Skip to main content

tv   Bloomberg Surveillance  Bloomberg  October 14, 2021 6:00am-7:01am EDT

6:00 am
whether banks beat or miss numbers this quarter, it is what is driving the beats. >> i think we will find out that companies still see a lot of topline growth. >> as the covid problems fade away that will be the catalyst to bring everything back to normal. >> it is still pretty solid. >> besides deflationary growth, it looks like we are having a little bit of both. >> from new york city from our audience -- for our audience worldwide this is bloomberg surveillance live on tv and radio alongside tom keene and lisa abramowicz, i am jonathan ferro. for big banks on wall street reporting earnings. tom: it is going to be exceptional, and there is no other way to put it. i looked at the tape this
6:01 am
morning. the stag in stagflation is being pushed aside. jonathan: i say day 2 because monday is not enough to cover the cpi report. even steve major has gone from 1% to 1.5%. it is a tactical story for them, a three-month horizon. you take note of that. tom: it is the only order of conversation in washington, the imf and world bank meetings. the quality, the character of this inflation. we are data-dependent. we will have to wait to see what more inflation is. you heard it in the president's comments, it has political attention because the public feels -- they don't care about the dallas trim meeting. jonathan: you can't take out food, you can't take out energy. that t-where it is facing a bigger challenge. lisa: the only person sticking
6:02 am
with it is janet yellen. everyone else has a swear jar to put dollars and every time they say the word transitory. every metric of red going up dramatically. in some cases at the highest pay since 2001. you can't strip it out and it takes away from discretionary income. jonathan: up 30 on the s&p. yesterday we snapped a three-day losing streak on the s&p 500. we add some weight to yesterday's move. big ranks reporting through the morning. lisa will guide you through the times to put in your diary. yields unchanged, back towards 150. one 53.16. euro-dollar just about reclaiming the 1.16 handle. you want to sit on that, tom? tom: i want to sit on it. there has been a shift away from the stag towards much more optimism. i about fell off my imf seat
6:03 am
looking at vix under 18. this is not a one or two day nuance. this is a shift back to growth. jonathan: we came close to 40 basis points on the front end of the yield curve. that is the conversation to me, how sensitive with the fed be to incoming data? lisa: the idea that perhaps they plan to end their purchases of bonds by the middle of next year. this is more hawkish than we had before. we will see how much that helps the banks, how much it helps the outlook without a steeper yield but definitely a higher front in the yield. bank of america kicking off today's bonanza of earnings. we are looking at loan growth, telling quincy's, interest income. the fact that bank of america is up more than 40 percent year-to-date. same with morgan stanley. wells fargo of more than 50%
6:04 am
year-to-date. citigroup up 16%. how much can they outperform? will this be the underperformer of the group trying to catch up, or will this be a shift in market share? 11 :00 a.m., i am close. u.s. is planning to release crude oil inventory data, one of the biggest stories. oil prices at the highest level since 2014 as the iea comes out and expects a deficit in total oil supplies through the end of this year. deepening more than they expected. how much can the u.s. compensate for that? you say cpi continues -- ppi increases for september following what we saw in china. the biggest increase in factory prices going back 26 years. this is commodity prices biting and their ability to pass on to the consumer is bleeding into some of the economic productions
6:05 am
for the economy there. jonathan: the first thing i looked at when i woke up and, you came back from wherever you are coming back from, china ppi picking up in a big way, dollar-lire picking up in a big way. your comment on this? the president of turkey firing three policymakers and seemingly this market set up for another interest rate cut even though cpi is approaching 20%. lisa: in the commentary in the article they talk about the nontraditional approach to monetary policy where you think that rate cuts are going to reduce inflation. there is very little in terms of academic research that signifies this. that is what you see. they look at the determination of erdogan to have lower rates even if that really doesn't actually mean lower borrowing costs. who is going to lend to turkey right now? jonathan: we will find out through the month ahead if they cut interest rates once again.
