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US bank stocks sink after New York Community Bancorp cuts dividend

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US bank stocks sink after New York Community Bancorp cuts dividend
© Reuters.

(Reuters) -Regional U.S. bank shares sank on Wednesday, dragged down by a 46% plunge in the shares of New York Community Bancorp (NYSE:) after it cut its dividend and posted a surprise loss.

The KBW Regional Banking Index fell by nearly 4%, putting it on track for its biggest one-day drop since May 2 last year when concerns over the health of First Republic Bank (OTC:) deepened the impact of the collapse of Silicon Valley Bank and Signature Bank (OTC:).

Deposits have since stabilized, but investors said ongoing concerns about the regional banking sector were compounded on Wednesday by uncertainty over the trajectory of Federal Reserve interest rates.

The central bank will announce the outcome of its first policy meeting this year later on Wednesday.

“That fear is out there. On the banking side, that’s what’s happening,” Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, said. “The fact that it’s Fed day compounds this issue because you never know what the Fed is going to say. They might be somewhat dovish.”

Shares of Valley National Bancorp (NASDAQ:), Western Alliance (NYSE:) Bancorp and Comerica (NYSE:) also fell between 3% and 10% each.

NYCB, which bought some of Signature Bank’s assets last year, on Wednesday said it was cutting its dividend by 70% and was building capital and bolstering its balance sheet.

The Signature Bank purchases, along with its 2022 purchase of Flagstar, pushed NYCB’s balance sheet above the $100 billion regulatory threshold that subjects it to stricter capital and liquidity requirements.

“While we began preparing to be a $100 billion bank almost immediately after closing the Flagstar acquisition, we crossed this important threshold sooner than anticipated as a result of the Signature transaction,” New York Community Bancorp (NASDAQ:) CEO Thomas Cangemi said in a statement.

The shares of some banks just under the threshold also fell on Wednesday. Zions, with $87 billion, was down nearly 3%, and Comerica, with $85 billion, was down 1.5%.

New York Community Bancorp had assets of $116.3 billion as of December-end, its latest earnings report said.

The bank 70% quarterly dividend cut to 5 cents per share and adjusted loss of $185 million reported on Wednesday compared to a profit of $274 million a year earlier and analysts’ average estimate for a profit of $204.34 million.

Some analysts said NYCB’s issues were idiosyncratic and that Wednesday’s selloff was a knee-jerk reaction.

“I don’t think what we saw in the regional banking space in last March is anywhere on the cards right now,” David Smith, a bank analyst at Autonomous Research, said.

NYCB set aside $552 million as provision for credit losses for the fourth quarter, compared with $124 million in the year-ago period.

“Its purchase of assets from failed Signature Bank apparently triggered NYCB to set aside more capital and additional loss provisions. So on that front, it was unique to NYCB and not contagious to other regional banks,” said Stephen Biggar, banking analyst at Argus Research.

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Paris Olympics broadcasters diverge on AI approach

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By Sheila Dang

(Reuters) – The Paris Olympics will be a showcase of generative AI for American viewers but European audiences won’t see a similar approach, a contrast that reflects how global media companies are deliberating over the use of the technology.

Comcast (NASDAQ:)’s NBCUniversal is diving into AI for its U.S. broadcast of the Games, including re-creating the voice of a legendary sportscaster, while Warner Bros. Discovery (NASDAQ:)’s sports division in Europe said the tech is still too nascent for roles such as sports commentating.

Warner Bros. Discovery, which will stream the Games on its Max and discovery+ streaming platforms across Europe, received demos from tech companies to translate speech into other languages but the demos have lacked the emotion that comes with heart-racing sports moments, said Scott Young, senior vice president at Warner Bros. Discovery Sports Europe.

“In every part of their (demos), it feels like yes, you’ve translated the words correctly, but you haven’t translated or narrated the feeling,” he said.

For instance, when Italian sprinter Marcell Jacobs stunned the world by winning gold in the men’s 100 metres in Tokyo, Italian commentators screamed their reactions, showing the genuine moment of “experts sitting side-by-side, really living out that story,” Young said. “It is very hard to automatically generate that.”

Meanwhile, U.S. audiences will experience AI when they watch the Games on NBC or streaming service Peacock due to a new partnership between NBCUniversal, Google (NASDAQ:) and Team USA.

AI-enhanced Google Map images of the Olympic venues will help viewers get a feel of Paris and NBC’s hosts will demonstrate how Google AI search can answer questions about the competitions.

NBCUniversal will also use generative AI to create personalised daily briefings of the Olympic events, which will be narrated by an AI re-creation of sports commentator Al Michaels’ voice.

Almost seven million different variations of the daily recaps could be created over the course of the Paris Olympics, NBCUniversal said.

The media company has the largest Olympics broadcast rights deal in the world and paid $7.65 billion to air the Games through 2032.

The Olympic Broadcasting Services, which produces neutral coverage that can be used by media companies around the world, is also embracing AI to assist with quickly cutting vast amounts of footage into brief highlights, but previously told Reuters it remained wary of the risks of deepfakes and “tampering with reality.”

Given how quickly AI capabilities are advancing, it may not be long until European sports fans see more of the technology.

© Reuters. Jul 26, 2024; Paris, FRANCE;  General view from inside the Trocadero during the Opening Ceremony for the Paris 2024 Olympic Summer Games along the Seine River. Rob Schumacher-USA TODAY Sports

“We’re probably just one Summer Games away from where the real impact will be for us,” Young said.

