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Speaker 1: This is Bloomberg Surveillance. That's gonna be two years where

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Speaker 1: oil prices are gonna be half of where they were

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Speaker 1: before the correction. And that's that's a long period of time.

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Speaker 1: When the Chinese currency moves one to three percent against

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Speaker 1: the dollar, the world gets in a tivy. When the

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Speaker 1: US markets done well, MS and I performed and in

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Speaker 1: pairs with the global markets about a week a year,

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Speaker 1: e ms of underperformed. Bloomberg Surveillance your link to the

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Speaker 1: world of economics, finance, and investment on Bloomberg Radio. Good

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Speaker 1: morning everyone, Michael McKee and Tom Kane Bloomberg Surveillance Worldwide.

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Speaker 1: Bank of America out earlier a SAGGI report. Michael McKee,

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Speaker 1: you're looking at the first headlines from Wells Fargo. Wells

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Speaker 1: Fargo reporting net income of five and a half billion

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Speaker 1: dollars works out to an earnings per share of nine cents.

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Speaker 1: The consensus of analysts surveyed was for ninety seven cents.

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Speaker 1: Headlines are just crossing. Will get you all the details

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Speaker 1: as they continue to come in, but looks like Wells

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Speaker 1: Fargo may have beaten. However, we do have to see

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Speaker 1: if they adjust that earnings per share number and they

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Speaker 1: spike up. They do a JP Morgan pretty much U

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Speaker 1: as we saw yesterday. JP Morgan UH spiking up yesterday,

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Speaker 1: Wells Fargo spiking up. Both of them very different than

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Speaker 1: the immediate price action that we saw in Bank of America.

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Speaker 1: Bloomberg Surveillance this morning brought you by Cone Resnec Accounting

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Speaker 1: Tax Advisory. To keep your business on top of issues

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Speaker 1: dot com. Alright, we've got a revenue number now for

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Speaker 1: Wells Fargo two point two billion the consensus forecast twenty

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Speaker 1: one point six. So early on it looks like Wells

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Speaker 1: Fargo has done better than expected net interest margin of

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Speaker 1: two point nine percent. The forecast was for two point

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Speaker 1: nine two No friend of the Fed. There we become

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Speaker 1: wiser right now, Eric joins us with Standard and Porsons. Eric,

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Speaker 1: what is the distinction to meet? Wells Fargo is the

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Speaker 1: most distinctive too big to fail? Do I have that right? Yeah,

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Speaker 1: Wells Fargo is the strongest bank in the United States

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Speaker 1: with the least global exposure. So it was a little

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Speaker 1: bit of a surprise that it was considered um in

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Speaker 1: that it failed to Living Wells yesterday. What is uh,

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Speaker 1: it's very early, but do we have an UH information

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Speaker 1: on on what it was that Wells Fargo did right

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Speaker 1: compared with the others whose U revenue came in light. Um. Yeah,

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Speaker 1: it's a little bit early. We're still going through the

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Speaker 1: release right now, but it looks like UH in terms

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Speaker 1: of the UH net interest income and the loan growth.

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Speaker 1: I mean, well Fargo has had traditional least strong loan

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Speaker 1: growth and now that the net interest margin is more

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Speaker 1: stable that they've gotten over their narrowing net interest margin, UM,

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Speaker 1: that is going to really help them with the revenues.

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Speaker 1: And no negative surprises on the non interest income as well. Yeah,

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Speaker 1: loans and profits grow, which is the same thing we

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Speaker 1: saw at Bank of America. Bank of America, you know

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Speaker 1: there their shortfall came about in the trading room. Again,

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Speaker 1: but it looks like banking, the traditional banking seems to

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Speaker 1: be doing fine for these companies. Yeah, that's true. UM.

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Speaker 1: With Bank of America. First of all, the comparison from

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Speaker 1: a year ago is very difficult. UM. So yes, it's true.

