Baidu 4Q15 Earnings Call Notes

Robin Li – Co-Founder, Chairman and Chief Executive Officer

Service and domestic consumption are growing faster in China

“Even as China’s overall gross slows, service and domestic consumption are growing faster. This growth in service is outpacing overall GDP in 2015. Providing an additional tailwind is the Chinese government’s Internet Plus initiative, which is pushing traditional industries to work more closely with Internet companies, bringing structural change to those sectors.”

Baidu largely services these growing sectors

“Baidu largely services these growing sectors. With our top revenue verticals by broad classification including retail ecommerce, local services, healthcare, financial services and education. We are confident in our outlook for Baidu and China’s growing sectors. Baidu plays a vital role as the platform to connect users and merchants in these verticals. ”

Investing in autonomous driving

“We see a very bright future for autonomous driving, especially here in China where we face severe pollution, frequent traffic jams and high mortality rates from traffic accidents. Baidu believes, we can transform transportation as we know it. We’ll keep you updated with new divestments from this exciting area.”

Search algorithm is pretty much all machine learning today

“Our machine learning is a fundamental technology to (40:20). Five years ago, search was pretty much based on statistical tactics. These days, the search algorithm itself is pretty much machine learning. So far, a lot of our existing products and services including the algorithmic search, pay search, the query side based on voice, based on images, those are all very heavily driven by machine learning, especially deep learning technologies. And I’m actually very proud of our speech recognition capability.”

Self driving car can probably become a commercial product within five years

I think self-driving car can become a commercial product probably within the next five years. So that is very dependent on our machine learning and artificial intelligence capabilities.”

TD Bank FY 1Q16 Earnings Call Notes

The Toronto-Dominion Bank (TD) Bharat B. Masrani on Q1 2016

Normalization in credit conditions became apparent this quarter

“We have signaled for some time that we expected a normalization in credit conditions. That became apparent this quarter. But while provisions rose, this was due in large part to volume growth, prior-period recoveries, and the negative impact of foreign exchange.”

Deterioration in oil and gas but credit quality remains strong otherwise

“Underlying loss rates remain acceptable. We did experience some negative credit migration in oil and gas portfolios, and we added to reserves accordingly. We continued to monitor our oil and gas exposures closely and remain confident that any losses will be manageable given the small size of this exposure relative to our balance sheet. Mark will address credit in more detail in his remarks, but at a high level, credit quality remains strong across our Canadian and U.S. portfolios and we are comfortable that we are adequately reserved.”

Fundamentals are strong despite the market

“More generally, the heightened focus on credit and falling commodity prices reflects growing concern that fiscal and monetary authorities will be unable to prevent a slowdown in the global economy. The resulting increase in risk aversion has unsettled financial markets and shaken confidence in the outlook. While this volatility can be unnerving, it is important not to lose sight of the fundamentals. TD’s business model is strong”

Riaz E. Ahmed – Group Head and Chief Financial Officer

Mark R. Chauvin – Chief Risk Officer and Group Head

Seeing definitely signs of deterioration in oil affected regions

“Although we are seeing definite signs of deterioration in consumer lending, delinquency, and loss rates in the impacted regions, to-date, loan losses have been largely offset by strong performance across the rest of the country.”

Credit quality is strong otherwise, but has normalized

“To conclude, the key takeaways in the quarter are: first, credit quality remains strong in the Canadian and U.S. portfolios; second, the U.S. portfolio losses have largely normalized from unsustainably low levels in 2015 with losses expected to remain stable over the balance of the year; and lastly, our major concern continues to be low energy prices.”

Seeing credit losses in auto in oil impacted provinces

“Yeah. So, the – I would say on the indirect auto in Canada, prime and non-prime or what you’re referring to, is the one area that we’re seeing the initial credit losses in the oil impacted provinces”

Michael Bo Pedersen – Group Head-U.S. Banking TD Bank Group and President & CEO-TD Bank

Credit card loans season after two years

“with cards, as we build that book quite fast, there’s a phenomenon we call seasoning which means that in the second year, you tend to get a little more delinquency and loss than you do in the first year. So, as you build, that gets reflected as the cohort season. So, you’re seeing a little bit of that across the portfolio, but that was very much – it’s behaving as expected, nothing that causes us any worry.”

