WEBVTT - Surveillance: U.S. Consumer Banking Very Strong, Cassidy Says 0:00:00.080 --> 0:00:12.960 Yeah, Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane 0:00:13.480 --> 0:00:17.560 Jay Lee. We bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.520 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:27.840 Bloomberg dot Com, and of course on the Bloomberg I'm 0:00:27.840 --> 0:00:29.640 ready placed to say that Johnny, Tom and I here 0:00:29.640 --> 0:00:32.200 in New York City is Allison Williams, a CEDIA analyst 0:00:32.200 --> 0:00:34.720 here at Bloomberg Intelligence, to run us through some of 0:00:34.720 --> 0:00:38.240 the numbers from JP Morgan. Allison aggressively going through the 0:00:38.280 --> 0:00:40.639 press release. So let's talk about it. The top line 0:00:40.680 --> 0:00:43.280 for you, Allison this morning. So I think the top 0:00:43.320 --> 0:00:48.080 line is the bottom line, the return on tangible equity, 0:00:49.080 --> 0:00:52.559 which to us is extremely impressive. JP Morgan is already 0:00:52.600 --> 0:00:55.640 executing at the top end of piers and that shows 0:00:55.680 --> 0:00:58.520 that they continue to do so. Looking at the guidance, 0:00:58.560 --> 0:01:01.800 I would say what's most positive is the expense guide, 0:01:01.840 --> 0:01:04.319 which looks like it's coming in a little bit lower UM. 0:01:04.360 --> 0:01:07.160 So again, it's a lot of data out there that 0:01:07.200 --> 0:01:09.720 we need to sift through, but um on the surface 0:01:09.760 --> 0:01:12.880 that's positive. On the net interest margin or net interest 0:01:12.920 --> 0:01:16.200 income is similar to last quarter, um. However, recall that 0:01:16.280 --> 0:01:19.480 intra quarter they did sort of guide down UM. But 0:01:19.560 --> 0:01:21.560 again I think I wouldn't make too much of it, 0:01:21.920 --> 0:01:23.440 too much out of it one way or the other. 0:01:23.440 --> 0:01:26.240 They were saying fifty seven plus or minus. Then they said, oh, 0:01:26.319 --> 0:01:29.280 maybe maybe it might be UM, you know, closer to 0:01:29.319 --> 0:01:33.000 fifty seven. I think in general, uh, interest rates is 0:01:33.360 --> 0:01:35.720 sort of the one situation that matters most of banks, 0:01:35.800 --> 0:01:38.600 but where we'll probably get the least clarity this quarter, 0:01:38.760 --> 0:01:42.160 just because of the dynamics driving that are really things 0:01:42.200 --> 0:01:44.760 beyond the bank's control. Let's talk about an interest income 0:01:44.840 --> 0:01:47.160 just briefly. Then the stock is filmed in the pre market, 0:01:47.200 --> 0:01:50.200 but I run about two percentage points net interesting income 0:01:50.640 --> 0:01:53.200 less than fifty seven point five billion dollars is to 0:01:53.280 --> 0:01:55.280 a rate across for the other big banks on Wall Street. 0:01:55.360 --> 0:01:57.760 Was still too early to tell, Allison, I think it's 0:01:57.800 --> 0:01:59.960 a little too early to tell. We haven't sort of 0:02:00.080 --> 0:02:03.360 gone through to see, um, what's happening with mix, and 0:02:03.400 --> 0:02:05.760 I think that's could be the one area where we 0:02:05.760 --> 0:02:09.000 get positively surprised and we could see an offset to 0:02:09.120 --> 0:02:11.600 some of the margin pressures. So if we looked at 0:02:11.600 --> 0:02:13.799 some of the weekly data that comes out consumer loan 0:02:13.840 --> 0:02:17.640 growth UM has been doing better. That's higher margin and 0:02:17.680 --> 0:02:22.880 to the extent that you have that influencing your portfolio, UM, 0:02:22.919 --> 0:02:25.880 that's obviously helpful to net interest income. The other thing 0:02:26.000 --> 0:02:30.360 fixed income trading, which is actually more important for City 0:02:30.360 --> 0:02:32.520 and Goldman. It's a bigger share their earnings will hear 0:02:32.560 --> 0:02:36.359 from them shortly, but that coming in much better than estimates. 0:02:36.440 --> 0:02:38.440 We allcome, all of you worldwide and coast to coast. 