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Speaker 1: The trading volume UH fell pretty significantly, but that's from

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Speaker 1: a year ago. UM. In terms of how it did

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Speaker 1: with relation to Q four Q retrading, voume was up

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Speaker 1: very strongly. UM. I would say that the major thing

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Speaker 1: with Banco America is that their net interest margin got

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Speaker 1: hit pretty hard. UM. And that's because of the debt

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Speaker 1: securities they have as assets that they have to raise

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Speaker 1: those up to meet liquidity requirements, so that really hurts

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Speaker 1: their net interest margin. And therefore they had a four

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Speaker 1: percent revenue miss versus consensus. Yeah. I I look at

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Speaker 1: the nuance here, how much of this is an overlay

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Speaker 1: of nominal g d P. We all get hyper narrow

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Speaker 1: and I can hear a lot of our audience worldwide going, yeah,

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Speaker 1: but the economy is weak. If we had I mean,

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Speaker 1: forget about Atlanta GDP now or even New York GDP now,

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Speaker 1: if we had a run rate of subpar two and

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Speaker 1: a half percent or Morning in America three point two,

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Speaker 1: a lot of this discussion would go away, right. Yeah,

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Speaker 1: that's true. UM. Loan growth would certainly be a lot stronger,

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Speaker 1: uh than it is right now. I mean long growth

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Speaker 1: at these banks, UM. What before the economic crisis, long

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Speaker 1: growth was traditionally about seven percent a year, or about

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Speaker 1: twice the GDP growth rates. And right now with a

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Speaker 1: low let's say two run rate on the GDP, long

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Speaker 1: growth is about four percent, and clearly the two depend

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Speaker 1: on each other. So um, it looks like we're still

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Speaker 1: in a low growth environment, and so banks have to

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Speaker 1: make the bottom line by cutting expenses and improving their

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Speaker 1: legal cost position and trying to keep the provisions relatively low. Well,

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Speaker 1: it looks like from Bank of America today they did

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Speaker 1: contain legal issues. Yeah, and the same thing with JP

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Speaker 1: Morgan Chase. Both banks uh, as we know, paid out

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Speaker 1: very heavily in two thousand and eleven through two thousand

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Speaker 1: and fourteen. So um, knock on wood, it looks like, uh,

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Speaker 1: they've gotten through that tunnel. And um. Jamie Diamond did

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Speaker 1: note that they expect that the legal costs will be

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Speaker 1: much much lower going forward, and I would say that

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Speaker 1: that's a very positive point for both of those banks.

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Speaker 1: I would suggest, Eric, and I really you know, I

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Speaker 1: love what you do with five stars. What's the star

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Speaker 1: on Bank of American out here? And do you know that?

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Speaker 1: Is it? Five star? Four star, three star? Negative? One star?

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Speaker 1: What is it? No? I'm sorry, I don't understand. You

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Speaker 1: have this SNP outlook star ratings. Yeah, yeah, okay, in

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Speaker 1: terms of ye go to the banks, Yeah, we have

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Speaker 1: a by ranking on Bank of America, JP, Morgan Chase

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Speaker 1: and a group and that would be four star. I

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Speaker 1: would suggest a lot of our audience has an understanding

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Speaker 1: somewhat of Mr Diamond and the structure under him. Bank

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Speaker 1: of America. You know, with no fault of Brian Winnihan,

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Speaker 1: is this Ken lewis amalgamation of forty eight banks or

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Speaker 1: whatever it was? And I mean it goes back to Bob.

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Speaker 1: You're being the spokesman for Bay Bank up in Boston

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Speaker 1: a million years ago. What is the organization under Mr moynihan.

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Speaker 1: The perception is he's running this off the roll of

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Speaker 1: decks at his desk, which I'm sure is wrong. Yeah,

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Speaker 1: I mean I think it's a less forceful leader than

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Speaker 1: Jamie Diamond. I mean JPM is an amalgamation of many banks. Yeah,

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Speaker 1: Manufacturer's hanover Chemical. You're not old enough, Toney. Oh, I'm all.

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Speaker 1: I'm old enough to know Manny Hanny and its predecessors.

