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Speaker 2: YouTube Asertao Paul Swiney live here in our Bloomberg Interactive
Speaker 2: Broker studio. We are streaming live on YouTube as well,
Speaker 2: so go check us out there. I've been doing the
Speaker 2: stock market thing at leasta for like forty years almost
Speaker 2: still have.
Speaker 3: No idea how this whole thing works.
Speaker 2: I mean, look at Goldman, Sachs, Morgan, Stanley, b of A,
Speaker 2: what I thought were really pretty darn good quarters in
Speaker 2: a world where we're not really sure what's going on.
Speaker 3: So of course all the.
Speaker 2: Stocks are trading down today, so I can't figure it out.
Speaker 2: But our next guest is an expert.
Speaker 3: She knows what's going on.
Speaker 2: Alison Williams, senior analy she covers all the big banks
Speaker 2: and all that kind of good stuff for Bloomberg Intelligence.
Speaker 2: She joins us here in our studio here. So as
Speaker 2: you looked at you know again we've had two days
Speaker 2: of the big banks Alison, and you've been covering these
Speaker 2: guys for a very long time. You've seen it all
Speaker 2: come and go. How are the big banks investment banks
Speaker 2: doing this quarter?
Speaker 4: Well, you mentioned you've been doing this forty years and
Speaker 4: you've never seen a corner like you saw Goldman Sachs
Speaker 4: equity trading record YEP trading. I mean, the really stand
Speaker 4: out for Goldman is they're the biggest inequity trading. They
Speaker 4: are the biggest in M and A and they had
Speaker 4: the biggest jump, so really solidifying that leadership. I mean
Speaker 4: the equity trading up thirty six percent, prime brokerage, cash derivatives.
Speaker 4: We talked about the fact that we saw record trading
Speaker 4: on the equities exchanges this corner. We certainly saw that
Speaker 4: come through with the banks, M and A. Goldman talking
Speaker 4: about the fact that announce volumes are up thirty percent
Speaker 4: and we're running above average now, so that bodes well
Speaker 4: for the future. And I think, you know, in terms
Speaker 4: of the stock reactions that you refer to, I think
Speaker 4: you know, so as I said, we can see that
Speaker 4: they're there was a lot of strength in the exchange volumes.
Speaker 4: We could see that you know, IPOs had rebounded the
Speaker 4: last couple of months. Even though you know it wasn't
Speaker 4: an analyst numbers, I think there was some visibility there.
Speaker 5: So I think in terms of.
Speaker 4: What the stocks are reacting to, Morgan Stanley had a
Speaker 4: really strong quarter, you know, beat everything, but just not
Speaker 4: as good as Goldman, And I think people are looking
Speaker 4: at that equities trading. Morgan Stanley was in the lead
Speaker 4: for a few years and now Goldman is really pulling ahead.
Speaker 6: Yeah, and I see because the whole morning I was like,
Speaker 6: why is the stack where?
Speaker 1: Ever?
Speaker 6: Since the bell opened, it is.
Speaker 4: And by the way, like wealth, wealth is the business
Speaker 4: that people watch for them the wealth flows. You know,
Speaker 4: the numbers were good, so again, what are people worried about?
Speaker 4: So it could be the market share. Morgan Stanley did
Speaker 4: point out that they had a record quarter in Europe.
Speaker 4: They said that they're gaining share. We'll see what happens
Speaker 4: when the Europeans report and Asia. The other thing is
Speaker 4: capital so buybacks better than expected at Goldman, weaker at
Speaker 4: Morgan Stanley. And keep in mind we've seen these big
Speaker 4: moves in the financials, A lot of that is really
Speaker 4: about the capital return story well and.
Speaker 6: The consumer resilience. We look to Bank of America for
Speaker 6: that So did you did you see it?
Speaker 4: We did see it, and I think that is what
Speaker 4: we've what we saw in the quarter. So net interest
Speaker 4: income as well as charge offs, those are kind of
Speaker 4: the two bank business lines, if you will, that are
Speaker 4: most revolving around lending and consumer health, and you know,
Speaker 4: interest income. It was like a little bit soft in
Speaker 4: the quarter, but the outlooks are fine or better and
Speaker 4: credit coming in in line to better than expected, and
Speaker 4: the reserve building really telling you that, look, there is
Speaker 4: some conservative conservatism baked in for some uncertainty in the
Speaker 4: second half, but in general things are improved.
