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Speaker 2: Welcome about Bloomberg Intelligence. I'm Lise Matteo alongside Paul Sweeney.
Speaker 2: Big day for bank earning some mixed reports though. Taking
Speaker 2: a look at the stock, we have JP Morgan they're
Speaker 2: down their shares down about half percent, Wells Fargo down
Speaker 2: five percent, we have City up about one and a
Speaker 2: half percent. So here to break it all down for
Speaker 2: us and what happened with each bank is Alison Williams,
Speaker 2: who else Bloomberg Intelligence, Senior analyst, Global Banks and Asset Managers. Alison,
Speaker 2: Thanks for joining us here in the studio. Good to
Speaker 2: see you. So let's start with JP Morgan, right, they
Speaker 2: had some surprise deal making gains. I mean, is that
Speaker 2: a sign that taraffears are easy or how do you
Speaker 2: take it?
Speaker 3: I mean they had a solid quarter.
Speaker 4: There's always a high bar for JP Morgan, but I
Speaker 4: think a really good quarter, strong returns, good organic growth,
Speaker 4: and I think, you know, about a billion dollars of
Speaker 4: upside with trading and fees, and so I think that
Speaker 4: we you know, we did see that that fee pick
Speaker 4: up we saw April stall, then we saw fees really
Speaker 4: did pick up in May and June. As you said,
Speaker 4: it really is. The advisory business was big upside, you know,
Speaker 4: for both JP Morgan and City and we also saw
Speaker 4: IPOs better and so we have seen that improving sentiment.
Speaker 4: I think there is going to be a little bit
Speaker 4: of a lift in terms of some of the expectations
Speaker 4: for those banking fees going forward as well.
Speaker 5: Red Headline crossing the Bloomberg terminal, Tesla's top North America
Speaker 5: sales executive, Troy Jones exits.
Speaker 6: That's according to the Wall Street Journal. So when it
Speaker 6: rains at.
Speaker 5: Pours there all right, here we go. So we had
Speaker 5: JP Morgan, City Group in Wells report today. Guess what
Speaker 5: I worked at all of the firms Chase and Hatton
Speaker 5: Bank not part of JP Morgan, Salomon Brothers now part
Speaker 5: of City Group, and Wheat First Securities, which is.
Speaker 6: Now part of Wells Fargo.
Speaker 5: That's what Wills Fargo got its original broker deal license
Speaker 5: by acquiring my firm Wheak for Securities, Richard Virginia.
Speaker 6: So I got I'm biased all over the place here.
Speaker 6: Let's start with Citygroup.
Speaker 5: I think that's got the most upside because I think
Speaker 5: it's underperformed for such a long time. It was just
Speaker 5: begging for really, really, really good management. Is this, I mean,
Speaker 5: a stock's hitting fifty two weeks high today? Is this
Speaker 5: the turnaround that everybody's been waiting for?
Speaker 3: You think, think, yeah, Jane is getting it done right.
Speaker 4: So and and to be fair, you know, her predecessor's
Speaker 4: made some changes, but I think she's She's made some
Speaker 4: tough decisions, you know, especially the sale of the you know,
Speaker 4: the Mexico business, where she really cut her teeth. I
Speaker 4: think that is a sign that she can be objective
Speaker 4: in terms of deciding what's right for the business. And
Speaker 4: they are working there way up to some better return. So,
Speaker 4: you know, there's a lot of talk about the evaluation
Speaker 4: for City Group. We know that they trade at a
Speaker 4: discount to their book value. They traded assistant to their peers. Wow,
Speaker 4: that's what happens when you don't earn your cost of
Speaker 4: capital and your returns are below peers. But I think
Speaker 4: the changes that they're making are moving them in the
Speaker 4: right direction.
Speaker 2: So when I look at Wells Fargo, I'm trying to
Speaker 2: go through the information. So the big thing that kind
Speaker 2: of stands out to me is that across the one
Speaker 2: point nine to five trillion asset mark, is that a
Speaker 2: big milestone?
