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New York Community Bancorp stock value set to halve as slump extends

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New York Community Bancorp stock value set to halve as slump extends
© Reuters. FILE PHOTO: A screen displays the trading information for New York Community Bancorp on the floor at the New York Stock Exchange (NYSE) in New York City, U.S., January 31, 2024. REUTERS/Brendan McDermid/File Photo

By Niket Nishant and Saqib Iqbal Ahmed

(Reuters) -Shares of New York Community Bancorp (NYSE:) dived another 14% on Tuesday, extending a sell-off since the lender reported a surprise quarterly loss last week and putting the stock on track to shed more than half of its value at the current levels.

The frenzied selling since Wednesday has also dragged down shares of peers on renewed fears about the health of the industry, which for months has been worried about exposure to the beleaguered commercial real estate (CRE) industry.

The bank last week set aside bigger-than-expected provisions for potential bad loans, chiefly due to its exposure to CRE where several borrowers are at risk due to high interest rates and low occupancies.

“There’s a lot of anecdotal evidence that it’s grim out there in CRE and indeed that may be getting even worse than folks are allowing people to know, at least in terms of office real estate,” said Russell Hackmann, founder of Hackmann Wealth Partners.

U.S. Treasury Secretary Janet Yellen also acknowledged CRE concerns on Tuesday, and said the Financial Stability Oversight Council, a body made up of multiple regulators, was focusing on it.

The KBW Regional Banking index dropped around 0.8% on Tuesday. The index has been hit even as analysts highlighted that the issues at NYCB were specific to its balance sheet.

The lender’s assets breached a $100 billion threshold after it purchased Signature Bank (OTC:) last year, subjecting it to stricter regulatory requirements and prompting a dividend cut to build capital.

The bank’s decision to slash its dividend came after mounting pressure from the Office of the Comptroller of the Currency (OCC), a top banking regulator, Bloomberg News reported on Monday.

The lender’s market value has fallen to about $3.5 billion since its earnings report, a far cry from its peak value of nearly $10 billion in August.

At least 13 brokerages have downgraded or lowered their price targets for the bank’s stock since the earnings report.

Fitch also downgraded the bank’s credit rating last week, citing the increased regulatory requirement that the agency said will curtail NYCB’s “flexibility” as it focuses on building capital.

The size of provisions the bank took were also “outside of Fitch’s baseline expectations,” the ratings agency said.

STIRS UP OPTIONS ACTIVITY

The slump in NYCB’s stock has kickstarted heightened activity in the options market. NYCB options were changing hands at 11 times their usual pace, according to Trade Alert data.

Put contracts, typically bought to express a bearish or defensive view, outnumbered calls, generally a bullish play, nearly 5-to-1, the data showed.

The bank’s 30-day implied volatility – or how much traders expect the bank’s shares to swing in the near term – rose to 170%, the highest in at least four years, Trade Alert said.

The broader Regional Banking exchange-traded fund (ETF) also drew heightened options activity, though at a more moderate level, suggesting that investors were more focused on the specific prospects of NYCB than on the broader regional banking sector.

The 30-day implied volatility for the ETF slipped to 33%, down about a point from the 3-month high touched on Wednesday, according to the data.

The plunge in NYCB’s stock has enriched short sellers, investors who profit from a slide in stock prices. Such investors have made roughly $159 million in paper profits on NYCB since it reported results, according to data from Ortex.

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Wendy’s, blasted over CEO’s pricing comment, vows no price hikes at busy times

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Wendy's, blasted over CEO's pricing comment, vows no price hikes at busy times
© Reuters. FILE PHOTO: A Wendy?s restaurant displays a “Now Hiring” sign in Tampa, Florida, U.S., June 1, 2021. REUTERS/Octavio Jones/File Photo

By Waylon Cunningham and Deborah Mary Sophia

DALLAS (Reuters) -Wendy’s said on Wednesday it has no plans to raise menu prices at times of peak demand, after the burger chain weathered heavy criticism on social media since its CEO said earlier this month it would start testing “dynamic pricing”.

CEO Kirk Tanner told investors on a call this month that starting as early as 2025, Wendy’s (NASDAQ:) would begin testing features including “dynamic pricing and daypart offerings”. Dynamic pricing refers to surge pricing based on demand, especially during peak hours of the day.

This practice often raises prices at busy times, similar to how Uber (NYSE:) adjusts ride fares.

Tanner’s comment this week sparked an online backlash. U.S. Senator Elizabeth Warren in a post on the social media platform X on Wednesday called it “price gouging plain and simple.”

Wendy’s, in a statement to Reuters, said on Wednesday it “would not raise prices when our customers are visiting us most.”

Its initiative to add digital menuboards to certain stores would instead allow Wendy’s to offer discounts to customers more easily, “particularly in the slower times of day,” it added.