6:06 am
comments from christine lagarde. it is critical policy support is not withdrawn prematurely. the rebound phase of the economy is increasingly advanced and the risk to the euro zone is balanced. the view from the ecb president this morning. tom: the second round effects is one of the weakest phrases in economics. it is something that you bandy about when you don't have acuity. i will be blunt. the second round is the new transitory. jonathan: when you catch up with the ecb president if you see her around the halls of the imf -- tom: we will discuss second round after the second beverage. jonathan: chris it capital founding partner and cio. socgen just dropped in our inboxes. have we priced and enough that action for now? do you think we have? >> i would say that this prize is going to be more
6:07 am
aggressiveness. i have operated under the assumption that the fed is pretty much sitting on the couch and watching this play out. they have wanted to see inflation rise. they wanted a little more wiggle room for policy to come back and say that they will end tapering and buying altogether in the middle of next year. to me that is a hawkish move. tom: detailed notes on apple computer, up 25%. i went into the cash flow model that he has. these things are cash flow juggernauts and they hinge on a growth economy. are we in this moment re-pricing away from the gloom back towards some types of stable growth? jack: i would love to get there, i just don't see an easy path from where we are to what has been laid out. we have to get past some of
6:08 am
these shortages and i think that is probably embedded or implied in that note. if we can get beyond this shortages and move forward there is growth. meanwhile, you have essentially three sources. you have labor, capital, and then you have these commodity inputs. labor and commodity inputs are crowding out. tom: adjusting for the china issue with the iphones. lisa: this is the issue as we get earnings from the big bank, they are indicative of the economic projection. i want to look at the apple story. supply chain disruptions are affecting those that produce products, not so much the banks. how much are banks indicative of the economic cycle given their similar immunity to some of the pressures that we are seeing
6:09 am
broadly? jack: my main concern particularly with earnings and margins is not financials, not necessarily tech. it will be consumer discretionary consumer say folds. look at a company like dollar general. that company is really caught in three trends working against them. one is they have to maintain this dollar price, which is difficult. two, they are trying to attract workers at $12 an hour where walmart and amazon are paying $17. and they are trying to get product. a lot of their product comes from overseas. it is either delayed or not even available. companies like that, where there is a lot of labor for the amount of market cap that they have, generally the consumer side, absolutely under pressure.
6:10 am
financials, it is ideal conditions for financials. net interest margins, loan loss reserves, credit conditions are incredible. i would call credit conditions the north pole. i don't see how they get any better. from a financial bank investor, great. you put through two into the cash register. then we look forward and we say what is going on from here? jonathan: we appreciate your time. coming up later this morning, 6:40 5 a.m. bank of america, 7:30 morgan stanley, citi at 8:00 a.m.. a lot of people talk about things as a haven away from the supply chain issues. when you speak about loan growth they will tell you the story that companies cannot get access to inventory so they are not borrowing money to buy it. that is what we need to get the
6:11 am
loan books to build back up again. it is a little thing, but worth focusing on. lisa: it is not just companies. we are not seeing loan growth in the consumer space. the idea is they are flush with cash. how long will it take them to bleed down savings? how much income can they really earn given how low rates are and how much demand there is? jonathan: we had one of the biggest fiscal transfers and economic history and are working through it. 7:30, morgan stanley i know gets your attention. tom: front and center, hit the ball out of the park this time and the time before it. i'm fascinated to see if he can carry over asset management excellence to the rest of the company. jonathan: 7:00 eastern, the big conversation for us this morning. there is a real challenge to the transitory story of this federal reserve. your equity market up 29, .7%. this is bloomberg.