Speaker 2: When President Trump was elected for this second term, almost immediate,
Speaker 2: people are saying, by the banks they're going to be
Speaker 2: the beneficiaries of reducing regulation and reduced oversight.
Speaker 3: Has that happened? Do we still expect that to happen?
Speaker 3: Is that still part of the story.
Speaker 7: I think, you know, we're on a journey.
Speaker 4: I guess if you if you'd say, isn't that the
Speaker 4: current rhetoric? But I think that's why the good buybacks
Speaker 4: were important. Right. So the reason one of the things
Speaker 4: that people are very excited about in terms of reduced
Speaker 4: regulation is holding less capital returns our equity, you're going
Speaker 4: to go up mathematically, there'll be more money to return
Speaker 4: to shareholders. I mean, Goldman had really that leading dividend
Speaker 4: increase that we saw after the stress tests, buy backs
Speaker 4: better than expected, you know, And meanwhile I saw the
Speaker 4: weakness of Morgan Stanley Wells Fargo another one that was
Speaker 4: another bank that investors were really optimistic about. After the
Speaker 4: US election, they did get the asset cap removed, so
Speaker 4: I think there's there's a long term overhang over the stock.
Speaker 4: But in the current quarter, people were a little disappointed.
Speaker 4: Like you know, they didn't give any guidance on buybacks,
Speaker 4: it didn't change their retre earned target, and you know,
Speaker 4: it just might be that that's that's going to come.
Speaker 4: But didn't get the news yesterday.
Speaker 6: Private credit, Where did banks stand with private credit? Your
Speaker 6: JP Morgan say they would have best like fifty billion
Speaker 6: dollars in private credit. So what kind of examples that
Speaker 6: set for the industry.
Speaker 4: You know, I think, And Jamie Diamond also, I think,
Speaker 4: you know, made some comments around private credit that I
Speaker 4: know we're picked up in the headlines. I think that again,
Speaker 4: you know, private credit, it's it's it's been sort of
Speaker 4: you know, the hot the hot item for us all
Speaker 4: to talk about. But you know, maybe you know and
Speaker 4: we are seeing, you know, continued strength. I think we
Speaker 4: do expect continued fundraising, but you know, I would say
Speaker 4: nothing really stands out.
Speaker 3: This quarter from any of the banks.
Speaker 2: Yeah, at least was asking before we went on here,
Speaker 2: can she ask you about private credit? I said, you
Speaker 2: can ask Alison about anything and still having a formed opinion.
Speaker 3: That's why I'm going going down this alley.
Speaker 2: Strong results out of the US big banks this week,
Speaker 2: we're going to hear from the European ones. I guess
Speaker 2: next week, when is a European Union going to say,
Speaker 2: if we ever want to compete in global finance, we
Speaker 2: have to allow across murder merger deals. Is that even
Speaker 2: on the table?
Speaker 4: I mean, I think that it does come up, and
Speaker 4: I think we have heard regulators talk about it like yo,
Speaker 4: yes we should do something. But the question is, you know,
Speaker 4: everyone wants to be the one, you know, the victor.
Speaker 4: They want to be the one you know where you
Speaker 4: know they're champion, is the buyer. And so I think
Speaker 4: that's you know, where the rubber meets the road. If
Speaker 4: you will, it will be interesting to your point, when
Speaker 4: we see those Europeans report again Morgan Stanley wreckerd quarter
Speaker 4: in Europe, they said the first half, they called it
Speaker 4: extraordinary in Asia. Obviously, we know Asia is a lot
Speaker 4: a lot of diverse parts, but the Europeans, like UBS ten,
Speaker 4: have tended to be stronger there. So so if this
Speaker 4: quarter we don't see them participate and kind of follow
Speaker 4: that Morgan Street Stanley lead, that will give us further
Speaker 4: proof that they're actually losing share in their home market,
Speaker 4: and that should be a little bit more concerning.
