WEBVTT - Bloomberg Surveillance: Bank Earnings Kick Off 0:00:05.160 --> 0:00:08.480 This is the Bloomberg Surveillance Podcast. I'm Tom Keene, along 0:00:08.520 --> 0:00:12.360 with Jonathan Farrow and Lisa Abramowitz. Join us each day 0:00:12.400 --> 0:00:16.840 for insight from the best and economics, geopolitics, finance and investment. 0:00:17.280 --> 0:00:22.119 Subscribe to Bloomberg Surveillance on demand on Apple, Spotify and 0:00:22.320 --> 0:00:26.600 anywhere you get your podcasts, and always on Bloomberg dot Com, 0:00:26.640 --> 0:00:30.960 the Bloomberg Terminal, and the Bloomberg Business App. Jered Cassidy 0:00:31.880 --> 0:00:35.479 joins us. He's a large cat bank analyst at RBC Capital. 0:00:35.840 --> 0:00:41.040 Marcus the decades of experience. What will the cost reductions be, Gerard, 0:00:41.159 --> 0:00:43.480 I mean, I get they're gonna come out and they're 0:00:43.479 --> 0:00:44.279 going to manage that. 0:00:44.400 --> 0:00:45.919 But it's twenty. 0:00:45.440 --> 0:00:49.320 Twenty four beginnings with this earnings report, a year of 0:00:49.400 --> 0:00:52.040 cost reductions for these major banks. 0:00:53.120 --> 0:00:55.920 Tom, I think they will be an increased focus on 0:00:56.000 --> 0:00:59.360 reducing costs, no doubt about it. The banks are striving 0:00:59.360 --> 0:01:02.640 for positive operating leverage, and as you know, the net 0:01:02.640 --> 0:01:06.560 interest revenue numbers will start the year of on the 0:01:06.600 --> 0:01:09.680 weak side because of the margin pressure that the banks 0:01:09.680 --> 0:01:13.160 are experiencing. We expect that to inflect though sometime in 0:01:13.200 --> 0:01:15.080 the first or second quarter or twenty four. But to 0:01:15.160 --> 0:01:18.760 your point, we do expect to see further announcements of 0:01:18.920 --> 0:01:20.559 downsizing of personnel. 0:01:20.959 --> 0:01:23.679 We've already had some announcements, as you know. P and 0:01:23.680 --> 0:01:25.760 C is an example. Of course. City Group's got a 0:01:25.760 --> 0:01:27.000 big restructuring going on. 0:01:27.240 --> 0:01:30.200 So yes, Tom, we do expect to hear more about 0:01:30.360 --> 0:01:31.240 reducing costs. 0:01:31.440 --> 0:01:35.600 So good Friday, folks, I zeld In Offspring, Jared Cass 0:01:35.640 --> 0:01:38.800 and you know Zell Works. How's a digital banking battle? 0:01:38.840 --> 0:01:41.800 Who is winning the digital bank wars? 0:01:43.200 --> 0:01:43.480 Tom? 0:01:44.000 --> 0:01:48.000 All of the major banks have incredibly good digital products. 0:01:48.040 --> 0:01:50.440 You know, when you think about the introduction of the 0:01:50.480 --> 0:01:53.400 iPhone back and I think it was seven eight, it 0:01:53.480 --> 0:01:57.360 really has transformed banking like so many other industries around 0:01:57.400 --> 0:02:00.800 the world, especially on the consumer banking side. But as 0:02:00.800 --> 0:02:05.000 we know, you can buy a very strong product off 0:02:05.040 --> 0:02:08.720 the shelf, which allows the smaller community banks to compete 0:02:08.960 --> 0:02:11.880 against the likes of Bank America and JP Morgan. 0:02:11.760 --> 0:02:14.120 With the digital product, and probably as. 0:02:13.960 --> 0:02:16.920 You know from your own personal experience, is only a 0:02:17.000 --> 0:02:20.280 handful of app or transactions we do on the phone, 0:02:20.400 --> 0:02:22.600 so you don't need all the bills and whistles. It's 0:02:22.600 --> 0:02:25.680 like the old VHS machines, Tom, we only use them 0:02:25.720 --> 0:02:28.919 to play tapes and maybe record, even though they had 0:02:28.919 --> 0:02:30.800 all those other bells and whistles on it. 0:02:31.120 --> 0:02:32.480 Changing the digital apps. 0:02:32.600 --> 0:02:35.200 He's he busted my jobs just a little bit. He 0:02:35.240 --> 0:02:37.120 knows you have no clue what we're talking about. 