0:02:38.440 --> 0:02:39.959 It's a too big to fail day for me and 0:02:40.040 --> 0:02:42.040 John Farrell, and you can do that with Fred Cannon 0:02:42.440 --> 0:02:45.760 of KBW of course part of Stiffle as well, with 0:02:45.880 --> 0:02:49.960 decades of experience, including being on the inside at Bank 0:02:50.000 --> 0:02:54.000 of America years ago. Fred Cannon, these banks can't acquire 0:02:54.120 --> 0:02:57.560 other banks, they got deposit issues and that they're just 0:02:57.600 --> 0:03:00.679 gonna organically grow. Do you see the too big to 0:03:00.760 --> 0:03:05.160 fails growing at nominal GDP less than nominal GDP or 0:03:05.240 --> 0:03:08.079 they all blended gonna get JP Morgan like seven eight 0:03:08.160 --> 0:03:11.400 nine pc per your growth? Well, I think in terms 0:03:11.400 --> 0:03:15.960 of top line growth slightly slower than nominal GDP, the 0:03:16.040 --> 0:03:17.919 small banks and FinTechs are going to pick up a 0:03:17.919 --> 0:03:20.440 bit of market share in terms of asset growth, so 0:03:20.480 --> 0:03:22.280 that keeps them down and you're seeing that in the 0:03:22.360 --> 0:03:25.880 numbers that said bottom line growth. How do you get there? 0:03:25.919 --> 0:03:29.880 Operating leverage, keep the expenses down, and buy backs, that's 0:03:29.919 --> 0:03:32.920 the key. I mean, I I thought Mr Diamond's comments 0:03:32.919 --> 0:03:34.520 and of course there'll be much more in this John 0:03:34.840 --> 0:03:38.280 as well, But Allison, I mean the comments were all upbeat, upbeat, 0:03:38.360 --> 0:03:41.240 up beat, you know, the usual boilerplate and investor relations 0:03:41.240 --> 0:03:44.240 guy would put together for Mr Diamond. Where's the gloomy here? 0:03:44.280 --> 0:03:46.800 I'm in a gloomy mood today. Is there any gloom 0:03:46.800 --> 0:03:49.840 in the JP Morgan story? I can't find it so 0:03:50.000 --> 0:03:54.560 not so far. But you see any gloom? I don't 0:03:54.600 --> 0:03:56.400 see a lot of gloom in this, but we wouldn't 0:03:56.400 --> 0:03:58.560 expect at this point in time, John, you see any 0:03:58.920 --> 0:04:03.600 stalks up nineteen percent through the way people talk about 0:04:03.640 --> 0:04:05.680 the banks freadits and if they've had a terrible year, 0:04:06.360 --> 0:04:08.800 what's going on? How do you reconcile the sentiment around 0:04:08.800 --> 0:04:10.400 some of these big names with the performance in the 0:04:10.400 --> 0:04:12.960 equity market? Well, I mean the year to date is 0:04:12.960 --> 0:04:15.120 a tough one because remember we had such a bad 0:04:15.320 --> 0:04:17.719 that applies to the whole index that applies to the 0:04:17.760 --> 0:04:20.159 whole index, That applies to the whole of the SMP 0:04:20.320 --> 0:04:21.880 five hundred. You look at it on the year, we've 0:04:21.920 --> 0:04:25.679 done nothing. But what a difference a month make, of course, 0:04:25.720 --> 0:04:28.520 but let's talk about this. If you ask people about 0:04:28.520 --> 0:04:30.800 how stocks have done this year, they feel like stocks 0:04:30.800 --> 0:04:33.360 have done well. You ask them how banks have done 0:04:33.360 --> 0:04:37.000 this year, they feel like banks haven't performed. So what's 0:04:37.040 --> 0:04:40.120 happening is that the banks have made progress, especially on 0:04:40.160 --> 0:04:43.160 the bottom line, and the multiples have held, and that's 0:04:43.160 --> 0:04:46.200 allowed for this growth. And we're still trading at fifteen 0:04:46.240 --> 0:04:50.240 year lows on on multiple on pe ratios for the banks, 0:04:50.560 --> 0:04:52.520 and so the fact is that they're bouncing along the 0:04:52.560 --> 0:04:55.479 bottom evaluation and continuing to make some progress in terms 0:04:55.520 --> 0:04:57.479 of the bottom line, and that that has allowed some 0:04:57.560 --> 0:05:01.040 reasonable UH money to be even the bank stoxes here. 0:05:01.160 --> 0:05:03.440 Just in terms of ivise effects, Allison looking back twelve 0:05:03.440 --> 0:05:06.080 months for this quarter, is that when we see somebody 0:05:06.080 --> 0:05:08.680 out performance and fick redative to equities, it's a big 0:05:08.680 --> 0:05:11.279 base effect to play here. So that'll be the story 