The Wall Street Journal - 19.10.2019 - 20.10.2019

B12| Saturday/Sunday, October 19 - 20, 2019 **** THE WALL STREET JOURNAL.

BUSINESS & FINANCE NEWS

American Express Co.’s
profit and revenue climbed in
the third quarter, along with
its provision for losses.
The credit-card company
had a profit of $1.76 billion, up
6.1% from the comparable
quarter a year ago. Earnings
were $2.08 a share, up from
$1.88ashare.
Analysts polled by FactSet
were expecting $2.03 a share.
Revenue net of interest ex-
pense was $10.99 billion, up
8.3% from a year ago. Analysts
were expecting $10.94 billion.
American Express expects
revenue to rise between 8%
and 10% in the current quar-
ter, Chief Executive Steve
Squeri said. He also reaffirmed
the company’s earnings guid-
ance for the year.
“The trends we saw in the
business this quarter continue
to be consistent with an econ-
omy that continues to grow, al-
beit at a more modest pace
than last year,” Mr. Squeri said.
Provisions for losses rose
7.6% to $879 million. This met-
ric rose in the consumer-ser-
vices division because of a rise
in net lending write-offs and
delinquencies.
Expenses rose 8.8% to $7.84
billion. Costs for marketing
and business development
rose, and costs for card-mem-
ber rewards and services rose.

BYALLISONPRANG

AmEx Ups

Provisions

For Losses;

Profit Rises

Singapore startup Zilingo plans to grow its U.S. team to more than 100 workers in the next year.

ORE HUIYING/BLOOMBERG NEWS

Protests in Hong Kong have led to a plunge in tourism and visitor arrivals to the city.

KYLE LAM/BLOOMBERG NEWS

CEO at the start of this year.

Whatever momentum that

had been building at each of

those banks appeared to stall in

late 2018, when a sharp stock-

market selloff cut into many of

the businesses that collect fees

on the assets they oversee for

clients. Clients continue to shift

more money into low-cost in-

vestment funds from those that

command higher fees, ramping

up the pressure on both asset

managers and their custody

banks to cut fees.

More recently, a drop in

long-term debt yields crimped

interest income.

In an interview, Mr. O’Han-

ley said those factors still

weigh on the industry. But the

bank is on track to meet its

goal of wringing $400 million

in expenses by the end of 2019,

he said. Recent efforts to rene-

gotiate contracts with its larg-

est clients have slowed what

has been a relentless march to-

ward lower fees in asset-ser-

vicing, and State Street’s acqui-

sition of investing-analytics

platform Charles River Systems

Inc. is starting to bear fruit, he

added.

Fee income was $2.26 bil-

lion in the third quarter, down

2.5% from a year earlier. Net

interest income totaled $644

million, down 4.2%.

Total assets under custody

and/or administration fell 3.2%

to $32.9 trillion. Assets under

management totaled $2.95 tril-

lion, up 5.1%.

State StreetCorp. posted

quarterly results that beat Wall

Street estimates and offered

investors some signs of a turn-

around.

The custody bank’s shares

rose 6.1% to $63.34 on Friday.

State Street’s profit dropped

nearly 24% to $583 million, or

$1.42 a share, in the quarter,

compared with $764 million, or

$1.87 a share, a year earlier.

Total revenue slipped 2.9% to

$2.9 billion.

Quarterly profit and revenue

exceeded analysts’ average es-

timates, though, according to

FactSet. And the bank’s reve-

nue rose 1% from its total three

months earlier, thanks to stock-

market gains and some new

business wins by its core divi-

sion that provides accounting

and administrative services to

other asset managers.

“We are making progress,”

Ron O’Hanley, chief executive

of State Street, said Friday

during a conference call with

analysts.

State Street and rival Bank

of New York Mellon Corp.

have been mired in yearslong

turnaround plans aimed at

slashing expenses, modernizing

technology systems and identi-

fying new businesses that can

help jump-start growth. Both

custody banks also turned to

new leaders, with Mr. O’Hanley

stepping in as State Street’s

BYJUSTINBAER

ANDROBERTBARBA

State Street Tops

Analysts’ Estimates

and co-founder Ankiti Bose

said in an interview. “It’s not

like electronics. There is zero

technology in the factories, no

SAP, Oracle....There is nothing

tailor-made for the apparel in-

dustry.”

The company’s supply-chain

platform gives suppliers and

brands access to technology

such as financing, invoicing and

inventory management tools. It

also provides auditing and

compliance services and pre-

dictive analytics to help compa-

nies respond quickly to trends.

About 60,000 retailers and

6,000 factories are on Zilingo’s

platform, the company said.

more than 100 in the next year.

Zilingo, which has raised

$308 million in funding and is

valued at about $970 million,

says it aims to speed apparel

sourcing by digitizing en-

trenched manual processes

and eliminating some of the

middlemen that can eat into

companies’ profit margins.

The garment trade has long

relied on sourcing agents and

supply-chain managers to con-

nect Western retailers and

brands with factories in Asia

and elsewhere.