6:12 am
♪ >> last month's federal reserve officials agreed they could start reducing emergency support for the economy in mid-november or mid-december. minutes from the policy makers meeting shows that there was increasing concern over inflation. most participants saw inflation risks weighted to the upside. they discussed if the labor supply would bounce back to 2019 levels. in china factory inflation grew at the fastest rate last month and almost 26 years. the producer price index rose from a year earlier. prices and other commodity costs also soared. that could add to inflationary pressure if local businesses pass on higher costs the customer. in turkey, president erdogan has fired monetary policy makers opposed to cutting interest rates further. his midnight decree drove the lira to record lows against the
6:13 am
dollar. the shakeup paid the weight -- pave the way for him to have bigger influence on the policymaking panel. the european union and u.k. a new round of negotiations over trade barriers in northern island -- northern ireland. there have been glimmers of progress. slashing customs checks by half. global news 24 hours a day on air and on bloomberg quicktake powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪
6:14 am
6:15 am
6:16 am
6:17 am
6:18 am
>> the word i would use here is resilient. we simply have to build much more deeply resilient supply chains. that is certainly the goal that he set out for our supply chain. jonathan: the white house counsel of economics advisors member sitting down with tom keene yesterday. sitting down with tom keene today, your equity market up 29 on the s&p advancing .7%. there is a nice lift. in 20 minutes, call it 30, we get numbers from bank of america and onwards three banks. a big turnaround, the curve has been flat or the last couple of days. 81.32. crude, up more than 1%. tom: i'm glad that you mentioned crude, 84. 84.16, a little bit away from
6:19 am
bursting through. that will be interesting to watch. you mentioned the turkish lira. i see a more constructive take. jonathan: do you? i see a lift, if that is what you need full -- if that is what you mean. i don't think the blue has faded away. i don't think we settled anything going into year in and i don't think the data will settle anything for the next three months. tom: the vix under 18. here is reality. jon ferro eats marmite, which is inedible. worse is vegemite from australia. what you need to know after hearing the president of the united states is that the los angeles times says it is 100 thousand year plus for the longshoreman unloading vegemite in long beach and l.a. he hates both, marmite and vegemite joining us from bloomberg government. i was surprised. i knew he would center on labor, but i was surprised how the president focused on the labor message.
6:20 am
>> they had to get labor unions involved in the conversations. they still had some work left to do. one of the criticisms of the work they are doing with 24-7 operations at ports is that you need to align that with tracking. if there are truckers parked for a long time and not getting paid for that, that is one of the outstanding issues that has been raised. getting a variety of stakeholders together on this has really been the president's only option. that is his role. this is not federal dollars paying for this. tom: we actually personally experienced that on trucking. in britain. labor votes for biden, do they? jack: typically biden performed more strongly among labor groups and probably in that demographic in 2020 than what we saw in 2016 from clifton. there was a push to try to get a
6:21 am
better democratic stronghold with labor after the 2016 disappointment. you hold onto that. that may be subject to broader economic issues that could push against democrats in 2022. lisa: i heard some of the proposals to ease up some of the supply chain kinks. it was very political in nature. he proposes keeping ports open longer, adding more workers. does anyone think this will work at a time when supply chains are increasingly complicated and depend on specific variables, not all of which can be fixed by president biden? jack: you're getting at the key issue. this is a piecemeal approach. it is not a holistic federal government solution to the problem. it is one piece of it. again, the criticism remains that they probably still need to do more work on trucking. the white house has said that
6:22 am
this is going to be a part of the three-month push they are trying in the next 90 days to come up with more solutions, agreements with private companies on what they can do to try to make progress by the end of the year. i don't even think that the president necessarily was casting this as the in the all be-all solution, or at least it wouldn't seem to be the final solution. lisa: can you paint this in infrastructure spending? is it using supply chain disruption as to why we need more investment to fortify supply chains, shipping, and infrastructure? is it being used as evidence to not spend more because it is fueling inflation and it is hurting the consumer? jack: when i've heard in on capitol hill it has been used in favor of that these are some of the issues that we would like to address. we need an infrastructure bill. i would point out that since the infrastructure bill has already
6:23 am
gotten through the senate and looks to have a glide path essentially when the democrats finish up their other bill, nobody is arguing against the infrastructure bill at this point. there is no reason to do that. it is positive words about that. tom: look where we are in this government. with the battles that we have on "surveillance" about the economy and gdp. it is only coming into thursday but they have to get to the sunday talk shows and message there. what will be the administration's message to a fractious democratic party? jack: it seems to be trying to put supply-side issues that contribute to inflation into plain english. when you heard the president speak in his speech, going out and saying you may have heard of something called the supply chain, this is a pretty complex issue that does not lend itself to campaign politics easily.