0:02:37.120 --> 0:02:40.919 I remember VHS, Tom, I was around for VHS. Well, 0:02:41.320 --> 0:02:45.000 that's good, Jp Morgan, you are a bank for America. 0:02:45.080 --> 0:02:47.720 Just around the corner. Before we get there, Jared, let's 0:02:47.760 --> 0:02:51.840 talk about how to navigate these numbers from BFA. The 0:02:51.880 --> 0:02:55.040 one time items are anticipating how to really get a 0:02:55.080 --> 0:02:58.000 sense of the underlying business, the strength of the underlying business, 0:02:58.000 --> 0:02:58.720 what we look for. 0:03:00.440 --> 0:03:03.440 That's true, John, We're going to obviously, you know, exclude 0:03:03.480 --> 0:03:06.320 the one time items. Everybody's going to have the big 0:03:06.400 --> 0:03:09.959 FDIC charge you might recall from what happened last spring 0:03:10.000 --> 0:03:12.440 with the failures, So that's a one time item that 0:03:12.480 --> 0:03:14.800 the banks will incur. But it's really going to come 0:03:14.840 --> 0:03:17.160 down to the core numbers, and that's going to really 0:03:17.200 --> 0:03:19.959 focus on two areas, the ninja's. 0:03:19.480 --> 0:03:21.359 Revenue growth and fee revenue growth. 0:03:21.600 --> 0:03:24.080 And within the fee revenue growth, of course, with the 0:03:24.080 --> 0:03:26.560 big universal banks, we're going to be very focused on 0:03:26.600 --> 0:03:29.720 the capital markets numbers, especially for read throughs for next 0:03:29.760 --> 0:03:32.200 week when Goldman and Morgan Stanley report. 0:03:32.040 --> 0:03:34.200 I've has been really soft. You know that, Jared. I'm 0:03:34.200 --> 0:03:37.600 just wondering where the pie hasn't been getting bigger, which 0:03:37.640 --> 0:03:39.760 bank has been getting a bigger slice of that pie? 0:03:40.200 --> 0:03:42.680 How are they out performing relative to other banks? Who's winning? 0:03:43.520 --> 0:03:46.560 Yeah, it appears that Bank America is showing the best 0:03:46.640 --> 0:03:50.600 improvement of taking a bigger piece of the pie. It's 0:03:50.640 --> 0:03:53.320 somewhat difficult on the trading side to really get a 0:03:53.320 --> 0:03:56.120 good handle on who's got the better market shares. The 0:03:56.200 --> 0:03:59.920 Geologic numbers help us on the investment banking side because 0:04:00.000 --> 0:04:02.480 those are public, they reported numbers, and those are good 0:04:02.600 --> 0:04:06.840 estimates that Theologic has. And in that area, the dominant players, 0:04:06.880 --> 0:04:10.480 of course are Golmen, Sachs, JP, Morgan Chase, and so 0:04:10.600 --> 0:04:13.760 we'll see if Bank America or City can creep up 0:04:13.760 --> 0:04:16.320 in their market share in that area as well. 0:04:16.480 --> 0:04:19.440 Jero, are you going to undersell their success here? I 0:04:19.480 --> 0:04:22.080 always it's not a joke, folks. I'm serious about it 0:04:22.120 --> 0:04:25.080 when I say they almost have to apologize for their 0:04:25.120 --> 0:04:29.240 concentration and their success down the income statement. Is it 0:04:29.360 --> 0:04:31.440 the same old, same old this time around with these 0:04:31.440 --> 0:04:32.680 four reporting. 0:04:33.440 --> 0:04:37.479 I would say that they are going to be very 0:04:37.480 --> 0:04:41.359 straightforward about the efforts that they're doing, the success that 0:04:41.360 --> 0:04:45.240 they're having, but also pointing out Tom that they're not 0:04:45.320 --> 0:04:48.840 only making money for their shareholders, but they're really investing 0:04:48.880 --> 0:04:51.919 in their communities. You know, the banking industry never really 0:04:51.960 --> 0:04:54.800 receives any credit to the amount of volunteer hours and 0:04:54.920 --> 0:04:58.919 money that's investing that they donate to communities around this country. 0:04:59.160 --> 0:05:02.000 And so it's that win for everybody when these banks 0:05:02.000 --> 0:05:06.080 produce strong numbers, and they have been producing strong numbers, 0:05:06.080 --> 0:05:08.960 these big four banks, and I expect today we'll see 0:05:09.000 --> 0:05:10.320 some really impressive numbers. 