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Speaker 1: So um No. But the JPM is an the magamimation

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Speaker 1: of six large different banks, each of which was a

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Speaker 1: roll up. So it comes down to forcefulness of personality

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Speaker 1: of forcing these banks to integrate. So I think the

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Speaker 1: knock on Bank of America is that they have not

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Speaker 1: really forcefully integrated these banks and it's still kind of

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Speaker 1: a mishmash. And I don't get that negative feeling with

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Speaker 1: JP Morgan. Uh. Energy has been a big issue for

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Speaker 1: a lot of banks, Wells Fargo with some particular exposure

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Speaker 1: to that sector. Yeah. I mean these larger banks, UM

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Speaker 1: have a greater exposure to the energy sector than most

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Speaker 1: regional banks. And the one thing to keep in mind,

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Speaker 1: it's not just oil, but it's also gas, and like

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Speaker 1: uh JP Morgan noted yesterday, gas is the thing that

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Speaker 1: they're really worried about. UM. I'll tell you that Wells

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Speaker 1: Fargo's energy exposure is one point nine of loans, so

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Speaker 1: um it's fairly large. But UM, as JP Morgan noted

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Speaker 1: yesterday's also the exposure to shipping and two metals and

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Speaker 1: mining that those are the things that worry them the most. Yeah.

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Speaker 1: They say in the in the earnings release that UM

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Speaker 1: their loan the oil and gas portfolio and this is

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Speaker 1: a quote, remains under significant stress. And they have reserved

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Speaker 1: built reserves of two hundred million dollars as UM. They

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Speaker 1: see continued deterioration within the oil and gas portfolio. They

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Speaker 1: are they setting us up for a disappointment next quarter.

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Speaker 1: Uh yeah, likely, UM, this will continue UH into Q two.

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Speaker 1: I mean just because bank stocks rallied strongly yesterday, UH,

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Speaker 1: does not mean we are out of this. And I

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Speaker 1: would expect that Q two earning for vault and vulnerable.

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Speaker 1: That's right where I want to go. Thank you so

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Speaker 1: much Mike McKee for bringing that up. Do you have

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Speaker 1: anything yet within the conference call or press releases that

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Speaker 1: tells you what's going on in April four h in

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Speaker 1: terms of the slow motion first slow motion? First quarter

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Speaker 1: were two weeks in the red, sox are in last place.

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Speaker 1: What is the second quarter looked like for these banks? Okay? Well,

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Speaker 1: one thing. On the positive side, I would say the

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Speaker 1: loan growth looks really strong. I mean JP Morgan yesterday

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Speaker 1: reported year over year loan growth, So the global economy

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Speaker 1: has not gone off the tracks. That's a strong positive. UM.

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Speaker 1: On the negative side, UH, costs for oil, gas and

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Speaker 1: mining will continue to be high and likely in Q two,

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Speaker 1: so there would be something that lasts for over a year. Erico,

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Speaker 1: where this with Standard and Port will continuous discussion on

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Speaker 1: global Wall Street and Bank. You maybe even might talk

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Speaker 1: about the excitement known as the European banks. That's Kelly.

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Speaker 1: They would kill for Brian Moynahan's problems futures exactly flat.

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Speaker 1: I have to check in with bam are now and

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Speaker 1: get the latest world of national headlines. Michael by Time,

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Speaker 1: thank you very much. Hillary Clinton and Bernie Sander's Ahold

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Speaker 1: of Democratic presidential debate tonight in New York. The CNN

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Speaker 1: of eight will take place in Brooklyn ahead of New

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Speaker 1: York's primary on Tuesday. Bloomberg Radio will carry the debate

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Speaker 1: live starting at nine pm. Wall Street Time, Donald Trump,

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Speaker 1: Ted Cruz, and John Kasik will each speak at New

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Speaker 1: York State Republican Gallant. US Defense Secretary Ash Carter says

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Speaker 1: American ships are conducting joint patrols with the Philippines in

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Speaker 1: the South China Sea. The US as IT will also

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Speaker 1: be keeping about three D troops in the Philippines through

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Speaker 1: the end of the month. NATO Secretary General says, you

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Speaker 1: will bring up the actions of Russian planes buzzing US

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Speaker 1: naval ships and talks next week between the military Alliance

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Speaker 1: and Russia. He says the behavior is unsafe and unprofessional.

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Speaker 1: Global News twenty four hours a day, powered by our

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Speaker 1: hundred journalists on Michael Barr. Michael Barr, thanks so much.