6:24 am
trying to introduce that concept, that the inflation we are seeing is not just because you got a stimulus check, that there are all of the supply chain issues, which is hard to communicate. tom: republicans are going to say this is president biden's fault. does it stick? jack: it may stick. we have enough time before election day 2022, but there seems to be a lot of confidence on the republican side that it is a strong issue for them. jonathan: thank you. yes, tom? jack: i am watching on the waterfront tom: tom: -- i am watching on the waterfront tonight. it is a movie. jonathan: i wasn't around then if you watched it as a kid. tom: i watched it 42 times. a lovely blonde showed up early in the movie. jonathan: speaker pelosi said that she should do a better job selling this package in d.c., her words.
6:25 am
i think you should do a better job to be frank. is that the problem? the reporters, the media? tom: that is a good question. what i would suggest, and the rest of them on 24/7, i hear almost a silence on the linkage of these two bills. it has sort of drifted away. jonathan: it has drifted into a new year, except they have to get it done. lisa: it is not fair for the journalists to be an advocate, that is not our job. number two, what are you selling when the democrats cannot get on the same page as to what they are trying to spend on question mark the details have not been worked out. we are discussing the headline number. this doesn't even begin the conversation of which programs to fund. this is part of the issue. jonathan: many issues. your equity markets up 28 on the
6:26 am
s&p. the yield is unchanged on tens. do you think we have bled through the chop already? tom: they are trying to justify weak gdp. maybe that will happen. jonathan: bank of america numbers are around the corner. good morning. this is bloomberg. ♪
6:27 am
it's moving day. and while her friends are doing the heavy lifting, jess is busy moving her xfinity internet and tv services. it only takes about a minute.
6:28 am
wait, a minute? but what have you been doing for the last two hours? ...delegating? oh, good one. move your xfinity services without breaking a sweat. xfinity makes moving easy. go online to transfer your services in about a minute. get started today. so many people are overweight now and asking themselves, "why can't i lose weight?" for most, the reason is insulin resistance, and they don't even know they have it. conventional starvation diets don't address insulin resistance. that's why they don't work. now there's golo. golo helps with insulin resistance, getting rid of sugar cravings, helps control stress, and emotional eating, and losing weight. go to and see how golo can change your life. that's
6:29 am
6:30 am
jonathan: live from new york city this morning -- good morning -- price action shaping up as follows -- equity futures up 28, advancing quite nicely, .6%. same story on the russell to the small-cap, a real lift here. let's start with the bank's premarket. shaping up as follows for the likes of bank of america, jp morgan, and citi. since september 22 when we started to have a conversation about higher interest rates, bank of america is up about 10%. this talk about rates.