0:05:10.480 --> 0:05:13.160 Jared, I believe this, and I've said this from the 0:05:13.240 --> 0:05:15.440 day I walked to the Dorrit Bloomberg. We don't understand 0:05:15.440 --> 0:05:17.880 how big these people are. I just added up an 0:05:17.920 --> 0:05:22.880 approximation of how many people they have. Some together, these 0:05:22.920 --> 0:05:29.120 four banks are nine hundred eighty nine thousand plus employees. 0:05:29.839 --> 0:05:32.720 A lot of that's retail banking. Where's that statistic? In 0:05:32.880 --> 0:05:35.679 five years, it's. 0:05:35.560 --> 0:05:36.760 Going to be interesting. 0:05:36.839 --> 0:05:40.560 I think that number, depending on how well they can grow, 0:05:40.839 --> 0:05:45.120 will probably be flatted down because of the expectation over 0:05:45.160 --> 0:05:48.760 the next five years of increased use of artificial intelligence 0:05:49.080 --> 0:05:52.480 to really make the banks more efficient and more profitable. 0:05:52.680 --> 0:05:54.560 But nobody should expect those. 0:05:54.480 --> 0:05:57.200 Numbers to be down twenty to thirty percent because of 0:05:57.279 --> 0:05:59.240 new technologies these companies. 0:05:59.279 --> 0:06:00.560 It's a people business time. 0:06:00.640 --> 0:06:04.560 As you well know, financial services is generally a high 0:06:04.640 --> 0:06:06.400 touch business in many areas. 0:06:06.560 --> 0:06:09.080 There is opportunities for digital. 0:06:08.680 --> 0:06:11.200 Banking as we as we know, but it's not a 0:06:11.279 --> 0:06:14.880 total elimination of the human touch, which is an important 0:06:14.880 --> 0:06:15.880 part of banking. 0:06:16.120 --> 0:06:18.880 Jared to stay close said type. We've got some numbers 0:06:18.880 --> 0:06:21.240 in just a moment from Bank for America and JP 0:06:21.360 --> 0:06:24.360 Morgan Wels, Fargo City, all coming up later this morning 0:06:24.600 --> 0:06:26.320 going into it. If you are just joining us, welcome 0:06:26.360 --> 0:06:28.000 to the program. It got to futures on the S 0:06:28.040 --> 0:06:30.320 and P five hundred just slightly negative. We're down by 0:06:30.400 --> 0:06:33.040 zero point two percent. The tension in the Middle East 0:06:33.040 --> 0:06:35.560 continues to build. Crude is up by more than four percent, 0:06:35.720 --> 0:06:38.880 seventy five dollars on WTI on brank crude we are 0:06:38.880 --> 0:06:42.080 in the eighties eighty dollars and about seventy cents. With 0:06:42.200 --> 0:06:43.920 us around the table to break down these numbers on 0:06:44.000 --> 0:06:47.480 please to say it's Bloomberg stionnale bassectionalite, four big banks, 0:06:47.760 --> 0:06:49.600 four different stories. What are you looking for? 0:06:50.120 --> 0:06:51.680 What is going to turn around the story for Bank 0:06:51.680 --> 0:06:54.000 of America? I think is an interesting question we started there. 0:06:54.000 --> 0:06:57.320 Can you imagine, John, that capital won last year was 0:06:57.360 --> 0:07:00.359 up forty two percent and Bank of America only up 0:07:00.400 --> 0:07:00.800 two percent? 0:07:00.960 --> 0:07:01.039 Right? 0:07:01.640 --> 0:07:04.599 Because people are borrowing on their credit cards. If you 0:07:04.600 --> 0:07:06.919 think about it, on one hand, it's that strict balance 0:07:07.200 --> 0:07:10.720 between being able to borrow and being able to not 0:07:10.800 --> 0:07:12.000 lose money on those loans. 0:07:12.240 --> 0:07:14.920 Okay, But to be careful here, moynihan has to come 0:07:14.920 --> 0:07:18.360 out today. Does he have to address not concerns or 0:07:18.400 --> 0:07:21.960 fears that overdoes it, but just a study of Bank 0:07:22.040 --> 0:07:24.520 of America's liquid in the insolvency position? 