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Speaker 1: All right, let's have a look at what's going on

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Speaker 1: with these bank earnings and don't join now. By Shannali Bassak,

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Speaker 1: Bloomberg Wall Street reporter. Shanali, thank you so much for

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Speaker 1: joining us. Let's have a look at JP Morgan to

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Speaker 1: begin with. I mean, you know, we had Jamie Diamond,

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Speaker 1: the CEO, warning of a hurricane possibly confronting the Federal Reserve.

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Speaker 1: But he seemed very very sanguine when talking about the

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Speaker 1: numbers in the US economy. Yeah, I mean, he does

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Speaker 1: highlight there are a lot of risks ahead. However, when

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Speaker 1: he's talking with the U S economy itself, one bright

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Speaker 1: spot that they had was the US consumer and the

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Speaker 1: point that they're making him and his chief financial officer

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Speaker 1: is that consumers are still spending their spending on discretionary

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Speaker 1: and non discretionary items, and so there is not a

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Speaker 1: complete cause for alarm with the data we're seeing now. However,

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Speaker 1: some of the economic issues that are in the future

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Speaker 1: might be pulled forward and their myriad of issues here,

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Speaker 1: and he's want many of them before. Yeah, I didn't

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Speaker 1: hear the whole call, and so I'll defer to you

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Speaker 1: on this, but it seems like he's pointing a little

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Speaker 1: bit more of a finger at the at the war

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Speaker 1: in Ukraine and perhaps supply chain issues and the FED

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Speaker 1: removing some liquidity, the unknown effects of QT, and that

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Speaker 1: he's blaming that more than the consumer. Is that right?

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Speaker 1: And what does he actually think about inflation? Yeah, that's right,

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Speaker 1: especially because the job market is still strong in the

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Speaker 1: United States and jobs are plentiful and available, and so

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Speaker 1: this does come down to, yes, the war Ukraine, rising inflation,

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Speaker 1: rising interest rates, and to the point that you're making

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Speaker 1: about quantitative tightening, it's something that a lot of banks

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Speaker 1: around the world really don't understand the ramifications of what

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Speaker 1: will happen is market conditions tighten, especially because this time around,

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Speaker 1: in the wake up two thousand and eight, the banks

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Speaker 1: don't make markets like they used to. They have a

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Speaker 1: lot of constraints, and including the most recent period, the

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Speaker 1: FED is really tightening, its tightening its grip. You know,

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Speaker 1: you do see the banks is, particularly JP Morgan's being

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Speaker 1: subject to potentially higher capital requirements, which is why they

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Speaker 1: suspended buy backs for now until they could build more capital.

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Speaker 1: But that means that they might have a tighter outlook

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Speaker 1: ahead for underwriting and and really extending credit to customers

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Speaker 1: that might be in a tough space. But you know,

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Speaker 1: and not only that being fined too for this for

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Speaker 1: failing to monitor employees using unauthorized messaging apps here. So

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Speaker 1: we're talking about Morgan Standing which also had these numbers

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Speaker 1: as well as JP Morgan here. So that's a billion

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Speaker 1: dollars with the five big banks here as well. Okay,

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Speaker 1: the grand scheme of things, it's not that much. But

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Speaker 1: again it talks about the regulatory environment, does it not

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Speaker 1: say it does? And remember there's not necessarily a sense

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Speaker 1: ahead yet and how much tighter the FED might get

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Speaker 1: in terms of its supervisual advisory powers. But there is

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Speaker 1: an expect expectation that that will become a tighter under

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Speaker 1: the rest of the Biden administration. And so should that

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Speaker 1: be the case, you know, what are they really subject

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Speaker 1: to at the end of the day. There's also a

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Speaker 1: lot of measures about that in the SEC are looking

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Speaker 1: at to really kind of tighten the rules and the

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Speaker 1: disclosures around how the banks take on clients. In the

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Speaker 1: week of Archegos, so you're right, yes, they are definitely

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Speaker 1: seeing higher finds that did impact Morgan Stanley this time around. Yes,

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Speaker 1: it's a one time charge, but these banks might face

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Speaker 1: a more stringent regulatory regime ahead in the near terms

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Speaker 1: after what was many years of a rollback. It is

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Speaker 1: interesting that JP Morgan seems to be a little more

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Speaker 1: conservative at the moment than some of the other banks.

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Speaker 1: I mean, maybe that's not that unusual because it's such

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Speaker 1: a big bank and you know, they have so much

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Speaker 1: exposure out there. But they set aside quite a bit

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Speaker 1: for bad loans four million, and they had just cleared

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Speaker 1: in the numbers from the previous um comparison period some

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Speaker 1: three billion of of set aside money that that was

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Speaker 1: cleared because of getting through the pandemic. So it's kind

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Speaker 1: of moving money around in one sense, you know, and

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Speaker 1: you're looking at it, what's the essential message from the bank? Yeah,

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Speaker 1: it means that they are getting cautious. And if you

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Speaker 1: look at Bloomberg estimate, analysts do expect those provisions to

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Speaker 1: rise every quarter for the next several quarters, which means

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Speaker 1: that analysts are expecting that look to get worse, not

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Speaker 1: better when it comes to putting money away for potentially

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Speaker 1: bad loans. Jamie Diamond a couple of weeks ago guided

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Speaker 1: that charops, So some of those learners actually turning that

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Speaker 1: not just the provisioning to start rising into the billions

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Speaker 1: of dollars for for a year. So there is an

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Speaker 1: expectation that things start to deteriorate. But he does make

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Speaker 1: the point that charge ups are still going to be

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Speaker 1: less than two percent, that they're historically low, and even

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Speaker 1: when things get bad, if they get bad, they may

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Speaker 1: not be catastrophic. And I will say Morgan Stailing said

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Speaker 1: the same thing. He's not expecting jamformant that he's not

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Speaker 1: expecting a deeper drastic position, but he is certainly expecting one,

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Speaker 1: and things might be work in Europe. Yeah, okay, very interesting. Shanali,

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Speaker 1: thank you very much for joining us. Shannali bassa Bloomberg

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Speaker 1: Wall Street reporter looking at at Morgan Stanley and JP

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Speaker 1: Morgan the bank's earnings