6:31 am
's two --two's 10's and 30's is what i want to look at. tom: where 2 -- are we autumn, 2022? jonathan: deutsche bank is out in 2022. they think the federal reserve will be sensitive to the inflation story that will persist. yesterday, not just yesterday, but the day before, the amount of demand on 10's and 30's has been remarkable. lisa: this highlights the distance between the rate hike and the longer term trend -- the sooner the fed hikes, the less incentive. jonathan: you get to flatter curves, tens 1354, yields
6:32 am
basically unchanged. tom: a short-term curve -- a long-term view. there are some dynamics there. i do take the point that away from the vanilla curve, there are some interesting nuances. jonathan: you can take your pick. for the banks, what really matters is the very front tens, and the median narrative that everything -- everyone tracks tens, and starts to matter because people believe in it, but for profitability, it is all about the 10's. tom: not only the profitability, but the quality of those profits. bank of america's research director thrilled to join us on these earnings days. can leon, the character of jp morgan's profits, do you adjust them for the reserve dynamics,
6:33 am
or you say boy, those are quality profits, or we are going to see quality profits this morning. -- this morning? ken: it will taper to near zero in 2022, so it is all about the business, volume activity, and to the point of getting through rates, rate rise, net interest -- it is complex for general viewers, but it really matters because it is 50% to 60% of total net revenue has to do with rate. i think the big themes today, and this is the first time we have seen this in 10, 15 years -- why are they all loaded up today, but it is about the consumer, velocity, and do consumers really want to borrow or have these large loan balances if they are flush with cash? lisa: talk a little bit more
6:34 am
about that -- we saw with jp morgan there was some life in the corporate lending sector. there was zero life when it comes to the consumer lending sector. what you have to see to get more bullish in some of these banks? ken: it is a great question. we did see constructive on the corporate side, it is moderate. it is really a bigger rate of change for the consumer. the ceo of citigroup will speak again and say if this consolidation of consumer balances will happen later this year -- credit cards, -- however, the pandemic will change behavior, as we have seen and consumers might be worried about job retention and a new world, we will have this conversation if not today, in the future, consumers now with fintech have the ability to buy
6:35 am
now, pay letter -- pay later, and have zero interest rates. i check the fed, the average charge on credit cards is in the mid end, 15 -- mid global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. -- teens, 15%-17%. lisa: we are bringing forward hope. ken: it is like the famous novel "waiting for good know," analysts are usually out of investor saying rates will have a strong impact on the recovery for these banks and we will model that in 2022 and 2023. usually gets moderated every
6:36 am
quarter where they report. when you look at the mechanics of things like earnings yields, spreads, net interests, margins, all of the stuff, it is moderate. for jp morgan yesterday, most of those metrics were flat quarter over over quarter from the june 2 the september quarter. it will take time, but you need volume. if you're not going to get it in rates, which is an easy pass for the banks and portfolio managers want to buy these banks for that reason, you need volume, which is stressed to the economy and produce a patient of the consumer. jonathan: we get numbers in nine minutes time. we will spend time in big figures, big numbers, and it will be a big distraction. before we mentioned that, you mention something that was important, fintech. companies, these stocks have reevaluated it appeared i am wondering if fintech caps the
6:37 am
ability for the stocks to rerate much higher than they already have? what is your take on that? ken: perhaps. fintech does two things. it is possibly a disruption to established businesses, particularly consumer banking, or second it is a leverage with technology and they acquire businesses or technologies that help them augment processing and improving their bank, which means improve margins and profitability. so they always use technology. jamie dimon only speaks to this, but it is the notion that millennials, generation-wide, behavior is changing, and whether banks, given their scale and embedded costs can have the same pivot as a new startup. unsecured loans is going to be the theater of the next two years, and why should we pay 15% or 17% on a credit card just
6:38 am