Copa 4Q15 Earnings Call Notes

Pedro Heilbron – Chief Executive Officer & Director

Possibly the most challenging economic environment in a decade for Copa

“I want to congratulate our co-workers for their efforts in what was possibly the most challenging year for Latin America and for Copa in the last decade as the region is going through an economic contraction and currencies have devaluated significantly against the U.S. dollar, exerting considerable pressures on yields.”

Load factors are trending flat, but yields are down

“Turning to our current demand environment, load factors were trending flat year-over-year during the first quarter of 2016. However, yields are down significantly year-over-year, given the effect of currency devaluations experienced during the last 12 months, as well as a softer economic environment.”

Not seeing much of an impact from Zika

“I mean, we could say maybe it’s too early, so – I don’t want to say that there won’t be an impact in the future. But so far, we have not seen an impact. Also bear in mind that in those markets, most of our passengers originate in Latin America so the Zika scare is not such a big deal. We’re already living in Latin America. And I guess the main threat is to pregnant women, but pregnant women don’t tend to travel that much. So far we’re not seeing an impact.”

Jose Montero – Chief Financial Officer

Revenues down by 17% driven by currencies and economies

“Our 2015 profitability was affected by revenues, which came in 17% lower year-over-year. As we’ve mentioned before, the lower revenues were driven mainly by weaker economies and weaker currencies in Latin America, particularly in Venezuela, Brazil and Colombia.”

Brazil, Venezuela and Colombia are the three major drivers

Yeah. But there is a clear breakdown of the affect on our unit revenue performance driven by Brazil, Venezuela and Colombia. Those are the three major drivers of this – in the percentage that Pedro mentioned.

Didn’t have significant cash balances in Argentina

“Well this is Jose here, Duane. We currently do not hold any significant balances there. Basically, the government there liberalized the exchange rate after they came into power, so therefore there is no real limits on repatriations there. And we do not hold significant balances there. The impact there was due to the fact that at one point, when the currency got – was opened, we had to revalue our net asset position in the market. So therefore, that’s what that is about. And there – and so basically, that’s the way that it was valued. Now it wasn’t necessarily a revaluation of any cash holdings that we have there.”

Yum 4Q15 Earnings Call Notes

Yum! Brands’ (YUM) CEO Greg Creed on Q4 2015 Results

Spinning off China division

“2016 will be a transformational year for Yum!, as we complete the spinoff of our China division, ultimately creating two powerful independent focus growth companies. The fundamental goal of Yum! however is unchanged. We are 100% dedicated to building and strengthening KFC, Pizza Hut and Taco Bell all around the world as strong brand critical to delivering the same growth and creating shareholder value over the long-term.”

Macro environment has impacted casual dining segment in China

“The macroeconomic environment and volatile stock market has impacted the Casual Dining segment and we know we have to generate more exciting news and value to counter this headwind. ”

We are encouraged by what we’re seeing in China in January

“I want to give you a quick update on January sales in China. We are encouraged by what we are seeing at KFC, but Pizza Hut sales remain soft. It’s difficult to gauge exactly where the first quarter will finish, especially given the earlier timing of Chinese New Year. But at this point we expect same-store sales growth to be up low-single digits for the division which sets us up well for the balance of the year.”

The macro in China has gotten worse since December

“Well I think first of all, obviously the macros which have got worse since December, since we were all together in December and I think we all know that macros impact casual dining more than they impact QSR. So, I think there’s definitely that issue. I would agree with you that we’ve not had enough value in use to overcome this backdrop.”

There’s been a big value push in the market

“Just let me talk to about whole question about value, I think the great thing is that Taco Bell is incredibly well positioned, it remains the value leader. But look, we’ve all seen what’s been happening in the marketplace in the early year: five for $4, four for $4, two for $2, so let’s not kid ourselves. So, there’s been a fair amount of value initially out there.”

For pizza hut in China, the macro affects casual dining more than QSR

“we’ve seen this not just in China, but outside that casual dining is impacted by macros. It’s just what happens. And it always has a bigger impact on casual dining when macros are volatile and changing than it does on the QSR business. So if I were to say what are the four factors, I would say macros.”

