WEBVTT - Goldman Sachs Posts Best Stock-Trading Quarter in History 0:00:02.720 --> 0:00:10.600 Bloomberg Audio Studios, Podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.640 --> 0:00:18.520 Eastern on Applecarplay and Android Auto with the Bloomberg Business App. 0:00:18.640 --> 0:00:21.880 Listen on demand wherever you get your podcasts, or watch 0:00:21.960 --> 0:00:22.720 us live on. 0:00:22.640 --> 0:00:26.200 YouTube Asertao Paul Swiney live here in our Bloomberg Interactive 0:00:26.239 --> 0:00:29.520 Broker studio. We are streaming live on YouTube as well, 0:00:29.640 --> 0:00:31.280 so go check us out there. I've been doing the 0:00:31.280 --> 0:00:33.560 stock market thing at leasta for like forty years almost 0:00:33.960 --> 0:00:34.360 still have. 0:00:34.360 --> 0:00:35.680 No idea how this whole thing works. 0:00:35.680 --> 0:00:38.920 I mean, look at Goldman, Sachs, Morgan, Stanley, b of A, 0:00:39.800 --> 0:00:42.080 what I thought were really pretty darn good quarters in 0:00:42.120 --> 0:00:43.919 a world where we're not really sure what's going on. 0:00:44.000 --> 0:00:45.400 So of course all the. 0:00:45.400 --> 0:00:48.040 Stocks are trading down today, so I can't figure it out. 0:00:48.159 --> 0:00:49.479 But our next guest is an expert. 0:00:49.520 --> 0:00:50.280 She knows what's going on. 0:00:50.320 --> 0:00:53.440 Alison Williams, senior analy she covers all the big banks 0:00:53.479 --> 0:00:55.440 and all that kind of good stuff for Bloomberg Intelligence. 0:00:55.800 --> 0:00:57.840 She joins us here in our studio here. So as 0:00:57.880 --> 0:00:59.560 you looked at you know again we've had two days 0:00:59.560 --> 0:01:02.040 of the big banks Alison, and you've been covering these 0:01:02.040 --> 0:01:04.520 guys for a very long time. You've seen it all 0:01:04.560 --> 0:01:07.120 come and go. How are the big banks investment banks 0:01:07.120 --> 0:01:08.479 doing this quarter? 0:01:09.120 --> 0:01:12.399 Well, you mentioned you've been doing this forty years and 0:01:12.480 --> 0:01:14.880 you've never seen a corner like you saw Goldman Sachs 0:01:14.920 --> 0:01:19.959 equity trading record YEP trading. I mean, the really stand 0:01:20.000 --> 0:01:23.240 out for Goldman is they're the biggest inequity trading. They 0:01:23.440 --> 0:01:25.360 are the biggest in M and A and they had 0:01:25.400 --> 0:01:29.880 the biggest jump, so really solidifying that leadership. I mean 0:01:30.160 --> 0:01:36.920 the equity trading up thirty six percent, prime brokerage, cash derivatives. 0:01:36.959 --> 0:01:39.480 We talked about the fact that we saw record trading 0:01:39.520 --> 0:01:41.800 on the equities exchanges this corner. We certainly saw that 0:01:41.800 --> 0:01:45.399 come through with the banks, M and A. Goldman talking 0:01:45.400 --> 0:01:48.480 about the fact that announce volumes are up thirty percent 0:01:48.600 --> 0:01:51.240 and we're running above average now, so that bodes well 0:01:51.280 --> 0:01:54.320 for the future. And I think, you know, in terms 0:01:54.360 --> 0:01:57.360 of the stock reactions that you refer to, I think 0:01:57.760 --> 0:01:59.760 you know, so as I said, we can see that 0:01:59.800 --> 0:02:02.080 they're there was a lot of strength in the exchange volumes. 0:02:02.160 --> 0:02:04.840 We could see that you know, IPOs had rebounded the 0:02:04.920 --> 0:02:08.520 last couple of months. Even though you know it wasn't 0:02:08.520 --> 0:02:11.400 an analyst numbers, I think there was some visibility there. 0:02:11.919 --> 0:02:13.040 So I think in terms of. 0:02:12.960 --> 0:02:15.960 What the stocks are reacting to, Morgan Stanley had a 0:02:16.000 --> 0:02:19.160 really strong quarter, you know, beat everything, but just not 0:02:19.240 --> 0:02:21.200 as good as Goldman, And I think people are looking 0:02:21.240 --> 0:02:24.119 at that equities trading. Morgan Stanley was in the lead 0:02:24.160 --> 0:02:27.200 for a few years and now Goldman is really pulling ahead. 