because maybe i was furloughed for a month or two or longer? that will be the big area. jonathan: stay we will break these numbers down and luckily we will have these with you through the morning. on to wells fargo between 7:00 and 8:00 a.m. lisa, this is a big issue. i know chanel he is in the building waiting to break down the numbers. i know you can do the compare and contrast. paypal, 300 billion market cap -- what is citi? shonali: less than half of that. he said he would spend anything he could to be able to meet the competition. it is interesting to see -- jamie dimon has done a ton of acquisitions. let's see if the demand exists
6:39 am
for others when there is so much pressure on margins -- there is a lot of pressure on costs. tom: the bible here is the late, wonderful, clay christiansen committee wonderful friend of the show and the innovator's dilemma -- ken brian moynihan do clay christiansen -- co-op modern technology? shonali: is interesting. yesterday it was is the answer for jp morgan to buy something like dell, and how creative of an answer is that? it is not just fintech, but you also have cryptocurrencies and blockchain's been adopted at a fast rate by folks like apollo and kkr, and other major credit providers to this economy. so, are the banks going to also invest in those technologies? tom: i would kill to talk to
6:40 am
brian moynihan about this over a beverage of his choice. with moynihan it would be a narragansett logger beer. this is serious stuff. can they do what clay christiansen talked about? i am hugely skeptical. jonathan: this is one of the big questions to the industry. lisa: for they have the capacity to do it -- they certainly have the cash. have investors been rewarding banks were making investors that are risky, but looking forward? shonali: at the end of the days -- day, these are constrained. we have had a run-up in their stock price, but not as much as the fintech, by and large, and not as much as their private capital appears. you are seeing huge diversions when it comes to the way capital market function today. jonathan: sit taipei the numbers
6:41 am
are moments away. we will get the thoughts of kenley on later. -- ken leon later. there is a lift out there at the moment, lisa. there was a lips yesterday, too, but we keep coming back to the story with cpi. it is cpi data that will be day three. the federal reserve could not get away from this now. it is possible to talk about the story they were pushing -- i wonder if this is not just a balance of risks story. you need to adjust your baseline. lisa: your started to see a broadening out of inflationary pressures. jonathan: mohamed el-erian joining us in about 20 minutes. i have an idea about what mohammed thinks about the moment we are in right now. equity futures up 29. a earnings season well underway on wall street. this is bloomberg.
6:42 am
>> with the first word news, i am leigh-ann gerrans. president biden is heading to global climate talks weakened by infighting at home -- he has embraced climate action like no other u.s. president has, promising to cut carbon and shifting to electric cars, but u.s. negotiators may have nothing to show other than promises as down payments to help poor countries fight climate change is unlikely to clear congress this month. former treasury secretary larry summers is blasting the fed for risking losing control of inflation. summers said there is a generation of central bankers defining themselves by their woke us -- they pay too much attention to social issues and not enough to the biggest risk of inflation since the 1970's. the white house says it will not
6:43 am
support president trump's executive privilege over records related to the january 6's insurrection. it has ordered national archives to turn over documents within 30 days. the former president has indicated he might start a legal challenge to keep the records shielded. eight out of 10 british companies struggle to find workers left month even though many are increasing wages. survey found the british commerce forecast worse. global news 24 hours a day on air and on bloombergquint take powered by more than 2700 journalists and analysts in more -- bloombergquint take, powered by more than 2700 journalists and analysts. this is bloomberg. ♪
6:44 am
jonathan: live from new york city for our audience worldwide, this is bloomberg surveillance -- these are the numbers from bank of america -- equity trading revenue, stronger it, decent at bank of america as well. we understood there would be weakness on the fixed side of things, it is actually a beat at bank of america. revenue 6.8 3 billion. we get the revenue for investment banking at 2.1 7 billion. net interest income, widely expected here. then a reserve release pin we had two big quarters of this -- we saw this at jp morgan and we get a third at bank of america.
