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Banking stocks look good value but are they?

Banking stocks on both sides of the Atlantic and internationally currently look attractively priced. Despite core interest rates rising throughout 2022,…



Banking stocks on both sides of the Atlantic and internationally currently look attractively priced. Despite core interest rates rising throughout 2022, something which is usually beneficial to bank valuations because it boosts income from lending, many banks saw their values fall last year.

Among the major UK banking stocks, the Barclays share price fell by a little over 15% in 2022 while Lloyds returned a loss of 5% for the year. Spain’s Santander, a bank with a major high street presence in the UK also saw its valuation slide last year. Even exceptions like HSBC, up 15% for 2022 and NatWest, which returned 9%, are seen as currently significantly undervalued.

Wall Street-listed banks had an even worse time of it last year. Financial markets data company Morningstar reports that the KBW Nasdaq bank index fell 23.7% last year to underperform the market’s 20.7% decline. Among the bank stocks with big losses in 2022 were First Republic Bank FRC, down 40.1% and Bank of America BAC, which lost 23.8%.

Source: Morningstar

Banking stocks have started 2023 well despite disappointing Q4 2022 results

2023 has started much more positively for banking stocks. Despite an 8% dive on the day it released its Q4 2022 results showing a 14% drop in pre-tax profits for the full year, the Barclays share price is up over 6% so far in 2023. Lloyds Banking Group is up 8.5% for the year-to-date, also despite seeing a fall of over 4% in the past week.

The NatWest share price has fallen almost 6.5% today after releasing its own disappointing Q4 results and Spain’s Banco Santander has leapt a


In the USA, Bank of America has returned 4.4% so far in 2023, Citigroup is up 11.6%, Wells Fargo 12% and JPMorgan Chase 4.4%. However, even after those gains, Morningstar reports the U.S.-listed banking stocks its analysts cover are, on average, trading about 11% below their fair value estimates.

Why do many expect banking stocks to have a good 2023?

If, as expected, interest rates rise further this year to add to last year’s leaps, that will benefit banks by further boosting income from outstanding loans with a variable rate and higher interest rates on new lending. The Fed’s base rate began 2022 at 0.25% and has now reached 4.5%-4.75%, while the Bank of England’s rate has risen from 0.25% to 4%.

Commercial banks that offer accounts to business and retail customers still make most of their money by lending. Lending has been a tight margins business over the last decade or so with interest rates at historic lows, which goes a long way to explaining the general underperformance of most banking stocks over the same period.

From that point of view, a significant leap in core interest rates has the potential to multiply the revenue and profits commercial banks earn from loans. That has provided positive momentum for banking stocks so far this year. As has growing market confidence the U.S. economy will avoid a significant recession this year, potentially even altogether. And that recessions elsewhere, including the UK economy, will be milder than feared until recently.

Why might some of the optimism around banking stocks be misplaced?

A majority of stock market analysts, and investors, are currently bullish on banking stocks, which they think still look attractively priced given the coming interest rates windfall they see revenues being swelled by. However, there are also reasons to urge a degree of caution when it comes to expectations around valuation performance over the coming period.

The first headwind is that the boost higher interest rates give banks tends to be frontloaded. Banks usually increase the rates and profit margin on new lending very quickly after their central bank has hiked the base rate. They are significantly slower to increase the interest rate they offer on deposits and savings products.

However, despite the lag these interest rates do start to rise in competitive markets, squeezing net interest income – the margin between rates charged borrowers on loans and the yields that banks pay out on customers’ deposits.

Banks will still have better net interest income than over the period since 2009 which was characterised by historical lows because they raise rates offered by less than they charge when the base rate rises. But the improvement will be capped by the need to also offer competitive rates on deposits and savings products.

Another factor to consider is last year’s fears over the impact of a recession and rise in bad loans and drop in borrowing and business activity that brings which was a drag on banking stocks. The threat of recession, even if it is receding in terms of its expected severity, remains. And there are several uncertainties such as the risk of an escalation in the war in Ukraine that could still result in a worse recession than markets now appear to be pricing in.

The reality is we remain in a period of heightened risk and uncertainty. Morningstar strategist Eric Compton notes that banking stocks have historically been discounted to fair value estimates by between 25% and 30% during periods of recession. Right now, after recent gains, they are seen as less than 10% below fair value.

That means that there would be potentially significant downside if fears around the threat of a more significant recession become heightened again for any reason. He also notes there are already signs that net interest income is starting to contract for major banks in the USA, namechecking JPMorgan Chase. And other major banks such as Wells Fargo and Bank of America have announced lower-than-expected revenue guidance for the first quarter of 2023, even before a compression in net interest margin.