Speaker 4: Well, the removal of the asset cap that is really
Speaker 4: I think that the big structural benefit. And I think
Speaker 4: that goes to the number that you're talking about, where
Speaker 4: you know, for years they had to.
Speaker 3: Limit their balance sheet growth.
Speaker 4: They finally got the go ahead that you know, we
Speaker 4: don't have to be so concerned about what that exact
Speaker 4: number is.
Speaker 3: I think the stock has really.
Speaker 4: Priced in a lot of the optimism around getting that
Speaker 4: ass cap remove. I mean basically has been you know,
Speaker 4: a huge gainer since the US election. I think the
Speaker 4: shares are responding today to the lower debt interest income outlook,
Speaker 4: and I think there's a couple of things there.
Speaker 3: The core net interest income, that's what people focus.
Speaker 4: On, right because the income that you get from trading
Speaker 4: generally has an offset to fees. But if you're just
Speaker 4: focusing on top on, you're just focusing on that number.
Speaker 4: People are disappointed in that outlook.
Speaker 3: For Welsbargo.
Speaker 5: What are you hearing from these banks today and over
Speaker 5: the coming days about loan growth because it seems like
Speaker 5: what the yield curve steepening, it's a good time to
Speaker 5: be making loans. How's the demand out there? Because only
Speaker 5: hear about is private credit here?
Speaker 6: Private credit there? How about the banks?
Speaker 4: I mean, we are we did see like things a
Speaker 4: little bit better. I would say that, you know, the
Speaker 4: grow loan growth is still a bit modest, but the
Speaker 4: expectation in terms of reduced risk to the economy is
Speaker 4: really a positive these banks going into the second half,
Speaker 4: and so I think there's there's certainly room for improvement
Speaker 4: in the loan growth.
Speaker 3: But I think things were fine.
Speaker 2: Well, there's been the loosening and regulations capital requirements for
Speaker 2: the banks. I mean, did this show up in the
Speaker 2: results or or when will it?
Speaker 4: I think that's that is something that is going to
Speaker 4: come over time. I mean, we did see some some
Speaker 4: some good buybacks at Wells Fargo for example, But I
Speaker 4: think the big news was the stress tests that we
Speaker 4: saw in June basically are signaling that their capital hurts
Speaker 4: are going lower. Further, a proposal out there that you
Speaker 4: know there we're going to have sort of average results
Speaker 4: over time, So that for this year means that the
Speaker 4: the you know, the decreases might not be as much
Speaker 4: and they might come a little bit later. But we
Speaker 4: think that's positive over time because what that means is
Speaker 4: that there'll be more stabilization and not sort of these
Speaker 4: ratios moving around a lot, so lots of outside excess
Speaker 4: capital at the banks. Even more as those ratios go lower,
Speaker 4: that means more buybacks, especially since we expect that any
Speaker 4: further regulations are not going to be as drastic.
Speaker 5: Goldman Sachs, Morgan Stanley they report tomorrow. I always love
Speaker 5: looking at, you know, the way you guys analyze kind
Speaker 5: of league tables and how people are doing competitively. Would
Speaker 5: expect to hear from those two investment banks.
Speaker 3: I mean, so we expect strength.
Speaker 4: I mean the results that we saw today in terms
Speaker 4: of fixed income trading better than expected, equities trading better
Speaker 4: than expected, fees almost across the board better than expected.
Speaker 4: We talked about the IPOs like that's a really good
Speaker 4: sign for Morgan.
Speaker 3: Stanley and Goldman, the M and A.
Speaker 4: You know, Goldman is typically an M and A leader there,
Speaker 4: although JP Morgan has really been catching up, So those
Speaker 4: are all very positive signals. I mean, twenty seven percent
Speaker 4: growth year every year in City Group's rates and currencies business.
Speaker 4: That is a really strong result. And you know Goldman
Speaker 4: and Morgan Stanley lead and the equities they earn the
Speaker 4: most from these businesses, so I think that you.
