a storage tank falling from a winch and slamming into the deck of a ship, followed by yellow-coloured gas rising into the air as people ran away.

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Health ministry officials said they expected only a handful of people to remain hospitalised by Tuesday.

Chlorine is a widely used disinfectant and water purification agent, but if inhaled, the gas turns to hydrochloric acid, which can lead to internal burning and drowning through a reactionary release of water in the lungs.

Jordan’s Aqaba grain silos halted work to allow inspection of its grains and for any signs of contamination, but maritime traffic at Aqaba ports continues, officials said.

There were no vessels unloading any grains cargo at the time of the incident, they added.

Aqaba port at the north end of the Red Sea has long been a major transit route for Iraqi imports and exports.

Prime Minister Bisher al-Khasawneh arrived at Aqaba and headed to a hospital where some of the injured were being treated, state TV reported.

Al-Khasawneh also formed an investigation team into the incident chaired by the interior minister, state TV cited the information minister as saying.

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Reporting by Moataz Mohamed, Omar Fahmy, Nayera Abdallah and Suleiman al-Khalidi; Editing by Deepa Babington, Mark Porter and Lisa Shumaker

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Legal clashes await U.S. companies covering workers’ abortion costs

June 26 (Reuters) – A growing number of large U.S. companies have said they will cover travel costs for employees who must leave their home states to get abortions, but these new policies could expose businesses to lawsuits and even potential criminal liability, legal experts said.

Amazon.com Inc (AMZN.O), Apple Inc (AAPL.O), Lyft Inc (LYFT.O), Microsoft Corp (MSFT.O) and JPMorgan Chase & Co (JPM.N) were among companies that announced plans to provide those benefits through their health insurance plans in anticipation of Friday’s U.S. Supreme Court decision overturning the landmark 1973 Roe v. Wade ruling that had legalized abortion nationwide. read more

Within an hour of the decision being released, Conde Nast chief executive Roger Lynch sent a memo to staff announcing a travel reimbursement policy and calling the court’s ruling “a crushing blow to reproductive rights.” Walt Disney Co (DIS.N) unveiled a similar policy on Friday, telling employees that it recognizes the impact of the abortion ruling but remains committed to providing comprehensive access to quality healthcare, according to a spokesman. read more

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Companies including health insurer Cigna Corp (CI.N), Paypal Holdings Inc (PYPL.O), Alaska Airlines Inc [RIC:RIC:ALKAIR.UL] and Dick’s Sporting Goods Inc (DKS.N) also announced reimbursement policies on Friday.

Abortion restrictions that were already on the books in 13 states went into effect as a result of Friday’s ruling and at least a dozen other Republican-led states are expected to ban abortion.

The court’s decision, driven by its conservative majority, upheld a Mississippi law that bans abortion after 15 weeks. Meanwhile, some Democratic-led states are moving to bolster access to abortion.

Companies will have to navigate that patchwork of state laws and are likely to draw the ire of anti-abortion groups and Republican-led states if they adopt policies supportive of employees having abortions.

State lawmakers in Texas have already threatened Citigroup Inc (C.N) and Lyft, which had earlier announced travel reimbursement policies, with legal repercussions. A group of Republican lawmakers in a letter last month to Lyft chief executive Logan Green said Texas “will take swift and decisive action” if the ride-hailing company implements the policy.

The legislators also outlined a series of abortion-related proposals, including a bill that would bar companies from doing business in Texas if they pay for residents of the state to receive abortions elsewhere.

LAWSUITS LOOMING

It is likely only a matter of time before companies face lawsuits from states or anti-abortion campaigners claiming that abortion-related payments violate state bans on facilitating or aiding and abetting abortions, according to Robin Fretwell Wilson, a law professor at the University of Illinois and expert on healthcare law.

“If you can sue me as a person for carrying your daughter across state lines, you can sue Amazon for paying for it,” Wilson said.

Amazon, Citigroup, Lyft, Conde Nast and several other companies that have announced reimbursement policies did not respond to requests for comment.

For many large companies that fund their own health plans, the federal law regulating employee benefits will provide crucial cover in civil lawsuits over their reimbursement policies, several lawyers and other legal experts said.

The Employee Retirement Income Security Act of 1974 (ERISA) prohibits states from adopting requirements that “relate to” employer-sponsored health plans. Courts have for decades interpreted that language to bar state laws that dictate what health plans can and cannot cover.

