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US Bank Earnings Surpass Wall Street Expectations · Bloomberg Intelligence

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  Speaker 2: A lot of movers out there in the marketplace, including
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  Speaker 2: the big banks, because men, it's the busiest day I've
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  Speaker 2: ever seen for big bank earnings, just all coming in
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  Speaker 2: on one day here. So we've been checking in with
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  Speaker 2: a good friend, Herman Chain, who covers all the banks
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  Speaker 2: for Bloomberg Intelligence. So I guess my takeaway Herman is
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  Speaker 2: they beat expectations generally, which is and expectations were high
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  Speaker 2: coming into this quarter. What are they saying about the
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  Speaker 2: back half of the year. I guess that's probably the
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  Speaker 2: bigger issue.
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  Speaker 3: Yeah, that's right, that's the chief question on the earnings
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  Speaker 3: cost today. We had robust results, knocked it out of
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  Speaker 3: the park, particularly in equity trading. Can the spece sustained
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  Speaker 3: at least from the JP Morgan earnings called earlier this morning?
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  Speaker 3: Management said that while it's hard to replicate the second
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  Speaker 3: quarter earnings results from equity trading in particular, there's still
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  Speaker 3: a constructive backdrop. Some of the activity in the second
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  Speaker 3: quarter was really driven by the trading activity from SpaceX
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  Speaker 3: and the like. That may be a bit more idiosyncratic
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  Speaker 3: to the quarter, but still really strong trading results expected
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  Speaker 3: for the back happ of the year.
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  Speaker 2: What are the banks of the big lending books like WACOVI,
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  Speaker 2: like viave Lake City. What are you saying about the
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  Speaker 2: credit quality out there?
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  Speaker 3: Yeah, credit quality has been really strong. You see that
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  Speaker 3: in Wells Fargo in particular. They're net charge offs for
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  Speaker 3: the quarter of the loan losses were down about ten
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  Speaker 3: basis points, and that was really led by much lower
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  Speaker 3: commercial loan losses in particular. So the commercial borrowers have
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  Speaker 3: been able to weather some of this economic concergency and
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  Speaker 3: expectations for rates to be higher for longer. So we're
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  Speaker 3: actually pretty assanguine about the credit quality for the group,
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  Speaker 3: at least in the near intermediate term.
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  Speaker 2: What are some of the return ratios that you and
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  Speaker 2: bank investors look at, and then how are they trending
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  Speaker 2: these days?
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  Speaker 3: Yeah, returns and return on tangible common equity in particular
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  Speaker 3: is the key banking metric that we look at, and
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  Speaker 3: those were strong across the board. You see this in
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  Speaker 3: JP Morgan's adjusted ROTC twenty three percent, their target over
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  Speaker 3: the longer term seventeen percent. Even banks that are at
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  Speaker 3: the lower end of the spectrum, banks like a City,
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  Speaker 3: we're seeing ROTC at thirteen percent and their target for
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  Speaker 3: the year is only ten to eleven percent. So they're
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  Speaker 3: vastly outstripping their targets and their expectations, and that's happening
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  Speaker 3: across the board for the banks that reported today.
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  Speaker 2: All right, so in that context, how they're easing regulations
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  Speaker 2: on the banks, how they impacted those their performing and
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  Speaker 2: those types of ratios.
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  Speaker 3: That's right. So that's another positive story for the banks,
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  Speaker 3: particularly the big ones, where we have easing capital regulations,
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  Speaker 3: that will create a more flexibility on the balance sheet.
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  Speaker 3: So that's in terms of both buybacks, that's in terms
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  Speaker 3: of dividends, that's in terms of increasing their lending capacity,
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  Speaker 3: and that means there's a less equity component on the
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  Speaker 3: balance sheet, which is inversely related to return, so returns
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  Speaker 3: will go higher systematically because there's lower equity capital ratios.
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  Speaker 3: So all in a really good story. You just saw
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  Speaker 3: from the stress tests where we're after that in the aftermath,
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  Speaker 3: banks really lifted their dividends by ten, eleven, twelve percent
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  Speaker 3: across the board.
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