Speaker 3: Know, the bar is definitely hire for them tomorrow. All right,
Speaker 3: good stuff, appreciate it.
Speaker 5: Alison Williams, Senior anos Global Banks Asset Managers Bloomberg Intelligence.
Speaker 6: She's been doing it for a long time.
Speaker 5: She worked on the buyside at Morgan's Stanley Investment Management,
Speaker 5: investing in these big banks, so she knows what she's doing.
Speaker 5: She's got a great team there at Bloomberg Intelligence on
Speaker 5: a global basis looking at some of the big global
Speaker 5: banks around the world. So I appreciate getting a couple
Speaker 5: of minutes of her time.
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Speaker 5: We want to turn our attention to healthcare company Managed
Speaker 5: care Company, United Health Group It's a big company, two
Speaker 5: hundred and sixty seven billion dollars in market cap. Its
Speaker 5: sound forty percent year to date, but it's had a
Speaker 5: distinction of having I think sixty consecutive quarters that kind
Speaker 5: of beat earnings estimates out there. But I think the
Speaker 5: analysts are starting to take another look at some of
Speaker 5: those earnings numbers, and they're going to look at how
Speaker 5: this company put those numbers up. And I remember this
Speaker 5: kind of story back in the day from General Electric,
Speaker 5: where they would just beat by a couple of pennies
Speaker 5: every single quarter.
Speaker 6: But that turned out.
Speaker 5: To be a little bit of a mirage when you
Speaker 5: go back and look at.
Speaker 6: Some of the data there.
Speaker 5: Michelle Davis Joints is here, Bloomberg Senior Deals reporter, Michelle.
Speaker 5: What you find when you're looking at United Healthcare? How
Speaker 5: are they making some of those numbers recently?
Speaker 7: So, Yeah, as you mentioned, they had kind of a
Speaker 7: pristine record for more than sixty quarters. They beat estimates.
Speaker 7: Analysts love them, and at the end of last year
Speaker 7: that got a bit harder for them to keep up.
Speaker 7: You know, medical costs arising. The government's been cracking down
Speaker 7: on reiinbursements and that was eating into profits. And so
Speaker 7: what we reported is that at the end of last
Speaker 7: year they approached several private equity firms and asked them
Speaker 7: if they wanted to buy stakes off of them of
Speaker 7: their businesses, and a couple interesting things happen here. Not
Speaker 7: only did they quietly do this, but the deals were
Speaker 7: structured such that United Health can be forced to buy
Speaker 7: the businesses back down the road, so it's temporary in nature.
Speaker 7: And United booked the gains in an interesting place. They
Speaker 7: booked them as part of operating earnings, which is or
Speaker 7: adjusted earnings, which is normally where you look to see
Speaker 7: kind of how a business is doing, you know, excluding
Speaker 7: one off gains or one off events like this. And
Speaker 7: so it was just interesting to say, not only the
Speaker 7: fact that they stealthily did this, but where they put them,
Speaker 7: and without these gains they would have missed estimates and
Speaker 7: profit would have dropped in the last quarter of last year.
Speaker 2: So, as I'm going through this article, this certain quote
Speaker 2: stands out for me from an analyst that you spoke to.
Speaker 2: He said, if the company is manufacturing earnings by chopping
Speaker 2: up their furniture or selling their assets, that's not exactly
Speaker 2: a great business model. Okay, so is the risk that
Speaker 2: it might be kind of masking this weakness in the operations.
Speaker 3: That's the concern.
Speaker 7: And just to be clear, you know, there's nothing illegal
Speaker 7: about what they're doing, per se. You know, they disclosed
Speaker 7: that they did this, most people didn't see it. It
Speaker 7: was in a footnote in their ten K that kind
Speaker 7: of went under the radar, and there are no details
Speaker 7: about what exactly they sold. That's what we're trying to
Speaker 7: you know, report on here. But yeah, the concern is
Speaker 7: it clouds, you know, your ability to see how the
Speaker 7: business is actually performing. And we heard from sources that
Speaker 7: there's a culture inside United Health of you know, kind
Speaker 7: of there being this pressure to do whatever you can
Speaker 7: to meet targets every quarter. Yep.
