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Speaker 1: Broadcasting live to New York, Gloomberg eleventh to Washington d C,

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Speaker 1: Bloomberg to Boston, Bloomberg dwell Onners to San Francisco, Bloomberg

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Speaker 1: to the Country Channel one nine and around the globe

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Speaker 1: the Bloomberg Radio Plus appen Bloomberg dot Com. This is

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Speaker 1: Bloomberg Surveillance. Good morning. It is seven thirty on Wall

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Speaker 1: Street and Michael McKee, along with Tom Keene, were two

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Speaker 1: hours away from the opening of trading today with futures

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Speaker 1: flat on the day. Here's some of the news you

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Speaker 1: need to know from American companies. Home Depot fourth quarter

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Speaker 1: earnings per share a dollar seventeen, better than the estimate

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Speaker 1: of dollar ten revenue of twenty point nine eight billion,

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Speaker 1: better than the twenty point four billion consensus forecast. Home

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Speaker 1: Depot shares up by UH at this point two point

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Speaker 1: six percent UH in early trading. Western Digital plans to

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Speaker 1: buy SanDisk for about nineteen billion in cash and shares.

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Speaker 1: Western Digital will pay sixty seven fifties share in cash

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Speaker 1: and just under a quarter of a share. Western Digital

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Speaker 1: shares down by six point seven percent. Sandy's shares off

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Speaker 1: four point seven percent. United Technology says it walked away

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Speaker 1: from Carlamer he talks about a merger with Honeywell do

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Speaker 1: in part to concerns that a deal wouldn't win approval

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Speaker 1: from antitrust authorities. Honeywell last week offering a hundred and

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Speaker 1: eight dollars a share for United Technologies and Microsoft co

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Speaker 1: founder Bill Gates siding with the government in its dispute

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Speaker 1: over Apple's refusal to break into a terrorist iPhone that

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Speaker 1: according to The Financial Times, Gates will be with us

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Speaker 1: in about thirty minutes here on Bloomberg Surveillance. Now, let's

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Speaker 1: check in with John Tucker that the latest world and

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Speaker 1: national headlines. John and Good Morning, Michael Pole Show. Donald

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Speaker 1: Trump plays to win his third consecutive Republican presidential nominating

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Speaker 1: contest tonight when Devado holds its caucuses. Low participation, an

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Speaker 1: electrical electoral system that rewards political insiders, could to manage

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Speaker 1: the magnitude of any victory. Latest NP act Pole has

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Speaker 1: no Trump leading Ohio Governor John Kasi thirty one to

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Speaker 1: twenties percent among the state's likely Republican presidential primary voters.

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Speaker 1: Winning his home states March fifteenth primary is critical to case,

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Speaker 1: which is a presidential bid and members of Congress trying

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Speaker 1: to head off a new Jersey transit track authorized for

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Speaker 1: March thirteenth. The last time New Jersey Railroad employees walked

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Speaker 1: off the job was thirty three years ago. It displaced

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Speaker 1: Manhattan commuters. They turned to fill in charter buses for

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Speaker 1: more than a month. Global News twenty four hours a day,

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Speaker 1: cowered by our twenty four hundred journalists. He had more

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Speaker 1: than one hundred fifty news videos around the world. I'm

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Speaker 1: John Tucker, Michael Time now for the Rankatino Otto Group,

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Speaker 1: Bloomberg NBC Sports Update with John stash Our. John, all right,

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Speaker 1: my things going from bad the worst for them. Next,

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Speaker 1: who had a little over a month ago, were five

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Speaker 1: hundred trying to make the playoffs. There two and twelve.

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Speaker 1: Since they lost sixthtrade at home, only Brooklyn and Philadelphia

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Speaker 1: behind them in the East. Last night, Toronto won the

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Speaker 1: second quarter thirty one to fifteen and won the game

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Speaker 1: one ninety five. Next, coach Kurt Rambis watched the Raptors

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Speaker 1: shoot fIF It takes five guys to stop the ball.

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Speaker 1: It's not just the two guys involved intimately in the

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Speaker 1: pick and roll. It takes all five guys. And if

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Speaker 1: if we can't get all five guys, engage one guy.

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Speaker 1: One guy makes a mistake. That's all. That's all a

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Speaker 1: good offensive team needs. Nix visit Indiana tomorrow. Nets visit

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Speaker 1: Portland tonight to start a nine game road trip Golden State.

