WEBVTT - BofA Impacted by Charge-Offs for Soured Loans 0:00:02.920 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.960 Week inside from the reporters and editors who bring you 0:00:14.000 --> 0:00:18.319 America's most trusted business magazine, plus global business, finance and 0:00:18.400 --> 0:00:22.840 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.040 --> 0:00:25.800 and Tim Stenebek from Bloomberg Radio. 0:00:27.240 --> 0:00:31.360 Bank of America in particular, reporting that bank traders notching 0:00:31.400 --> 0:00:33.360 one of their best first quarters on record. The company 0:00:33.360 --> 0:00:36.520 also reaped the benefits of elevated borrowing costs the push 0:00:36.720 --> 0:00:39.640 nest interest pushed excuse me, net interest income of of 0:00:39.680 --> 0:00:42.000 analyst estimates. But the stock is slumping and there are 0:00:42.080 --> 0:00:42.800 good reasons why. 0:00:42.840 --> 0:00:45.240 Yeah, that's the good news, Carol. Stockdown three point three 0:00:45.280 --> 0:00:48.320 percent as we speak. Bank America reporting elevated expenses and 0:00:48.400 --> 0:00:51.519 charge offs for soured loans that were higher than analysts expected, 0:00:51.760 --> 0:00:54.520 failing to satisfy investors with a gain in its trading business. 0:00:54.600 --> 0:00:57.640 Charge offs totally one point five billion dollars of twenty 0:00:57.760 --> 0:00:59.680 six percent from the last three months of twenty twenty 0:00:59.680 --> 0:01:01.560 three was more than analysts foretasts. 0:01:01.600 --> 0:01:04.000 All right, let's bring in Bloomberg Intelligence Senior Global Banks 0:01:04.000 --> 0:01:07.160 analyst Alison Williams here in our Bloomberg Interactive Broker Studio. 0:01:07.480 --> 0:01:09.120 Is it all about the charge offs? Is that the 0:01:09.160 --> 0:01:09.720 big bummer? 0:01:10.440 --> 0:01:12.480 I mean, I think it's a lot of little things. 0:01:12.600 --> 0:01:14.760 And I'd also point out that all of banks are 0:01:14.840 --> 0:01:17.600 selling off, and you know, banks do not do well 0:01:17.640 --> 0:01:23.560 and risk off days, So let's start there. And you know, 0:01:23.600 --> 0:01:25.440 I think the other, I mean, the other disappointment is 0:01:25.520 --> 0:01:27.959 not interesting income that's been the story of the quarter. 0:01:28.080 --> 0:01:31.720 They did actually have a beat, and they actually showed 0:01:31.720 --> 0:01:35.240 sequential growth, which was positive versus what what analysts had 0:01:35.280 --> 0:01:36.279 expected and what. 0:01:37.200 --> 0:01:39.800 Other banks had expected. But they kept their views. 0:01:39.520 --> 0:01:43.520 Steady, just like the other big banks, and so you know, 0:01:43.640 --> 0:01:46.039 people are not happy about that. But I do think, like, 0:01:46.360 --> 0:01:49.440 let's look at the underlying trends. Right, the deposit costs 0:01:49.920 --> 0:01:52.160 are still going up, but at a slowing pace, and 0:01:52.200 --> 0:01:54.760 so we think that's that is positive, and we think 0:01:54.840 --> 0:01:57.880 it's prudent for these banks to just stay pat Bank 0:01:57.880 --> 0:02:00.400 of America is already a little bit more optimistic than banks. 0:02:00.400 --> 0:02:04.120 They're calling for a trough second quarter, so it's disappointing 0:02:04.160 --> 0:02:08.520 that it wasn't fourth quarter, but still more optimistic most. 0:02:08.639 --> 0:02:10.640 You know, if you look at consensus, it thinks like 0:02:10.720 --> 0:02:13.960 one queue of next year. But look at how fast 0:02:14.040 --> 0:02:18.000 things have changed. You know, you just had we've just 0:02:18.240 --> 0:02:20.800 had the discussion over the last few and it's right changed. 0:02:21.360 --> 0:02:24.120 So if you were bank management, would you be changing 0:02:24.120 --> 0:02:27.640 your guidance, you know, but so quickly it really just 0:02:27.680 --> 0:02:31.920 doesn't it's not helpful and it doesn't tend to be rewarding. 