“We said these menuboards would give us more flexibility to change the display of featured items. This was misconstrued in some media reports as an intent to raise prices when demand is highest … We have no plans to do that,” the company said.

Warren’s post on X, previously Twitter, said Wendy’s plan “means you could pay more for your lunch, even if the cost to Wendy’s stays exactly the same. It’s price gouging plain and simple, and American families have had enough.”

“I guess I won’t be eating at Wendy’s anymore,” one Reddit user said in a post, while others on X called for boycotts.

Analysts and consultants were skeptical of the idea of surge pricing at restaurants.

Wendy’s “dynamic pricing” was a hot topic at a restaurant conference in the Dallas area, with several executives saying customers – already skittish after recent price increases – would likely be scared off by unpredictable prices.

“I don’t see it taking off any time soon,” said Victor Fernandez, a senior analyst at restaurant analytics firm Black Box Intelligence.

Michael Lukianoff, CEO of SignalFlare.ai, who has consulted with restaurants about pricing for years, said that “dynamic pricing” is a great success in other industries such as airlines, but would not work in restaurants.

“Customers will shop elsewhere,” he said.

Wendy’s sales have already slowed. Placer.ai data showed visits to Wendy’s outlets declined in all three months of the fourth quarter of 2023.

Wendy’s shares, which dropped about 14% in 2023, were up 1% on Wednesday. The company also recently issued a profit forecast for this year below Wall Street estimates, hurt by higher commodity and labor costs.

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Apple shareholders reject AI disclosure proposal

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Apple to disclose AI plans later this year, CEO Tim Cook says
© Reuters. Apple logo is seen in this illustration taken, August 22, 2022. REUTERS/Dado Ruvic/Illustration

By Stephen Nellis

(Reuters) -Apple plans to disclose more about its plans to put generative artificial intelligence to use later this year, Chief Executive Officer Tim Cook said during the company’s annual shareholder meeting on Wednesday.

Cook said that the iPhone maker sees “incredible breakthrough potential for generative AI, which is why we’re currently investing significantly in this area. We believe that will unlock transformative opportunities for users when it comes to productivity, problem solving and more.”

Apple (NASDAQ:) has been slower in rolling out generative AI, which can generate human-like responses to written prompts, than rivals such as Microsoft (NASDAQ:) and Alphabet (NASDAQ:)’s Google, which are weaving them into products.

On Wednesday, Cook argued that AI is already at work behind the scenes in Apple’s products but said there would be more news on explicit AI features later this year. Bloomberg previously reported Apple plans to use AI to improve the ability to search through data stored on Apple devices.

“Every Mac that is powered by Apple silicon is an extraordinarily capable AI machine. In fact, there’s no better computer for AI on the market today,” Cook said.

Apple shareholders on Wednesday rejected a measure asking the company to disclose more information about how it uses artificial intelligence in its business and its ethical guidelines for the technology.

The proposal, which was defeated at the company’s annual shareholder meeting, was put forth by the pension trust of the AFL-CIO, the largest American labor union federation, which has also proposed AI measures at other technology companies.

A similar proposal will be heard at Walt Disney (NYSE:)’s annual meeting in April.

At Apple, the AFL-CIO asked for a report on the company’s use of AI “in its business operations and disclose any ethical guidelines that the company has adopted regarding the company’s use of AI technology.”

In its supporting statement in Apple’s proxy materials, the AFL-CIO wrote that “AI systems should not be trained on copyrighted works, or the voices, likenesses and performances of professional performers, without transparency, consent and compensation to creators and rights holders.”

Apple opposed the measure, saying that disclosures could tip its hand on strategy as it competes against rivals in the fast-moving AI field.

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UMG to generate 250 million euros in savings by 2026, flags job cuts

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UMG to generate 250 million euros in savings by 2026, flags job cuts
© Reuters. FILE PHOTO: Universal Music Group logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) – Universal Music Group (AS:) will cut jobs and streamline its operations with the aim of generating 250 million euros ($271.03 million) in run-rate savings by 2026.

In the first phase of the plan, which will be introduced immediately, the group plans to save 125 million euros in 2025, including 75 million euros in 2024, the company said.

“Our organizational redesign achieves efficiencies in targeted cost areas while providing our labels with unprecedented capabilities to deepen artist and fan connections via new experiential, commerce, and content offerings,” the group said in a statement.

UMG also posted a 9.2% year-on-year increase in adjusted core profit (EBITDA), to 677 million euros in the fourth quarter, as its revenue rose to 3.21 billion euros, up 9.0% from previous year.

It proposed a year-end dividend of 0.27 euros per share, bringing total dividend payout in 2023 to 0.51 per share.

($1 = 0.9224 euros)

(This story has been refiled to add ‘euros’ in the headline)

(Reportin by Dagmarah Mackos, editing by Tassilo Hummel)

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