0:07:24.680 --> 0:07:27.000 Well, he does not, because Bank of America has really 0:07:27.040 --> 0:07:30.200 taken care of that problem over the last decade, haven't they. 0:07:30.480 --> 0:07:32.680 And you know, you could make an argument that investors 0:07:32.720 --> 0:07:35.880 maybe want Bank of America to take on more risk. Remember, 0:07:36.040 --> 0:07:38.480 they have piled a lot of their balance sheet into 0:07:38.560 --> 0:07:42.160 bonds when yields were next to nothing, and so they 0:07:42.160 --> 0:07:44.600 have had that money tied up. That balance sheet is 0:07:44.640 --> 0:07:46.960 starting to roll off quite a bit, and you're starting 0:07:46.960 --> 0:07:50.120 to see their health maturity, losses starting to shrink as 0:07:50.160 --> 0:07:53.080 well as rates rise, so the or rates come down 0:07:53.160 --> 0:07:57.200 rather so they want them to put that money to work. Remember, 0:07:57.200 --> 0:07:59.360 their average fight go score is higher than some of 0:07:59.400 --> 0:08:02.680 these risky borrowers here, But does that mean they want 0:08:02.720 --> 0:08:04.920 them to lend harder? I think this is the balance 0:08:05.040 --> 0:08:08.960 question of the banks, especially as delinquencies start to rise 0:08:09.000 --> 0:08:11.680 on credit cards. How much risk are you really willing 0:08:11.680 --> 0:08:12.640 to take on as a bank? 0:08:12.680 --> 0:08:15.360 Today will be all loving kisses. What happens in February. 0:08:15.360 --> 0:08:17.720 Do we see a lot of right sizing and rationalizations. 0:08:17.720 --> 0:08:20.120 Do we see announcements or is it dribs and drabs 0:08:20.200 --> 0:08:20.920 through the late winner. 0:08:21.040 --> 0:08:23.400 We've been talking about this, the calling. We have seen 0:08:23.480 --> 0:08:26.320 stricter callings right at the end of last year. 0:08:26.560 --> 0:08:28.520 The media too. 0:08:28.760 --> 0:08:31.760 It is brutal. It's absolutely brutal. And remember we saw 0:08:31.800 --> 0:08:34.400 so many job cuts last year. The hope this year 0:08:34.679 --> 0:08:36.280 is that things start to turn around and they can 0:08:36.360 --> 0:08:39.160 keep more people on staff. To Gerard Cassidy's point here, 0:08:39.440 --> 0:08:41.560 you did see Bank of America gain little share in 0:08:41.600 --> 0:08:44.400 investment banking, and they also bank in the middle market 0:08:44.440 --> 0:08:47.600 where a lot of banks don't have that wide American 0:08:47.600 --> 0:08:50.280 footprint and deals happen faster when they're less than ten 0:08:50.280 --> 0:08:50.839 billion dollars. 0:08:50.920 --> 0:08:52.960 We've been talking about banks for the last fifteen minutes. 0:08:53.120 --> 0:08:55.760 Haven't mentioned last sprink? Have we left that all behind? 0:08:55.800 --> 0:08:55.959 Now? 0:08:56.040 --> 0:08:57.959 The bank facty is of nine months ago. 0:08:58.760 --> 0:09:01.199 Yes, I mean in the sense that you are going 0:09:01.200 --> 0:09:03.960 to see those FDIC charges. But the idea of the 0:09:04.000 --> 0:09:07.160 severe crisis that the people felt back in March, they 0:09:07.160 --> 0:09:09.800 don't feel that now. But we do see pain still 0:09:10.000 --> 0:09:12.200 and you'll see that in places like commercial real estate. 0:09:12.240 --> 0:09:14.360 By the way, you'll also see it in places like 0:09:14.480 --> 0:09:17.600 auto and credit cards that could get messy in the 0:09:17.640 --> 0:09:21.360 coming quarters, as we see from FED studies that delinquencies 0:09:21.360 --> 0:09:21.800 are rising. 0:09:21.880 --> 0:09:23.880 They all come out with their different power points. What's 0:09:23.880 --> 0:09:25.560 the first thing you look for? 0:09:25.800 --> 0:09:27.600 I mean, they're like forty two pages. 0:09:27.679 --> 0:09:30.440 Let's say, what's the first thing Chanelli Bessett goes to. 0:09:30.760 --> 0:09:32.720 I go to You and I both do this. We 0:09:32.800 --> 0:09:34.360 go to the returns. At the end of the day, 0:09:34.400 --> 0:09:36.600 it comes down to the returns on tangible common equity. 