Speaker 5: So again the stock it's a huge company, huge player
Speaker 5: in the managed care business. Stocks down forty percent. What's
Speaker 5: the underlying concern for investors out there? Do you think
Speaker 5: around this company?
Speaker 7: United Health has been dealing with a lot of things.
Speaker 7: I mean, even before we knew about this, there was
Speaker 7: obviously the tragedy of you know, one of their executives
Speaker 7: being murdered last year, and then you know, there was
Speaker 7: a Wall Street Journal investigation this year about potential medicare fraud,
Speaker 7: which they have denied. They also in the first quarter
Speaker 7: reported their first earnings miss in you know, more than
Speaker 7: sixty quarters, so that shoe finally dropped. They ousted their CEO.
Speaker 7: So investors are just concerned about the story here. You know, what,
Speaker 7: what is the United Health story? I think that's what
Speaker 7: the big concern is.
Speaker 2: So are there any other companies, like maybe other health
Speaker 2: companies or something like that where this same story that
Speaker 2: you've been talking about it kind of plays out?
Speaker 7: Not that we could find. It seems like United Health
Speaker 7: is really you know, unique in its ability and history
Speaker 7: of you know, really carefully managing it's reporting every quarter.
Speaker 5: So new management team here, what's kind of the focus
Speaker 5: now at the company? What's kind of the message to
Speaker 5: Wall Street about how they're I guess going to try
Speaker 5: to turn this thing around.
Speaker 7: So they brought in their former CEO, who is a
Speaker 7: accountant by by nature, and it seems like the market's
Speaker 7: pretty uh, they've been put at ease by him. The
Speaker 7: view or the hope from analysts is that the last
Speaker 7: quarter was kind of an anomaly and they were just
Speaker 7: bleeding out all the bad stuff and now they'll have
Speaker 7: a lower base to kind of beat off of They
Speaker 7: report earnings later this month, so we'll see, you know,
Speaker 7: how the business is actually doing. But the big surprise
Speaker 7: in the first quarter was that, you know, medical costs
Speaker 7: were a lot higher than they say they anticipated. That
Speaker 7: was confusing to people because their job is to anticipate that.
Speaker 5: But that's what I've when we're reporting on that story
Speaker 5: a couple of weeks ago, I said, Yeah, isn't that
Speaker 5: the job of the company to know, Hell, that's going
Speaker 5: to go?
Speaker 2: All right?
Speaker 5: I'm looking at the an R function on the Bloomberg
Speaker 5: kermninal that tracks analysts recommendations, and if you're not at
Speaker 5: health they're twenty one buys, six.
Speaker 6: Holds and two cells.
Speaker 5: So yeah, I think the streets still generally buying off
Speaker 5: on this maybe this turnaround story. But maybe we'll take
Speaker 5: a look at your story here today. Michelle Davis, thank
Speaker 5: you so much for joining us. Michelle Davis is a
Speaker 5: senior deals reporter for Bloomberg News. Joining us live here
Speaker 5: in our Bloomberg Interactive Brokers studio. But it's interesting to
Speaker 5: see on the healthcare space, and again I always come
Speaker 5: in here every Mondayly said, it's like there's an M
Speaker 5: and A deal coming out of the healthcare space, which
Speaker 5: keeps the likes of Michelle Davis busy on the deal front.
Speaker 5: But it's again, we see it time and time again
Speaker 5: in a healthcare space. If you can't come up with
Speaker 5: that next drug or that next you know, procedure.
Speaker 6: Whatever in your R and D lab, you got to
Speaker 6: join up.
Speaker 5: You got to go buy somebody. You know, you go
Speaker 5: go go buy somebody. And that's how that business has played.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
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Speaker 5: All right, Lisa Matteo, Paul Swhen you were live here
Speaker 5: in our Bloomberg Interactive Brokeer Studio streaming live on YouTube.