ERISA regulates benefit plans that are funded directly by employers, known as self-insured plans. In 2021, 64% of U.S. workers with employer-sponsored health insurance were covered by self-insured plans, according to the Kaiser Family Foundation.

Any company sued over an abortion travel reimbursement requirement will likely cite ERISA as a defense, according to Katy Johnson, senior counsel for health policy at the American Benefits Council, a trade group. And that will be a strong argument, she said, particularly for businesses with general reimbursement policies for necessary medical-related travel rather than those that single out abortion.

Johnson said reimbursements for other kinds of medical-related travel, such as visits to hospitals designated “centers of excellence,” are already common even though policies related to abortion are still relatively rare.

“While this may seem new, it’s not in the general sense and the law already tells us how to handle it,” Johnson said.

LIMITS

The argument has its limits. Fully-insured health plans, in which employers purchase coverage through a commercial insurer, cover about one-third of workers with insurance and are regulated by state law and not ERISA.

Most small and medium-sized U.S. businesses have fully-insured plans and could not argue that ERISA prevents states from limiting abortion coverage.

And, ERISA cannot prevent states from enforcing criminal laws, such as those in several states that make it a crime to aid and abet abortion, so employers who adopt reimbursement policies are vulnerable to criminal charges from state and local prosecutors.

But since most criminal abortion laws have not been enforced in decades, since Roe was decided, it is unclear whether officials would attempt to prosecute companies, according to Danita Merlau, a Chicago-based lawyer who advises companies on benefits issues.

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Reporting by Daniel Wiessner in Albany, New York, Editing by Alexia Garamfalvi and Grant McCool

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Sheikh Mohammed ordered phones of ex-wife and lawyers to be hacked: UK court

  • Phones of Jordan’s Princess Haya and lawyers hacked-court ruling
  • Hacking involved the powerful NSO Pegasus software
  • Sheikh was prepared for his operatives to break law, judge says

LONDON, Oct 6 (Reuters) – Dubai’s ruler Sheikh Mohammed bin Rashid al-Maktoum ordered the phones of his ex-wife and her lawyers to be hacked as part of a “sustained campaign of intimidation and threat” during the custody battle over their children, England’s High Court has ruled.

Mohammed used the sophisticated “Pegasus” software, developed by Israeli firm NSO for states to counter national security risks, to hack the phones of Princess Haya bint al-Hussein, half-sister of Jordan’s King Abdullah, and some of those closely connected to her, according to the rulings.

Those working for him also tried to buy a mansion next door to Haya’s estate near the British capital, intimidatory action the court ruled that left her feeling hunted, unsafe and like she “cannot breathe anymore”.

The latest rulings come 19 months after the court concluded that Mohammed had abducted two of his daughters, mistreated them and held them against their will.

“The findings represent a total abuse of trust, and indeed an abuse of power to a significant extent,” Judge Andrew McFarlane, President of the Family Division in England and Wales, said in his ruling.

The sheikh rejected the court’s conclusions, saying they were based on an incomplete picture.

“I have always denied the allegations made against me and I continue to do so,” he said in a statement.

“In addition, the findings were based on evidence that was not disclosed to me or my advisers. I therefore maintain that they were made in a manner which was unfair.”

Mohammed, 72, and Haya, 47, have been involved in a long, bitter and expensive custody battle since she fled to Britain with their two children, Jalila, 13, and Zayed, 9. She said she feared for her safety amid suspicions that she had had an affair with one of her British bodyguards.

Among those targeted by the hacking was Haya’s lawyer Fiona Shackleton, a member of Britain’s House of Lords who represented British heir-to-the-throne Prince Charles in his divorce from his late first wife Princess Diana.

The activity came to light in August last year after Shackleton was urgently tipped off by Cherie Blair, the wife of former British Prime Minister Tony Blair, that she and Haya had been hacked, the court was told.

Blair is also a prominent lawyer who worked as an external adviser for NSO.

At the same time a cyber expert from the University of Toronto’s internet watchdog Citizen Lab, which researches digital surveillance, also alerted Haya’s lawyers after tracking the hacking, the court heard.

Once the hacking was uncovered, NSO cancelled its contract with the UAE, Haya’s lawyers said. The Israeli firm said it could not immediately comment on the case, but said it took action if it received evidence of misuse of Pegasus.

Shackleton and Blair declined to comment.

Mohammed is regarded as the visionary force behind Dubai’s ascent into a global commercial hub. He has sought to burnish the Gulf city’s reputation on issues such as human rights and equality.