0:02:32.000 --> 0:02:33.880 But you know, and getting to charge offs, so you 0:02:33.880 --> 0:02:35.720 made the point them out charge offs. Credit card charge 0:02:35.760 --> 0:02:39.600 offs are always higher in the first quarter, delinquencies are lower, 0:02:39.960 --> 0:02:42.320 and if you look at the delinquency trends, they show 0:02:42.360 --> 0:02:46.600 that that pattern should continue to play out. The commercial 0:02:46.639 --> 0:02:48.600 real estate, I think people might have been taken them 0:02:48.600 --> 0:02:52.120 back a little bit, especially because Wells Fargo and JP Morgan, 0:02:52.160 --> 0:02:55.240 who are the bigger lenders, you know. Wells Fargo especially 0:02:55.360 --> 0:02:58.679 showed improvement in their US office. They showed improvement and 0:02:58.760 --> 0:03:02.400 multi family. But with Bank of America said is that 0:03:02.960 --> 0:03:06.520 they changed their models. They did some reevaluation, so maybe 0:03:06.760 --> 0:03:09.600 shows that they weren't as being as conservative and. 0:03:09.560 --> 0:03:12.160 So you got that uplifted charge offs. 0:03:12.280 --> 0:03:15.519 Any commentary from management about the strength of the consumer 0:03:15.720 --> 0:03:18.880 at Bank of America, because that's they've got a great 0:03:18.960 --> 0:03:21.000 view into the consumer with all the accounts. 0:03:20.680 --> 0:03:23.080 They have, they do and the consumer is still healthy. 0:03:23.120 --> 0:03:25.840 We keep hearing about the healthy consumer. I think where 0:03:26.440 --> 0:03:29.120 their spent disappointment is the commercial side of things, so 0:03:29.600 --> 0:03:33.680 card growth, and then you can argue how healthy it is, right, 0:03:33.720 --> 0:03:36.240 people are barring on their card to spend, but card 0:03:36.240 --> 0:03:39.760 growth is really you know, that's the blowout versus that's 0:03:39.800 --> 0:03:41.800 the only place where you're getting low growth. And that's 0:03:41.800 --> 0:03:44.520 why you saw a city JP Morgan the most exposure there. 0:03:44.960 --> 0:03:48.160 Bank of America has some exposure, so they're doing well 0:03:48.200 --> 0:03:49.640 and that business is doing. 0:03:49.640 --> 0:03:51.040 Meaning people carrying balances. 0:03:51.080 --> 0:03:52.680 What do you meaning people are carrying balances? 0:03:52.920 --> 0:03:56.200 So that's an interesting test. That's an interesting definition of 0:03:56.200 --> 0:03:57.080 strength of the consumer. 0:03:57.160 --> 0:03:57.320 Right. 0:03:57.400 --> 0:04:01.680 So well, so the spending is healthy, but so the 0:04:01.720 --> 0:04:04.200 balances are growing. That's why I said, you know, you 0:04:04.240 --> 0:04:09.720 can argue right that you know, consumers having the ability 0:04:09.760 --> 0:04:13.119 to borrow is seen as well, there's capacity, right, that's 0:04:13.120 --> 0:04:16.120 a healthy thing. But as they use up that ability, 0:04:16.320 --> 0:04:18.440 is that really healthy? And if you look at City Group, 0:04:19.600 --> 0:04:23.520 you know they they actually raise their guidance on their 0:04:23.560 --> 0:04:27.480 private label card, which tends to skew you know, more 0:04:27.560 --> 0:04:31.680 towards the lower end of the scale. So it does 0:04:31.760 --> 0:04:34.719 show that, you know, are there some signs of cracks coming? 0:04:35.680 --> 0:04:38.839 Is there a net net takeaway for you, Allison watching 0:04:38.880 --> 0:04:40.880 all of these big banks, right, it's start on Friday 0:04:40.880 --> 0:04:43.520 and we finished or you know, we're kind of getting 0:04:43.560 --> 0:04:46.039 through it all in terms of the health of the 0:04:46.040 --> 0:04:48.360 big banks, and then what it tells us about kind 0:04:48.360 --> 0:04:50.560 of the broader business and consumer environment. 0:04:50.640 --> 0:04:52.640 So you know, I think again, if you back away 0:04:52.680 --> 0:04:55.280 the guidance, right, the stocks react to the guidance, the 0:04:55.680 --> 0:04:58.280 cost of deposits, that that's showing some stabilization. 0:04:58.440 --> 0:04:59.279 So that's a good thing. 