Speaker 2: I mean, you could argue that the horse is already
Speaker 2: out of the barn. They've missed it. I'm just thinking
Speaker 2: twenty years ago, it was so much more competitive. They
Speaker 2: were so much more competitive. I remember just going up
Speaker 2: against some of those big European banks, and now it's
Speaker 2: almost like an afterthought. It's just amazing how that's evolved.
Speaker 2: Alson Waims, thank you so much.
Speaker 7: Appreciate that.
Speaker 2: Alison Willims, she's a Seene analyst covers all global financials.
Speaker 2: If you have any question on anything on Global Wall Street,
Speaker 2: you can.
Speaker 3: Just go up to Allison on the Street and answer.
Speaker 3: So have an answer for you.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 6: This is Bloomberg Intelligence. I'm Lismiths Matteo along as I'm
Speaker 6: Paul Sweeney. We do have some news at a Hewlett
Speaker 6: Packard enterprise. So it's creating this new strategy committee. Turning
Speaker 6: to Elliott Investment Management for help with this. Here with
Speaker 6: all the details and to break it all down for
Speaker 6: us is Woodin, who Blueberg Intelligence, Senior technology analyst. Woodin,
Speaker 6: Thank you for joining us. I want to start with,
Speaker 6: of course, who is involved in Who is part of
Speaker 6: this committee?
Speaker 8: Yeah?
Speaker 9: Sure, thanks Lisa. So it is a handpicked board member
Speaker 9: by Elliott Management. Keep in mind Elliott is an activist
Speaker 9: investor that has a ten percent plus shareholding of HPE.
Speaker 9: I believe they made their position early in this year
Speaker 9: and who they appointed was Bob Calderoni, who has done
Speaker 9: similar type of deals in terms of taking companies private
Speaker 9: or more importantly operational streamlining. So any changes I think
Speaker 9: Elliott is going to try through Bob to affect a
Speaker 9: lot of changes at HP.
Speaker 5: Mooch, just remind us what HP is today?
Speaker 3: Number one?
Speaker 5: And number two, what do they need to fix to
Speaker 5: move this thing forward?
Speaker 9: Yeah, hey, Paul, so, HPE is one of the leading
Speaker 9: enterprise IT infrastructure vendors. They provide servers, storage, now a
Speaker 9: bigger networking presence with the Juniper acquisition, and actually, quite
Speaker 9: quite frankly, there's quite a bit to fix from an
Speaker 9: operational standpoint. They fumbled the first quarter results by mispricing
Speaker 9: their server business and it seems to be reconciled now,
Speaker 9: but it flags some of the operational issues Number one,
Speaker 9: Number two, they have made a lot of M and
Speaker 9: A that just didn't create the synergies that they had hoped. So,
Speaker 9: you know, they did hire the former HPCFO to streamline
Speaker 9: the financials, and with the Juniper merger UH starting underway,
Speaker 9: I suspect that, you know, the new strategy board will
Speaker 9: try to find more operational synergies between the two networking businesses.
Speaker 6: Wiji And can you dig more into how it's under
Speaker 6: pressure kind of like lagging behind Dell and growing AI
Speaker 6: What kind of pressure is it facing in that in
Speaker 6: that market?
Speaker 7: Yeah?
Speaker 9: So, so if we if we think about AI, right,
Speaker 9: you know, HP actually owns Cray and we think about
Speaker 9: high performance compute.
Speaker 7: They are the market leaders there.
Speaker 9: They weren't a HP has not been able to transition
Speaker 9: that Cray business elegantly uh to uh the to the
Speaker 9: AI side of things. So let me put this into context.
Speaker 9: I think HPE should be on track for about three
Speaker 9: to four billion dollars in AI sales UH this year,
Speaker 9: possibly you know four to five. Right, Dell is going
Speaker 9: to be on track for about fifteen billion dollars this year,
Speaker 9: and super Micro is probably on track for about twenty
Speaker 9: twenty billion this year. So you know, they've lagged on
Speaker 9: the AI front even though they have some of the
Speaker 9: leading technologies on high performance compute. That's an area that
Speaker 9: you know, could be fixable under the right hands.
Speaker 2: One more here before we let you go, which is
Speaker 2: just you mentioned they owned craye, they owned Juniper. If
Speaker 2: I'm Elliott Management, am I thinking about maybe they can
Speaker 2: be selling or spinning off some of these businesses to
Speaker 2: enhance value.