0:02:27.680 --> 0:02:29.800 Yeah, and I see because the whole morning I was like, 0:02:29.880 --> 0:02:31.239 why is the stack where? 0:02:31.240 --> 0:02:31.360 Ever? 0:02:31.440 --> 0:02:33.160 Since the bell opened, it is. 0:02:33.200 --> 0:02:35.720 And by the way, like wealth, wealth is the business 0:02:35.760 --> 0:02:38.680 that people watch for them the wealth flows. You know, 0:02:38.760 --> 0:02:42.560 the numbers were good, so again, what are people worried about? 0:02:42.639 --> 0:02:45.600 So it could be the market share. Morgan Stanley did 0:02:45.600 --> 0:02:49.160 point out that they had a record quarter in Europe. 0:02:49.320 --> 0:02:51.440 They said that they're gaining share. We'll see what happens 0:02:51.480 --> 0:02:55.120 when the Europeans report and Asia. The other thing is 0:02:55.280 --> 0:03:00.520 capital so buybacks better than expected at Goldman, weaker at 0:03:00.520 --> 0:03:03.280 Morgan Stanley. And keep in mind we've seen these big 0:03:03.320 --> 0:03:05.720 moves in the financials, A lot of that is really 0:03:05.720 --> 0:03:08.120 about the capital return story well and. 0:03:08.120 --> 0:03:11.200 The consumer resilience. We look to Bank of America for 0:03:11.280 --> 0:03:12.560 that So did you did you see it? 0:03:12.760 --> 0:03:14.600 We did see it, and I think that is what 0:03:14.639 --> 0:03:16.959 we've what we saw in the quarter. So net interest 0:03:17.040 --> 0:03:20.720 income as well as charge offs, those are kind of 0:03:20.760 --> 0:03:24.240 the two bank business lines, if you will, that are 0:03:24.280 --> 0:03:28.600 most revolving around lending and consumer health, and you know, 0:03:28.720 --> 0:03:30.680 interest income. It was like a little bit soft in 0:03:30.720 --> 0:03:34.359 the quarter, but the outlooks are fine or better and 0:03:35.240 --> 0:03:38.480 credit coming in in line to better than expected, and 0:03:38.520 --> 0:03:42.880 the reserve building really telling you that, look, there is 0:03:42.920 --> 0:03:47.800 some conservative conservatism baked in for some uncertainty in the 0:03:47.840 --> 0:03:50.800 second half, but in general things are improved. 0:03:52.000 --> 0:03:56.000 When President Trump was elected for this second term, almost immediate, 0:03:56.000 --> 0:03:58.280 people are saying, by the banks they're going to be 0:03:58.320 --> 0:04:01.960 the beneficiaries of reducing regulation and reduced oversight. 0:04:02.520 --> 0:04:05.240 Has that happened? Do we still expect that to happen? 0:04:05.360 --> 0:04:06.560 Is that still part of the story. 0:04:06.680 --> 0:04:08.800 I think, you know, we're on a journey. 0:04:08.840 --> 0:04:10.720 I guess if you if you'd say, isn't that the 0:04:10.760 --> 0:04:14.480 current rhetoric? But I think that's why the good buybacks 0:04:14.480 --> 0:04:18.040 were important. Right. So the reason one of the things 0:04:18.080 --> 0:04:20.360 that people are very excited about in terms of reduced 0:04:20.400 --> 0:04:24.440 regulation is holding less capital returns our equity, you're going 0:04:24.480 --> 0:04:27.800 to go up mathematically, there'll be more money to return 0:04:27.839 --> 0:04:30.960 to shareholders. I mean, Goldman had really that leading dividend 0:04:31.040 --> 0:04:34.240 increase that we saw after the stress tests, buy backs 0:04:34.240 --> 0:04:38.800 better than expected, you know, And meanwhile I saw the 0:04:38.800 --> 0:04:41.960 weakness of Morgan Stanley Wells Fargo another one that was 0:04:42.000 --> 0:04:46.400 another bank that investors were really optimistic about. After the 0:04:46.480 --> 0:04:50.040 US election, they did get the asset cap removed, so 0:04:50.160 --> 0:04:53.000 I think there's there's a long term overhang over the stock. 0:04:53.360 --> 0:04:55.839 But in the current quarter, people were a little disappointed. 