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Speaker 1: Oil Green on the screen, say what you will higher

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Speaker 1: on American Oil Brent from New York, worldwide, coast to

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Speaker 1: coast Bloomberg Surveillance. This news update brought to you by

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Speaker 1: the Radio plus Mobile Act and on your radio. This

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Speaker 1: is a Bloomberg Business flash and I'm Karen Moscow US

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Speaker 1: dot Index futures are a little change this morning. Let's

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Speaker 1: go to the first word Breaking and news desk for

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Speaker 1: today's morning call. And here's Bill Maloney. Good morning, Bill,

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Speaker 1: Good morning Karen. That's right, U s stock you just

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Speaker 1: are quiet today. Doubt you just currently lower by two points.

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Speaker 1: SAPs are little change and NAZAC futures are lower by

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Speaker 1: three the US tenniel at one point seven nine percent,

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Speaker 1: and European markets are trading mixed this morning. On the

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Speaker 1: US econd i'm on Frinday eight thirty, initial job is

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Speaker 1: PLAIM and cp I at ten o'clock, FEDS lock Card

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Speaker 1: speaks in Chicago and at ten thirty natural gas storage

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Speaker 1: change in other newspecific cresis until expect to miss Q

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Speaker 1: one view midpoint and cut its forecast. William Blair says

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Speaker 1: Catalent reasonable takeout price thirty five dollars a share, and

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Speaker 1: Goldman Sack says tobacco stocks have tail one's into Q

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Speaker 1: one after the Bellos night Seagate, Plymber d q th

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Speaker 1: revenue was below estimates, shares a down nine per cent

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Speaker 1: pre market. Regarding earns this morning, black Rock and p

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Speaker 1: n C EPs missed estimates, Bank of America miss Delta

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Speaker 1: EPs beat and Walts Fargo EPs beat but an interest

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Speaker 1: margin was below estimates. Finally, some of your Street upgrades

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Speaker 1: and downgrades. Three D Systems raised to buy a Bank

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Speaker 1: of America, cow and down grades Potash, Mosaic and CF Industries.

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Speaker 1: Chipotle raised over at JP, Morgan PEPs cut to hold

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Speaker 1: it stifle, and applied materials raised to buy over at

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Speaker 1: UBS Live from the first of Breaking News desk go

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Speaker 1: on Bo Maloney Karen, alright, thanks bell to here by

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Speaker 1: breaking news over here of Bloomberg type squawk go and

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Speaker 1: your terminal. That's SUU a w K go. That's a

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Speaker 1: Bloomberg business flash. Tom and Mike, Karen, thanks so much,

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Speaker 1: greatly appreciated. Good morning everyone, Good morning worldwide. Bloomberg Surveillance

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Speaker 1: where at investco, dot com, Slash Interactive, Erica joining US

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Speaker 1: with Standard and Ports. As we look at banking, Eric,

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Speaker 1: I hate to do this. Is it possible we could

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Speaker 1: talk about other banks besides these chosen five too big

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Speaker 1: to fail? How are the regionals doing well? The regionals

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Speaker 1: traditionally have stronger long growth than the big five to

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Speaker 1: big too big to fail banks UM. The trouble with

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Speaker 1: the regionals UH is that they've been under some net

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Speaker 1: interest margin pressure due to the low interest rate and fire,

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Speaker 1: and they also have some exposure to oil and gas drilling.

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Speaker 1: So we expect UH slightly better reports UM based on

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Speaker 1: what JP Morgan Chase reported yesterday. We expect that long

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Speaker 1: growth will remain strong, UH, that the U S economy

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Speaker 1: is strong, but that there will be costs UH due

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Speaker 1: to the oil and gas exposure. PNC, the first big

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Speaker 1: regional out this morning, revenue three point six seven billion

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Speaker 1: lower than the three point seven six forecast and earnings

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Speaker 1: per share of dollar sixty two way under the estimated

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Speaker 1: dollars seventy times. Well, yeah, you know, I I think

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Speaker 1: that the challenges out there are we were we were

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Speaker 1: decades ago, ERIC, where it's not what you do, it's

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Speaker 1: what you don't do. Are the regionals in a better

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Speaker 1: spot because they didn't do some of the things that

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Speaker 1: the big banks did? Or is it the other way

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Speaker 1: around that JP Morgan's in a better spot because they

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Speaker 1: didn't do what the regionals did. Which way does that cut? UM?