0:09:36.600 --> 0:09:38.800 It comes down to the returns on equity. It's the 0:09:38.840 --> 0:09:41.000 best clean way to gauge the banks. 0:09:41.000 --> 0:09:43.920 But the profitability it's basically except for city group, big 0:09:43.960 --> 0:09:46.240 double digit, right is that there. 0:09:46.040 --> 0:09:50.240 Again everybody else is wavering against that double digit number. 0:09:50.240 --> 0:09:52.840 And it comes down to the costs as well. Those 0:09:52.880 --> 0:09:55.079 returns can't be gauged if you can't keep your costs 0:09:55.120 --> 0:09:59.240 under control. Interestingly enough, Bank of America had made that 0:09:59.480 --> 0:10:03.080 great move to increase their minimum wage to twenty five 0:10:03.160 --> 0:10:06.400 dollars per person in the next year or so in 0:10:06.400 --> 0:10:08.560 the next couple of years, so they do have a 0:10:08.600 --> 0:10:11.360 cost base, a big employee base that they have to 0:10:11.400 --> 0:10:14.440 contend to while also managing how to bring in more 0:10:14.480 --> 0:10:16.240 net interest income at a time where people are over 0:10:16.440 --> 0:10:17.160 extended on loads. 0:10:17.280 --> 0:10:18.480 I don't think we've ever done this job. 0:10:18.480 --> 0:10:20.760 It's six forty four Wall Street time, and we're waiting 0:10:20.800 --> 0:10:23.120 for four separate button pushes. 0:10:23.160 --> 0:10:24.280 It's six forty five. 0:10:24.320 --> 0:10:26.160 This is his fault? 0:10:26.600 --> 0:10:28.480 Whose fault is it? I remember that time Bank of 0:10:28.520 --> 0:10:30.640 America came out at five forty five in the morning. 0:10:31.320 --> 0:10:34.400 But Jared Cassey, he remembers when there's carrier pigeons, I mean, 0:10:34.440 --> 0:10:36.880 you know the pigeon. That's how the bird would fly 0:10:37.000 --> 0:10:38.800 up from New York to Boston and he'd be a 0:10:38.880 --> 0:10:41.960 tucker Anthon can chest out with a big net out 0:10:42.000 --> 0:10:42.600 the window to. 0:10:42.559 --> 0:10:44.400 Capture the booby to run again these numbers in the 0:10:44.400 --> 0:10:47.520 next five ten minutes. Shinale just quickly briefly what you 0:10:47.520 --> 0:10:49.000 make of that black Rock tail this morning. 0:10:49.480 --> 0:10:53.160 Blackrock has been struggling to grow its alternatives business, and 0:10:53.200 --> 0:10:55.320 to do it in infrastructure is one place it makes 0:10:55.360 --> 0:10:58.959 the most sense. If you think about their competition now 0:10:59.000 --> 0:11:02.439 it's Brookfield, and you will wonder if they will dig 0:11:02.480 --> 0:11:06.120 deeper into those other alternatives like private credit that you've 0:11:06.160 --> 0:11:07.360 seen others really dive into. 0:11:07.360 --> 0:11:09.760 Would you suggest that we're going to be very careful 0:11:09.760 --> 0:11:11.440 here with the time folks will give you the banks 0:11:11.480 --> 0:11:12.280 the moment that come. 0:11:12.120 --> 0:11:13.040 Out, John'll do that. 0:11:13.720 --> 0:11:18.120 I'm fascinated if this was a bidding war, I mean Gatwick, 0:11:18.320 --> 0:11:21.079 who as Canal, whatever it is, there's different there. And 0:11:22.440 --> 0:11:25.880 the basic idea to me is everybody else must have 0:11:25.880 --> 0:11:27.240 been bidding as well, right. 0:11:27.480 --> 0:11:30.800 These alternative asset managers. When I talk to folks in 0:11:30.800 --> 0:11:32.160 the market, they're all up for sale. 0:11:32.520 --> 0:11:33.320 Everybody is up. 0:11:33.360 --> 0:11:34.800 Everyone is because now. 0:11:34.679 --> 0:11:37.200 Money costs something and everybody's for song. 0:11:36.920 --> 0:11:40.200 And scale matters. Unfortunately, scale matters, So if you're not 0:11:40.200 --> 0:11:42.080 big enough, then you're not invited to the Party. 