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Speaker 1: This is Bloomberg Surveillance. When a FED rises rights, it

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Speaker 1: has a huge imact on the rest of it. It's

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Speaker 1: actually very negative for emerging markets. We've had a confusing market,

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Speaker 1: not just in oil and not just in the financials,

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Speaker 1: but across all commodities. China's both may be slowing down,

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Speaker 1: but we're still talking about China growing at six and

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Speaker 1: a half seven percent, and even if it slows down

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Speaker 1: a bit from there, it's still running at a much

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Speaker 1: faster right than the developed world. Bloomberg Surveillance your link

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Speaker 1: to the world of economics, finance, and investment on Bloomberg Radio.

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Speaker 1: Good morning, everyone, Michael McKain, Tom Keane, Bloomberg Surveillance. In

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Speaker 1: this our mirror, Mirror on the wall. Gerard Chassidy on banking,

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Speaker 1: who's got the job done? Who is the fairest bank

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Speaker 1: of them all? We're good to catch up with. Mr Cassidy.

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Speaker 1: Will do that here in a moment. We'll do that

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Speaker 1: this morning. Markets churning, Futures flat down, futures negative six. Uh.

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Speaker 1: The the yen one oh nine, that's a weaker yen.

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Speaker 1: It's a weaker earlier. It's churning. I'll call it. Looking

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Speaker 1: for fifty dollars in oil Brent flat This morning Bloomerk

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Speaker 1: Surveillance brought to by cone Resnick Accounting checks Advisory. During

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Speaker 1: times of growth, crisis or economic uncertainty, your business needs

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Speaker 1: a cone Resnick advisory group for the strategies to move forward.

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Speaker 1: Find out more at cone Resn dot com, c O

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Speaker 1: h n R e z n I c K con

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Speaker 1: Resin dot com. Gerard Cassidy has been covering banks since

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Speaker 1: Hamilton's and he gets bored every once in a while,

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Speaker 1: and so he does interesting pieces, really thought provoking pieces

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Speaker 1: about who got the job done? Gerard, you toss that

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Speaker 1: out now, it is a terrific piece, and let's cut

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Speaker 1: to the chase. And maybe it's no surprise. Mr Stump

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Speaker 1: of Wells Fargo does better than good discuss. That's correct, Tom.

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Speaker 1: When you look at our peace mirror, mirror on the walls,

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Speaker 1: who's the fairest of them all? You'll discover that under

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Speaker 1: the tenure of the CEOs of the top twenty banks

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Speaker 1: in the United States, Mr Stump does do the best

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Speaker 1: job at Wells Fargo, showing a compound annual return that

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Speaker 1: far exceeds the you know, the comparatible bank index as

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Speaker 1: well as you know, doing better than all of his competitors,

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Speaker 1: and Wells has done this you know, consistently ever since

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Speaker 1: Dick Pick Devosovich ran the company. Is this because they

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Speaker 1: stick to their knitting and UH and don't try to

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Speaker 1: make up the difference in UH banking business by by trading.

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Speaker 1: I think that is part of it, as well as

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Speaker 1: the culture that this company has instilled in its people.

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Speaker 1: As you guys know, it's hard to put culture in

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Speaker 1: a graph, but over years and decades of putting this

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Speaker 1: um winning attitude that they've management team has in this

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Speaker 1: company and the cross selling nature of how there are

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Speaker 1: people work, it's proven to be very successful. But also

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Speaker 1: avoiding the problems has been a huge reason why this

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Speaker 1: company has been successful. It's JP Morgan day, Um, they

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Speaker 1: have been better than successful no matter what the situation.

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Speaker 1: Jamie Diamond always seems to find a way. You know.

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Speaker 1: It's very interesting in this analysis that we did, we

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Speaker 1: discovered that under his tenure, and Jamie Diamond has led

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Speaker 1: a large, large company to be one of the top

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Speaker 1: performing banks under the last you know, ten years since

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Speaker 1: he's arrived. So in our view, aside from the slip up,

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Speaker 1: they had with the London Whale. He's really done a

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Speaker 1: remarkable job and he's one of the top three banks

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Speaker 1: in terms of performance. What is his secret, sauce? I

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Speaker 1: think it's another one that developed the culture of an organization,

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Speaker 1: this culture of JP Morgan. Of course it's different than

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Speaker 1: what we've seen at Wells Fargo, but they are a

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Speaker 1: leader in just about every line in business that they

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Speaker 1: have focused on, whether it's the capital markets, business, credit,

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Speaker 1: current asset management. They've got a diversity revenue that gives them,

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Speaker 1: I think, a broad array of opportunities to grow, and

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Speaker 1: he has bosted that growth under his tenure. And there's

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Speaker 1: no surprise. I mean, of all the banks, the one

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Speaker 1: that anybody in finance would have known is the first

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Speaker 1: national bank of Wilmer's. I saw Robert Wilmer's in a

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Speaker 1: Economic Club of New York meeting here a bit ago.

