Airbnb Q3 Earnings Beat Market Expectations, ECB Puts Pressure On Banks Regarding Climate Change, Credit Suisse Just Misses Junk Status
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Summary:
- Airbnb Q4 earnings look dim.
- ECB to increase capital requirements for banks if they do not address climate change risks.
- S&P Global Ratings reduced Credit Suisse Group AG's.
Airbnb anticipating poor booking outlook for Q4
Shares of Airbnb Inc. dropped after the firm provided a poor booking outlook for the fourth quarter, signaling that consumer preferences are changing back to urban and international locations rather than the more expensive rentals that were popular during the pandemic.
In comparison to the third quarter's rise of 25%, the home-sharing platform said it anticipates the pace of nights and experiences booked will "slow significantly" in the fourth quarter. In the three months that ended in September, Airbnb reported 99.7 million nights and experiences booked, underperforming analysts' expectations of 99.9 million.
Prior to the New York stock exchanges opening, the shares decreased by nearly 6% in premarket trading. In trading on Tuesday, the stock increased 2% to settle at $109.05 after falling 35% this year.
Additionally, Airbnb stated that it anticipates average daily rates to moderate this quarter as a result of a strong currency and a trend in travelers returning to cities, where rates are often cheaper due to smaller facilities. With the low end of that range falling below Wall Street's estimate of $1.86 billion, the business projected fourth-quarter sales of between $1.80 billion and $1.88 billion. The somber prognosis comes after Airbnb had its most successful quarter and greatest quarterly revenue during the summer. The company's third-quarter earnings of $1.2 billion above analysts' expectations as revenue increased 29% to $2.88 billion.
Before the numbers were made public, Bloomberg Intelligence analysts Mandeep Singh and Damian Reimertz warned in a note that Airbnb could start competing again with hotels, which are currently seeing more inventory come back online following the pandemic downturn.
$ABNB reports Q3 earnings that beat estimates, but comes in a bit low with Q4 guidance sending shares down.
— Yahoo Finance (@YahooFinance) November 1, 2022
👀 Q4 revenue forecast $1.80B to $1.88B vs $1.86B estimate
💵 Revenue $2.88B vs $2.83B estimatehttps://t.co/RzAY1P67Ux
ECB addressing Climate Risk
After identifying numerous areas of concern, the European Central Bank increased the pressure on banks by warning them that if they don't address their financial risks related to climate change within the next two years, there will be increased capital requirements and fines. The ECB has sent letters to all of the major banks in the eurozone outlining 25 areas, on average, where it believes they are falling short in tackling climate risks and setting a deadline of 2024 to do so.
The ECB announced on Wednesday that a "limited number" of banks have already had their capital requirements increased this year owing to concerns that they have not adequately addressed climate risks. This occurred in accordance with "pillar two" guidance, which, though not required, has a big impact on banks' capital management.
The actions signal a substantial increase in the central bank's pressure on eurozone bankers to accelerate their efforts to identify, manage, and disclose climate risks in their balance sheets. Frank Elderson, vice-chair of the ECB's supervisory board, stated in a blog post that "the glass is slowly filling up, but it is not yet even half full."
Credit Suisse just misses junk status
ECB warns banks of capital hit if they fail to tackle climate risk https://t.co/ttlQoZDm1B
— Finance News (@ftfinancenews) November 2, 2022
S&P Global Ratings reduced Credit Suisse Group AG's long-term rating to only one notch above junk status, highlighting the bank's difficulties following the announcement of a dramatic restructuring plan last week.
The long-term rating of the Swiss bank was downgraded from BBB to BBB- with a stable outlook. Just one notch separates that from the BB "speculative grade." Following the restructuring's announcement on Thursday, the US ratings agency echoed a number of experts by stating that it saw "significant execution risks amid a deteriorating and uncertain economic and financial environment." Additionally, it indicated that many aspects of asset sales are still "unclear."
As investors assessed the hefty costs of the plan, the low return expectations, and the massive dilution, Credit Suisse's new strategy led to the day's worst single-day decrease in share price ever, with shares falling 18%. The bank announced the strategic review as it reported a quarterly loss of 4.03 billion Swiss francs, which included a substantial impairment of deferred tax assets connected to the redesign. The restructure will result in the dissolution of the investment bank and will cost roughly $2.9 billion through 2024.
S&P downgrades Credit Suisse Group, Moody's cuts some ratings https://t.co/n12QMnXBx5 pic.twitter.com/ASCCZSV3cg
— Reuters (@Reuters) November 2, 2022
Sources: finance.yahoo.com, twitter.com, ft.com, reuters.com