Speaker 9: Well, you know, Bob Calderoni used to be on the
Speaker 9: Juniper board and they actually helped with the operational streamlining
Speaker 9: of Juniper. Right, So I think that you want to
Speaker 9: keep Juniper. Okay, there are other aspects of the networking
Speaker 9: business that you could probably probably pars away. Right, the
Speaker 9: CRAG business you'd want to keep because AI is going
Speaker 9: to be the growth engine and also help you transition
Speaker 9: to the enterprise AI.
Speaker 5: All right, Jinho, thank you so much for joining us.
Speaker 2: Wuojin host is senior techanalyst for Bloomberg Intelligence based down
Speaker 2: there are BI offices down there in Princeton, New Jersey.
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Speaker 2: All right, let's get back to a story that crossing
Speaker 2: the tape over in Europe.
Speaker 3: Earlier this morning, the.
Speaker 5: Agio CEO, Deborah Crew steps down.
Speaker 3: What's going on there?
Speaker 2: Duncan Fox Bloomberg Intelligence senior consumer staples analyst joins this year, Duncan,
Speaker 2: what's happening at Diagio?
Speaker 8: Well, I suppose the performance of the shares and the
Speaker 8: organic growth and sales et cetera haven't been very good
Speaker 8: for the last couple of years since she became CEO,
Speaker 8: so there was sort of rumors, a bit of pressure
Speaker 8: that she should go. But it's ironic that she has
Speaker 8: performed the other Spirit companies in Europe period, So I
Speaker 8: think it just shows you have to show something to
Speaker 8: shareholders not to sort of have rumblings of discontent in
Speaker 8: the background.
Speaker 6: So how long has she been there? And then who's
Speaker 6: stepping in for now?
Speaker 8: Well, at the moment, well, she's been there two years
Speaker 8: a CEO, and she was she was sort of going
Speaker 8: to take over from the previous CEO, and she'd been
Speaker 8: there about six to nine months before that to sort
Speaker 8: of get to know the business. Tempory CEO is going
Speaker 8: to be Nick Jingyangi through the CFO. He's only been
Speaker 8: there nine months, so that's quite clear. They now have
Speaker 8: to go out and get the right CEO to take
Speaker 8: them to the next phase, which essentially is getting through
Speaker 8: tariffs and now that they've got rid of the excess
Speaker 8: inventory in most of the countries around the world, actually
Speaker 8: driving organic growth again.
Speaker 2: All right, looking at the stock over the last five
Speaker 2: years on a compounded annual basis, the agio down per
Speaker 2: year and when you put against the foot sea up
Speaker 2: almost eleven percent a year.
Speaker 3: You see the real underperformance there.
Speaker 2: But if you just look at a relative to the
Speaker 2: foot Sea All Share Beverages index, that's down more than
Speaker 2: two percent, So it's not that bad relative to the industry,
Speaker 2: but it's a tough industry. Duncan aredner growth drivers for
Speaker 2: the Spirit's business.
Speaker 8: Long term. Yeah, So in the short term you had
Speaker 8: obviously the excesses after COVID where shutdowns of cup clubs
Speaker 8: and bars really hurt, so they had a nice benefit
Speaker 8: when everybody restocked. Then interest rates went up inflation that
Speaker 8: really killed people going out, and that's really the problems
Speaker 8: they've had to get over. And subsequently you had tariff
Speaker 8: in China thirty nine percent of not actually affecting Diazure,
Speaker 8: but obviously President Trump, which I heard talking about just earlier.
Speaker 8: I could not tell you what European taris. We know
Speaker 8: the UK will be ten percent, so it's good for
Speaker 8: Scotch but I have no idea it's going to be
Speaker 8: for anything else that they've got within their portfolio. So
Speaker 8: you know, this is the problem. It's very difficult to
Speaker 8: pin down your earnings estimates and they've obviously been falling
Speaker 8: for about eighteen months two years now to really say
Speaker 8: that the recovery is coming, because we just don't know
Speaker 8: whether it's going to be two hundred percent, which was
Speaker 8: rumored at some point after April, or it could go
Speaker 8: down to ten. It really is up in the air
Speaker 8: of the moment, and that's the problem for the whole
Speaker 8: spirits industry. I'm afraid.