0:04:59.360 --> 0:05:01.960 That means that you know the impact of higher rates 0:05:01.960 --> 0:05:04.880 on deposits and people shifting the money around, that's stabilizing. 0:05:05.160 --> 0:05:07.560 So obviously that could change depending on what happens with rates. 0:05:08.560 --> 0:05:11.000 We just talked about higher charge offs and higher charge 0:05:11.040 --> 0:05:14.919 of the card, but in general reserve releases across the banks, 0:05:15.160 --> 0:05:18.919 and that's not you know, card is forcing to go 0:05:19.040 --> 0:05:23.200 up at credit and the provisions are come, are you know, 0:05:23.240 --> 0:05:26.800 scaling back because the economy is turning out to be 0:05:26.800 --> 0:05:29.920 better than expected or better than feared, you might say, right, 0:05:30.040 --> 0:05:34.400 So and again that's right, So those things are positive 0:05:34.520 --> 0:05:38.320 you know, the cost side is still very inflated, so 0:05:38.360 --> 0:05:40.479 that's a negative. That's also sort of a knock on 0:05:40.640 --> 0:05:43.760 the Bank of America. And if you have revenue pressure 0:05:43.880 --> 0:05:47.400 and you have costs going up, bank investors don't like that. Finally, 0:05:47.440 --> 0:05:50.920 capital markets, you know, we had expected resilience. 0:05:51.120 --> 0:05:52.720 It was better than we thought. 0:05:53.920 --> 0:05:56.640 We have a choppy start to this quarter, but that's 0:05:56.680 --> 0:05:58.600 still gonna be really good for trading. That's a big 0:05:58.880 --> 0:06:01.760 source of revenue invested banking. The other thing that we're 0:06:01.839 --> 0:06:05.799 looking at really came in well in the first quarter. 0:06:06.080 --> 0:06:08.839 A lot of the banks talking about, you know, positive 0:06:09.279 --> 0:06:10.640 outlook for i POS. 0:06:11.279 --> 0:06:13.080 You know, these contents of markets are not. 0:06:13.520 --> 0:06:17.039 Yeah, they're starting to happen. Some of the performance in 0:06:17.080 --> 0:06:20.240 the first quarter IPOs is positive. Both JP Morgan and 0:06:20.279 --> 0:06:24.040 Goldman pointing to that, Morgan Stanley is saying, look, these companies, 0:06:24.600 --> 0:06:27.040 you know, at some point they have to make their 0:06:27.160 --> 0:06:30.839 they have to you know, make their decisions and execute 0:06:30.880 --> 0:06:34.000 regardless of the markets. But I think I think, you know, 0:06:34.040 --> 0:06:36.279 if if we have like a few more if the 0:06:36.480 --> 0:06:38.520 few days like this, yeah. 0:06:38.320 --> 0:06:40.280 Turn into more of a sustained trend, it's going to 0:06:40.360 --> 0:06:40.640 be tough. 0:06:40.720 --> 0:06:43.080 Allison Williams of our BI team, and we've got the 0:06:43.160 --> 0:06:45.440 KBW Bank index down one and a half percent. 0:06:47.160 --> 0:06:50.720 You're listening to the Bloomberg Business Week podcast. Catch us 0:06:50.760 --> 0:06:54.000 Live weekday afternoons from two to five pm Eastern Listen 0:06:54.040 --> 0:06:56.200 on Apple car Play and then Brute Auto with a 0:06:56.200 --> 0:07:00.160 Bloomberg Business act or wants us Live on YouTube. 0:07:01.040 --> 0:07:02.600 Charlie mentioned Morgan Stanley shares. 0:07:02.640 --> 0:07:05.040 They are definitely rallying in today's session in a market 0:07:05.040 --> 0:07:07.040 where we're kind of little changed overall in the major 0:07:07.080 --> 0:07:10.240 equity averages. This is coming after Morgan Stanley's first quota 0:07:10.280 --> 0:07:13.679 revenue exceeded analyst expectations, helped out by its trading business 0:07:14.080 --> 0:07:17.160 that came in at five point thirty three billion dollars, 0:07:17.200 --> 0:07:21.160 cruising past analyst estimates, and also as its wealth management 0:07:21.400 --> 0:07:24.200 juggernaut also got back on track on that remember the 0:07:24.240 --> 0:07:28.040 news last week Morgan Stanley downplaying queries into its wealth 0:07:28.040 --> 0:07:31.040 management clients. That news last week did, as you know, 0:07:31.200 --> 0:07:32.480 send shares tumbling. 