The next Summer Games are the 2028 Los Angeles Olympics.

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Ultra Clean shares target raised, rating kept on strong outlook

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On Friday, TD Cowen increased its stock price target for Ultra Clean (NASDAQ: UCTT) shares to $60 from the previous $55 while maintaining a Buy rating on the stock. The firm’s decision came after Ultra Clean reported a stronger-than-expected performance for the June 2024 quarter, which was primarily driven by robust spending on semiconductor processing equipment (SPE) in China, increased demand for high bandwidth memory (HBM), and advanced packaging equipment.

The company’s results for the past quarter outperformed expectations, bolstered by the aforementioned factors. In particular, domestic China SPE spending played a significant role, along with the demand for deposition and etching processes required for HBM manufacturing. Moreover, equipment sales for advanced packaging contributed to the company’s successful quarter.

Looking ahead, Ultra Clean’s guidance for the September 2024 quarter suggests a continuation of these trends. The company anticipates maintaining the momentum with similar driving forces contributing to its performance. Furthermore, growth is expected to extend through the fourth quarter of 2024 and into the calendar year 2025.

The analyst from TD Cowen expressed confidence in the company’s future, stating, “UCTT reported a June ’24 quarter beat attributed to strong domestic China SPE spending, high bandwidth memory (HBM) driving dep/etch demand, and equipment for adv. pkg. The Sept ’24 quarter guide sees much of the same before expected growth through C4Q24/CY25. Reiterate Buy; Price Target goes to $60.”

Ultra Clean’s revised price target and sustained Buy rating reflect the firm’s positive outlook on the company’s performance and growth prospects in the upcoming periods.

In other recent news, Ultra Clean Technology (UCT) reported robust financial performance for Q2 2024, with both revenue and earnings surpassing expectations. UCT’s Q2 revenue reached $516.1 million, a significant increase attributed to strong demand in the domestic China market and AI application suppliers. The company also received the Outstanding Partner Award from Piotech China, which further validates its industry standing.

In terms of future expectations, UCT anticipates Q3 revenue to be between $490 million and $540 million, with EPS ranging from $0.22 to $0.42. CEO Jim Scholhamer predicts sustained high business levels in China throughout the year, and marketing expert Cheryl Knepfler expects solid performance in the litho market moving forward.

These recent developments highlight UCT’s strategic initiatives and its readiness to capitalize on favorable industry trends in the high-tech manufacturing and services landscape.

InvestingPro Insights

Ultra Clean’s recent performance and the optimistic outlook from TD Cowen have been echoed in some of the real-time metrics from InvestingPro. The company’s market capitalization stands at $2.31 billion, and despite a challenging revenue decline of 20.71% over the last twelve months as of Q1 2024, there’s a silver lining with a quarterly revenue growth of 10.25% in Q1 2024. This suggests a potential turnaround or stabilization in the company’s financial performance.

InvestingPro Tips indicate that Ultra Clean is expected to see net income growth this year, which aligns with the positive momentum suggested by TD Cowen. Moreover, the company has sufficient liquid assets to cover short-term obligations, which is a reassuring sign for investors concerned about financial stability. For those looking to delve deeper into Ultra Clean’s financials and future prospects, InvestingPro offers a wealth of additional tips – 11 more to be precise, accessible through the dedicated company page.

Investors interested in Ultra Clean may also take note of the company’s price relative to its adjusted earnings, with a P/E ratio of -68.57, indicating that the market has expectations of future earnings recovery. With the next earnings date set for October 23, 2024, and a fair value estimate by analysts at $55, slightly above the InvestingPro Fair Value of $50.63, there seems to be a consensus on the stock’s potential upside. For those seeking to leverage these insights, don’t forget to use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at InvestingPro.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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US, Brazil to work together on climate partnership, says Yellen

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By David Lawder and Marcela Ayres

RIO DE JANEIRO (Reuters) – The U.S. and Brazilian governments announced a climate partnership agenda on Friday, seeking to deepen ties on an issue they seen as key but treated as secondary by opposition in both countries.

Speaking on the sidelines of a G20 finance leaders meeting in Rio de Janeiro, U.S. Treasury Secretary Janet Yellen said that “advancing work on climate and on nature and biodiversity can bring benefits not only to both of our economies but also to the region and to the global economy.”

“We want to be more close,” said Brazil’s Finance Minister Fernando Haddad, adding he expected these guidelines to turn into concrete actions very quickly.

The joint work between the U.S. and Brazil, the two largest economies in the Western Hemisphere, will focus on four key areas, including efforts to facilitate countries’ ease of access to multilateral climate fund resources, a priority for Brazil during its G20 presidency this year.

© Reuters. Brazil's Finance Minister Fernando Haddad shakes hands with U.S. Treasury Secretary Janet Yellen during the the G20 finance leaders' meeting in Rio de Janeiro, Brazil, July 26, 2024. REUTERS/Tita Barros

Yellen also mentioned as pillars of this agenda the aim to bolster clean energy supply chains and efforts to improve the integrity and effectiveness of voluntary carbon markets.

Efforts to mobilize finance and develop innovative solutions to conserve and restore nature and biodiversity, including through multilateral development banks, are also on the agenda.

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