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Speaker 1: What a tenure, What a distinguished idea of doing a

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Speaker 1: bank within a community. But nobody would have ever guessed

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Speaker 1: it would be Buffalo, New York. Dovetail. Wilmer's an M

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Speaker 1: and D bank with a community that most across America

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Speaker 1: would say is a belieguered community that doesn't fit, doesn't

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Speaker 1: You're so right, Tom, And that's the important part about

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Speaker 1: commercial banking. Quite often people look down their noses at

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Speaker 1: the slower growth parts of the United States, But when

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Speaker 1: it comes to commercial banking, some of our best banks

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Speaker 1: are banks that are focused in the slower growth parts.

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Speaker 1: But most importantly, what Bob Wilmur's has done, and it's

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Speaker 1: amazing to your point, he's done it for over twenty

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Speaker 1: five years, is that he is the best allocator of capital.

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Speaker 1: And when you look at these top banks, whether it's

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Speaker 1: Jamie Diamond, John Stumps, Bob Wilmers, what they do best

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Speaker 1: is the allocate capital very well and they give it

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Speaker 1: back to shareholders when they don't need it. And that's

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Speaker 1: what Wilmurs has done so successfully. Let's cut to the

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Speaker 1: chase of making money. Who's the next M ANDT bank.

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Speaker 1: Who's a smaller bank that you see out there that

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Speaker 1: has the culture of Mr Wilmers. Yeah, that's that is

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Speaker 1: the good. That's a very good question because we all

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Speaker 1: know about the best, but within the top twenty, for

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Speaker 1: a moment, the name and I would identify that's moving

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Speaker 1: up his PNC financial under build dem check. He is

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Speaker 1: a clone of the JP Morgan way of doing business.

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Speaker 1: So I would identify A. P and C as the

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Speaker 1: company that could be moving up to that top tier

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Speaker 1: echelonce um in our opinion, can they do that from

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Speaker 1: Pittsburgh A good, good question, and the inshort answers yes,

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Speaker 1: partly due to the fact that again what separates the

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Speaker 1: top names from the guys at the bottom is that

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Speaker 1: the guys at the top don't make this mistakes, especially

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Speaker 1: our credit and dem check knows this, of course. But second,

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Speaker 1: and equally as important is this allocation of capital, focus

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Speaker 1: on return on equity and and again build dem check

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Speaker 1: at P ANDC knows this and this focused on it.

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Speaker 1: I would point out that Pittsburgh in Buffalo directly north

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Speaker 1: south of each other. Maybe if some of those attributes

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Speaker 1: leads to thank you sobriety, there have been troubled banks.

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Speaker 1: Your colleague and cry Michael Mayo of CLSA was so

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Speaker 1: fired up a while Mr Cassidy that Mike Mayo came

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Speaker 1: into our radio studios here and with all his collegiality,

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Speaker 1: was most critical of some of the governance challenges at

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Speaker 1: Bank of America. They don't fare so well neither the

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Speaker 1: City Group BB and T doesn't farewell. Why is that?

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Speaker 1: I think what we have a Bank America is that,

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Speaker 1: you know, the management team is trying to turn around

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Speaker 1: a giant battleship and they're struggling. Um, they've had unfortunately, uh,

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Speaker 1: you know, the prior management team in the acquisitions that

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Speaker 1: they've made were obviously disastrous, and so I think that's

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Speaker 1: part of it. I also would suggest that they haven't

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Speaker 1: been aggressive enough, radical enough to really transform Bank America.

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Speaker 1: And that's right. I'm gonna cut you off because I

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Speaker 1: think this is so important, Gerard Cassidy, whether it's Deutsche

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Speaker 1: Bank or City Group or Bank of America, Guys like

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Speaker 1: you and Frankly Mr Mayo and Charles Peabody at Portalis

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Speaker 1: are looking for let's go on your list. Where's the

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Speaker 1: let's go that we don't see with some of these banks.