0:04:55.920 --> 0:04:59.120 Like you know, they didn't give any guidance on buybacks, 0:04:59.120 --> 0:05:01.720 it didn't change their retre earned target, and you know, 0:05:01.760 --> 0:05:03.840 it just might be that that's that's going to come. 0:05:03.920 --> 0:05:05.760 But didn't get the news yesterday. 0:05:06.320 --> 0:05:09.000 Private credit, Where did banks stand with private credit? Your 0:05:09.080 --> 0:05:11.080 JP Morgan say they would have best like fifty billion 0:05:11.120 --> 0:05:14.479 dollars in private credit. So what kind of examples that 0:05:14.520 --> 0:05:15.880 set for the industry. 0:05:16.000 --> 0:05:18.680 You know, I think, And Jamie Diamond also, I think, 0:05:18.760 --> 0:05:21.680 you know, made some comments around private credit that I 0:05:21.680 --> 0:05:24.919 know we're picked up in the headlines. I think that again, 0:05:25.040 --> 0:05:27.520 you know, private credit, it's it's it's been sort of 0:05:27.960 --> 0:05:30.360 you know, the hot the hot item for us all 0:05:30.400 --> 0:05:35.600 to talk about. But you know, maybe you know and 0:05:35.640 --> 0:05:38.279 we are seeing, you know, continued strength. I think we 0:05:38.320 --> 0:05:43.719 do expect continued fundraising, but you know, I would say 0:05:43.720 --> 0:05:44.960 nothing really stands out. 0:05:44.800 --> 0:05:46.239 This quarter from any of the banks. 0:05:46.360 --> 0:05:48.320 Yeah, at least was asking before we went on here, 0:05:48.440 --> 0:05:50.320 can she ask you about private credit? I said, you 0:05:50.360 --> 0:05:53.560 can ask Alison about anything and still having a formed opinion. 0:05:53.560 --> 0:05:56.560 That's why I'm going going down this alley. 0:05:56.920 --> 0:05:59.760 Strong results out of the US big banks this week, 0:06:00.000 --> 0:06:01.960 we're going to hear from the European ones. I guess 0:06:02.160 --> 0:06:07.360 next week, when is a European Union going to say, 0:06:07.760 --> 0:06:11.400 if we ever want to compete in global finance, we 0:06:11.560 --> 0:06:16.240 have to allow across murder merger deals. Is that even 0:06:16.279 --> 0:06:16.920 on the table? 0:06:17.040 --> 0:06:19.680 I mean, I think that it does come up, and 0:06:19.720 --> 0:06:23.960 I think we have heard regulators talk about it like yo, 0:06:24.120 --> 0:06:27.400 yes we should do something. But the question is, you know, 0:06:27.760 --> 0:06:30.520 everyone wants to be the one, you know, the victor. 0:06:30.560 --> 0:06:32.960 They want to be the one you know where you 0:06:33.000 --> 0:06:35.960 know they're champion, is the buyer. And so I think 0:06:36.080 --> 0:06:38.760 that's you know, where the rubber meets the road. If 0:06:38.800 --> 0:06:41.640 you will, it will be interesting to your point, when 0:06:41.640 --> 0:06:46.840 we see those Europeans report again Morgan Stanley wreckerd quarter 0:06:46.960 --> 0:06:49.600 in Europe, they said the first half, they called it 0:06:49.680 --> 0:06:52.839 extraordinary in Asia. Obviously, we know Asia is a lot 0:06:53.279 --> 0:06:56.840 a lot of diverse parts, but the Europeans, like UBS ten, 0:06:57.080 --> 0:07:01.480 have tended to be stronger there. So so if this 0:07:01.680 --> 0:07:04.559 quarter we don't see them participate and kind of follow 0:07:04.560 --> 0:07:07.280 that Morgan Street Stanley lead, that will give us further 0:07:07.360 --> 0:07:10.200 proof that they're actually losing share in their home market, 0:07:09.880 --> 0:07:12.200 and that should be a little bit more concerning. 0:07:12.320 --> 0:07:14.400 I mean, you could argue that the horse is already 0:07:14.400 --> 0:07:16.520 out of the barn. They've missed it. I'm just thinking 0:07:16.640 --> 0:07:20.280 twenty years ago, it was so much more competitive. They 0:07:20.320 --> 0:07:22.320 were so much more competitive. I remember just going up 0:07:22.320 --> 0:07:25.200 against some of those big European banks, and now it's 0:07:25.200 --> 0:07:27.720 almost like an afterthought. It's just amazing how that's evolved. 