0:05:11.360 --> 0:05:14.400 next quarter. I think the story of this quarter is though, 0:05:14.400 --> 0:05:18.440 that embody comparisons are easing, so we really strong half 0:05:18.440 --> 0:05:20.520 that sort of faded in three Q. But I think 0:05:20.520 --> 0:05:22.520 for FICK, and again we're gonna want to dig into 0:05:22.560 --> 0:05:25.039 the details, but September was a really strong month for 0:05:25.080 --> 0:05:28.040 credit issuance. It was a strong month for credit trading, 0:05:28.240 --> 0:05:31.600 especially in high yield. We know that's more profitable. UM. 0:05:31.640 --> 0:05:35.080 You know, we had good, good spreads, We had a good, 0:05:35.200 --> 0:05:37.320 good bond price movement. So I think that might be 0:05:37.400 --> 0:05:40.479 what you're seeing play into fictual quest. The question is 0:05:40.560 --> 0:05:43.839 with FICK, is going to be sustainable? Allison, I have 0:05:43.880 --> 0:05:46.440 a question and it is a light question, but it's 0:05:46.480 --> 0:05:49.440 also serious as well. I looked through quickly as sped 0:05:49.520 --> 0:05:52.320 read through all their stuff. I don't see we Work mentioned, 0:05:52.880 --> 0:05:54.600 and you know this is in the headlines, and I 0:05:54.640 --> 0:05:57.080 would give us the I know, I agree, but for 0:05:57.160 --> 0:05:59.720 our listening on its give us the amount of we 0:05:59.720 --> 0:06:02.640 were Is it like literally a drop in a lake? 0:06:03.160 --> 0:06:05.919 I think, you know, WE Work, I think is a 0:06:06.000 --> 0:06:10.280 broader you know, people might say perhaps a reputational issue. 0:06:10.440 --> 0:06:13.479 It's not something that you know, perhaps there might have 0:06:13.560 --> 0:06:16.360 been a mark in the portfolio. There's a big headline 0:06:16.440 --> 0:06:19.440 number about how much UM they're invested, but that's across 0:06:19.480 --> 0:06:21.960 their private equity funds, and they do have a very 0:06:21.960 --> 0:06:25.440 big portfolio. The question I think is more um, you know, 0:06:25.480 --> 0:06:27.200 I guess softer in terms of, you know, what are 0:06:27.200 --> 0:06:29.520 they doing from here? And so I'm not necessarily saying 0:06:29.960 --> 0:06:33.040 that there's a reputational hit. I'm saying that, you know, 0:06:33.080 --> 0:06:34.960 people are going to want to know, like, what is 0:06:35.080 --> 0:06:38.520 what's JP Morgan doing? Um from here? They're gonna just 0:06:38.560 --> 0:06:40.440 want to hear a little bit and a little bit 0:06:40.480 --> 0:06:42.760 more about that. And that was really something for for 0:06:42.960 --> 0:06:45.480 I think the call all along, it's not necessarily something 0:06:46.000 --> 0:06:48.320 you would see in the press release unless there was 0:06:48.400 --> 0:06:51.600 some outsized hit. We're looking ahead for it. I just wander, 0:06:51.680 --> 0:06:55.000 from your perspective, the hangover from the we work saga 0:06:55.440 --> 0:06:57.400 for I p o s for the back end of 0:06:57.400 --> 0:07:00.000 this year, for investment bank fees, how do you think 0:07:00.040 --> 0:07:01.400 we set up for the back half of this year 0:07:01.400 --> 0:07:03.440 at the back end of this year. I'm pretty cautious 0:07:03.520 --> 0:07:05.600 on that. I mean, what we're seeing is these unicorns 0:07:05.680 --> 0:07:08.760 in the just cannot get their private market valuations in 0:07:08.800 --> 0:07:10.840 the public market. I mean, we work you think is 0:07:10.840 --> 0:07:13.080 a one off, but it's continual. In other words, we've 0:07:13.160 --> 0:07:16.480 we've seen this story before of these unicorns having these 0:07:16.560 --> 0:07:19.040 huge private market valuations and they just don't come through. 