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Speaker 1: I think it's gonna be City Group. Tom. I think

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Speaker 1: what we're gonna find that City Group has the right

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Speaker 1: mix at the top, with Mike O'Neil as chairman, obviously

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Speaker 1: Um Corbett my Corpett is the CEO. They are, in

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Speaker 1: my view, not getting enough credit for what they've been doing.

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Speaker 1: And again, it's a giant organization that they're turning around.

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Speaker 1: But I think City Group is the one on the cusp,

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Speaker 1: most of them Bank America and then the others of

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Speaker 1: the let's go attitude. Uh becauld they go the wrong

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Speaker 1: way when you say they're on the cust but sounds

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Speaker 1: like they could go either way. No, it's it's not

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Speaker 1: that they could go you know, step, you know, fall back.

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Speaker 1: It's just in our view there it's such a large organization.

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Speaker 1: They're chipping away at the you know, the businesses and

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Speaker 1: the assets that are not generating generating the returns they need.

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Speaker 1: And they're going to need to get some help though

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Speaker 1: from the regulators because they're generating such excess capital and

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Speaker 1: none of the big bank ship have been able to

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Speaker 1: give back the excess capital in when When When will

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Speaker 1: that change? I mean, when will that change? When do

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Speaker 1: they start to see yep? I think we have a

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Speaker 1: shot at it next year. This year's c CAR as

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Speaker 1: you guys know, that's the stress test. The results are

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Speaker 1: coming out in June. I don't expect the city to

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Speaker 1: go to a dent of earnings, but in seventeen that

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Speaker 1: could be the critical year. We've heard that Mike on

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Speaker 1: this show from Charles p He's heated about what is

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Speaker 1: to come eighteen months out. I'm with you, and we

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Speaker 1: know Charlie very well and we're with with him on

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Speaker 1: then kick go aut per City Group. I want to

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Speaker 1: tease forward to our next section with Gerad Cassidy. George,

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Speaker 1: give me one small bank. We'll talk about in our

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Speaker 1: next section. One small bank. Yep, No, I think we

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Speaker 1: gotta go with the with the time of the year,

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Speaker 1: the Bar Harbor Bank shairs. We could talk about that

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Speaker 1: one This is great, we're going down. It's one morning

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Speaker 1: in May or what over that wonderful buglas. But I

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Speaker 1: can't even fit thexcent that one morning in Maine. Gerard

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Speaker 1: Cassidy with us from Maine with RBC rolls. Right now

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Speaker 1: you are a very good Oh, you've got the clear sir,

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Speaker 1: rd O keeper of the m X. Gerard Cassody with

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Speaker 1: us and folks, we're gonna talk about not only specifically

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Speaker 1: Bar Harbor Bank and will be up to speed on

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Speaker 1: that when we come back, but much more importantly the

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Speaker 1: attributes of a Bar Harbor bank that one day could

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Speaker 1: make it grow like M and T of Buffalo futures

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Speaker 1: negative one down futures negative tend the yield one point

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Speaker 1: seven six brent barrel. Brent now within reach of fifty dollars.

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Speaker 1: The barrel tied down to check in with Michael Barr.

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Speaker 1: Get the latest World of National Headquarters headlines. Mike, thank

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Speaker 1: you very much. There has been a new wave of

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Speaker 1: bombings today in Baghdad. At least thirty six people are

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Speaker 1: dead after bombs exploded in outdoor markets in she and

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Speaker 1: I dominated neighborhoods. No one has immediately claimed responsibility. Despite

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Speaker 1: increasing concerns about the Zeke of virus, the World Health

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Speaker 1: Organizations chief says the agency still does not recommend canceling

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Speaker 1: or postponing the upcoming Rio di jan Ero summer Games.

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Speaker 1: In the briefing today in Geneva, Dr Margaret Chan said,

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Speaker 1: more we learned about ZEKEA, the more worried we get

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Speaker 1: about it. Meanwhile, the US Senate will debate proposals today

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Speaker 1: to fund fighting the Zeke of virus in the US

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Speaker 1: Global News twenty four hours a day, powered by ore

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Speaker 1: twenty four hundred journalists more than a hundred fifty news

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Speaker 1: bureaus around the world. Michael Barr to Michael Barr, thank

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Speaker 1: you so much. B H. B. B. H B fire

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Speaker 1: Harbor Bank shares. We're gonna discuss that with Gerard Cassidy.

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Speaker 1: The backdrop is a flatter curve two stone spread nineties

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Speaker 1: six basis points Gerard Cassidy looking up to two thousand

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Speaker 1: seventeen and a steeper field curve from New York Bloomberg Surveillance.