0:07:27.960 --> 0:07:29.120 Alson Waims, thank you so much. 0:07:29.160 --> 0:07:29.760 Appreciate that. 0:07:29.800 --> 0:07:33.080 Alison Willims, she's a Seene analyst covers all global financials. 0:07:33.160 --> 0:07:36.080 If you have any question on anything on Global Wall Street, 0:07:36.200 --> 0:07:36.520 you can. 0:07:36.480 --> 0:07:38.040 Just go up to Allison on the Street and answer. 0:07:38.120 --> 0:07:41.240 So have an answer for you. 0:07:41.240 --> 0:07:44.960 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:07:45.040 --> 0:07:48.120 weekdays at ten am Eastern on Apple Coarclay and Android 0:07:48.160 --> 0:07:51.440 Auto with the Bloomberg Business app. Listen on demand wherever 0:07:51.520 --> 0:07:54.640 you get your podcasts, or watch us live on YouTube. 0:07:55.200 --> 0:07:58.280 This is Bloomberg Intelligence. I'm Lismiths Matteo along as I'm 0:07:58.280 --> 0:08:01.120 Paul Sweeney. We do have some news at a Hewlett 0:08:01.160 --> 0:08:04.960 Packard enterprise. So it's creating this new strategy committee. Turning 0:08:04.960 --> 0:08:07.960 to Elliott Investment Management for help with this. Here with 0:08:08.000 --> 0:08:09.680 all the details and to break it all down for 0:08:09.760 --> 0:08:15.160 us is Woodin, who Blueberg Intelligence, Senior technology analyst. Woodin, 0:08:15.320 --> 0:08:17.760 Thank you for joining us. I want to start with, 0:08:17.880 --> 0:08:20.760 of course, who is involved in Who is part of 0:08:20.760 --> 0:08:21.480 this committee? 0:08:22.240 --> 0:08:22.440 Yeah? 0:08:22.520 --> 0:08:28.720 Sure, thanks Lisa. So it is a handpicked board member 0:08:29.080 --> 0:08:32.920 by Elliott Management. Keep in mind Elliott is an activist 0:08:32.920 --> 0:08:37.000 investor that has a ten percent plus shareholding of HPE. 0:08:37.440 --> 0:08:40.720 I believe they made their position early in this year 0:08:41.280 --> 0:08:47.320 and who they appointed was Bob Calderoni, who has done 0:08:47.559 --> 0:08:50.400 similar type of deals in terms of taking companies private 0:08:50.520 --> 0:08:54.800 or more importantly operational streamlining. So any changes I think 0:08:55.000 --> 0:08:58.880 Elliott is going to try through Bob to affect a 0:08:58.880 --> 0:08:59.920 lot of changes at HP. 0:09:01.000 --> 0:09:04.440 Mooch, just remind us what HP is today? 0:09:04.800 --> 0:09:05.280 Number one? 0:09:05.280 --> 0:09:08.200 And number two, what do they need to fix to 0:09:08.280 --> 0:09:09.120 move this thing forward? 0:09:09.960 --> 0:09:13.600 Yeah, hey, Paul, so, HPE is one of the leading 0:09:14.960 --> 0:09:21.800 enterprise IT infrastructure vendors. They provide servers, storage, now a 0:09:21.800 --> 0:09:26.680 bigger networking presence with the Juniper acquisition, and actually, quite 0:09:26.720 --> 0:09:29.319 quite frankly, there's quite a bit to fix from an 0:09:29.320 --> 0:09:35.880 operational standpoint. They fumbled the first quarter results by mispricing 0:09:35.960 --> 0:09:39.839 their server business and it seems to be reconciled now, 0:09:40.440 --> 0:09:43.679 but it flags some of the operational issues Number one, 0:09:43.800 --> 0:09:46.199 Number two, they have made a lot of M and 0:09:46.280 --> 0:09:49.120 A that just didn't create the synergies that they had hoped. So, 0:09:49.640 --> 0:09:56.000 you know, they did hire the former HPCFO to streamline 0:09:56.280 --> 0:10:01.959 the financials, and with the Juniper merger UH starting underway, 0:10:02.080 --> 0:10:07.520 I suspect that, you know, the new strategy board will 0:10:07.559 --> 0:10:11.400 try to find more operational synergies between the two networking businesses. 0:10:11.640 --> 0:10:14.360 Wiji And can you dig more into how it's under 0:10:14.400 --> 0:10:17.600 pressure kind of like lagging behind Dell and growing AI 0:10:17.840 --> 0:10:19.520 What kind of pressure is it facing in that in 0:10:19.520 --> 0:10:20.080 that market? 