Customers in lower tier cities have been more significantly impacted

“So first on China same-store sales, similar to recent quarters, performance was stronger in Tier 1 cities at both brands. Our view is that customers in lower tier cities have been more significantly impacted by the softening economy, particularly around the industrial cities, which have been more heavily affected by China’s slowing export trade.”

You can’t just water the new plants

“The way I look at it, look the new plants that you — trees that you plant and the ones that are growing both need water. You just can’t throw water on the new plants. You got to throw water on the big strong trees to make sure they continue to be big, strong, and keep going.”

Pat Grismer

Planning to maintain 5x EBITDA leverage

“I’m also happy to report that we’re on schedule to complete our recapitalization in the first half of the year, issuing incremental debt of approximately $5.2 billion and plan to maintain roughly 5 times EBITDA leverage going forward.”

E House Holdings 2Q15 Earnings Call Notes

“As expected” the Chinese property market has started to warm up driven by government policies

“As expected the overall Chinese property market started to warm up since the end of March driven in part by the governments loosened credit policies and purchasing restrictions in certain cities. Despite recent Chinese Stock Market volatility the real estate sector has stayed relatively stable so far. As a result we are on track to achieve our overall revenue target set at the beginning of the year.”

Chinese real estate market has been quite healthy

“Yes, the first half of this year, the Chinese real estate market overall, it has been quite healthy. We are pleased with the state of the market and transaction volume can recovery in the fourth quarter, and continue into the summer. The month of July and August, we see this growth taper out to some extent which is normal. In a normal year, the month of July and August are a small — minor quiet period in terms of real estate market activities. And everyone is now gearing up and waiting for the next — traditionally a strong transaction season in September and October. So far, you know, everything that has happened is quite healthy.”

Lower interest rates will be good for us

“Yes, so the rate cut as well as the decrease in the required reserve ratio were mainly aimed to give a boost to the macro economy, and everyone is obviously — it has gotten the potential impact on the domestic stock market, but one thing that is clear is that this — the drop in interest rate is — will be good, will be beneficial to the real estate market”

I don’t think stock market drop will cause people to favor real estate over stocks

“I don’t think the recent drop in the stock market will again prompt many people to reconsider their investment strategy to favor real estate purchase more than stock market investment.”

Royal Bank of Canada FY 3Q15 Earnings Call Notes

Bank of Canada has cut rates twice this year

“Starting with the economy, in the recent months, we have seen mixed economic data and weaker than anticipated growth which led The Bank of Canada to cut interest rates for a second time this year. Looking ahead, we still forecast modest growth in Canada in the second half of the year as the strengthening US economy and lower Canadian dollar are expected to drive export growth, and consumer spending continues to be steady.”

Declining oil prices causing economic uncertainty

“Declining oil prices is causing economic uncertainty, particularly in the west with lower levels of investment. As we expected, lower oil prices are challenging for some of our clients. ‘

Lower housing activity in the oil exposed region

“Offsetting some of this growth is lower activity in oil exposed region. It’s important to remember that many areas of Alberta are coming off several years of hyper growth. So the recent slowdown is in part a return to more normal growth levels but we do recognize these markets remain vulnerable to lower oil prices.”

Credit quality remains strong

“credit quality remains strong this quarter as credit trends stayed near historic lows reflecting our strong risk management, low interest rates and strong employment trends”

Stressing oil portfolio for $35 oil could see some uptick in provisions at these levels

“As the price of oil has continued to decline through the year we’ve updated our stress scenarios. From a wholesale perspective, we stress test on a name-by-name basis. Our most recent scenario assumes a $35 oil price for the remainder of 2015 and uses the forward price curve for 2016 which currently averages $45. Based on this scenario, we are now monitoring a handful of additional loans compared to our prior scenarios. If the price of oil stays at current levels, we could see an uptick in wholesale provisions. However, we have seen a number of companies raise capital, delay capital spending or cut dividends which should help mitigate some of the impact.”

Our original expectations for redeterminations was $53

“One factor we will keep a close eye on is this fall’s borrowing-based redeterminations. Our price deck used for our spring redetermination expected the average annual price to be closer to $53 in 2015 with small increases to the mid $60 over time. Should the oil prices remain below $45, we would expect to see further challenges for these clients as our price deck would be reflecting these further depressed prices.”