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Speaker 1: This news update was brought to by Sector Spider et

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Speaker 1: F squy by a single stock. When you can invest

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Speaker 1: in the entire sector, visit sector spd rs dot com

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Speaker 1: or call on six Sector e t F Global Business

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Speaker 1: the radio plus mobile app and on your radio. This

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Speaker 1: is a Bloomberg Business Flash and I'm Karen Moscow. Future

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Speaker 1: is little change this morning. Let's go to the first

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Speaker 1: Word Breaking news desk for today's morning call. Here's Bill Maloney.

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Speaker 1: Good morning, Bill, Good morning Karen. That's right us. You

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Speaker 1: just remained quiet right now, doubt if you just currently

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Speaker 1: lower by twelve points, sp S drop one in NAZAC

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Speaker 1: futures are unchanged. US Tenuel at one point seven six

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Speaker 1: per cent, on the US economic front at a thirty

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Speaker 1: housing starts and cp I at nine fifteen. Industrial production

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Speaker 1: at twelve o'clock FEDS Williams and Lockhart speak in Washington

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Speaker 1: regarding aarrings this morning. Home Depot boosted your views, Q

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Speaker 1: want Q one comps sales up six and a half percent,

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Speaker 1: and Children's Place boosted your just EPs after develous night.

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Speaker 1: Agilant raised forecast. In other news, Pandora pushed to explore

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Speaker 1: sale by activist investor Corbeck's, and Lending club sinks twelve

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Speaker 1: percent pre market amended it's ten K four material weakness. Finally,

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Speaker 1: some of your wallsheet upgrades and downgrades. Freeport McMahon raised

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Speaker 1: to buy overra At Jefferies at five Networks cut to

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Speaker 1: sectuate a Pacific crest, and it was Fargo Tereks raised

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Speaker 1: to Apple form and hard for Financial cut to market perform.

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Speaker 1: Live from the first Breaking news task on Bill Maloney

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Speaker 1: Karen alright, thanks bail to your live breaking news over

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Speaker 1: your Bloomberg type squawk go on your terminal. That's squ

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Speaker 1: a w K go and that's a Bloomberg business flash.

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Speaker 1: Tom and Mike, Karen, thanks so much of Bloomberg surveillance

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Speaker 1: this morning. But you, by Investco, have you considered all

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Speaker 1: of your investment alternatives non traditional st classes and strategies

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Speaker 1: may help you achieve your goals. Find out more at

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Speaker 1: investco dot com slash alternatives. Michael Tom if we if

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Speaker 1: we hurry, we can make it out to JFK for

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Speaker 1: the ten fifteen Jet Blue flight to bar Harbor, Maine

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Speaker 1: two dren eight five miles by driving north of Boston,

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Speaker 1: farther north in Easert Island not desert desert maker font

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Speaker 1: of New England pronunciation next lemonster. Well, Michael will meet

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Speaker 1: your our cassidy there because his his pick for our

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Speaker 1: small bank of the day, Bar Harbor Bank Shares b

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Speaker 1: hb US equity. Uh why, I mean, I'm looking at

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Speaker 1: their numbers and they're pretty good. Although the stock's gone

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Speaker 1: nowhere for a wild drard, that's right because of the

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Speaker 1: market cap. Of course, that has in impact on the

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Speaker 1: performance of some of these smaller banks. But I think

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Speaker 1: investors have discovered that this company is a Wilmer's type company,

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Speaker 1: as we talked about a moment ago, because they give

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Speaker 1: back capital. They've raised their dividend in twenty consecutive quarters

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Speaker 1: by about a half a cent per quarter, which comes

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Speaker 1: out to about ten percent annual growth. So that's the

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Speaker 1: type of management you have here is that they're very

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Speaker 1: focused on shareholder returns, return on equity ten correct with

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Speaker 1: the capital level. This is one of the issues faced

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Speaker 1: in the entire industry, from City Group all the way

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Speaker 1: down to Bar Harvard Bank shows, which is the industry,

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Speaker 1: as you may know, is chock full of capital. In fact, Tom,

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Speaker 1: we got to go back to night to find capital

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Speaker 1: levels in the banking industry as high as they are today,

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Speaker 1: and that affects the r O. We okay, but within

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Speaker 1: this is what will the principles do. Peter Dodge has

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Speaker 1: been doing this for a few years. I would suggest

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Speaker 1: the chairman of the shop with Mr Smart and and

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Speaker 1: there's always the idea that successful regional bankers will sit

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Speaker 1: on it and milk it. What is the strategic plan