0:10:20.840 --> 0:10:21.080 Yeah? 0:10:21.200 --> 0:10:23.680 So, so if we if we think about AI, right, 0:10:25.320 --> 0:10:30.280 you know, HP actually owns Cray and we think about 0:10:30.360 --> 0:10:31.600 high performance compute. 0:10:32.720 --> 0:10:34.400 They are the market leaders there. 0:10:34.600 --> 0:10:37.679 They weren't a HP has not been able to transition 0:10:38.559 --> 0:10:43.280 that Cray business elegantly uh to uh the to the 0:10:43.320 --> 0:10:45.800 AI side of things. So let me put this into context. 0:10:46.559 --> 0:10:49.920 I think HPE should be on track for about three 0:10:49.960 --> 0:10:54.080 to four billion dollars in AI sales UH this year, 0:10:54.679 --> 0:10:59.160 possibly you know four to five. Right, Dell is going 0:10:59.160 --> 0:11:01.439 to be on track for about fifteen billion dollars this year, 0:11:01.800 --> 0:11:04.559 and super Micro is probably on track for about twenty 0:11:04.800 --> 0:11:08.080 twenty billion this year. So you know, they've lagged on 0:11:08.080 --> 0:11:10.040 the AI front even though they have some of the 0:11:10.160 --> 0:11:13.560 leading technologies on high performance compute. That's an area that 0:11:13.840 --> 0:11:17.600 you know, could be fixable under the right hands. 0:11:18.679 --> 0:11:21.760 One more here before we let you go, which is 0:11:21.880 --> 0:11:24.320 just you mentioned they owned craye, they owned Juniper. If 0:11:24.360 --> 0:11:27.640 I'm Elliott Management, am I thinking about maybe they can 0:11:27.720 --> 0:11:29.840 be selling or spinning off some of these businesses to 0:11:30.000 --> 0:11:30.840 enhance value. 0:11:31.559 --> 0:11:34.160 Well, you know, Bob Calderoni used to be on the 0:11:34.200 --> 0:11:38.040 Juniper board and they actually helped with the operational streamlining 0:11:38.360 --> 0:11:42.000 of Juniper. Right, So I think that you want to 0:11:42.080 --> 0:11:47.120 keep Juniper. Okay, there are other aspects of the networking 0:11:47.160 --> 0:11:51.800 business that you could probably probably pars away. Right, the 0:11:52.000 --> 0:11:55.400 CRAG business you'd want to keep because AI is going 0:11:55.400 --> 0:11:57.920 to be the growth engine and also help you transition 0:11:57.960 --> 0:11:59.040 to the enterprise AI. 0:11:59.360 --> 0:12:01.320 All right, Jinho, thank you so much for joining us. 0:12:01.320 --> 0:12:04.520 Wuojin host is senior techanalyst for Bloomberg Intelligence based down 0:12:04.520 --> 0:12:07.319 there are BI offices down there in Princeton, New Jersey. 0:12:09.080 --> 0:12:12.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:12:12.880 --> 0:12:16.240 weekdays at ten am Eastern on Applecarclay and Android Otto 0:12:16.360 --> 0:12:19.440 with the Bloomberg Business app. Listen on demand wherever you 0:12:19.480 --> 0:12:22.480 get your podcasts, or watch us live on YouTube. 0:12:22.800 --> 0:12:25.320 All right, let's get back to a story that crossing 0:12:25.559 --> 0:12:27.080 the tape over in Europe. 0:12:27.160 --> 0:12:28.240 Earlier this morning, the. 0:12:28.200 --> 0:12:31.200 Agio CEO, Deborah Crew steps down. 0:12:31.679 --> 0:12:32.520 What's going on there? 0:12:32.600 --> 0:12:37.920 Duncan Fox Bloomberg Intelligence senior consumer staples analyst joins this year, Duncan, 0:12:37.960 --> 0:12:39.360 what's happening at Diagio? 0:12:41.600 --> 0:12:45.640 Well, I suppose the performance of the shares and the 0:12:45.800 --> 0:12:48.439 organic growth and sales et cetera haven't been very good 0:12:48.480 --> 0:12:51.320 for the last couple of years since she became CEO, 0:12:51.520 --> 0:12:54.400 so there was sort of rumors, a bit of pressure 0:12:54.440 --> 0:12:57.280 that she should go. But it's ironic that she has 0:12:57.520 --> 0:13:01.640 performed the other Spirit companies in Europe period, So I 0:13:01.679 --> 0:13:05.480 think it just shows you have to show something to 0:13:05.600 --> 0:13:08.679 shareholders not to sort of have rumblings of discontent in 0:13:08.720 --> 0:13:09.360 the background. 