6:45 am
the third quarter including a 1.1 billion dollars reserve release. into this morning we are up about .8%. just a read of some of the numbers. trading revenue, $3.36 billion. back with us to help us break this down -- your first read on this -- sonali: a nice beat on a lot of different business lines. the net interest income came well in above in -- expectations. you have to parse the numbers -- where are we seeing the most activity and what does it look like into 2022? it is good news for bank of america. you have a lot of strong numbers in the investment bank as well. this is one of the best reads i have seen for bank of america in a long time in terms of how much they beat market expectation. bank of america had had a lot of change at the top, a lot of
6:46 am
turnover, so these executives are walking into a clean slate. lisa: i want to hone in on the net interest income. a lot of people had lowered expectations -- jp morgan basically in line, little lower than expectations. do you have any sense by the two -- the degree to which they have eight. sonali: it is breathtaking. last quarter they had felt shy. brian moynihan had been telling street that by the end of the year they could get $1 billion more in net interest income, but you saw the jp morgan print yesterday. a very sluggish growth when it comes to the consumer. where is the growth coming from? again, the mixture of bank of america's business is a little different. when we look at citigroup later, very, very card heavy, that is one of the businesses we are concerned about, but sustainability -- it comes to mind with mortgages when i think of bank of america. when rates start to rise, how
6:47 am
are these businesses impacted? deposits growing. loans as well, growing, and we will watch if the ratio starts to turn such that they have less pure cash and more deployment of that cash. tom: for brian moynihan, it is a boston bruins hockey stick -- i won't go with which player, but the efficiency ratio really begins to get back to a nirvana from another time and place -- they have gone from 71% efficiency ratio to a stunning 63. all you need to know, folks, that is moving in the right direction. is this a new bank of america? sonali: it is getting there, but it is still the same bank in they probably have a lot of technology investment they need to do. the efficiency ratio for the three months was 50%, which is more in line with what investors like to see. once you get past 60, we don't love it. they have been bringing those costs down.
6:48 am
now the question is how they can sustain that. bank of america is one of the firms that had committed not only to minimum wages, but pressuring their suppliers to also increase minimum wages, so the wage pressure, i know we are hearing from brian moynihan later today, the wage pressure on margins is a question. jonathan: one down -- here another one that wells fargo, third quarter eps, revenue, 17. the estimate, 18.4. total average loans, the number from wells fargo, $854 billion. just some of the numbers from bank of america, wells fargo -- some commentary, we grew wherever news faster than expenses, producing year-over-year operating leverage in every business segment and 12% for the company -- net interest income improved despite a challenging rate environment. speaking of wells fargo,
6:49 am
negative, about 1/10 of 1%. a quick look at bank of america in the premarket if we can as well -- bring that up on the screen for our audience. i will do that on my terminal. up by 1.74%. tom: i want to emphasize these are two different banks. jonathan: very much so. tom: we bundle them all in together, and i really can't say how wells fargo has separated away from these other banks. they all have their own stories, foibles, etc., but to me, wells fargo is removed -- kenley on is better -- can leon is utter at that than any of us are -- better at that than any of us are. help us with the distinction -- how separate are they from bank of america, j.p. morgan, and citigroup? ken: they are handcuffed with
6:50 am
their ability to grow assets, so they have to be selective with where to get the best profit for the return. as far as investors, i have to disagree -- bank of america looks like a clean quarter. everything is firing on all signals. wells fargo, they have a bigger delta opportunity if they can improve businesses. with wells fargo, the velocity of mortgages, refi is a big engine for wells fargo in they have another big delta on the card business -- they still have a national platform for the consumer, so it is not always who is the best and who is the worst, but who is changing, and that is what investors need to capture. bank of america is a great company, but this is their first clean quarter, as noted earlier, versus the last two. lisa: just to be clear, it sounds like you are more bullish on wells fargo as an equity investor then bank of america. ken: that is correct that i have
6:51 am