0:07:33.320 --> 0:07:36.400 Bank of America also reported and traders not one of 0:07:36.400 --> 0:07:38.960 their best first quarters on record, as the company also 0:07:39.080 --> 0:07:42.040 reaped the benefits of elevated borrowing costs that push net 0:07:42.040 --> 0:07:45.800 interest income above analyst estimates. We should note that all 0:07:45.880 --> 0:07:48.640 this came after Goldman, JP, Morgan City, Wells Fargo and others. 0:07:48.720 --> 0:07:51.480 Carol and the banking sector have reported as well. Bank 0:07:51.520 --> 0:07:54.440 of America right now down three point eight percent. 0:07:54.520 --> 0:07:56.040 All right, So we've got a guest who follows the 0:07:56.040 --> 0:07:58.320 financial sector. Cheryl Paid is back with us. She's senior 0:07:58.320 --> 0:08:01.880 portfolio manager at the investment manager from angel O Capital. 0:08:02.160 --> 0:08:03.720 She joins us from Atlanta. 0:08:03.840 --> 0:08:06.680 She serves as portfolio manager for the financial's Income Fund 0:08:06.840 --> 0:08:10.200 financial Strategies, Income Term Trust and the Dynamic Financial Strategies 0:08:10.240 --> 0:08:12.840 Income Term Trust. So, Cheryl, good to have you here 0:08:12.880 --> 0:08:15.880 with us. You look at the financial sector, the results 0:08:15.920 --> 0:08:17.800 that we've gotten from the big banks and what does 0:08:17.840 --> 0:08:20.200 it tell you? And not everyone is the same, we 0:08:20.280 --> 0:08:21.800 know not all the results were the same. 0:08:21.840 --> 0:08:23.680 But what were your key takeaways? 0:08:25.000 --> 0:08:27.520 Yeah, I think there's a couple things that we're looking at, 0:08:27.960 --> 0:08:32.160 and I think, first off, guidance is critical in today's 0:08:32.280 --> 0:08:37.720 environment more so than results generally, in terms of how 0:08:38.000 --> 0:08:41.400 banks are really adjusting to a higher for longer environment 0:08:41.600 --> 0:08:44.760 and how their positioned to benefit. On an NII side, 0:08:44.960 --> 0:08:48.080 I think what we've really seen thus far the reporting 0:08:48.120 --> 0:08:52.559 season is that results have generally beat expectations, but it's 0:08:52.600 --> 0:08:55.880 been largely from the FIA income side. So to your 0:08:55.920 --> 0:08:59.760 earlier commentary, we've seen capital market strength, We've seen you know, 0:08:59.800 --> 0:09:02.040 the M and A pipeline has been building. You've seen 0:09:02.080 --> 0:09:05.839 strength in investment banking and wealth management fees, and then 0:09:05.880 --> 0:09:10.240 also on the expense side. NII in general, I think 0:09:10.320 --> 0:09:14.120 has roughly hit the bar, but the forward guidance has 0:09:14.120 --> 0:09:17.559 been maybe a little disappointing versus byside expectations. 0:09:17.960 --> 0:09:20.400 What about potential concerns here as we've heard from the 0:09:20.440 --> 0:09:23.520 big banks already, concerns about the consumer, concerns about commercial 0:09:23.520 --> 0:09:25.640 real estate. What are your takeaways? 0:09:26.960 --> 0:09:30.280 Yeah, I think credit has remained remarkably benign. We've been 0:09:30.320 --> 0:09:34.360 looking for some normalization over the past couple of quarters, certainly, 0:09:35.160 --> 0:09:38.240 but what we've seen thus far I think holds us 0:09:38.320 --> 0:09:42.120 in good stead. We also got credit card monthly data 0:09:42.160 --> 0:09:47.760 out yesterday that showed the delinquencies are slowing again for 0:09:47.840 --> 0:09:51.240 the fifth consecutive months, So we feel generally pretty good 0:09:51.280 --> 0:09:53.720 about the consumer. There are some pockets on the low 0:09:53.720 --> 0:09:57.240 wear income side which we have some concerns about, but 0:09:57.280 --> 0:10:00.880 that's not really showing through in the numbers. Yet we've 0:10:00.920 --> 0:10:03.800 been more concerned clearly on the commercial real estate side, 0:10:03.840 --> 0:10:08.199 both office and multifamily. I think the takeaway from Wells 0:10:08.280 --> 0:10:12.280 Fargo they didn't increase their reserve on the office cur portfolio, 0:10:12.720 --> 0:10:15.560 So we do expect there will be bumps along the road, 0:10:15.600 --> 0:10:19.360 and there's certainly headline risk, but I think that will 0:10:19.440 --> 0:10:22.480 hit more in the regional bank space relative to the 0:10:22.559 --> 0:10:24.760 large caps or even the community banks. 