0:13:09.760 --> 0:13:12.400 So how long has she been there? And then who's 0:13:12.400 --> 0:13:13.240 stepping in for now? 0:13:14.760 --> 0:13:17.360 Well, at the moment, well, she's been there two years 0:13:17.400 --> 0:13:20.720 a CEO, and she was she was sort of going 0:13:20.760 --> 0:13:25.000 to take over from the previous CEO, and she'd been 0:13:25.000 --> 0:13:27.120 there about six to nine months before that to sort 0:13:27.120 --> 0:13:30.560 of get to know the business. Tempory CEO is going 0:13:30.640 --> 0:13:33.520 to be Nick Jingyangi through the CFO. He's only been 0:13:33.559 --> 0:13:36.080 there nine months, so that's quite clear. They now have 0:13:36.120 --> 0:13:38.520 to go out and get the right CEO to take 0:13:38.559 --> 0:13:41.960 them to the next phase, which essentially is getting through 0:13:42.040 --> 0:13:46.319 tariffs and now that they've got rid of the excess 0:13:46.360 --> 0:13:49.200 inventory in most of the countries around the world, actually 0:13:49.280 --> 0:13:50.720 driving organic growth again. 0:13:51.280 --> 0:13:52.959 All right, looking at the stock over the last five 0:13:53.000 --> 0:13:58.199 years on a compounded annual basis, the agio down per 0:13:58.320 --> 0:14:01.480 year and when you put against the foot sea up 0:14:01.520 --> 0:14:02.760 almost eleven percent a year. 0:14:02.840 --> 0:14:04.319 You see the real underperformance there. 0:14:04.360 --> 0:14:05.800 But if you just look at a relative to the 0:14:05.840 --> 0:14:10.079 foot Sea All Share Beverages index, that's down more than 0:14:10.080 --> 0:14:12.720 two percent, So it's not that bad relative to the industry, 0:14:12.720 --> 0:14:17.520 but it's a tough industry. Duncan aredner growth drivers for 0:14:17.679 --> 0:14:18.880 the Spirit's business. 0:14:20.440 --> 0:14:23.360 Long term. Yeah, So in the short term you had 0:14:23.360 --> 0:14:27.760 obviously the excesses after COVID where shutdowns of cup clubs 0:14:27.800 --> 0:14:31.440 and bars really hurt, so they had a nice benefit 0:14:31.480 --> 0:14:35.960 when everybody restocked. Then interest rates went up inflation that 0:14:36.080 --> 0:14:39.400 really killed people going out, and that's really the problems 0:14:39.400 --> 0:14:42.440 they've had to get over. And subsequently you had tariff 0:14:42.880 --> 0:14:47.320 in China thirty nine percent of not actually affecting Diazure, 0:14:47.960 --> 0:14:52.040 but obviously President Trump, which I heard talking about just earlier. 0:14:53.120 --> 0:14:55.360 I could not tell you what European taris. We know 0:14:55.400 --> 0:14:57.200 the UK will be ten percent, so it's good for 0:14:57.240 --> 0:15:00.520 Scotch but I have no idea it's going to be 0:15:00.560 --> 0:15:02.680 for anything else that they've got within their portfolio. So 0:15:03.200 --> 0:15:05.480 you know, this is the problem. It's very difficult to 0:15:05.520 --> 0:15:09.360 pin down your earnings estimates and they've obviously been falling 0:15:09.400 --> 0:15:12.600 for about eighteen months two years now to really say 0:15:12.640 --> 0:15:15.520 that the recovery is coming, because we just don't know 0:15:15.560 --> 0:15:17.960 whether it's going to be two hundred percent, which was 0:15:18.080 --> 0:15:21.600 rumored at some point after April, or it could go 0:15:21.680 --> 0:15:24.360 down to ten. It really is up in the air 0:15:24.360 --> 0:15:25.840 of the moment, and that's the problem for the whole 0:15:25.840 --> 0:15:27.040 spirits industry. I'm afraid. 