Speaker 5: So check us out there. You know, to an extent,
Speaker 5: I at any luck in meeting other people. It's been
Speaker 5: at a bar and no dating apps here.
Speaker 2: I know, I know, I met my husband at the
Speaker 2: grease trucks at Rutgers after who doesn't having burgers?
Speaker 3: There you go.
Speaker 5: Now, dating apps must evolve, as gen Z redefines romance.
Speaker 5: That's according to it bloom We're going to tell survey
Speaker 5: We're going there, folks, We're going down that rabbit hole.
Speaker 5: Nicole Desuza joins its Internet and software equity analysts for
Speaker 5: Bloomberg Intelligence. Nicole, what's your survey? What are the questions
Speaker 5: that asked and what did you find?
Speaker 8: Yeah, so we have Bloomberg Intelligence conducted the survey to
Speaker 8: better understand how people are navigating dating, how they use
Speaker 8: dating apps, and then also how they feel about AI
Speaker 8: within dating apps. And so some really interesting findings. First
Speaker 8: that you know, specifically, gen Z tends to be single
Speaker 8: but not dating.
Speaker 6: Gen zs what age again, sixteen to twenty eight?
Speaker 5: Sixteen to twenty all right, so yay single, two of
Speaker 5: my four into that one, Okay, And so they're not
Speaker 5: using the apps.
Speaker 8: They're not even dating, single and not dating. So this
Speaker 8: is I mean, there's a few reasons. Studies have kind
Speaker 8: of shown they do have higher rates of loneliness, but
Speaker 8: they are also prioritizing independence. They are also you know,
Speaker 8: feeling a reduced stigma around being single. So it could
Speaker 8: really change dating patterns generationally.
Speaker 2: I can kind of say my son was on a
Speaker 2: dating app and then he stopped because he got tired
Speaker 2: of it and it just and he's in that gen
Speaker 2: Z kind of group and they're not going to pay
Speaker 2: for them too. So how does that change for these
Speaker 2: different you know, dating apps out there? How do they
Speaker 2: have to change their approach?
Speaker 8: So right now a lot of what we're seeing from
Speaker 8: gen Z is that even though they are dating less,
Speaker 8: they are looking for long term relationships. Those that are dating,
Speaker 8: they are looking to form meaningful connections. So, you know,
Speaker 8: some of the products we've seen from these dating apps
Speaker 8: that really introduce AI are more around how to create
Speaker 8: a profile, how to make it easier to talk to people,
Speaker 8: you know, using AI to generate prompts that might not
Speaker 8: necessarily you know, correlate with what gen Z is looking
Speaker 8: for in terms of forming a meaningful connection.
Speaker 5: I'll tell you Lisa go to the Parker House and
Speaker 5: seeing her in New Jersey on a summer Saturday, thousands
Speaker 5: and thousands of kids of gen Z type are there
Speaker 5: yet like four o'clock in afternoon, they're not on the
Speaker 5: They're all made up, dressed to the nines. I think
Speaker 5: they're looking too to meet somebody.
Speaker 2: Right now, I've been here, I had to wait on dress.
Speaker 6: I mean, I don't know what's going on. How about millennials?
Speaker 6: How did they fare?
Speaker 8: So millennials are they kind of came of age during
Speaker 8: the time of dating apps, so a lot of dating
Speaker 8: apps are really created to target dating patterns of millennials.
Speaker 8: So millennials have a more favorable relationship with dating apps,
Speaker 8: and they also are much more like comfortable with AI
Speaker 8: in dating apps versus gen Z, which was surprising to us.
Speaker 2: Now what about Okay, people always forget about gen X, the.
Speaker 3: Gen X folks.
Speaker 2: Yeah, so what about gen X? And then you know
Speaker 2: my my mom, you know, single, like she wants to
Speaker 2: find out about these apps. I'm telling you, what about
Speaker 2: the older generation? They're on dating apps, so they're on it.