Speaker 6: Yeah, now, duncan you mentioned tariffs. But also there's a
Speaker 6: lot of stories we were talking about about people drinking less.
Speaker 6: I mean, does that play into this as well?
Speaker 5: Please, except for Paul.
Speaker 8: Well, well done for we needed to drink a lot more,
Speaker 8: by the way. There's a couple of issues that I mean,
Speaker 8: it's true that the gen Z's have at some point
Speaker 8: we're sort of abstaining a little bit from alcohol, and
Speaker 8: I think people took that a little bit too fast,
Speaker 8: assuming that people were going to switch to cannabis based
Speaker 8: beverages or something else. But what is happening, is what's
Speaker 8: happened for the last twenty years, is that people are
Speaker 8: drinking less, but they're drinking better. So that actually plays
Speaker 8: into the spirit's portfolio better than probably beer beer, to
Speaker 8: be honest, because you know you'll probably have an expensive cocktail,
Speaker 8: we'll shut out with friends rather than four or five beers.
Speaker 8: So it's the way they set the strategy up. Every
Speaker 8: company our follow has that as their strategy. They push
Speaker 8: you towards the premium brands. But to do that you
Speaker 8: need inflation to be tamed, and that is still not
Speaker 8: a guarantee, just as we sit here today, as we
Speaker 8: saw from US and UK inflation today US yes, and
Speaker 8: in the UK today. So yeah, there's still question marks
Speaker 8: over when the volume and the mixed sales growth will
Speaker 8: return in the spirits industry.
Speaker 5: Well, we'll pay close attention to that.
Speaker 3: I can guarantee you that.
Speaker 2: Duncan Fox Senior Consumer Staples and Nanos were Bloomberg Intelligence
Speaker 2: just breaking down what we're seeing in the global spirits business,
Speaker 2: had some turnover senior management at the and just kind
Speaker 2: of get into lowdown on that side of the consumer.
Speaker 1: Right now, you're listening to the Bloomberg Intelligence podcast. Catch
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Speaker 2: It's kind of the commercial banks we've been talking to
Speaker 2: Allison Williams of Bloomberg Intelligence. The past couple of days
Speaker 2: on the big money center banks, the big global investment banks.
Speaker 2: Now it's time to focus on the regional banks. And
Speaker 2: what I learned during a regional bank crisis a few
Speaker 2: years ago is the United States has about five thousand
Speaker 2: regional and community banks around the country.
Speaker 3: I had no idea it was that money that many.
Speaker 2: I don't think Herman Chan follows all of them, but
Speaker 2: he follows a lot of them. Herman Chan, Bloomberg Intelligence
Speaker 2: senior analysy covers the US regional banks. What are you
Speaker 2: expecting nath to hear from your banks this quarter? How
Speaker 2: is their business right?
Speaker 10: So earning season's kicked off today for a number of
Speaker 10: region halls, and what we've seen as just a resilient economy.
Speaker 10: Credit quality was really stable. A lot of the banks
Speaker 10: reduce their bad debt provisioning, so provisioning for credit losses,
Speaker 10: and that just shows that you're not seeing charge offs
Speaker 10: really rise from here. Consumers are active in spending, and
Speaker 10: commercial barroers are really transacting. They're preparing for terrorists, and
Speaker 10: you've seen an increased in lending activity because of that.
Speaker 6: Now, when we look at local banks. I look at
Speaker 6: my local bank and sometimes it seems like more of
Speaker 6: a billboard.
Speaker 7: I don't see it as so busy.
Speaker 6: I mean talk about the trend of how these local
Speaker 6: branches are changing. I mean some are cafes.
Speaker 7: Even right right. Yeah.
Speaker 10: Banks view their branches as a marketing ploy and really
Speaker 10: to help support their customers. One thing that they're doing
Speaker 10: is they're reducing the real estate footage within these branches,
Speaker 10: so that's helping reduce costs. But a lot of the
Speaker 10: regionals that I cover are really expanding as well. They're
Speaker 10: growing in new markets, particularly where the growth is right.