0:15:27.240 --> 0:15:30.280 Yeah, now, duncan you mentioned tariffs. But also there's a 0:15:30.320 --> 0:15:33.320 lot of stories we were talking about about people drinking less. 0:15:33.480 --> 0:15:35.720 I mean, does that play into this as well? 0:15:35.720 --> 0:15:37.960 Please, except for Paul. 0:15:39.720 --> 0:15:41.720 Well, well done for we needed to drink a lot more, 0:15:41.800 --> 0:15:44.920 by the way. There's a couple of issues that I mean, 0:15:45.440 --> 0:15:48.920 it's true that the gen Z's have at some point 0:15:48.960 --> 0:15:51.680 we're sort of abstaining a little bit from alcohol, and 0:15:51.720 --> 0:15:53.720 I think people took that a little bit too fast, 0:15:54.120 --> 0:15:57.520 assuming that people were going to switch to cannabis based 0:15:57.800 --> 0:16:02.000 beverages or something else. But what is happening, is what's 0:16:02.000 --> 0:16:04.000 happened for the last twenty years, is that people are 0:16:04.040 --> 0:16:07.840 drinking less, but they're drinking better. So that actually plays 0:16:07.880 --> 0:16:11.720 into the spirit's portfolio better than probably beer beer, to 0:16:11.760 --> 0:16:14.960 be honest, because you know you'll probably have an expensive cocktail, 0:16:15.920 --> 0:16:19.080 we'll shut out with friends rather than four or five beers. 0:16:19.120 --> 0:16:23.120 So it's the way they set the strategy up. Every 0:16:23.160 --> 0:16:25.800 company our follow has that as their strategy. They push 0:16:25.840 --> 0:16:28.400 you towards the premium brands. But to do that you 0:16:28.480 --> 0:16:31.920 need inflation to be tamed, and that is still not 0:16:32.120 --> 0:16:34.520 a guarantee, just as we sit here today, as we 0:16:34.560 --> 0:16:38.720 saw from US and UK inflation today US yes, and 0:16:38.800 --> 0:16:43.040 in the UK today. So yeah, there's still question marks 0:16:43.720 --> 0:16:46.680 over when the volume and the mixed sales growth will 0:16:46.680 --> 0:16:48.560 return in the spirits industry. 0:16:48.720 --> 0:16:50.680 Well, we'll pay close attention to that. 0:16:50.760 --> 0:16:51.960 I can guarantee you that. 0:16:52.240 --> 0:16:55.240 Duncan Fox Senior Consumer Staples and Nanos were Bloomberg Intelligence 0:16:55.320 --> 0:16:58.000 just breaking down what we're seeing in the global spirits business, 0:16:58.000 --> 0:17:02.000 had some turnover senior management at the and just kind 0:17:02.000 --> 0:17:04.000 of get into lowdown on that side of the consumer. 0:17:04.400 --> 0:17:09.960 Right now, you're listening to the Bloomberg Intelligence podcast. Catch 0:17:10.040 --> 0:17:13.160 us live weekdays at ten am Eastern on Apple Coarcklay 0:17:13.160 --> 0:17:16.119 and Android Auto with the Bloomberg Business App. Listen on 0:17:16.200 --> 0:17:19.440 demand wherever you get your podcasts, or watch us live 0:17:19.520 --> 0:17:20.160 on YouTube. 0:17:20.440 --> 0:17:22.199 It's kind of the commercial banks we've been talking to 0:17:22.200 --> 0:17:25.280 Allison Williams of Bloomberg Intelligence. The past couple of days 0:17:25.280 --> 0:17:28.280 on the big money center banks, the big global investment banks. 0:17:28.440 --> 0:17:31.040 Now it's time to focus on the regional banks. And 0:17:31.040 --> 0:17:34.160 what I learned during a regional bank crisis a few 0:17:34.200 --> 0:17:37.520 years ago is the United States has about five thousand 0:17:37.680 --> 0:17:39.760 regional and community banks around the country. 0:17:39.840 --> 0:17:43.080 I had no idea it was that money that many. 0:17:43.560 --> 0:17:45.320 I don't think Herman Chan follows all of them, but 0:17:45.320 --> 0:17:47.600 he follows a lot of them. Herman Chan, Bloomberg Intelligence 0:17:47.600 --> 0:17:50.920 senior analysy covers the US regional banks. What are you 0:17:50.960 --> 0:17:53.600 expecting nath to hear from your banks this quarter? How 0:17:53.680 --> 0:17:54.560 is their business right? 0:17:54.680 --> 0:17:57.960 So earning season's kicked off today for a number of 0:17:57.960 --> 0:18:02.399 region halls, and what we've seen as just a resilient economy. 