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Speaker 1: Last night one at Atlanta the Warriors fifty and five,

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Speaker 1: fastest ever to fifty wins. Rangers visit the slumping Devils tonight.

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Speaker 1: College roops Miami be third ranked Virginia locally, Ionna ble

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Speaker 1: but still one at Sienna one and Tonio Cremarti's second

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Speaker 1: stint as a Jets cornerback is over released one season

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Speaker 1: into a four year contract. He was a disappointment of

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Speaker 1: the Jets, secondary it saves them eight million on the

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Speaker 1: salary cap. With the Bloomberg NBC Sports uptick, I'm John Stash,

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Speaker 1: Thank you John. As we mentioned, futures at the moment

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Speaker 1: are basically flat, with oil prices now higher on the day,

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Speaker 1: West Texas up by a tenth of a percent, Brent

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Speaker 1: crude up eight tenths of a percent. You're listening to

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Speaker 1: Bloomberg Surveillance. This is Bloomberg Radio worldwide. Welcome back to

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Speaker 1: the surveillance and Michael McKee along with Tom Keene on

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Speaker 1: a day where we aren't certain where markets are going

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Speaker 1: to open. S and P futures unchanged at the moment

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Speaker 1: now evening futures are up just six points, that's less

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Speaker 1: than a tenth of a percent. Nasdaq Future is the

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Speaker 1: only clear direction at the moment, off seven points. That

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Speaker 1: is almost two tenths of eight percent, although they have

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Speaker 1: paired their losses as well. Stocks six hundred off by

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Speaker 1: a point right now two tenths of a percent. The

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Speaker 1: Bloomberg n j I t STEM Report is brought to

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Speaker 1: you by New Jersey Institute of Technology, partnering with government

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Speaker 1: and industry to apply the university's world class research assets

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Speaker 1: to innovate and spur economic growth. Learn more at n

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Speaker 1: j I t EU. Here's Bob Michael, thanks very much,

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Speaker 1: and at seven thirty five on Wall Street, here's what's

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Speaker 1: making news in science, Technology, engineering, and math. Microsoft co

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Speaker 1: founder Bill Gates is backing the government in that dispute

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Speaker 1: with Apple over a terrorist iPhone. Industry leaders are generally

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Speaker 1: siding with Apple, which is refusing a court order to

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Speaker 1: help the FBI break into the device. Gates tells The

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Speaker 1: Financial Times the government order is really no different than

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Speaker 1: asking for bank and telephone records. Apple has warned the

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Speaker 1: order creates a dangerous precedent and a reminder please join

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Speaker 1: us at eight am Wall Street time when we speak

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Speaker 1: to Bill and Melinda Gates on both Bloomberg Radio and television,

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Speaker 1: and that is this morning's Bloomberg and j I t

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Speaker 1: Stem Report. Bob, thank you very much. Well. We raised

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Speaker 1: a question yesterday with Lisa brown Wits about the exposure

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Speaker 1: of banks to the energy sector, and there was some

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Speaker 1: question about just how bad things might get. Gerard Cassidy

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Speaker 1: of RBC Capital Markets, our old friend has actually been

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Speaker 1: looking into this and he has some numbers on it all.

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Speaker 1: And I might start by noting, Gerard, I think you're

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Speaker 1: attending JP Morgan's investor day today. The bank putting out

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Speaker 1: a statement suggesting that if oil prices stay about where

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Speaker 1: they are, uh, it would mean seven fifty million dollars

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Speaker 1: in additional reserves for them. If they dropped to twenty

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Speaker 1: five dollars, it's one and a half billion, which sounds

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Speaker 1: like a lot of money. But in the context of

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Speaker 1: these big banks, the energy exposure, you right, aren't that bad?

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Speaker 1: Isn't that bad? That's correct, Mike. When you're especially specifically

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Speaker 1: if you look at JP Morgan, we have to put

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Speaker 1: it in the context of their earnings last year. They

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Speaker 1: earned twenty four billion dollars, so even if they were

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Speaker 1: to see oil prices go to twenty five I think

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Speaker 1: it's very manageable. And that's true for the top twenty banks. Well,

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Speaker 1: we look at the exposure for the top twenty banks

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Speaker 1: as a percentage of total loans, it's about five and

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Speaker 1: a half percent, so it's very manageable even at these

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Speaker 1: very low prices. Now the rest of the banks, uh,