0:07:19.560 --> 0:07:22.680 And that's a tough story to to build up your 0:07:22.680 --> 0:07:24.320 I p O pipeline one. Just to fund a word 0:07:24.360 --> 0:07:27.000 on the Allison, how difficult Q four might be because 0:07:27.040 --> 0:07:28.960 of some of the big dramas, the big sagas that 0:07:29.000 --> 0:07:31.240 we've had with some of these prime profile I p 0:07:31.400 --> 0:07:34.360 O s. So, so I'll say two words and for 0:07:34.480 --> 0:07:36.800 earnings easy comps. So that's what we'll be talking about 0:07:36.800 --> 0:07:38.920 in January. But I think that you know, the I 0:07:39.000 --> 0:07:41.120 p O question, I think is a is a bigger 0:07:41.200 --> 0:07:44.680 question sort of I think going into and I think 0:07:44.720 --> 0:07:47.120 what's also interesting is that this while you have sort 0:07:47.120 --> 0:07:50.440 of we were canceling their deal, you have paloton um, 0:07:50.480 --> 0:07:53.280 you know, disappointing, you also have all these conferences going 0:07:53.320 --> 0:07:56.400 on in Morgan stan Ley Goldman getting into these conferences 0:07:56.400 --> 0:07:59.200 where the private investors are saying that they're not getting 0:07:59.360 --> 0:08:02.559 enough money. So I think it's sort of and perhaps 0:08:02.600 --> 0:08:04.720 talking about the circumventing the banks and is there a 0:08:04.760 --> 0:08:07.320 way for them to sort of get more of the economics, 0:08:07.800 --> 0:08:09.680 which in a way I think highlights sort of the 0:08:09.800 --> 0:08:12.600 role of the intermediary, right. Some people think that they're 0:08:12.640 --> 0:08:16.800 overpriced something they're overpriced underpriced. So that's that is something 0:08:16.840 --> 0:08:18.440 we're gonna look to hear more about in the call 0:08:18.640 --> 0:08:20.160 to two of you thank you so much else than 0:08:20.240 --> 0:08:23.400 you can thank you so much for being with KBW 0:08:23.600 --> 0:08:26.000 before they write up their banking combine and write up 0:08:26.120 --> 0:08:43.960 reports on four banks, so they somebody who's run out 0:08:44.000 --> 0:08:49.240 of ammunition? Is the week company we did? Did you 0:08:49.240 --> 0:08:51.760 read the whole prospectives? Right? John? I didn't, but nice 0:08:51.760 --> 0:08:58.480 when he did. We are down to Coupan with what's 0:08:58.520 --> 0:09:02.840 called an equity kicker in the trade to guarantee I say, 0:09:02.920 --> 0:09:08.199 a thirty percent return. This is like you know this 0:09:08.200 --> 0:09:11.360 this transaction they're trying to structure. So there's two options. 0:09:11.400 --> 0:09:15.680 Either the soft bank bailout all ultimately JP Morgan leading 0:09:15.720 --> 0:09:18.439 a group of bankers and securing some debt for them. 0:09:18.520 --> 0:09:23.559 JP Morgan's turnishing their reputation, including including a two billion 0:09:23.640 --> 0:09:29.760 dollar note payment and kind note coupon almost double Tom 0:09:29.920 --> 0:09:33.199 what they've paid last year. I'm real has never written 0:09:33.520 --> 0:09:36.360 that larger coupon or that large and equity kicker. You 0:09:36.480 --> 0:09:39.400 talked to adults, What do the adults of Wall Street 0:09:39.480 --> 0:09:43.200 say when they see fifteent coupon and equity kicker on 0:09:43.280 --> 0:09:47.520 warrants promising thirty percent return, it's a tough environment to 0:09:47.520 --> 0:09:51.680 get that done. Obviously, what ever, right ever, let alone 0:09:51.679 --> 0:09:53.800 in the market that we're in right now, they're talking 0:09:53.840 --> 0:09:56.000 to everybody and their mother to try to get this done. 0:09:56.080 --> 0:09:58.360 But whether they can or not, if they do, it's 0:09:58.360 --> 0:10:01.000 a real hail Mary. The myth maddox here is what's 0:10:01.000 --> 0:10:03.040 called a cramdown, which is if you do a coupon, 0:10:03.160 --> 0:10:05.559 and you do that, you cram down to value where 0:10:05.559 --> 0:10:08.200 it kicks right over to the new investors. How many 0:10:08.320 --> 0:10:11.679 billion is the is the diminishment here to get this 0:10:11.720 --> 0:10:14.080 thing done? I mean they're trying to get two billion 0:10:14.120 --> 0:10:16.160 of this done, right but I mean everybody that I 0:10:16.240 --> 0:10:18.840 talked to is saying, oh, it's it's it's a tough one. 0:10:18.880 --> 0:10:21.439 It's a stretch, and you know it's a lot of 0:10:21.800 --> 0:10:26.600 a lot of money. Billion. What's the thing worth right now? 0:10:26.640 --> 0:10:29.959 I have no idea less than ten Probably it's a 0:10:30.000 --> 0:10:34.400 distress nesset now, that's what it is. Who's making the decision? 