Have seen a slight uptick in delinquencies in oil exposed provinces

“Delinquencies remain near historical lows and we have not seen an increase in delinquencies for Canada as a whole but have noticed a slight uptick this quarter in oil exposed provinces. This increase is insignificant at this point and it’s too early to say that this is a trend.”

Focused on managing expenses to a lower revenue growth outlook in ’16

“We are very focused as we go into 2016 Doug and myself on a more modest revenue growth outlook given market conditions. And so the completion of our international wealth restructuring program is allowing us to accelerate our expense program. So we are bringing that expense profile in line with our revenue growth, so that we are able to deliver positive operating leverage even in a more modest revenue environment.”

Not seeing deterioration in retail or commercial credit

“On the retail side, across all of the portfolios as I reported we’re not seeing deterioration in our impairment rates and in fact in some cases we are actually still seeing some improvements. So I am not really seeing either in retail or commercial significant concerns at this point, it’s just — I overlay of course, the market conditions that we’re operating in and so that’s why I’ve tried to express a cautious view.”

Fixed income new issue flows are down in high yield because of recent volatility

“I can start with the trading conditions currently. I think starting with fixed income, we are seeing because of the recent market volatility high yield for instance in the U.S. new issue flows is down, investment grade credit is steady but down a little bit, and in rates trading I would say it hasn’t changed.”

Equity trading has been robust recently as completing trades on an agency basis

“In the equities trading side of the business, it’s really just agency trading. We are not really putting capital to work for to offer liquidity. So the equities trading business has actually been as you might imagine reasonably robust especially over the last several days.”

Nestle 2Q15 Earnings Call Notes

Environment across EMENA remains volatile

“The environment across the Zone remains volatile, with inflationary conditions in certain European markets — Eastern European markets, leading to price increases and volume pressure. On the other hand, in many parts of Western Europe, our organic growth was mainly driven by volume, as pricing was negative in a deflationary environment. Additionally, political and economic uncertainties in parts of Eastern Europe and Middle East were also challenging. In that context, EMENA’s results were strong in the first half of the year. ”

China is difficult as you all know

“Let’s move to China now. The overall economic situation is difficult and I’m sure that you have read and seen that as well. That also impacts our business there. Nevertheless, we continued our efforts to update our portfolio in line with fast changing consumer expectations.”

The environment in China is very volatile right now

“Regarding China, we are experiencing an interesting growth. Actually, if you look at the last three months we were having mid-single-digit growth in China, which is good, which is satisfactory. And there, once again, we see an improvement, which we are very pleased with, post cleaning of some inventory issues. So we are pleased with that. That being said, I want to be careful. As you saw and as you read and as you heard over the last couple of days, there is a lot of volatility today in China. So we are satisfied with what we have seen and the turnaround that we see in China. That being said, we are very careful about the outlook, given the volatile trading environment.”

Pricing is a local decision

“we are operating in an environment where we’ve got places around the world with deflationary conditions. We’ve got places with inflationary conditions. And this is also why we always say pricing is a local decision is because we have to act within the local conditions. We have to act within the local strength of our brand, within actions of our competitors, within the strategies of the retailers as well. So, there are many components that go into pricing.”

Alibaba FY 1Q16 Earnings Call Notes

Part of everyday life of the Chinese consumer

“Our growth was driven not only by an increase in the number of consumers coming to our marketplaces to shop, but also the frequency and breadth of their consumption activity across more and more product categories. This reflects our ability to deliver excellent customer experience and demonstrates that our platform is truly a part of everyday life of the Chinese consumer. We also experienced robust growth in mobile and encouraging progress in mobile monetization.”

Next day delivery in 41 cities

“Consumers now enjoy next-day delivery services in 41 cities, including Beijing, Shanghai, Guangzhou, Shenzhen and Hangzhou, and this will be extended to 50 cities by the end of this year. We have also launched same-day delivery of groceries, initially starting with Beijing and Shanghai, which has been very successful.”

Market leader in cloud in China

“Next, I’d like to discuss our cloud computing business, which had a triple-digit growth in the June quarter. We are the number one market leader in cloud computing services in China, and we are beginning to reap the results of years of investment in this business.”