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Speaker 1: that's been We've had the sell off this year because

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Speaker 1: people are concerned that the banking industry could blow up

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Speaker 1: over oil prices, especially when we get to the March

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Speaker 1: resets on loans to some of these energy companies that

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Speaker 1: may not be able to make it go at twenty

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Speaker 1: five dollar oil. No, I think that's contributed to the

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Speaker 1: sell off. I would agree with you. Unfortunately, we think

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Speaker 1: it's a little misplaced. I would be more concerned about

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Speaker 1: the FED not raising FED fund rates this year, which

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Speaker 1: I think has been the main contributor to the sell

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Speaker 1: off that I would about the energy concerns because we're

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Speaker 1: not expecting any deprecation of book value, suggesting losses that

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Speaker 1: would reduce your book value. This is really different than

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Speaker 1: the nineteen eighties when the exposure to energy was much

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Speaker 1: greater and we lost nine out of the ten largest

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Speaker 1: banks in Texas. And due to the drop an oil price,

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Speaker 1: are we going to lose any banks, even smaller banks.

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Speaker 1: That's an interesting question because there's a possibility the smaller

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Speaker 1: banks that have physically located in Texas, in Houston or Midland,

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Speaker 1: that have commercial real estate loans on top of oil loans,

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Speaker 1: those are the vulnerable ones. But at this point it's

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Speaker 1: too early to say that. But clearly the smaller banks

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Speaker 1: would be far more vulnerable because of the commercial realistic

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Speaker 1: exposure than just energy exposure. But you say we should

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Speaker 1: worry more about Jennet Yellen sitting on her hands. I

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Speaker 1: think that's the real issue here. And if we see

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Speaker 1: the U s economy of gaining some strains in the

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Speaker 1: spring with the housing market, and there's a nascent pickup

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Speaker 1: in manufacturing in the last thirty days, if that starts

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Speaker 1: to accelerate even further because of the strength of the

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Speaker 1: auto industry, and the set decides to move come June,

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Speaker 1: nobody expect the March move that would be a real

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Speaker 1: positive for the bank stocks. Far I let you go.

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Speaker 1: J Morgan ahead of Investor Day has released a set

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Speaker 1: of slides and a statement, uh basically testing that as usual,

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Speaker 1: things are just fine over at Fortress Diamond. They're forecasting

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Speaker 1: at fourteen return on tangitible common equity over a three

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Speaker 1: year profit outlook. Um, what do you think of what

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Speaker 1: they are saying this morning? So far? What they've released

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Speaker 1: in their slide deck is very impressive. They tell you

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Speaker 1: that they have shown the best growth a monkst our

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Speaker 1: biggest banks, and most importantly, what drives value for the stocks,

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Speaker 1: all stocks, not just JP Morgan, is the growth intangible

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Speaker 1: book value, and they demonstrated with their numbers how they

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Speaker 1: have been a leading creator of tangible book value growth.

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Speaker 1: And I expect that to continue because of the strength

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Speaker 1: of that management team and the position that their businesses

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Speaker 1: are in not only here in the US, but around

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Speaker 1: the globe. Interesting Jamie Diamond suggests they're going to focus

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Speaker 1: on still cutting expenses. That is still a huge issue

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Speaker 1: for the industry particular, even if the FED raises rates

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Speaker 1: once or twice this year, we need to see a

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Speaker 1: number of branches shut down in this industry as technology

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Speaker 1: and the digital channel is making huge advances and delivering

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Speaker 1: retail product and I think this is going to lead

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Speaker 1: to bigger consolidation in two thousand and seventeen as well.

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Speaker 1: Gerard Cassidy, RBC Capital Markets, thank you very much for

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Speaker 1: joining us. We'll let you get over to talk Mr

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Speaker 1: Diamond and company and see what else you can learn.

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Speaker 1: Have you back soon here on Bloomberg Surveillance. JP Morgan

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Speaker 1: shares UM just beginning to trade in pre market, down

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Speaker 1: by about half a percent right now, fifty eight dollars

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Speaker 1: thirty cents. No uh, significant movement. They were up one

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Speaker 1: point three percent yesterday on the day. As we continue

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Speaker 1: to monitor futures, markets generally flat. Smp DAL futures are

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Speaker 1: flat right now. Nasdaq futures off by a tenth of

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Speaker 1: a percent. This is Bloomberg Radio Bloomberg Surveillance, brought you

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