“The idea is to make it eas-

ier for brands to source and

sell,” Zilingo Chief Executive

Singapore-based fashion

technology startup Zilingo is

investing $100 million to

launch operations in the U.S.

as it builds out its supply-

chain business connecting ap-

parel brands with factories

and suppliers.

The company is opening of-

fices in New York and Los An-

geles and hiring sales and prod-

uct teams as it pushes to get

more U.S. brands and manufac-

turers on its platform. The

four-year-old startup said it has

800 employees and plans to ex-

pand its U.S. team from 17 to

BYJENNIFERSMITH

Fashion Sourcing Platform

Designs Push Into the U.S.

Hong Kong’s flagship carrier

Cathay Pacific AirwaysLtd.

shelved plans to sell its first

U.S. dollar bonds in more than

two decades after receiving

lukewarm interest from poten-

tial investors, according to peo-

ple familiar with the matter.

The airline has struggled

with steep declines in passen-

ger numbers in recent months

and was embroiled in contro-

versy after some of its employ-

ees took part in antigovern-

ment protests in Hong Kong.

Those actions drew criticism

from Chinese authorities and

threats to boycott its flights

from Chinese businesses,

BYFRANCESYOON prompting Cathay to fire doz-

ens of employees and replace

both its chief executive officer

and chairman.

Cathay recently raised 800

million Hong Kong dollars

($102 million) via a private

placement of three-year bonds

denominated in the city’s local

currency. The company said it

would continue to monitor the

U.S. dollar bond market.

In late September, repre-

sentatives for the airline had

met with bond investors in

Hong Kong and Singapore to

drum up enthusiasm ahead of

a dollar bond sale. Cathay also

tapped four large investment

banks to help coordinate a

deal, according to a document

reviewed by The Wall Street

Journal.

Declines in U.S. Treasury

yields this year have made dol-

lar bond funding an attractive

option for many companies.

On Friday, the airline said

the number of passengers it

carried in September fell 7.1%

from a year ago, and it expects

a significant decline in book-

ings on flights into Hong Kong

for the remainder of 2019.

Cathay’s mainland China

business “has been hit espe-

cially hard,” and the rest of

the year “will remain incredi-

bly challenging for the air-

line,” its chief customer and

commercial officer, Ronald

Lam, said.

Cathay Puts Bond Sale on Ice

After Lukewarm Reception

for two days during the black-

out, and its call centers were

overwhelmed.

Mr. Johnson on Friday apol-

ogized for the hardships

caused by the shut-off but de-

fended the company’s decision

to implement it, noting that

none of its power lines

sparked fires, even though

strong winds in certain areas

caused damage to its system.

“Making the right decision

on safety is not the same as ex-

ecuting that decision well,” he

said. “PG&E has to be better

prepared than it was this time.”

PG&E, which provides gas

and electricity to 16 million

people, shut off the power to

more than 700,000 homes and

businesses in anticipation of

strong winds that could have

increased the chances of its

power lines sparking fires. The

company’s equipment has

sparked 19 major fires during

windy periods in 2017 and

2018, mostly because vegeta-

tion blew into live wires.

Continued from page B1

PG&E isn’t the only Califor-

nia utility to deploy shut-offs

to mitigate wildfire risks. Edi-

son International’s Southern

California Edison and Sempra

Energy’s San Diego Gas &

Electric also cut power re-

cently in response to windy

conditions. But PG&E is the

only U.S. utility to have initi-

ated a weather-related black-

out on such a large scale.

The decision drew the ire of

legislators and local officials

who have called on PG&E to act

more prudently in enacting fu-

ture shut-offs. A group of

Northern California govern-

ments, including Napa and

Sonoma counties, on Thursday

filed a scathing brief with the

utilities commission that be-

rated PG&E for its lack of pre-

paredness.

“The experience of working

with PG&E to effect real

changes to its de-energization

program has been like battling

the Hydra,” it read. “This has

gottostop.”

For now, the shut-offs will

continue as PG&E scrambles to

trim trees near power lines

and upgrade equipment across

its 70,000-square-mile service

territory, after a protracted

drought this decade turned

millions of acres of forest into

a tinderbox.

Another major fire tied to

PG&E’s equipment would likely

drive the company to insol-

vency. It sought bankruptcy

protection in January, citing

more than $30 billion in liabil-

ity costs stemming from the

2017 and 2018 fires, which col-

lectively killed more than 100

people.

At the meeting Friday, com-

missioners questioned the

company’s commitment to its

customers and how long it an-

ticipates deploying its shut-off

strategy on such a large scale.

Mr. Johnson said the utility

is working to limit the scope

of future shut-offs by trim-

ming more trees and installing

technology to enable the shut-

down of smaller, more tar-

geted portions of the grid. But

he estimated it will take as

long as a decade before its

shut-offs will have “ratcheted

down significantly.”

“We will get better every

year,” he said.

Already, PG&E is behind on

several of its most important

safety efforts, records show,

including this year’s tree-trim-

ming campaign, which is less

than 50% complete. It also

trails its peers in technology

to track winds and isolate the

areas where equipment is at

highest risk of sparking fires.

Though the company

warned of continued shut-offs,

it is working to limit their du-

ration.

PG&E

Warns on

Blackouts

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