0:10:34.920 --> 0:10:38.280 We work? Well, they have two new CEOs now, right, 0:10:38.320 --> 0:10:40.480 and so Adam Newman is not the one here saying 0:10:40.520 --> 0:10:43.000 that we prefers off banker. We don't. It's the two 0:10:43.000 --> 0:10:45.920 new CEOs. I've got to say something. So they are 0:10:46.320 --> 0:10:49.280 supposed to run out of cash pretty soon, right next 0:10:49.320 --> 0:10:55.200 month exactly, and so um, remember their restructuring. Restructuring is expensive, right, 0:10:55.240 --> 0:10:57.400 They have to fire people, which is expensive. They have 0:10:57.559 --> 0:10:59.959 to get sell assets, which is expensive. They have to 0:11:00.000 --> 0:11:02.520 try to get out of some leases, which is expensive. 0:11:02.559 --> 0:11:04.880 So they have to take they have to spend money 0:11:04.920 --> 0:11:08.000 before they could even ever think about making money. And 0:11:08.040 --> 0:11:10.840 so if you're somebody who's betting on them now through, 0:11:11.040 --> 0:11:14.720 even with the coupon, at what point they actually turn 0:11:14.800 --> 0:11:18.040 around is a really tough question. Two options were on 0:11:18.080 --> 0:11:20.600 the table, and it looks like from our reporting this morning, 0:11:20.600 --> 0:11:24.520 they're exploding exploring the JP Morgan lifeline over the soft 0:11:24.520 --> 0:11:28.400 bank lifeline. Why do we have a hy at this point? So, 0:11:28.559 --> 0:11:31.760 if you think about it, if you take the debt right, 0:11:31.880 --> 0:11:34.280 you still have a more institutional base. If you get 0:11:34.320 --> 0:11:37.439 more equity from soft bank, soft bank owns you, right, 0:11:37.760 --> 0:11:40.720 and it's risky you're sharing all your income with soft 0:11:40.720 --> 0:11:46.319 bank rather than paying them down a coupon. Oh well, 0:11:46.360 --> 0:11:49.240 so that's the real problem with UM, you know, taking 0:11:49.240 --> 0:11:51.400 the soft Bank money. Remember soft Bank already owns almost 0:11:51.440 --> 0:11:55.120 fort of the company, so it's a real tough one 0:11:55.160 --> 0:11:58.880 when um, you know, they already practically own you, and 0:11:58.920 --> 0:12:03.160 they own more than Newman himself. But what about I 0:12:03.160 --> 0:12:05.240 don't mean to interrupt it, you just you just did. 0:12:05.840 --> 0:12:08.040 I was busy, you know, like the fan mail is 0:12:08.080 --> 0:12:09.840 coming in, and I just had to talk to Michael 0:12:09.880 --> 0:12:15.000 from from I don't know, up North, very very quickly. 0:12:15.040 --> 0:12:18.160 Here they need Kendall Roy. I mean, the answer is 0:12:18.200 --> 0:12:20.520 they need somebody like Kendall who was going to fly 0:12:20.679 --> 0:12:23.280 in and save this thing. All a succession, Oh, I 0:12:23.320 --> 0:12:27.839 wish Kendall Roy could be the person. Spoilers, No spoilers. 0:12:27.880 --> 0:12:31.079 I didn't watch Sunday Nights. We're in the new episode. 0:12:31.480 --> 0:12:34.040 Just no spoilers. You're like you did this week Game 0:12:34.040 --> 0:12:37.080 with Thrones. Don't ruin this for people. There's no different. 0:12:37.120 --> 0:12:39.679 Succession is the same as game and thrown. Seriously, who 0:12:39.760 --> 0:12:41.640 was the white Knight to come in? Buffet is not 0:12:41.640 --> 0:12:44.120 going to come in works on a seven or eight 0:12:44.120 --> 0:12:49.120 percent coupon? Here were percent coupon? Is this like Steven 0:12:49.200 --> 0:12:52.600 Schwartzman comes in and black Stone. No, well, yeah, even 0:12:52.640 --> 0:12:55.079 they might even be messy for Stephen Schwartzman. Right, you 0:12:55.160 --> 0:12:57.559 gotta think like somebody who likes to stress a little 0:12:57.559 --> 0:13:00.800 bit more than that, like an Apollo. But I doubt that. Okay, 0:13:01.320 --> 0:13:04.319 what what are the adults should Apollo do when they 0:13:04.360 --> 0:13:07.079 see what Jillian Tan and our team wrote about. Yeah, 0:13:07.200 --> 0:13:11.120 I mean, I don't you're talking about Steve Schwartzman, for example, 0:13:11.200 --> 0:13:13.720 very similar to Apollo. Steve has spoken about we work 0:13:14.000 --> 0:13:17.640 publicly before. He said that he doesn't understand where the 0:13:17.640 --> 0:13:20.200 economics came from in the first place. By the way, 0:13:20.240 --> 0:13:22.560 over the weekend, I had bankers involved in all of 0:13:22.600 --> 0:13:25.560 this deal, all of these deals saying oh, we probably 0:13:25.600 --> 0:13:27.520 should have seen the writing on the wall a while ago. 0:13:28.080 --> 0:13:33.520 It's a little far gone. That's the problem. Tom. We're working. 