The major UK banks all disappointed markets with their fourth quarter results for 2022, which came in short of analyst forecasts.

A further drag on the net income of major banks on both sides of the Atlantic this year and next is expected to be their need to increase loan-loss provisions. They are coming off low levels established when banks released the reserves they had set aside for the feared fallout of the Covid-19 pandemic and need to be bolstered this year to meet the threat of a recession.

Loan loss provisions jumped between the third and fourth quarters of 2022 and Compton expects banks to continue to increase them this year and next if there is indeed a mild recession before the end of 2023.

Another squeeze on banking income that the current sluggish economic conditions bring, which could yet deteriorate, is a drop in fees being earned for wealth management and mergers and acquisitions activity. Fees income is unlikely to improve before 2024, though it could bounce back strongly if major economies do.

However, one reason why banking stocks may not see their valuations fall to the usual level of recession discount of between 25% and 30% is the extent to which any 2023 recession will have been anticipated.

There are few if any historic examples of a recession approaching in such clear sight as the one currently on the horizon. And if it turns out to be a relatively mild recession as recessions go, or is miraculously side-stepped altogether, at least in the USA, markets could decide to pay it minimal attention.

UK banks could have less downside than U.S. peers

If market sentiment does turn sour again on banks, the UK’s banking stocks could well hold up better than peers in the USA. Beaten back down by Brexit at the time U.S. and other international banking stocks were moving past the 2008 international financial crisis, London-listed banks never really did.

They have been shunned by markets for years and have looked oversold and good long term value for some time, compared to international peers. U.S. banking stocks, meanwhile, recovered best and trade at higher multiples. As a result, UK banking stocks may have less downside in a negative scenario for the sector.

Banking stocks could well have a good 2023 as markets have anticipated by pushing up their valuations over the past few months. But investors should also be aware of the potential headwinds for the sector and why another year of negative returns is not out of the question.

The post Banking stocks look good value but are they? first appeared on Trading and Investment News.

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Ancient technology turns plant-based cheese into ‘something we want to eat’

Credit: Photo: Department of Food Science To produce plant-based cheeses that feel and taste like dairy cheese, scientists have their sights set on fermentation….



Credit: Photo: Department of Food Science

To produce plant-based cheeses that feel and taste like dairy cheese, scientists have their sights set on fermentation. In a new research result, University of Copenhagen scientists demonstrate the potential of fermentation for producing climate-friendly cheeses that people want to eat. 

Nearly thirty kilos of cheese are eaten by the average dairy-loving Dane every year. But increasing pressure on Earth’s resources and climate change call for our food system to turn in a more plant-based direction. As a result, scientists are looking into how to transform protein-rich plants like peas and beans into a new generation of non-dairy cheeses that possess the similar sensory properties as the dairy-based ones that humans have enjoyed for thousands of years.

Several plant-based cheeses are already on the market. The challenge is that plant proteins behave differently than milk proteins when trying to make cheese from them. To meet this challenge, producers add starch or coconut oil to harden plant cheeses, as well as an array of flavourants to make them taste like cheese.

But it turns out that this can be done with the help of nature’s smallest creatures. In a new research result from the University of Copenhagen’s Department of Food Science, researcher Carmen Masiá has succeeded in developing plant-based cheeses made from yellow pea protein with a firm texture and improved aroma profile. She was able to do so by using the same natural fermentation process with bacteria that we have used with cheeses made from milk for thousands of years.

“Fermentation is an incredibly powerful tool to develop flavour and texture in plant-based cheeses. In this study, we show that bacteria can serve to develop firmness in non-dairy cheese in a very short period of time while reducing the bean-like aroma of yellow pea protein, which is used as the main and only protein source,” explains Carmen Masiá. 

Fresh cheese after eight hours

The result builds upon a research result from last year by the same researcher, who found that yellow pea protein constituted a good “protein base” for making fermented plant-based cheese. In the new result, the researcher examined twenty four bacterial combinations made from bacterial cultures supplied by the biotech company Chr. Hansen, where Carmen Masiá is completing her Industrial PhD.

“The whole point of this study has been to combine the commercially-available bacterial cultures that are suitable for the fermentation of a plant-based raw material, and test them in a pea protein matrix to develop both taste and texture that would be suitable for a cheese-like product. And, even if some bacterial combinations performed better than others, all of them actually provided firm gels and reduced beaniness in the samples” says the researcher.