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Speaker 1: I think that the regionals UM certainly got themselves into

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Speaker 1: a lot of trouble UH ten years ago, UM, just

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Speaker 1: as the big banks did so UM. There are big

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Speaker 1: banks that did very well UM like JP market Chase

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Speaker 1: did not report any quarterly losses even during the financial

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Speaker 1: crisis UM, and then regional banks like p n C

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Speaker 1: and UM US Bancorps did not report any losses as well,

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Speaker 1: and then there were the horror stories like Bank of

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Speaker 1: America and City Group of the large banks, and then UH,

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Speaker 1: Fifth Third and UH some of the other regional banks

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Speaker 1: that don't even exist anymore, like National City that reported

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Speaker 1: gigantic losses. So I don't really think it's a size issue.

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Speaker 1: City Group yet to report of the biggest they're coming

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Speaker 1: out tomorrow. Our estimates are for a dollar three the

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Speaker 1: range to a dollar ten. That's still gonna be well

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Speaker 1: below what they earned in the first quarter last year.

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Speaker 1: So not going to be much change expected out of

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Speaker 1: Mr Corbatt's group. Yeah, that's true. Now. The thing with

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Speaker 1: City Group is that they are comparing to a year

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Speaker 1: ago when they had very strong UH fixed income trading revenues.

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Speaker 1: They had US three and a half billion dollars of

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Speaker 1: fixed income trading, So the comparisons are really really difficult,

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Speaker 1: and that is such a large part of what they do,

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Speaker 1: the trading and investment banking. So UH it will be

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Speaker 1: a difficult report for them. But based on what we

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Speaker 1: saw from JP Morgan Chase yesterday, the global economy is

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Speaker 1: still expanding and long growth should be strong. Well, if

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Speaker 1: you have a a tough quarter comparison and they come

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Speaker 1: in at least around estimates, how do investor react? The

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Speaker 1: City Group was the only one they got a passing

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Speaker 1: grade from the FED and FD I see on its

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Speaker 1: UH living will Yeah, And I think that's a tremendous

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Speaker 1: positive for City Group. I mean, just two years ago

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Speaker 1: they reported large losses UM in their Mexican subsidiary and

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Speaker 1: people rightly raised questions about their corporate governance and their

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Speaker 1: risk management. And I think it's it's a tremendous thing

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Speaker 1: now to see the progress that they've made under Michael

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Speaker 1: Corbett to rationalize the bank, sell down the city holdings

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Speaker 1: bad bank assets, and to really make it more like

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Speaker 1: JP Morgan Chase rather than Bank of America. And with

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Speaker 1: with City Groups UM global exposure, that's that's more and

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Speaker 1: more important UM to know that everything is well managed

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Speaker 1: in all the hundred and forty countries that they work in,

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Speaker 1: very very valuable, greatly appreciated Erico with standard ports. We

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Speaker 1: need to switch now to domestic economics. There's a set

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Speaker 1: of people we think we know, Stanley Fisher, Janet yellen

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Speaker 1: On and on, Mike McKee, who's Dennis Lockhart das Lockhart

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Speaker 1: is the president of the Federal Reserve Bank of Atlanta,

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Speaker 1: former City Group official among other things, UH and he

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Speaker 1: is on the on the hawkish side of the spectrum.

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Speaker 1: For the year, told the Nick Japan in Japan that

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Speaker 1: there is room for three rate increases this year was

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Speaker 1: his last public comment. He didn't do that when he

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Speaker 1: was a lieutenant the Marines. He was a lieutenant the

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Speaker 1: Marines out of Stanford, out of Johns Hopkins University School

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Speaker 1: of Advanced International Studies, with a really like a lot

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Speaker 1: of the presidents, with a really different and twisted path.

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Speaker 1: This to the President of the Atlanta Kathleen Hayes with

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Speaker 1: Lockhart next, we are kind of down to the opening bell. UH,

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Speaker 1: with all due respect. Highlight is next Landover. If it's

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