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Speaker 1: to be bigger than Bar Harbor? That you're bringing up

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Speaker 1: a really good point. You know, we call it the

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Speaker 1: big man on campus syndrome because they do have comfortable

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Speaker 1: lifestyles these smaller regional bank CEOs, which sometimes makes them

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Speaker 1: um become lazy. Well, what Bar Harbor recently did, as

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Speaker 1: you may have seen, they bought a bank in New

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Speaker 1: Hampshire called Lake Sentope. So now not only are they

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Speaker 1: using the alcant and capital back to shareholders, but they're

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Speaker 1: doing deals that are creative to earnings. And again, when

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Speaker 1: we look back at the M and T success story,

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Speaker 1: it was not only the organic growth in the allocation

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Speaker 1: of capital that Bob Wilmer's did, but he needs timely

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Speaker 1: acquisitions that benefited his shareholders. And we believe that's what

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Speaker 1: Bar Harbor is doing here with this acquisition of Lake Senope,

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Speaker 1: what's the what's the market for banks like this like

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Speaker 1: these days? Might they look at As we talked to

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Speaker 1: the small cap investment managers around the country, these types

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Speaker 1: of companies looked at safe haven's. They recognize they don't

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Speaker 1: have the exposures that some of the bigger banks may

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Speaker 1: have to either the capital markets or to the large

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Speaker 1: commercial real estate markets, and so they tend to be

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Speaker 1: safe havens, steady eddies, if you will. But over long

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Speaker 1: periods of time, we find that these smaller banks can

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Speaker 1: can and do deliver for their yeaholders if they're managed

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Speaker 1: well by the senior management team. Do people in places

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Speaker 1: like Bar Harbor want thanks like this or do they

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Speaker 1: want the big boys to come in that? I believe

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Speaker 1: many of the smaller communities around the country and Bar

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Speaker 1: Harbor included, prefer the local banks, particularly in the business side.

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Speaker 1: We all know that the consumer lending business is a

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Speaker 1: economies of scale business. These local banks are not going

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Speaker 1: to be issuing credit cards or mortgages. But for small

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Speaker 1: business borrowers, it's the core fabric that does go back

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Speaker 1: to the start of this country that Tom reference earlier

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Speaker 1: with Alexander Hamilton's and now Coast to coast, and it's

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Speaker 1: a place where Alexander Hamilton had a beverage of his choice,

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Speaker 1: and that would be an Eagleness cocktail in Bar Harbor,

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Speaker 1: at that place on the water Stuman's downtown Lobster Pound.

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Speaker 1: I mean, come on, it's like iconic. You go down there,

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Speaker 1: there's seagulls bothering, you sit on the deck and have

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Speaker 1: your lobster. George Cassidy, is there a difference between northern

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Speaker 1: lobster like Bar Harbor or what Roosevelt add up at

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Speaker 1: Campobello versus deep southern lobster like Kittery in Portland. No,

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Speaker 1: there isn't, not from that difference. But if you go

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Speaker 1: down for the south town down into the Florida be

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Speaker 1: each difference. But yes, in the entire state of Maine.

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Speaker 1: There's no difference from the deep cold waters of Bar

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Speaker 1: Harbor to the less cold waters down than kitt Remains.

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Speaker 1: They're all it's all delicious, as you know, and they're

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Speaker 1: your lobster report folks, Bloomberg Surveillance, Lumber Boston and around

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Speaker 1: the world. What are you eating out there? Is just

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Speaker 1: a tip to keep the seagulls away and the birds

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Speaker 1: you run fishing line above the picnic tables away. Experienced

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Speaker 1: that's that New Jersey lobster that well, that's actually the

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Speaker 1: last time I was up in one of the Connecticut

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Speaker 1: places eating outside. Very good. We just have to say this,

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Speaker 1: we could not have done the show today without John Tucker.

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Speaker 1: We could not Jard Cassidy seriously, terrific wisdom. Congratulations on

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Speaker 1: your report. It actually quantifies what the big bank CEOs

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Speaker 1: have done. In a major shout out to all listening

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Speaker 1: from Wells, Fargo, M and T, Bank, JP, Morgan and

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Speaker 1: Capital One in fourth place as well in a good

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Speaker 1: list of people in particular Commentsary on A B HB.

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Speaker 1: Bar Harbor Bank, Shares, Bar Harber main Stuments, Downtown Lobster Pound.

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Speaker 1: I think Mike, we could get some from road trip there.

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Speaker 1: West Street, Bar Harbor Main. Good morning, coming up the

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