Speaker 8: There are Yeah, there are a lot of gen X
Speaker 8: and baby boomers on dating apps, and there are a
Speaker 8: wide variety of dating apps to kind of address different
Speaker 8: age groups, different you know, things that people are looking for.
Speaker 8: So they're they're available.
Speaker 6: How does AI have to ask the AI questions?
Speaker 5: Because we had a guest on earlier about it. I
Speaker 5: walked out of there thinking AI is going to take
Speaker 5: over Wall Street? How about AI and dating apps? That
Speaker 5: I would think could be helpful to better select somebody
Speaker 5: who might be a good match or something.
Speaker 8: So we've seen dating app companies roll out a lot
Speaker 8: of AI products. I would say, right now, it seems
Speaker 8: at least based on our survey, that they haven't been
Speaker 8: that well received. It seems like people don't necessarily need
Speaker 8: AI to build a better profile, they don't need AI
Speaker 8: to help them engage in conversation. I think where it
Speaker 8: has been helpful is user safety, so to weed out
Speaker 8: profiles that are fake or you know, potentially send people
Speaker 8: who are sending harmful messages, and that is a common complaint.
Speaker 8: But as of right now, it doesn't seem that you know,
Speaker 8: at least gen Z and even some millennials are really
Speaker 8: really adopting these new AI products.
Speaker 2: So and there are certain a dating apps that are
Speaker 2: more po popular than others, I mean, which are the
Speaker 2: hot ones right now?
Speaker 8: So right now, at least by users, Tinder has by
Speaker 8: far the most users that's owned by match Group. And
Speaker 8: then Hinge is actually one of the few dating apps
Speaker 8: that is continuing to grow users, and that's probably because
Speaker 8: Hinge focuses a little bit more on kind of long
Speaker 8: term relationships, building meaningful connections. Tinder still has a reputation
Speaker 8: of kind of a hookup app.
Speaker 2: Yes, which one is that?
Speaker 3: Yeah, that's how my son was on.
Speaker 5: And I mean I'm looking at Nicole's research report.
Speaker 6: I mean she's got graphs here.
Speaker 5: Of like I'm in a monogamous relation, I'm single and
Speaker 5: currently dating. I'm in an open relationship, single but not dating,
Speaker 5: in a casual relationship by demo, by baby boomers, gen
Speaker 5: X millennials. I mean, this is a lot of research here,
Speaker 5: dudes on dating. I mean, go to a bar, you know,
Speaker 5: have a cocktail, relax. I don't know, I don't know.
Speaker 6: It's good stuff here. But Nicole, thanks so much for
Speaker 6: joining us.
Speaker 5: Great research again at Bi's cut and research Bloomberg Intelligence
Speaker 5: using some survey data here to go out and take
Speaker 5: a look at how some of these apps are working
Speaker 5: out there.
Speaker 6: Nicole Desuza.
Speaker 5: She covers all the internet stuff and all the software
Speaker 5: stuff for Bloomberg Intelligence.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple Coarcklay and Android
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 5: Black Rock. You know, the stock's down, but I mean
Speaker 5: it's black Rock. I mean, twelve and a half trillion
Speaker 5: and assets under management. I can't get my mind around that.
Speaker 5: It's just an extraordinary story. And by the way, it's
Speaker 5: separated from Blackstone.
Speaker 6: I mean, imagine if those two were together. Holy yew.
Speaker 5: Anyway, I mean, it's got a market cap up one
Speaker 5: hundred and sixty billion. Black Rock is down six percent today,
Speaker 5: up about one percent for the year. Neil Sips's in
Speaker 5: stew He's got to explain to us what's going on here.
Speaker 5: He covers all the asset managers for Bloomberg Intelligence, you know,
Speaker 5: talk to us about Blackrock gear.
Speaker 6: They never seem to have problems getting money in the past.
Speaker 6: What's going on?