0:10:24.840 --> 0:10:27.840 So we're the opportunities for you guys where you look 0:10:27.880 --> 0:10:30.840 at certainly debt issued by financial institutions, these are your 0:10:30.880 --> 0:10:32.000 investment opportunities. 0:10:32.280 --> 0:10:34.360 Where are you seeing the opportunities here? 0:10:35.600 --> 0:10:39.319 Yeah, I think we would generally think there's a Barbelle 0:10:39.360 --> 0:10:42.400 approach that makes sense in today's environment. We do like 0:10:42.480 --> 0:10:48.439 the large banks from a diversification perspective, more exposure to consumer, 0:10:48.520 --> 0:10:52.640 but also that fee income capital markets type business. And 0:10:52.679 --> 0:10:54.880 then on the smaller end of spectrum, I think there 0:10:55.000 --> 0:10:59.120 is value in both community bank equities and debt which 0:10:59.160 --> 0:11:03.920 are really benefiting from Here is a very strong deposit franchise, 0:11:04.679 --> 0:11:08.360 which is a benefit in a higher for longer world. 0:11:08.360 --> 0:11:12.080 A low cost funding base should help those franchises which 0:11:12.120 --> 0:11:15.160 are built on relationship banking. So we see value in 0:11:15.240 --> 0:11:17.760 both those ends of the spectrum, and I do think 0:11:17.800 --> 0:11:21.680 the regional banks are likely more challenged here again a 0:11:21.720 --> 0:11:25.359 little bit more of the office, commercial real estate exposure, 0:11:25.800 --> 0:11:31.360 higher funding costs, and probably a higher regulatory burden coming 0:11:31.400 --> 0:11:34.560 down the pike. So that's sort of how we think 0:11:34.600 --> 0:11:38.040 about it across the size spectrum. Yeah, I do also 0:11:38.080 --> 0:11:40.440 think that there is value in the debt side here, 0:11:40.480 --> 0:11:44.760 where you're seeing equity like returns for investment grade debt. 0:11:45.400 --> 0:11:48.520 Given some of the volatility over the last year, which 0:11:48.559 --> 0:11:51.439 is still remains a dislocated market, I. 0:11:51.400 --> 0:11:53.199 Want to push it a little bit on the regional banks. 0:11:53.200 --> 0:11:56.280 As you said, still challenged. What does that mean, Like, 0:11:56.440 --> 0:11:58.360 give me some idea, still challenge meeting, We're going to 0:11:58.360 --> 0:12:01.440 still have some problems. Maybe some regional banks are going 0:12:01.480 --> 0:12:03.440 to be taken out, They're going to be bought, Like 0:12:03.640 --> 0:12:05.880 what is what does challenge really mean to you? 0:12:07.200 --> 0:12:10.640 Yeah, I'm not necessarily calling for a wave of bank 0:12:10.679 --> 0:12:12.920 failures by any means. I do think there will be 0:12:13.440 --> 0:12:15.920 a lot of M and A that comes out of 0:12:15.960 --> 0:12:21.000 the recent events and when we look for probably more 0:12:21.080 --> 0:12:23.640 headline risk in terms of some of the commercial real 0:12:23.760 --> 0:12:28.560 estate exposure could drive M and A activity. We did 0:12:28.640 --> 0:12:32.679 see a deal announced last night, and so the resurgence 0:12:32.679 --> 0:12:35.680 of M and A I think helps the regional bank space, 0:12:35.800 --> 0:12:39.960 especially as we're thinking about higher regulatory costs to come, 0:12:40.040 --> 0:12:44.600 as well as high expenses currently relative you know, to 0:12:44.640 --> 0:12:48.200 the large cabet banks from a scale perspective, So it's 0:12:48.240 --> 0:12:52.360 really sort of expenses, potential commercial real estate risk and 0:12:52.480 --> 0:12:55.120 higher costs to manage along the way. 0:12:56.040 --> 0:12:59.559 Cheryl, we just heard from Fetcho J. Powell talking about 0:12:59.600 --> 0:13:02.360 potentially delaying rate cuts being higher for longer, and I'm 0:13:02.400 --> 0:13:06.040 wondering about if, for example, we don't see any rate 0:13:06.080 --> 0:13:09.040 cuts from the FED this year, if that changes any 0:13:09.080 --> 0:13:11.679 part of your thesis thinking about the financials. 