Revenue: 20B RMB

“Year-on-year, our revenue grew 28% to RMB20.2 billion, primarily driven by increase in new active buyers. The lower year-on-year revenue growth was due to three factors: number one, the suspension of the online lottery business in late February 2015; a decrease in revenue from the SME loan business that were transferred to Ant Financial; lower pricing for ads on Juhuasuan, a change we made in April to acquire high quality merchants.”

No insights on the Chinese economy

“We closely monitor the Chinese economy and consumer behaviors. But as we always said, we manage our business and we execute our growth strategy for the long-term, and short-term movement won’t affect our long-term strategy.”

PriceSmart FY2Q15 Earnings Call Notes

Colombia taxing capital

“One more item deserves mentioning, Colombia established a new tax on businesses based upon their level of equity which went into effect this calendar year”

Colombian peso devaluation had impact on financials

“As Jose Luis mentioned the extraordinary devaluation of the Colombian peso over the past several months has had a material impact on our financials in the most recent fiscal quarter. Given the level of merchandise that we import into our markets that is purchased in U.S. dollars, dramatic changes in currency can impact us in a number of ways all of which came into play in Colombia in Q2.”

Merchandise purchased in US dollars, payment due in local currency opens to exchange rate risk between time of order and payment

“When imported merchandise’s purchased, the liability is incurred in U.S. dollars. At the time payment is due, it is satisfied with local currency and therefore subject to the fluctuating exchange rate between that currency and the dollar.

During the first quarter and extending into the second quarter, a very large volume of U.S. value merchandise and fixed asset shipments were received by Colombia in advance of and during the initial opening of the three new warehouse clubs. This created large U.S. dollar liabilities which upon later settlement at a weaker Colombian peso resulted in realized currency losses.”

If you’re taking the long view in business, sometimes you have to take short term pain to maintain your position

“So there were so many fluctuations that we would keep bringing merchandise at different cost level. So it was little bit hard to in the second quarter in particular to even price merchandise them but we believe that definitely given our long-term view in Colombia the most important thing for us is try to be more reasonable with price increases and obviously be there for our members to sustain the long-term position.”

This is an opportunity to continue to look for places to grow

“on Colombia probably that currency concerns us but that doesn’t change our view of a market that has a lot of opportunity long-term.

So the initial results are encouraging obviously since we started in Colombia, we knew it wasn’t going to be without challenges. And I believe that this is good opportunity for us to keep looking for opportunities to grow there definitely the in particular the Bogota in cities are big cities where we still see opportunities for us.’

It takes people about a year to readjust after the currency devalues

“Assuming it doesn’t keep moving or it doesn’t goes the other way but I think it’s obviously very hard for us to tell but we believe that within a year timeframe people get adjusted. They just kind of realize that the new currency and that they go back to normal spending. So that is when we will probably be considering, I guess the normal condition.”

Definitely see an opportunity in buying land

“definitely we see the opportunity of buying land because all the opportunities are in all the land is quoted in pesos. We definitely depend on getting permits and getting through all those processes before acquiring land but as I mentioned we haven’t changed our position in Colombia.”

National Bank of Greece 4Q14 Earnings Call Notes

Liquidity conditions tight

“Liquidity conditions tightened further in Q1 ’15 due to the continuation of uncertainty and they should very well lift up. At the same time our domestic deposit outflows peaked in January minus €2.7 billion but have been subsiding ever since dropping practically to zero levels in March. So in total 6.2 billion has been lost in the five month period from October to February, this is the lowest amongst our peers, both in absolute terms and as a percentage of September domestic deposits. Current LD ratios are 102% for the Group and 93% domestic.”

Asset quality has deteriorated some recently

“Unsurprisingly the asset quality run rate has picked up in the first quarter of 2015 compared to the what Nikos described in Q4 which was a continued improvements throughout the year quarter-to-quarter that clearly reflects the uncertainty and perhaps increase more hazard in Q1. It only saving grace is the latest weekly data shows perhaps a slowdown in that change in direction. So until the uncertainty is resolved, I don’t think we’ll get a clear picture of where this is going.”