To study the behavior of the bacterial combinations, the scientist inoculated them in a protein base made of yellow pea protein. After only eight hours of incubation, the result was a firm “cheese-like gel” reminiscent of a fresh soft white cheese.

“All bacterial blends produced firm gels, which means that one can get a fermentation-induced gel without necessarily adding starch or coconut oil to the base. From an aroma perspective, we had two goals: To reduce the compounds that characterize the beaniness of yellow peas, and to produce compounds that are normally found in dairy cheese. Here we saw that some bacteria were better at producing certain volatile compounds than others, but that they all worked great to reduce beaniness – which is a very positive outcome. Furthermore, all blends acquired dairy aroma notes to different degrees” explains Carmen Masiá.

Taste and feeling is everything

The researcher points out there is still a way to go to before achieving this plant-based cheese, but that research is on the right track. According to her, tailored bacterial compositions and cultures must be developed in order to achieve the optimal cheese-like characteristics. Furthermore, the plant-based cheese might need to mature over time so that it develops flavor and character, just as dairy-based cheeses do.

Finally, the new generation of fermented plant-based cheeses must be judged by consumers, so that the flavour is perfected. All in all, this is to make plant-based cheeses so delicious that people seek them out and purchase them.

“The most challenging thing for now is that, while there are a lot of people who would like to eat plant-based cheese, they aren’t satisfied with how it tastes and feels in the mouth. In the end, this means that no matter how sustainable, nutritious, etc. a food product is, people aren’t interested in buying it if it doesn’t provide a good experience when consumed,” says Carmen Masiá, who adds:

“One needs to remember that dairy cheese production has been studied over many years, so it’s not something that we can just mimic overnight with totally different raw materials. Nevertheless, there are many scientists and companies out there doing great progress in the field; I hope that we will get closer to making non-dairy cheeses that taste good over the next few years. We are getting there.”

The study was conducted in collaboration between the Department of Food Science and microbial ingredients supplier Chr. Hansen, a bioscience company that produces ingredients for the food and pharmaceutical industries, among other things. 

What is fermentation:

Fermentation is an ancient technique which originated in China. Today, it is used to make beer, wine, cheese, pharmaceuticals and much more. Fermented foods are preserved by initiating a fermentation process in which natural lactic acid bacteria and enzymes are formed. This is done as microorganisms convert sugars in the selected food into lactic acid, acetic acid and carbon dioxide. This makes food acidic and prevents the growth of putrefactive and pathogenic bacteria.

The first textual evidence of cabbage fermentation is found in China’s oldest collection of poems, Shi Jing (Book of the Odes), which dates back to approximately 600 BC.

About the study:

  • The researchers tested twenty four different bacterial compositions on a protein base made from yellow pea protein.
  • The study shows that all of the bacterial compositions produce a firm cheese-like gel, reduced the beaniness, and produced dairy-related volatile compounds.
  • The study was conducted in collaboration between the Department of Food Science and microbial ingredients supplier Chr. Hansen, a bioscience company that manufactures microbial ingredients for the food and pharmaceutical industries.
  • The study has been published in the scientific journal Future Foods
  • The research is funded by Innovation Fund Denmark (grant 0153-00058B)

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BGI Genomics breaks new ground in Saudi Arabian precision medicine

The Saudi Society of Medical Genetics Annual Conference 2023 was held in Riyadh, Saudi Arabia, on September 29-30, 2023. As the most authoritative academic…



The Saudi Society of Medical Genetics Annual Conference 2023 was held in Riyadh, Saudi Arabia, on September 29-30, 2023. As the most authoritative academic conference on precision medicine in the Kingdom, this conference attracted global experts worldwide.

Credit: BGI Genomics

The Saudi Society of Medical Genetics Annual Conference 2023 was held in Riyadh, Saudi Arabia, on September 29-30, 2023. As the most authoritative academic conference on precision medicine in the Kingdom, this conference attracted global experts worldwide.

One of the highlights of the conference was the presentation entitled “Spatial-temporal sequencing and some large-scale application of precision medicine technologies,” delivered by Dr. Louis (Renyuan) Luo, VP of BGI Genomics West Asia, at the invitation of the Saudi Society of Medical Genetics.

Dr. Luo’s presentation discussed the importance of spatiotemporal sequencing technology in the field of precision medicine and its potential large-scale applications, introduced the company’s case studies, such as the world’s first multi-center project of newborn genetic screening, large-scale regional noninvasive prenatal testing (NIPT) coverage and extensive early screening project of colorectal cancer at Wuhan, Hubei province, China.