0:18:03.040 --> 0:18:06.520 Credit quality was really stable. A lot of the banks 0:18:06.760 --> 0:18:12.040 reduce their bad debt provisioning, so provisioning for credit losses, 0:18:12.560 --> 0:18:16.720 and that just shows that you're not seeing charge offs 0:18:16.760 --> 0:18:21.720 really rise from here. Consumers are active in spending, and 0:18:21.960 --> 0:18:26.639 commercial barroers are really transacting. They're preparing for terrorists, and 0:18:26.680 --> 0:18:29.040 you've seen an increased in lending activity because of that. 0:18:30.160 --> 0:18:32.399 Now, when we look at local banks. I look at 0:18:32.400 --> 0:18:34.840 my local bank and sometimes it seems like more of 0:18:34.880 --> 0:18:35.720 a billboard. 0:18:35.840 --> 0:18:38.280 I don't see it as so busy. 0:18:38.400 --> 0:18:41.600 I mean talk about the trend of how these local 0:18:41.800 --> 0:18:45.239 branches are changing. I mean some are cafes. 0:18:44.760 --> 0:18:47.400 Even right right. Yeah. 0:18:47.800 --> 0:18:52.720 Banks view their branches as a marketing ploy and really 0:18:52.800 --> 0:18:56.399 to help support their customers. One thing that they're doing 0:18:56.480 --> 0:19:01.840 is they're reducing the real estate footage within these branches, 0:19:01.880 --> 0:19:04.600 so that's helping reduce costs. But a lot of the 0:19:04.640 --> 0:19:07.160 regionals that I cover are really expanding as well. They're 0:19:07.200 --> 0:19:10.240 growing in new markets, particularly where the growth is right. 0:19:10.320 --> 0:19:13.760 So I cover a number of Midwest banks like PNC 0:19:13.880 --> 0:19:17.240 and Huntington, and they're growing in the higher growth areas 0:19:17.240 --> 0:19:19.679 in the sun belt areas. So that's something that we 0:19:19.720 --> 0:19:24.560 see ongoing and just changing the mix of the demographic 0:19:24.640 --> 0:19:27.200 growth for that company's How. 0:19:27.080 --> 0:19:31.399 Did the regional banks compete with private credit? A lot 0:19:31.440 --> 0:19:34.560 of the private credit funds that we talked to, at 0:19:34.640 --> 0:19:37.400 least at the beginning, they started out targeting the mid market, right, 0:19:37.480 --> 0:19:41.320 middle sized market companies, not like the big multikajillion dollar reels. 0:19:42.359 --> 0:19:46.320 But that's right where those regional banks like to play, right, 0:19:46.440 --> 0:19:48.600 how's that dynamic competitor that dynamic work. 0:19:48.880 --> 0:19:50.040 Yeah, it's been interesting. 0:19:50.960 --> 0:19:53.960 I would say that for a lot of the regionals, 0:19:54.000 --> 0:19:57.960 there's not a lot of direct competition quite yet. I 0:19:58.000 --> 0:20:01.480 would say the private credit folks are are catering to 0:20:01.720 --> 0:20:06.639 a more riskier company. So, for example, we've taken a 0:20:06.680 --> 0:20:08.919 look at this a little bit. Where the private credit 0:20:08.960 --> 0:20:13.000 companies are you're talking about loan yields north of ten percent, 0:20:13.160 --> 0:20:20.600 whereas the traditional middle markets bank borrower is much more stable, 0:20:20.720 --> 0:20:24.280 so we're talking about six eight percent yields. So it's 0:20:24.280 --> 0:20:28.440 a different company, but we do see private credit really 0:20:28.680 --> 0:20:30.400 will continue to encroach over time. 0:20:30.720 --> 0:20:32.560 So you talked about some of the risks, some of 0:20:32.359 --> 0:20:34.879 the challenge that regional banks are facing. What are some 0:20:34.920 --> 0:20:37.159 of the things that they can kind of look forward to. 0:20:37.840 --> 0:20:41.680 Yeah, Really, what a lot of the regional. 0:20:41.280 --> 0:20:43.920 Banks have talked about thus far in the second quarter 0:20:43.960 --> 0:20:47.639 earnings is there's some pent up demand in lending and 0:20:47.680 --> 0:20:53.879 that's been positive. Their customers are preparing for tariffs and 0:20:53.920 --> 0:20:58.359 really increasing their line utilization, which is helping commercial and 0:20:58.440 --> 0:21:02.359 industrial lending. And they've been really saying when about the 0:21:02.480 --> 0:21:05.879