0:13:13.600 --> 0:13:19.079 That really benefits the more asset sensitive institutions and again 0:13:19.880 --> 0:13:24.319 potentially pressures the funding cost side. So that's really when 0:13:24.360 --> 0:13:29.120 it is important to dissect the funding base of these institutions. 0:13:29.800 --> 0:13:32.440 How much is in sort of lower cost you know, 0:13:32.600 --> 0:13:37.640 consumer sticky checking savings accounts versus higher cost money market 0:13:37.720 --> 0:13:40.560 CD type accounts, and that's you know, where you could 0:13:40.600 --> 0:13:43.760 see higher costs continue to remain a drag from a 0:13:43.800 --> 0:13:48.520 cost of funding perspective, but higher for longer with a 0:13:48.559 --> 0:13:52.200 balance sheet that reprices faster on the asset side should 0:13:52.240 --> 0:13:56.960 actually drive higher ANII guidance from a multitude of institutions, 0:13:56.960 --> 0:13:59.200 So I think that that puts most of the sector 0:13:59.200 --> 0:13:59.920 in a good place. 0:14:00.520 --> 0:14:02.480 You know, you guys look at credit like all kinds 0:14:02.520 --> 0:14:05.199 of iterations, if you will, you know, the moves in 0:14:05.240 --> 0:14:07.520 private credit, and certainly has been such a big discussion 0:14:07.559 --> 0:14:10.880 over the last couple of years. What are you seeing 0:14:10.920 --> 0:14:13.640 in terms of the strain and kind of your traditional financials, 0:14:13.679 --> 0:14:17.559 your traditional banks or who have gladly kind of given 0:14:17.640 --> 0:14:20.040 up playing in the middle market, if you will, when 0:14:20.080 --> 0:14:23.600 it comes to loans and issuing debt on behalf of 0:14:23.960 --> 0:14:26.600 some of those middle market corporate clients. I mean, what 0:14:26.680 --> 0:14:28.240 can you tell us and what are you seeing in 0:14:28.240 --> 0:14:31.320 today's environment in terms of moves continuing into the private 0:14:31.360 --> 0:14:31.960 credit world. 0:14:33.280 --> 0:14:36.400 Yeah, I think clearly you are seeing loan growth slowing 0:14:36.560 --> 0:14:39.160 at the banks. Some of it may be, you know, 0:14:39.240 --> 0:14:42.400 giving up some share at the margin to private credit. 0:14:42.800 --> 0:14:45.080 I do think it's a mix of that and also 0:14:45.200 --> 0:14:50.120 balance sheet optimization. I think capital remains key for the banks, 0:14:50.200 --> 0:14:55.440 and they're examining all ways to increase capital, whether it 0:14:55.480 --> 0:14:58.680 be you know, selling some non core assets some loan 0:14:58.760 --> 0:15:03.160 portfolios or just slowing growth. I think that will continue 0:15:03.200 --> 0:15:06.600 to remain a trend, and part of that business has been, 0:15:06.960 --> 0:15:09.720 you know, moving towards private credit for some time. It's 0:15:09.720 --> 0:15:16.200 a little bit different underwriting process, standards, et cetera. And 0:15:16.280 --> 0:15:19.800 so the banks are probably willing to see that type 0:15:19.840 --> 0:15:22.240 of UH portfolio in this environment. 0:15:22.320 --> 0:15:23.440 Yeah, it certainly has been the trend. 0:15:23.480 --> 0:15:25.240 Hey, one last question, because we you know, you talked 0:15:25.280 --> 0:15:28.360 about the large cat banks fee income and exposure to 0:15:28.360 --> 0:15:30.880 consumers that plays in their favor. Do you have an 0:15:31.240 --> 0:15:33.160 you know, when you look at the large cat banks, 0:15:33.160 --> 0:15:35.480 which we have focused on since they started reporting earnings 0:15:35.480 --> 0:15:37.400 on Friday, is there a name in the space that 0:15:37.560 --> 0:15:40.360 in particularly you think is a standout. 