The owner of Pizza Hut and KFC reported its fourth straight quarter of falling sales as it struggles to recover from a food scandal in China, where the firm makes most of its profit. Shares in Yum Brands fell about one per cent to $91 in extended trading yesterday. The company’s sales in China plunged after a news story in July last year alleged that one of its suppliers used meat that was past its expiration date.
The largest US mortgage lender reported a drop in profit for the second straight quarter as employee costs and other expenses rose. Lower interest rates have crimped the Wells Fargo’s income for the past two quarters, ending its five-year run of rising profits. Mortgage banking revenue, which accounted for 17 per cent of its non-interest income, fell one per cent. Net profit fell to $5.36bn from $5.42bn.
JP Morgan managed to withstand the pressure of continued low interest rates over the second quarter, reporting a stronger-than-expected rise in profit, helped by a drop in legal and restructuring expenses and a smaller tax bill. Legal expenses fell 57 per cent to $291m (£186m). The bank paid an effective tax rate of 25 per cent, down from 30 per cent in the same quarter last year, as its tax bill dropped 13 per cent to $2.81bn. That helped net income attributable to shareholders rise to $5.78bn from $5.57bn a year earlier. However, net revenue fell 3.2 per cent to $24.53bn, largely due to a fall in revenue from mortgage banking and fixed-income trading. JP Morgan said its return on tangible common equity, a key measure of profit performance, was unchanged from a year earlier at 14 per cent. The company’s longer-term target is 15 per cent. Total assets stood at $2.45 trillion at the end of June, compared with $2.58 trillion at the end of March.
US retail data
US retail sales slipped 0.3 per cent last month, the weakest reading since February, as consumers cut back on purchases of vehicles and other goods, according to a commerce department report. Economists polled by Reuters had forecast retail sales rising 0.2 per cent. Coming after a disappointing employment report for June and a sharp drop in small business confidence, the weak retail sales data suggested the US economy may have lost some momentum at the end of the second quarter after struggling in early 2015. The surprise drop in retail sales caused the dollar to drift lower against the yen and pound yesterday, after the data dented optimism about US economic growth as well as clouding prospects for a September rate hike by the Federal Reserve. Separately, the commerce department said US business inventories rose modestly in May, suggesting restocking will probably not contribute to economic growth in the second quarter.