0:11:42.760 --> 0:11:45.480 The push into private markets has been absolutely phenomenal. I 0:11:45.480 --> 0:11:48.040 want to bring back into on cassidy if ABC as 0:11:48.040 --> 0:11:49.959 we wait for these numbers from JP Morgan and Bank 0:11:50.000 --> 0:11:54.280 for America to add the competition private markets deep Bankking, 0:11:54.800 --> 0:11:56.720 these guys starting to eat the lunch of some of 0:11:56.720 --> 0:11:57.920 these big banks on Wall Street. 0:11:59.480 --> 0:12:03.400 I would say, John, they certainly have increased their competitive 0:12:03.440 --> 0:12:07.800 positions because many of the big banks that are regulated 0:12:08.240 --> 0:12:12.040 by the Federal Reserve, the controller of the currency, they've 0:12:12.080 --> 0:12:15.520 been de risked following the financial crisis, as we all know, 0:12:16.240 --> 0:12:19.280 the Fed made a push to de risk the large banks, 0:12:20.000 --> 0:12:23.480 and that's what's happening. But all in all, the shadow 0:12:23.480 --> 0:12:25.880 banking industry has been around, as we all know, for 0:12:25.880 --> 0:12:29.600 forty years, and it has taken over a very large 0:12:29.640 --> 0:12:33.679 position of providing financing for companies in this country. It 0:12:33.720 --> 0:12:37.000 has intensified more recently as you pointed out, John, and 0:12:37.080 --> 0:12:40.559 so the banks are competitive, but the private side has 0:12:40.600 --> 0:12:42.520 certainly taken a leg up more recently. 0:12:42.640 --> 0:12:45.040 Take turn out the numbers TWOP for BFA. Let's get 0:12:45.080 --> 0:12:47.600 to those numbers. There's a couple of one time items 0:12:47.600 --> 0:12:49.160 in here that you need to strip out to really 0:12:49.200 --> 0:12:51.600 gage the underlying business. You're not getting a full of 0:12:51.600 --> 0:12:54.440 picture of what's dropping the stockcase right now we down 0:12:54.440 --> 0:12:55.240 five five percent. 0:12:55.640 --> 0:12:59.080 They missed on a lot of critical figures here, going 0:12:59.080 --> 0:13:01.480 down to the core item here, for example, in trading, 0:13:01.480 --> 0:13:03.839 where you've seen them really punch above their weight, they 0:13:03.880 --> 0:13:06.679 did come in below estimates on fixed income as well 0:13:06.679 --> 0:13:09.640 as total sales and trading revenue. Importantly, also, they came 0:13:09.679 --> 0:13:11.960 in below estimates on net interest income. This is what 0:13:11.960 --> 0:13:16.240 we've been talking about their ability to bring in lending 0:13:16.280 --> 0:13:19.559 money at the time when you do see consumers still borrowing. 0:13:19.720 --> 0:13:22.360 Are people going to slow down their borrowing activity if 0:13:22.400 --> 0:13:26.240 they feel overextended? The outlook for that is really important 0:13:26.240 --> 0:13:29.839 here as we wait for further communication from executives. Here 0:13:29.960 --> 0:13:34.079 provision for credit losses, while that came in below estimates, John, 0:13:34.360 --> 0:13:37.360 you did see charge offs come in above estimates, which 0:13:37.400 --> 0:13:40.240 means loans are starting tour just a little bit more 0:13:40.440 --> 0:13:41.320 than Wall Street expense. 0:13:41.400 --> 0:13:44.080 As the statement comes out, John, and is a generalization 0:13:44.200 --> 0:13:46.320 here in Shanelle and Gerard of the pros on this 0:13:46.440 --> 0:13:50.760 return on average tangible common equity goes from fifteen ish 0:13:51.360 --> 0:13:52.559 to thirteen for. 0:13:52.559 --> 0:13:55.760 Bank of America. So there's that key ratio ebbing away a. 0:13:55.720 --> 0:13:57.760 Little bit Wellstanka coming out as well. But let's just 0:13:57.760 --> 0:13:59.760 sit on the training numbers out of Bank of America, 0:14:00.160 --> 0:14:03.080 just for Abate Shinali four Q trading revenue as you 0:14:03.080 --> 0:14:05.280 point it out, three point seventy five billion, the estimate 0:14:05.280 --> 0:14:08.280 three point eighty four FICK trading. Can break it down 0:14:08.320 --> 0:14:10.480 from fick trading