Besides sharing BGI Genomics research achievements and innovative applications in enhancing medical outcomes, Dr. Luo highlighted Genalive, BGI Genomics joint venture laboratory in the Kingdom of Saudi Arabia. This is the result of a localized strategic partnership aiming to provide cutting-edge precision medicine services, promote development and contribute to improving the country’s healthcare system.

The success of Dr. Luo’s presentation paves the way for deepening future localized collaboration and innovation in Saudi Arabia. BGI Genomics will continue to support the realization of Saudi Vision 2030 through active participation in global cooperation and exchanges in the field of precision medicine to enhance patients’ health outcomes.

About BGI Genomics:

BGI Genomics, headquartered in Shenzhen, China, is the world’s leading integrated solutions provider of precision medicine. Our services cover more than 100 countries and regions, involving more than 2,300 medical institutions. In July 2017, as a subsidiary of BGI Group, BGI Genomics (300676.SZ) was officially listed on the Shenzhen Stock Exchange.

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Swiss Writer Sentenced To 60 Days In Jail For Calling Journalist A “Fat Lesbian”

Swiss Writer Sentenced To 60 Days In Jail For Calling Journalist A "Fat Lesbian"

Submitted by BlueApples,

With Switzerland being the home…



Swiss Writer Sentenced To 60 Days In Jail For Calling Journalist A "Fat Lesbian"

Submitted by BlueApples,

With Switzerland being the home of the technocratic vanguard tasked with ushering in new world order totalitarianism in the World Economic Forum, the recent sentencing of a Swiss-French writer for what could best be described as a thought crime should come as no surprise. Writer and social commentator Alain Soral was handed a 60-day jail sentence for chastising a critic of his after he took aim at their body image and sexual orientation. Soral lashed out at the journalist by calling them a "fat lesbian" among berating them with more vitriolic criticism. A Swiss court in Lausanne determined that Soral's scornful remarks constituted criminal acts of defamation, discrimination and incitement of hatred. The sentenced ultimately handed down to the Soral was a cruel irony even more surreal than any satirical polemic social commentary he could have written.

Soral's remarks occurred two years ago when he took aim at Catherine Macherel, a journalist who prided herself in using her platform to advance her advocacy for LGBT causes. The polemicist turned to Facebook to air his grievances in a video in which he described Macherel as "unhinged" for her activism. His remarks resulted in his arrest, conviction, and sentencing to 3 months in prison in April 2021. Soral's sentence was one of the first to follow sweeping legislation in 2020 which criminalized homophobic statements by broadening the scope of existing laws against discrimination to extend its protections to people on the basis of their sexual orientation. However, Soral was initially able to escape the prison time handed down to him following a successful appeal in December 2022, instead only receiving a fine as punishment.

While Soral was initially able to evade a conviction, prosecutors were relentless in their pursuit by instigating a further appeal which would ultimately lead to the maximum sentence the court could hand down. That six month prison sentence exceeded the original three month prison term he faced. The decision to penalize Soral under the full force of the law was applauded by LGBT groups across Switzerland as a testament to the success of the country's criminalization of free speech. “This court decision is an important moment for justice and rights of LGBTQI people in Switzerland,” said Murial Waeger, co-director of the lesbian activist group LOS. Waeger would go on to opine that “The conviction of Alain Soral is a strong signal that homophobic hatred cannot be tolerated in our society.”

While Soral's conviction serves as a blueprint for the weaponization of the Swiss justice system again critics of LGBT groups, the writer is somewhat of an easy target considering his controversial past and already checkered criminal record. Before moving to Switzerland, Soral was sentenced to one year in jail 2019 in his native France for an illustration he made in 2016, Soral was charged for a cartoon he published in the notoriously satirical newspaper Charlie Hebdo. His contribution to the polemic publication was featured on a page titled "Chutzpah Hebdo" which bore an illustration of Charlie Chaplin in front of the Star of David asking "Shoah, where are you?" in a play on words the court ruled was a criminal act of Holocaust denial. Although Soral was sentenced to a year in prison, he failed to show up to court for the sentencing, instead announcing his plans to appeal the conviction before seeking refuge in Switzerland.

The illustration which led to Alain Soral being convicted of Holocaust denial.

Ultimately, the controversies which led to Soral fleeing France would follow him to Switzerland. Amidst expanding legislation across the whole of Europe leading to thousands of arrests for remarks made on the internet deemed to be hate speech, it appears that there is nowhere on the continent that Soral or any dissident challenging  the narratives approved by the ruling elite can find safe haven in any longer.

Tyler Durden Wed, 10/04/2023 - 08:30

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