Speaker 10: So I cover a number of Midwest banks like PNC
Speaker 10: and Huntington, and they're growing in the higher growth areas
Speaker 10: in the sun belt areas. So that's something that we
Speaker 10: see ongoing and just changing the mix of the demographic
Speaker 10: growth for that company's How.
Speaker 2: Did the regional banks compete with private credit? A lot
Speaker 2: of the private credit funds that we talked to, at
Speaker 2: least at the beginning, they started out targeting the mid market, right,
Speaker 2: middle sized market companies, not like the big multikajillion dollar reels.
Speaker 2: But that's right where those regional banks like to play, right,
Speaker 2: how's that dynamic competitor that dynamic work.
Speaker 7: Yeah, it's been interesting.
Speaker 10: I would say that for a lot of the regionals,
Speaker 10: there's not a lot of direct competition quite yet. I
Speaker 10: would say the private credit folks are are catering to
Speaker 10: a more riskier company. So, for example, we've taken a
Speaker 10: look at this a little bit. Where the private credit
Speaker 10: companies are you're talking about loan yields north of ten percent,
Speaker 10: whereas the traditional middle markets bank borrower is much more stable,
Speaker 10: so we're talking about six eight percent yields. So it's
Speaker 10: a different company, but we do see private credit really
Speaker 10: will continue to encroach over time.
Speaker 6: So you talked about some of the risks, some of
Speaker 6: the challenge that regional banks are facing. What are some
Speaker 6: of the things that they can kind of look forward to.
Speaker 7: Yeah, Really, what a lot of the regional.
Speaker 10: Banks have talked about thus far in the second quarter
Speaker 10: earnings is there's some pent up demand in lending and
Speaker 10: that's been positive. Their customers are preparing for tariffs and
Speaker 10: really increasing their line utilization, which is helping commercial and
Speaker 10: industrial lending. And they've been really saying when about the
Speaker 10: risk of terrace and we haven't seen really the credit
Speaker 10: quality deterioration that folks may have anticipated in April after
Speaker 10: Liberation Day.
Speaker 2: Credit quality, specifically commercial real estate. There was concern that
Speaker 2: if there was going to be a problem in our
Speaker 2: financial system from some falling particularly office real estate that
Speaker 2: we've seen in the middle sized regional banks.
Speaker 10: Have we seen that, Yeah, I would say that's an
Speaker 10: ongoing issue. We've seen losses continue, but they're manageable.
Speaker 7: Office commercial real estate.
Speaker 10: On average, for the companies that I cover in the
Speaker 10: large regional bank space, it's about two percent of their
Speaker 10: total loan portfolio, So it's manageable. P ANDZ just talked
Speaker 10: about this earlier, just a few moments ago on their
Speaker 10: earning scar and they said that charge offs could rise
Speaker 10: in future quarters because of deterioration and commercial real estate,
Speaker 10: but they're already fully reserved for that and they prepared
Speaker 10: for that eventuality.
Speaker 8: Now.
Speaker 6: I cover a lot of different conferences here at Bloomberg,
Speaker 6: and one of them is with banks and AI. So
Speaker 6: how to regional banks because they're not as big as
Speaker 6: the you know, the big bank. So where do they
Speaker 6: stand as far as AI and how much money they
Speaker 6: put into.
Speaker 10: Yeah, I view AI as a tool for the regional
Speaker 10: banks to continue to reduce their expenses, so it should
Speaker 10: help them in ways like reducing their the employees in
Speaker 10: the cost center is one where regional banks use chat
Speaker 10: bots and AI power chat bots to really help their
Speaker 10: customer base with in a more efficient manner and things
Speaker 10: that are more you know, human intensive. It could help
Speaker 10: reduce some of and streamline operations. Right now, it's more
Speaker 10: feeling it out. I don't think a lot of the
Speaker 10: regional banks have really jumped full board, but they are
Speaker 10: exploring ways to reduce costs over time.
Speaker 3: All right, Hermi Chan, thank you so much. We appreciate that.
Speaker 5: Hermie.
Speaker 2: Senior analysts for US regional banks for Bloomberg Intelligence, join
Speaker 2: us live here on our Bloomberg Interactive Broker studio.
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