There is no indication that last year’s ruling caused any major damage to him personally or to the UAE. Last month Britain and the UAE announced a “new, ambitious Partnership for the Future” involving billions of dollars in trade and investment.

LONG, EXPENSIVE BATTLE

Reporting restrictions on McFarlane’s findings after a year of hearings were lifted on Wednesday.

“I do not feel that I can move freely forward as things stand now, while I am and feel hunted all the time, and I am forced to look over my shoulder at every moment of the day,” the British-educated princess said in one witness statement.

The legal costs of the case have run into millions of pounds, with the case involving some of Britain’s most prominent lawyers. The costs of one appeal alone was cited by the court as costing 2.5 million pounds.

The sheikh, who is vice president and prime minister of the United Arab Emirates, initially sought to have the children brought back to Dubai, but has since suffered repeated defeats in the English courts.

In a judgment released on Wednesday, McFarlane ruled that the children should live with their mother.

In a ruling published last March, the judge concluded that Mohammed had subjected Haya to a campaign of intimidation which made her fear for her life.

He concluded the sheikh had arranged for his daughter Shamsa, then aged 18, to be kidnapped in 2000 off the streets of Cambridge in central England and flown back to Dubai.

The judge also found it was proved that Mohammed had arranged for Shamsa’s younger sister Latifa to be snatched from a boat in international waters off India by Indian forces in 2018 and returned to the emirate.

While his findings do not amount to a determination of criminal guilt, they mean McFarlane is satisfied the allegations are proven on the balance of probabilities and that this may impact arrangements for contact with his children in the future.

“As the previous findings of fact establish, the father, who is the head of government of the UAE, is prepared to use the arm of the state to achieve what he regards as right,” he said.

“He has harassed and intimidated the mother both before her departure to England and since. He is prepared to countenance those acting on his behalf doing so unlawfully within the UK.”

FRIENDS WITH QUEEN

Haya’s lawyers told the court that the British Foreign Office had been made aware of the hacking allegations, and police had expressed a desire to interview Haya and her lawyers as victims. Reuters was unable to establish if this took place.

There was no immediate comment from the foreign ministry or the police.

It is not the first time the UAE’s cyber activities have come under scrutiny. Last month, three former U.S. intelligence operatives, who worked as UAE cyber spies, admitted to violating U.S. hacking laws to spy on human rights activists, journalists and rival governments.

During the London hearings, Mohammed’s high powered team of lawyers battled for months to prevent the court from considering the hacking allegations, by saying it did not have the jurisdiction and that he had immunity, and then by trying to persuade the judge that the sheikh was not responsible.

Saudi Arabia and Jordan were amongst a host of other countries that could have been behind it, his legal team said.

McFarlane dismissed those suggestions, saying the idea it could be Jordan was “so insubstantial as to be without consequence” and was critical of how the sheikh had instructed his lawyers to act on his behalf.

In his statement, Mohammed said it was not appropriate for him to appear in court himself and neither the UAE nor the emirate itself were party to the case and so could not participate.

Instead of showing any concern for the safety of the mother of his children, “he has marshalled a formidable forensic team to challenge the findings sought by the mother and to fight the case against her on every point,” McFarlane said.

He concluded, and the Court of Appeal agreed, that the sheikh had authorised the hacking of six phones which took place between July and August 2020 when a vulnerability in Apple’s iPhone systems was exploited.

Expert cyber analysis revealed that on one occasion 265 megabytes of data was uploaded from Haya’s phone, the equivalent of 24 hours of voice recording or 500 photos.

Exactly how much data and what information was taken from her and the other phones has not been determined.

Haya and Mohammed have been fixtures in British high society for decades and both are on friendly terms with members of the British royal family including Queen Elizabeth.

The sheikh, through the Godolphin stable which he founded, is a major player and investor in the British horse racing industry. His horse Adayar won this year’s famous Epsom Derby flat race.

McFarlane also extended the provisions of a previous non-molestation order, which banned the sheikh from buying any land or property near her estate in rural Berkshire, west of London, after his agents tried to buy an adjoining 30 million pound mansion which overlooked her home.

“It feels like the walls are closing in on me, that I cannot protect the children and that we are not safe anywhere,” Haya told McFarlane in a statement. “I feel like I cannot breathe anymore; it feels like being suffocated.”

Reporting by Michael Holden; Editing by Mike Collett-White

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