0:13:33.559 --> 0:13:35.840 We can. We thank you all for listening. On the 0:13:35.880 --> 0:13:52.079 week Company. There have been any number of stories over 0:13:52.120 --> 0:13:55.240 the last forty eight hours. Really, Turkey and Syria front 0:13:55.280 --> 0:13:57.080 and center, and of course all the bank earnings as 0:13:57.080 --> 0:14:00.560 well in the financial world, and Brexit has become a 0:14:00.600 --> 0:14:04.440 state of confusion. Theresa Raphael writes brilliantly on this, and 0:14:04.520 --> 0:14:07.800 particularly writes on a relative basis and has a wonderful 0:14:07.960 --> 0:14:13.000 essay on what the United Kingdom will look like after 0:14:13.800 --> 0:14:17.440 Brexit or non Brexit or no deal or deal Brexit, 0:14:17.800 --> 0:14:20.800 whatever the eight flavors are. And what fascinates me to 0:14:20.880 --> 0:14:26.680 reason your essay is the Europeans are sort of afraid 0:14:27.400 --> 0:14:31.640 of what a separate United Kingdom will be like. Why 0:14:31.800 --> 0:14:37.880 is Paris, Berlin and Brussels afraid of what this independent, 0:14:38.000 --> 0:14:41.480 newly independent United Kingdom will look like? Right, So this 0:14:41.560 --> 0:14:45.120 is one of the fears that you hear from Angela 0:14:45.160 --> 0:14:49.360 Merkel in Germany, also from Makron, that an independent UK 0:14:50.000 --> 0:14:53.200 will look a little bit like a Singapore on the 0:14:53.720 --> 0:14:59.520 Thames River. It will cut taxes, slash regulations, open, uh, 0:14:59.600 --> 0:15:02.840 you know, put itself to the world's banks and businesses, 0:15:03.120 --> 0:15:07.080 and you know, actually become, um, you know, such a 0:15:07.360 --> 0:15:11.640 formidable competitor to the EU that that Brexit, uh, you know, 0:15:11.800 --> 0:15:16.320 encourages other EU countries to maybe try to join Britain's orbit. 0:15:16.360 --> 0:15:18.640 And so, you know, one of the balances that has 0:15:18.680 --> 0:15:21.560 to be struck in Europe is they you know, now 0:15:21.640 --> 0:15:23.080 I think very much would like to be rid of 0:15:23.120 --> 0:15:27.000 the UK. Uh. It's the Brexit negotiations have dragged on 0:15:27.040 --> 0:15:28.360 and on, but they want to do it in a 0:15:28.400 --> 0:15:31.800 way that that uh it seemed to hurt and doesn't 0:15:31.840 --> 0:15:34.920 give the UK of some trade advantage that they will 0:15:34.960 --> 0:15:38.720 then come to regret. Okay, but the feasibility of this, 0:15:38.840 --> 0:15:41.480 I mean, there's been the Norway on the Thames, and 0:15:42.000 --> 0:15:45.000 Singapore and the Thames in Toronto on the Thames and 0:15:45.040 --> 0:15:48.320 the rest of it. I don't hear anybody except the 0:15:48.320 --> 0:15:55.680 wishful hopeful, actually linking the culture, the ethos, the geography 0:15:55.800 --> 0:15:59.280 of Singapore with what we see in a more northern latitude. 0:15:59.440 --> 0:16:01.640 Yeah lately, I mean, I think the people you know, 0:16:02.320 --> 0:16:06.320 worrying most about Singapore and the Thames really haven't spent 0:16:06.400 --> 0:16:08.240 a lot of time in the UK. You just can't 0:16:08.240 --> 0:16:11.600 compare a one party city state of six and a 0:16:11.640 --> 0:16:16.880 half million to a country as large and geographically diverse 0:16:17.040 --> 0:16:21.400 and politically pluralistic as the United Kingdom. And you know, 0:16:21.440 --> 0:16:25.520 the main um reality of British politics now is it's 0:16:25.560 --> 0:16:28.520 going in the other direction. Even the Conservatives, traditionally the 0:16:28.520 --> 0:16:31.640 party of you know, fiscal prudence and low spending and 0:16:31.680 --> 0:16:35.120 low taxation, are turning it on when it comes to 0:16:35.440 --> 0:16:40.920 offering voters much enhanced public services, more spending. They still 0:16:41.000 --> 0:16:43.440 want to keep tax rates low, but they don't have 0:16:43.640 --> 0:16:46.760 that much to cut really kind of realm of corporate taxes. 