to equities trading, Fick trading coming in 0:14:10.520 --> 0:14:12.760 at two point two one billion, the estimate two point four, 0:14:13.120 --> 0:14:15.200 equities at one point five to five the estimate one 0:14:15.200 --> 0:14:18.000 point full four. What would you read into that? Right now? 0:14:18.440 --> 0:14:20.440 They had zero days of trading losses. On one hand, 0:14:20.440 --> 0:14:22.160 that is great for a bank. On the other hand, 0:14:22.200 --> 0:14:26.040 remember prime services, the ability to service asset managers and 0:14:26.120 --> 0:14:29.480 hedge funds super competitive. Goldman has been trying to eat 0:14:29.480 --> 0:14:33.520 away at everyone's share and so watching into next week 0:14:33.560 --> 0:14:36.840 how trading falls across the pack will be important. How 0:14:36.920 --> 0:14:38.920 much risk are you willing to take on in this 0:14:39.040 --> 0:14:41.000 volatile market is a question for these question. 0:14:40.800 --> 0:14:42.240 Surely global markets. 0:14:42.840 --> 0:14:47.200 Bank of America is zero trading loss days in twenty 0:14:47.280 --> 0:14:49.960 twenty three. Is that good or bad? I mean, I mean, 0:14:49.960 --> 0:14:52.280 I guess they're bragging about that. What does that really 0:14:52.320 --> 0:14:53.880 mean they took no risk on their desk. 0:14:54.320 --> 0:14:55.040 It is a good thing. 0:14:55.080 --> 0:14:57.680 You don't want to see these banks losing much money. 0:14:58.160 --> 0:15:01.320 But to your point here, at this point in time, 0:15:01.440 --> 0:15:03.560 can you afford to lose a little bit of money? 0:15:03.600 --> 0:15:07.640 That is a big question here. It's a tough, tough balance. 0:15:07.920 --> 0:15:10.240 You have to remember we're living in a time where 0:15:10.440 --> 0:15:13.440 non bank market makers are gaining a lot of share. 0:15:13.560 --> 0:15:16.600 Look at those Jane Street numbers, for example Citadel Securities. 0:15:16.600 --> 0:15:18.000 We don't know what they look like for all year. 0:15:18.280 --> 0:15:22.280 And remember, guys, trading activity bounce back at the end 0:15:22.280 --> 0:15:26.080 of last year, and so Bank of America is competitive positioning. 0:15:26.080 --> 0:15:28.480 We have to wait for everybody else's numbers, but you 0:15:28.520 --> 0:15:32.040 want to see if they are kind of holding their 0:15:32.080 --> 0:15:33.600 ground against the big guys. 0:15:33.600 --> 0:15:36.440 More numbers, Wells Fargo, I promised you those just briefly. 0:15:36.520 --> 0:15:39.760 Four quarter revenue twenty point four eight billion, the estimate 0:15:39.800 --> 0:15:42.760 twenty point three five. The stock is down by two 0:15:42.760 --> 0:15:46.240 point six percent. JP Morgan up next. We'll go through 0:15:46.280 --> 0:15:48.720 this piece by piece. Four Q Investment Bank in revenue 0:15:48.720 --> 0:15:50.800 one point five to eight billion, the estimate one point 0:15:50.960 --> 0:15:53.960 seven two. We talked about trading revenue over at Bank 0:15:54.000 --> 0:15:56.000 of America. Let's do that at JP Morgan as well. 0:15:56.200 --> 0:15:58.640 E Grete salsand trading revenue one point seven eight billion, 0:15:58.640 --> 0:16:00.960 the estimate one point nine to three. FIT comes in 0:16:01.000 --> 0:16:03.080 at four point zero three bid in the estimate three 0:16:03.080 --> 0:16:05.760 point eighty four. There's a ton to get through here 0:16:05.800 --> 0:16:09.720 with JP Morgan. Just the early stock reaction down four percent. Nalie, 0:16:09.880 --> 0:16:10.440 what do you see? 0:16:10.680 --> 0:16:10.880 Yeah? 0:16:11.160 --> 0:16:14.520 The interesting thing here is investment banking is not jumping 0:16:14.560 --> 0:16:17.800 back as quickly as anybody expects. Remember, even if dealmaking 0:16:17.920 --> 0:16:20.080 came back at the end of last year, you're not 0:16:20.280 --> 0:16:24.200 seeing the banks clip those fees yet from this activity. 