Speaker 9: Yeah, And I think what you're seeing a little bit
Speaker 9: in the second quarter is the net inflow figure was
Speaker 9: about half the first quarter, so perhaps a little bit
Speaker 9: slower than the analysts we're expecting. But what I think
Speaker 9: is encouraging and sort of what we're seeing with the
Speaker 9: transition you even mentioned Blackstone, Blackrock is trying to enter
Speaker 9: some of those businesses in a more meaningful way that
Speaker 9: Blackstone is involved in the private markets. We saw the
Speaker 9: handful of transactions last year Global Infrastructure Partners HPS, and
Speaker 9: what this is going to do is really sort of
Speaker 9: improve the organic base feed growth. So while we're seeing
Speaker 9: a little bit slower on the net inflow figure in
Speaker 9: terms of broader asset growth, what it means is as
Speaker 9: we push further into those private markets, those higher fee products,
Speaker 9: that organic growth is actually more meaningful to the fundamentals
Speaker 9: of the business. So we're going to see a little
Speaker 9: bit of a transit here. I think perhaps that's what
Speaker 9: you're seeing in the second quarter results today, is that
Speaker 9: sort of slower inflow growth, but perhaps still pretty robust
Speaker 9: based feed growth. And let's not forget the second quarter
Speaker 9: was really a tale of two stories, a rather unique
Speaker 9: quarter with a very challenging April and an incredible May
Speaker 9: in June, so that is also sort of balanced in
Speaker 9: the results.
Speaker 2: Now, a lot of messers look to what the executives
Speaker 2: are saying. So what kind of tone did did CEO
Speaker 2: Larry think take?
Speaker 9: Yeah, I think he struck a generally positive tone, especially
Speaker 9: considering the sort of broader macro uncertainties that are still
Speaker 9: out there. It feels like we've certainly moved back from
Speaker 9: some of the more worst case scenarios we'll call them.
Speaker 9: But there's still certainly quite a bit of uncertainty. But
Speaker 9: when you look at equity markets, you don't necessarily see it,
Speaker 9: right all time highs pretty much in the global equities landscape,
Speaker 9: and so that's generally a positive for asset managers, particularly
Speaker 9: someone like Blackrock. And what they've talked about is they
Speaker 9: experienced momentum exiting the second quarter to the third quarter.
Speaker 9: Clients continue to remain engaged. They haven't necessarily pulled away
Speaker 9: in sort of the volatility that we saw in some
Speaker 9: of the uncertainty that we talk about. So that sort
Speaker 9: of creates a solid setup for black Rock moving forward.
Speaker 5: All right, So for the asset managers that you find,
Speaker 5: like when I grew up in the business, the biggest
Speaker 5: customers on Wall Street were the mutual funds, and then
Speaker 5: hedge funds became big.
Speaker 6: Now it's ETFs. How do the asset.
Speaker 5: Managers that you deal with, you know, think about it? It
Speaker 5: just seems like all the money is going to ETFs.
Speaker 5: How do your asset managers deal with that?
Speaker 9: Yeah, Well, there's the way you deal with it is
Speaker 9: enter the ETF space to sort of capture that flow.
Speaker 9: But that is a business where scale is paramount. Because
Speaker 9: you talk about ETFs, you're thinking about average ten basis
Speaker 9: point fee rate. Right, You're not going to earn quite
Speaker 9: a bit. The margins are going to be razor thin.
Speaker 9: Unless you're the size of black Rock, who garners thirty
Speaker 9: percent of the market in US ETFs. That can be
Speaker 9: a profitable business, yep, and that's actually been from over
Speaker 9: forty percent. Vanguard's the one that's sort of nipping at
Speaker 9: the heels. But again it's sort of an oligopoly with Vanguard, Blackrock,
Speaker 9: and Fidelity in the ETF space. But how do you
Speaker 9: compliment that in a business where the flows are increasingly
Speaker 9: going to ETFs. Well, they're also going to private markets
Speaker 9: and that's why you saw again Blackrock push into that
Speaker 9: space last year.
Speaker 6: All right, Neil, thanks so much. We appreciate it.
Speaker 5: Neil Sipes covers all the banks and asset managers for
Speaker 5: Bloomberg A Tonza.
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