0:15:40.960 --> 0:15:41.200 Yeah. 0:15:41.400 --> 0:15:44.280 I mean, I think the two that we would call 0:15:45.000 --> 0:15:49.080 as probably the most attractive opportunities, you know, from a 0:15:49.160 --> 0:15:52.680 large cat perspective, JP Morgan, I think, has you know, 0:15:52.720 --> 0:15:55.120 a nice catalyst coming up in their investor day at 0:15:55.120 --> 0:15:58.880 the end of May. I think Guidance, while it was 0:15:59.040 --> 0:16:02.880 raised at her earnings, was a little disappointing, and maybe 0:16:02.880 --> 0:16:06.240 there's some upside potential there on a higher raise coming 0:16:06.280 --> 0:16:09.880 out of investor Day. And then we like City is 0:16:09.920 --> 0:16:13.800 more of the expense restructuring story, but that continues to 0:16:13.880 --> 0:16:15.760 show good execution in our opinion. 0:16:16.080 --> 0:16:17.360 All right, really appreciate it. 0:16:17.720 --> 0:16:20.480 A nice overview of certainly the big banks and really 0:16:20.480 --> 0:16:23.400 the financials overall, which has certainly been a focal point 0:16:23.400 --> 0:16:23.880 for investor. 0:16:24.000 --> 0:16:24.240 Cheryl. 0:16:24.240 --> 0:16:26.840 Thank you so much, Cheryl Pate. She's senior portfolio manager 0:16:26.840 --> 0:16:29.200 at angel O Capital. Joining us from Atlanta. 0:16:31.040 --> 0:16:34.920 You're listening to the Bloomberg Business Week podcast. Listen live 0:16:35.000 --> 0:16:37.800 each weekday starting at two pm Eastern on Apple car 0:16:37.920 --> 0:16:40.880 Play and Android Auto with the Bloomberg Business App. You 0:16:40.920 --> 0:16:44.200 can also listen live on Amazon Alexa from our flagship 0:16:44.240 --> 0:16:48.040 New York station, Just Say Alexa, playing Bloomberg eleven thirty. 0:16:49.920 --> 0:16:52.080 The IMF by the way out today inching up its 0:16:52.120 --> 0:16:55.560 expectations for global economic growth this year, citing strength in 0:16:55.600 --> 0:16:59.000 the US and some emerging markets, while warning the outlook 0:16:59.040 --> 0:17:03.360 remains cautious amid persistent inflation and geopolitical risks, and while 0:17:03.360 --> 0:17:05.480 the world appears to have dodged a downturn, as a 0:17:05.480 --> 0:17:07.560 story in the upcoming new issue of Bloomberg Business Week 0:17:07.600 --> 0:17:11.520 points out, wars and economic nationalism are leaving many countries 0:17:12.000 --> 0:17:14.000 worse off this story, as we said, in the new 0:17:14.000 --> 0:17:15.359 issue a Bloomberg Business Week. 0:17:15.440 --> 0:17:16.960 Yeah, that's out on newstands later this week. 0:17:16.960 --> 0:17:19.719 It's already online though, at Bloomberg dot com, slash BusinessWeek 0:17:19.960 --> 0:17:22.600 and on the Bloomberg terminal. With the details we bring 0:17:22.600 --> 0:17:26.040 in a Bloomberg BusinessWeek Global Economic Center. Christina Lynn Blad 0:17:26.160 --> 0:17:28.920 she's joining us here in our Bloomberg studio. So, Christina, 0:17:29.560 --> 0:17:32.800 the devil, as they say, is in the details. When 0:17:32.840 --> 0:17:35.000 you have a ten thousand foot view of the global economy, 0:17:35.000 --> 0:17:37.720 things are starting. Things look pretty good depending on where 0:17:37.760 --> 0:17:40.600 you look. But then when you look closer, more on 0:17:40.600 --> 0:17:43.159 the ground, at least according to this story, there are 0:17:43.200 --> 0:17:45.080 some parts that are a little bit troubling. 0:17:45.280 --> 0:17:45.800 That's right. 0:17:45.880 --> 0:17:49.600 I think that everyone is breathing a collective sigh of 0:17:49.640 --> 0:17:52.760 relief that some of the major economies, including the US, 0:17:53.040 --> 0:17:56.640 seem to have dodged a downturn, and the global economy 0:17:56.640 --> 0:17:59.200 as a whole has. But then when you look beyond 0:17:59.240 --> 0:18:03.280 that headline figure, you know, even the slight upgrades to 0:18:03.400 --> 0:18:07.800 the forecast, you see that you know some really troubling stats, like, 0:18:07.840 --> 0:18:11.520 for example, four out of every ten people in the 0:18:11.520 --> 0:18:14.679 world live in a country where the government spends more 0:18:15.119 --> 0:18:19.040 on paying interest on the debt than on education and health. 