0:16:24.400 --> 0:16:26.280 It takes a while for those fees to float in. 0:16:26.600 --> 0:16:30.520 Remember equities also below estimates. This is another competitive place 0:16:30.520 --> 0:16:32.760 on Wall Street today. Fees have been light the last 0:16:32.760 --> 0:16:35.080 couple of years, but that's a place that investors are 0:16:35.080 --> 0:16:38.120 expecting a bounce back as well. Fick came in above estimates, 0:16:38.240 --> 0:16:41.160 whopping four billion dollars, but is it enough to offset 0:16:41.200 --> 0:16:44.440 weakness elsewhere? We're keeping an eye on those provisions as well. 0:16:44.480 --> 0:16:47.800 Remember a JP Morgan a first glance, they're coming in 0:16:47.880 --> 0:16:51.920 above estimates for the provisions. Do they expect the environment 0:16:52.000 --> 0:16:55.120 to be weakening a little faster than investors expect. 0:16:55.200 --> 0:16:57.880 Burd at the bottom of the very clear JP Morgan report. 0:16:57.960 --> 0:17:02.280 This is not c if the institute worked Fortress principles. 0:17:02.520 --> 0:17:07.640 Book value up sixteen percent, tangible book value up eighteen percent. 0:17:07.920 --> 0:17:10.960 Fortress Diamond a bit of commentary from Jamie Diamond himself. 0:17:11.000 --> 0:17:15.200 The JP Morgan CEO race may be higher the markets expect. 0:17:15.560 --> 0:17:18.719 Inflation maybe stick here the markets expect. We've had these 0:17:18.760 --> 0:17:21.119 kind of warnings from Jamie Diamond over the last year 0:17:21.240 --> 0:17:23.320 or so. John Cassidy has had a bit of time 0:17:23.440 --> 0:17:25.840 to go through these numbers, tons of numbers here out 0:17:25.920 --> 0:17:29.800 wows Bank for America. JP Morgan put it all together 0:17:29.840 --> 0:17:32.240 for us. What's the story. 0:17:32.480 --> 0:17:35.320 It's certainly complicated because of all the one time charges, 0:17:35.359 --> 0:17:38.240 as we touched on a moment ago. But what caught 0:17:38.280 --> 0:17:42.359 my attention already is that the credit quality picture for 0:17:42.480 --> 0:17:46.159 the banks was strong in the quarter. For example, in 0:17:46.200 --> 0:17:50.119 Bank America, the provision for loan losses was less than expected. 0:17:50.520 --> 0:17:53.800 In the charge offs in our estimate were a little 0:17:53.800 --> 0:17:55.680 better than what we were anticipating. 0:17:55.880 --> 0:17:59.120 And so I think that's one of the messages for investors. 0:17:59.280 --> 0:18:02.320 When you talk to investors everybody is very concerned about 0:18:02.359 --> 0:18:05.040 the outlook for credit quality for the banks, and it 0:18:05.040 --> 0:18:05.840 it looks. 0:18:05.600 --> 0:18:07.560 Like it's shaping up toward the end of the year 0:18:07.600 --> 0:18:08.399 to be pretty strong. 0:18:08.560 --> 0:18:12.160 But the investment banking results, capital market results are coming 0:18:12.160 --> 0:18:13.240 in lighted and expected. 0:18:13.320 --> 0:18:14.680 As you guys have pointed it out. 0:18:14.640 --> 0:18:16.720 Edgier artists not the fine print, but it's on the 0:18:16.800 --> 0:18:17.840 edge of fine print. 0:18:18.000 --> 0:18:19.560 This is JP Morgan. 0:18:19.720 --> 0:18:24.359 Average deposits flat are down three percent excluding their first 0:18:24.400 --> 0:18:28.720 republic soiree. How do these banks react if yields come 0:18:28.800 --> 0:18:33.360 down and the money market fund wall migrates back to them. 0:18:34.680 --> 0:18:36.320 Tom, That's an interesting observation. 0:18:36.440 --> 0:18:40.480 The read intermediation back into the banks could certainly happen because, 0:18:40.840 --> 0:18:44.240 as you pointed out, the money market mutual funds, they're 0:18:44.320 --> 0:18:47.000 tied very tightly to the Fed funds rate. So if 0:18:47.040 --> 0:18:49.600 the Fed was to cut Fed funds this year, the 0:18:49.640 --> 0:18:52.359 money market mutual fund yields fall, the banks are a 0:18:52.400 --> 0:18:55.160