0:16:47.560 --> 0:16:49.320 You know, I looked at the photos of the Queen 0:16:49.400 --> 0:16:52.680 and Prince Charles and all that. I didn't see Boyd 0:16:52.720 --> 0:16:55.400 George there. But you know I I I looked for 0:16:55.480 --> 0:16:57.720 as at the speech and I you know, read through 0:16:57.960 --> 0:17:00.480 some of those stuff and I get that. But how 0:17:00.560 --> 0:17:03.840 much the Queen is supposed to voice what the Prime 0:17:03.840 --> 0:17:07.480 Minister wants, how much of it is like actual policy, 0:17:07.920 --> 0:17:11.800 and how much of it was if I'm elected free beer? Yeah, 0:17:11.800 --> 0:17:15.240 I mean it is obviously he the the government rights 0:17:15.359 --> 0:17:18.840 the Queen's speech. This one was you know, it was 0:17:18.840 --> 0:17:21.000 a bit of a joke because the government is meant 0:17:21.040 --> 0:17:23.040 to be setting out its agenda, but it doesn't have 0:17:23.080 --> 0:17:26.280 a majority. It has a majority of minus forty five, 0:17:26.440 --> 0:17:29.960 so it's not a legislative Agenda's effectively an election manifesto. 0:17:30.600 --> 0:17:33.680 Uh so it is a lot of you know, sort 0:17:33.680 --> 0:17:36.640 of free here. There was lots of talk about social 0:17:36.680 --> 0:17:39.760 care and other spending programs. It's basically telling voters, if 0:17:39.760 --> 0:17:42.280 you elect us, this is what will you know, this 0:17:42.359 --> 0:17:44.760 is what we'll do. Um, and so it was very 0:17:44.760 --> 0:17:47.399 controversial as well. Well you're you're a great student of 0:17:47.440 --> 0:17:49.639 the press. There was was a feeling that Queen was 0:17:49.680 --> 0:17:53.760 put in a compromising position. Yeah, there was a lot 0:17:53.800 --> 0:17:59.879 of scrutiny of the decision to prorogue or suspend parliament 0:18:00.040 --> 0:18:02.480 even for the short period and have a queen speech. 0:18:02.880 --> 0:18:06.280 It was very performative. It doesn't serve any uh, you know, 0:18:06.320 --> 0:18:09.240 any practical function. But you know, we are now in 0:18:09.280 --> 0:18:12.800 the realm of you know, the ridiculous, I think, in 0:18:12.840 --> 0:18:14.760 the view of many people, and this was just par 0:18:14.960 --> 0:18:18.240 for this new course that you know that everyone is on. Well, 0:18:18.240 --> 0:18:20.800 thank you, truths revel with a really good essay folks, 0:18:20.800 --> 0:18:23.520 sing Singapore and Attams. For those of you in Newport, 0:18:23.600 --> 0:18:27.760 Rhode Island, it's Singapore and Thames. But I don't understand 0:18:27.800 --> 0:18:32.000 the Thames Thames, Singapore and Thames. I'll try to get 0:18:32.000 --> 0:18:36.000 that on Twitter. Bloomberg Opinion touris Raphael with us this morning. 0:18:50.240 --> 0:18:53.560 Let us pause and do this over the next good 0:18:53.600 --> 0:18:57.800 half hour with Gerard Cassidy of RBC Capital Markets, who 0:18:57.880 --> 0:19:01.119 said two years ago, I know they're going nowhere, but 0:19:01.240 --> 0:19:06.600 at some point they'll move. If patient investors the banks moved, Gerard, 0:19:06.600 --> 0:19:09.600 I looked at Golden Sacks today tenure track record three 0:19:09.600 --> 0:19:13.560 point six percent per year. I looked at JP Morgan 0:19:13.680 --> 0:19:18.000 ten point x percent per year. Does JP Morgan's succeed 0:19:18.920 --> 0:19:25.360 because of their best practices or because they avoid worst practices? Tom, 0:19:25.440 --> 0:19:28.640 That's a really good point, because you put your thumb 0:19:28.640 --> 0:19:31.640 on it. With JP Morgan, they know how to execute 0:19:32.320 --> 0:19:37.680 the investment banking commercial banking businesses are generally commodity businesses. 