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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: A lot of movers out there in the marketplace, including

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Speaker 2: the big banks, because men, it's the busiest day I've

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Speaker 2: ever seen for big bank earnings, just all coming in

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Speaker 2: on one day here. So we've been checking in with

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Speaker 2: a good friend, Herman Chain, who covers all the banks

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Speaker 2: for Bloomberg Intelligence. So I guess my takeaway Herman is

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Speaker 2: they beat expectations generally, which is and expectations were high

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Speaker 2: coming into this quarter. What are they saying about the

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Speaker 2: back half of the year. I guess that's probably the

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Speaker 2: bigger issue.

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Speaker 3: Yeah, that's right, that's the chief question on the earnings

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Speaker 3: cost today. We had robust results, knocked it out of

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Speaker 3: the park, particularly in equity trading. Can the spece sustained

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Speaker 3: at least from the JP Morgan earnings called earlier this morning?

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Speaker 3: Management said that while it's hard to replicate the second

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Speaker 3: quarter earnings results from equity trading in particular, there's still

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Speaker 3: a constructive backdrop. Some of the activity in the second

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Speaker 3: quarter was really driven by the trading activity from SpaceX

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Speaker 3: and the like. That may be a bit more idiosyncratic

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Speaker 3: to the quarter, but still really strong trading results expected

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Speaker 3: for the back happ of the year.

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Speaker 2: What are the banks of the big lending books like WACOVI,

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Speaker 2: like viave Lake City. What are you saying about the

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Speaker 2: credit quality out there?

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Speaker 3: Yeah, credit quality has been really strong. You see that

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Speaker 3: in Wells Fargo in particular. They're net charge offs for

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Speaker 3: the quarter of the loan losses were down about ten

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Speaker 3: basis points, and that was really led by much lower

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Speaker 3: commercial loan losses in particular. So the commercial borrowers have

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Speaker 3: been able to weather some of this economic concergency and

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Speaker 3: expectations for rates to be higher for longer. So we're

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Speaker 3: actually pretty assanguine about the credit quality for the group,

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Speaker 3: at least in the near intermediate term.

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Speaker 2: What are some of the return ratios that you and

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Speaker 2: bank investors look at, and then how are they trending

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Speaker 2: these days?

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Speaker 3: Yeah, returns and return on tangible common equity in particular

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Speaker 3: is the key banking metric that we look at, and

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Speaker 3: those were strong across the board. You see this in

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Speaker 3: JP Morgan's adjusted ROTC twenty three percent, their target over

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Speaker 3: the longer term seventeen percent. Even banks that are at

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Speaker 3: the lower end of the spectrum, banks like a City,

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Speaker 3: we're seeing ROTC at thirteen percent and their target for

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Speaker 3: the year is only ten to eleven percent. So they're

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Speaker 3: vastly outstripping their targets and their expectations, and that's happening

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Speaker 3: across the board for the banks that reported today.

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Speaker 2: All right, so in that context, how they're easing regulations

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Speaker 2: on the banks, how they impacted those their performing and

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Speaker 2: those types of ratios.

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Speaker 3: That's right. So that's another positive story for the banks,

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Speaker 3: particularly the big ones, where we have easing capital regulations,

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Speaker 3: that will create a more flexibility on the balance sheet.

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Speaker 3: So that's in terms of both buybacks, that's in terms

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Speaker 3: of dividends, that's in terms of increasing their lending capacity,

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Speaker 3: and that means there's a less equity component on the

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Speaker 3: balance sheet, which is inversely related to return, so returns

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Speaker 3: will go higher systematically because there's lower equity capital ratios.

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Speaker 3: So all in a really good story. You just saw

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Speaker 3: from the stress tests where we're after that in the aftermath,

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Speaker 3: banks really lifted their dividends by ten, eleven, twelve percent

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Speaker 3: across the board.

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