0:18:19.440 --> 0:18:22.040 And so that from like just like a human gut 0:18:22.400 --> 0:18:25.639 likes thing is like horrible, right, But also think about 0:18:25.680 --> 0:18:30.960 how that constrains growth for those nations going forward. So yeah, 0:18:31.000 --> 0:18:33.200 so at the IMF meetings this week, I think that 0:18:33.800 --> 0:18:36.879 you know that that collective side of relief is quickly 0:18:36.960 --> 0:18:39.640 sort of being pushed aside to point to the problems 0:18:39.640 --> 0:18:40.240 that are out there. 0:18:40.359 --> 0:18:42.159 Debt, no doubt, you know, a problem when I think 0:18:42.160 --> 0:18:43.800 about years ago, right when we taught used to just 0:18:43.800 --> 0:18:45.720 talk about the US debt all the time and servicing 0:18:45.760 --> 0:18:47.119 the debt and how could we do it? And in 0:18:47.119 --> 0:18:50.400 a higher rate environment, it becomes much more problematic, whether 0:18:50.440 --> 0:18:51.920 it's for the US or other nations. 0:18:52.200 --> 0:18:53.159 The other thing I think. 0:18:53.080 --> 0:18:56.280 About is geopolitics, right, and you know we saw that 0:18:56.680 --> 0:18:59.719 certainly this weekend. You know, we are seeing new alliances 0:18:59.760 --> 0:19:02.439 geo politically, and you do wonder, you know, Christina, how 0:19:02.480 --> 0:19:04.760 that plays out economically as well. 0:19:04.840 --> 0:19:08.800 Right, So besides you know, real shooting wars, we also 0:19:09.000 --> 0:19:12.320 have what I think maybe a new front opening in 0:19:12.400 --> 0:19:15.680 this trade wars that the US is leading the fight 0:19:15.760 --> 0:19:19.720 on with Europe. Also, you know, joining and we saw 0:19:20.080 --> 0:19:23.080 Yellen coming back from her trip to China last week, 0:19:23.359 --> 0:19:27.080 already calling attention to the fact that China, that China 0:19:27.119 --> 0:19:31.480 has this overproduction problem as we're calling it, and you know, 0:19:31.560 --> 0:19:35.000 the German Chancellor is in China this week echoing the 0:19:35.119 --> 0:19:39.360 same kinds of ideas. So I think that we may 0:19:39.480 --> 0:19:45.399 expect to see new barriers coming into the US against 0:19:45.520 --> 0:19:49.200 you know, evs, Chinese evs, which already faced actually pretty 0:19:49.200 --> 0:19:52.320 big obstacles getting into the US market, but also like 0:19:52.520 --> 0:19:55.720 solar panels and things like that, areas where the US 0:19:56.000 --> 0:19:59.359 is investing lots of money to ramp up you know, capacity, 0:19:59.440 --> 0:20:03.200 manufacturer capacity here Christina. 0:20:03.240 --> 0:20:05.840 The story also brings up a part of the immigration 0:20:05.920 --> 0:20:09.440 conversation that I think does not get included when people 0:20:09.480 --> 0:20:12.200 talk a lot about migration, and that's the idea of 0:20:12.600 --> 0:20:13.960 what actually pushes. 0:20:13.640 --> 0:20:16.600 People to move to different countries. 0:20:16.440 --> 0:20:18.800 And the idea that if life is not good in 0:20:18.840 --> 0:20:21.520 parts of Sub Saharan Africa, or parts of Latin America 0:20:21.600 --> 0:20:24.040 or parts of South America, that spurs people to move 0:20:24.040 --> 0:20:26.679 to different parts of the world. Talk a little bit 0:20:26.680 --> 0:20:29.720 about that and how in some of these countries we 0:20:29.720 --> 0:20:33.320 could see even more migration, more immigration from these countries 0:20:33.359 --> 0:20:36.560 into other countries as a result of issues within the countries. 0:20:36.800 --> 0:20:37.400 Well, that's right. 0:20:37.440 --> 0:20:39.480 I mean there are many you know, what people call 0:20:39.560 --> 0:20:42.880 push factors to immigration, and the lack of opportunity at 0:20:42.880 --> 0:20:44.760 home is one of them. 0:20:45.440 --> 0:20:47.040 And that you know, that. 0:20:47.080 --> 0:20:50.200 Lack of opportunity isn't going to improve if governments are 0:20:50.200 --> 0:20:53.159 not able to invest in human capital, which is like 0:20:53.240 --> 0:20:56.600 health and education. And also, you know, climate change is 0:20:56.640 --> 0:21:00.399