0:19:37.720 --> 0:19:42.720 There's no patents or proprietary you know, products that really 0:19:42.760 --> 0:19:47.400 can distinguish one bank from another bank. It's all about execution, 0:19:47.960 --> 0:19:51.159 and that's what JP Morgan did again this quarter, and 0:19:51.200 --> 0:19:54.080 they're demonstrating that they're really starting to lead the pack, 0:19:54.440 --> 0:19:58.320 that they're able to deliver better than expected results because 0:19:58.320 --> 0:20:00.720 they're executing, whereas the other bank things don't seem to 0:20:00.760 --> 0:20:04.680 be executing as well. In some cases, what is executing me? 0:20:04.920 --> 0:20:07.080 You've only been doing this for four hundred years, you 0:20:07.160 --> 0:20:11.280 were and Hamilton was arguing before Andrew Jackson about there 0:20:11.280 --> 0:20:16.520 being too many banks. What does executing actually mean? It 0:20:16.600 --> 0:20:21.639 really comes down to looking at the playbook and having 0:20:21.640 --> 0:20:25.520 a map to drive the revenues and control your expenses. 0:20:25.840 --> 0:20:29.439 So it means making sure people are following up on 0:20:29.560 --> 0:20:33.240 phone calls with clients after a client meeting. It means 0:20:33.320 --> 0:20:36.359 that you know, opening branches, you know, when you're building 0:20:36.359 --> 0:20:39.240 out new branches, as JP Morgan is doing in Boston 0:20:39.480 --> 0:20:42.800 and Washington, d C. For example, opening them on time, 0:20:43.160 --> 0:20:45.800 having the layouts the way they wanted to. It's all 0:20:45.840 --> 0:20:48.920 these little things that really add up. You see, always 0:20:48.920 --> 0:20:51.320 set up cassidy with that answer, because I knew where 0:20:51.359 --> 0:20:55.280 I was going next. Paul, this was Jamie Diamond's annual essay, 0:20:55.640 --> 0:20:58.240 and he just he put in trumpy and all caps 0:20:58.359 --> 0:21:01.320 hard work, hard work. It's just how work. It's just jarred. 0:21:01.359 --> 0:21:03.359 I mean, it's I can't remember a day when we 0:21:03.400 --> 0:21:05.480 had so many big banks reporting on one day. So 0:21:05.680 --> 0:21:07.760 what I think a lot of our listeners and investors 0:21:07.760 --> 0:21:09.560 are trying to do is try to take a step 0:21:09.560 --> 0:21:12.440 back and say what can we take away about the 0:21:12.560 --> 0:21:18.680 U S and global banking business from today's results. It's 0:21:18.720 --> 0:21:21.919 really interesting that you bring that up, because we are 0:21:22.040 --> 0:21:25.160 overwhelmed with bank results today and we will be tomorrow. 0:21:25.720 --> 0:21:28.240 And when you step back for a moment and look 0:21:28.280 --> 0:21:32.199 at the bigger picture, our banking system is very strong. 0:21:32.359 --> 0:21:35.560 Our biggest banks are very strong, and they're taking market 0:21:35.600 --> 0:21:39.480 share away from the European banks who continue to struggle 0:21:39.600 --> 0:21:43.240 in the capital markets businesses. But what's also clear from 0:21:43.240 --> 0:21:47.600 today's results is the consumer banking business in the United 0:21:47.600 --> 0:21:50.919 States is very strong, which is supported by their strong 0:21:51.240 --> 0:21:54.919 consumer numbers. We see whether it's employment wage gains, and 0:21:54.960 --> 0:21:58.320 that's now showing up in the banking results. So, Gerard, 0:21:58.359 --> 0:22:00.119 one of the narratives that I think we hear a 0:22:00.119 --> 0:22:03.320 lot as we think about global banking um is that 0:22:03.359 --> 0:22:06.960 the US banks did a pretty good job post crisis 0:22:07.040 --> 0:22:10.080 kind of right sizing themselves to the new world, the 0:22:10.080 --> 0:22:13.879 new regulatory world, the new return outlook, whereas perhaps the 0:22:13.920 --> 0:22:17.400 Europeans really haven't been as aggressive. Is that a fair assessment. 0:22:18.160 --> 0:22:21.320 That's a very fair assessment. But I wouldn't put it 0:22:21.440 --> 0:22:24.879 all on the shoulders at the banks did it themselves. 0:22:25.359 --> 0:22:27.560