not seen today's results, but when you have turnarounds and you are kind of in the end of the second quarter, which wells fargo is, they are in position where they can show significant increases in businesses that have underperformed for several years. they have a new management team in place. that took several years. again, when you look at playing the banks and playing net interest income, you really should look at wells fargo, besides a bank of america. and when you look at quality, the wells fargo franchise is not going away. so, turnarounds are never pretty, but i am sure we are going to hear that narrative later today on the call. lisa: i want to dig deeper into the beat on net interest income for bank of america. this comes at a time when yields are pretty low and we are not seen the same kind of loan growth. i'm looking for the details on loan growth, and we don't have them quite yet, however we do have that the deposit balance has exceeded $1 trillion for the first time ever and that
6:52 am
consumer investment assets were up 32% to a record $253 billion. how good is this for a bank that really needs the loan growth -- the credit card loans you were talking about that have rates on them of 15%? ken: they do, and it is really -- net interest earnings is driven by many things, but it is usually transparent. i think what the consumer, unlike jp morgan, bank of america probably has a larger booking in terms of mortgages, auto loans, which is down for gpm, maybe stronger today for bank of america, and then i want to take a closer look at the credit card business. it seems that for bank of america, they are well-situated and their volumes had to be much better than what we saw yesterday. jonathan: this is what we're going to do. you're going to sit tight, stay close. we will come back to you in the next hour and catch up on
6:53 am
another host of bank earnings. we had jp morgan yesterday, wells fargo this morning. still to come, morgan stanley at 7:30 a.m., citigroup at 8:00 amylin is there something that ties these banks together? sonali: there is a lot of diversions. we are seeing a much higher efficiency ratio at wells fargo. look at the average loans and leases -- 14% lower you can consumer banking, 12% lower in commercial banking. so, where the loan growth is going to come from across the spread is going to be a big question mark. you have seen that interest grow at bank of america, but what is happening elsewhere? jonathan: thank you. do we see you in the next hour? sonali: i will see you very soon. jonathan: wells fargo negative about .10%. not a big move. ink of america up two percent -- bank of america up 2%.
6:54 am
tom: to your good question about how are these guys doing, and the answer is boy did they learn a lot of lessons 15 years ago -- what we are seeing here in huge natural disaster of a pandemic, and yes kumutha the fiscal support directed to the banks, these people are acting off of lessons learned a decade ago. jonathan: these banks are doing ok, which begs the question, tom, the likes of senator warren, incredibly frustrated with the federal reserve, the chair of the federal reserve, calling him a dangerous man -- because of what is happening in the financial sector right now, these banks are doing ok. they are doing ok now. the question is do they do ok in bad times? looking at the capital returns, the performance, the discipline we have seen over the last 10, 15 years, hard to make that argument, isn't it? tom: we don't get what we don't cover here for in 15-page
6:55 am
powerpoint when they do earnings, in page three or four they dive into the social aspects senator warren is concerned about. i don't know if they are good enough for her, but certainly they are addressing, hour-by-hour, their social message to the clients, customers, and to the nation. jonathan: the stock is up 2% after a decent on into these results. lisa: one of the data points, people from bloomberg news culling through the information --the average loans and leases in bank of america's business segment rose, but only a 1.6% increase, still seeing the tough sell in terms of new loans. you wonder how much that will weigh on performance and optimism going forward. tom: the morning -- jonathan: the morning heating up. jp morgan yesterday. wells fargo and bank of america behind us. still to come, morgan stanley. i did not expect was fargo to come five minute ago, so who knows.
6:56 am
in the bond market, 1.5299 on 10's. equity market up 29. tom: i want to try the marmite. jonathan: you need coffee after the late night you had in washington last night. tom: diplomacy, john. jonathan: we will speak to mohamed el-erian next. this is bloomberg. ♪
6:57 am
6:58 am
6:59 am
7:00 am
♪ >> it's not really about whether banks eat or miss -- banks beat or miss numbers this quarter. it is about what drives that beat or miss. >> i think that is going to be the real catalyst to bring everything back to normal. >> earnings season is going to give us a good clue where we are going with some of these supply chain issues. >> this is "bloomberg surveillance" with tom keene, jonathan ferro, and lisa abramowicz. jonathan: there is an equity market lift this morning. good morning. this is "bloomberg surveillance ," live on tv and radio. alongside tom keene and lisa abramowicz, i'm jonathan ferro. this hour, morgan stanley.


info Stream Only

Uploaded by TV Archive on