tv Whatd You Miss Bloomberg January 14, 2022 4:30pm-5:00pm EST
♪ romaine: let's look at how equities performed on the day and week. if saw the s&p 500 on a daily basis but finishing the week down .3%. similar story for the nasdaq. the bank index will finish higher by 1% for the week but a lot of talk about high multiple names, software stocks finishing down 1%. look at the board. the value debate continues to be a debate. value is the outperformer on friday, the outperformer on the week. over the past week, value outpaced growth for sometime.
this could be the set up for the rest of the year. this is the markets wrap and "what'd you miss" start right now. ♪ >> today marked the kickoff of the big bank earnings results. a pretty mixed bag for messaging. optimism will bounce back in 2022. ciber than expected clients in trading revenue with wages and cost driven up and so much anticipated borrowing rebound has not materialized yet. thanks are under pressure to show how they plan to grow going forward. we will dig into the results and discuss the perfect person to take us through the numbers. >> there is good, bad, and ugly with trading revenues, still
quite high but not as high as the last couple of quarters. some even missing the wall street expectation. the fixed income at jp morgan and citigroup but investment banking is hot, hot, hot at both places and the question is whether. it will stay that way. . wells fargo has a warm introduction from investors and borrowing will accelerate. cfo says the same. how much does that continue across jp morgan, citigroup, and bank of america, as they wait for card revenues to return in greater form, without paying down their balances? romaine: you take a look at the numbers here. you see jp morgan ended .6%. citigroup also lower. wells fargo is up 4%. some of us saw second-tier banks --not that wells fargo is second-tier but some that have a consumer focus do well today. caroline: overall, wells fargo
is optimistic. romaine: mike was here earlier. he talked about this. he seemed optimistic. obviously based on the share price, investors seem optimistic as well. let's see what the managing director and seymour equity analyst at barclays thinks. let's start with wells fargo since we were talking about that, their numbers looking decent. we heard from the cfo and he suggested they think this trend can continue. what do you think? jason: after pressured on roads last fortified quarters, you see loan growth come back with the commercial and consumer front, and it is broad-based. on the commercial side, across the corporate businesses and commercial real estate, and on the consumer front, auto lending grew. that bodes well for 2022. that is a driver banks hadn't had the last several quarters,
starting to return. caroline: starting to return. who will benefit the most you think in terms of the banks you look at, in who is best placed to capture that rebound? jason: i think loan growth will be broad-based. if you look at all the banks reporting today, it shows the beginning of loan growth. we think 2022 as a whole --you have the payment protraction loans running off. we will see broad-based improvement. taylor: i'm interested in the idea of control because you have jp morgan saying they will spend to compete but wells fargo and citigroup are talking about the idea of having leverage there moving forward. how much pressure does jp morgan's move put on other banks to spend their way forward? jason: that is a good point. jp morgan has spent needs to spend a lot in terms of technology, expanding
distribution in the u.s. and outside and increasing market. there is something to see from others. i think wells fargo is coming from a different point. they for the last several years have spent a lot and as effectively as they can. there are places they can become more efficient and use those proceeds to reinvest in the franchise. throughout next weeek, there is expense pressures in the industry not only from wages by things like travel and entertainment as well as technology e-marketing. romaine: i want to get your thoughts on the regulatory environment. there has been talk about the reshaping of the fed and just a little bit more regulatory scrutiny coming out of the current administration. how do you factor that into your optional outlook for the bank ing sector? jason: at the moment, there is uncertainty around m&a. the fed started re-approving
deals after a hiatus. there is backlog and rhetoric around what deals can and cannot get done. a lot of open-ended questions, the expected things like the leverage ratio, something they said they would get too soon in march. now, nine months later, we are still waiting and those others things remain in flux as they reconstitute the fed board of governors. that is something to watch as the year progresses. taylor: that slr --i'm wondering when it comes to competition, we are looking at the car business expected to start to come back. that's where there is some of the greatest competition. how is it that in such a competitive environment, everyone can win? jason: [laughter] it is certainly competitive. the one good thing about the car segment, there are five or six scale players. they are fairly rational in the way they do business.
it is an environment where it is good. the consumer is the healthiest it has been in some time. you have good spend levels but high credit card payment rates as the government stimulus continues to abate. you will see payment rates come down. consumer will continue to spend but begin to revolve more. it will be competitive, but an environment where credit card is them -- benign and he will pay back their loans, there should be enough profitability to go around for the skill players. caroline: i will cut it coast to the blown -- close to the bone. competition has talent like you. tell us what you are worried about. are people spending too much? what do you think about the expense part of the business? is it worth the talent --a war for talent? jason: you had a very good cycle in terms of the investment banking front and this year on the record trading revenues and record investment banking
revenues. you know, a lot of those businesses are driven by talent. the record revenue realization in 2021, pipelines are really good as you think about 2022 but particularly for m&a and capital raising. you will continue to see bigger players compete for the best talent. caroline: always great to check in with you at the start of the earnings season. have a great, long weekend. we continue our focus on banks and get focus on a portfolio manager of angel oak capital. she joins us with her expectations for continuing to outperform. this is bloomberg. ♪
romaine: today's triple take focuses on banks earnings. the wall street banks coming out before citigroup, wells fargo, jp morgan. carolilne, we ended the season on a high note with regards to stocks fueled by anticipation of a steepening of the yield curve. caroline: quite similar. they were up 35% in 2021. 11% over the course of this year alone, far outperforming the s&p 500, which is still down. taylor: it is not just the banks that have moved the anticipation. this is not moving quickly. you cmx down today, capital one flat today. there are repercussions for the other financials. romaine: let's bring in our next guest, cheryl pate, portfolio
manager at angel oak capital, joining us to talk about this. i want to get your sense of what we should focus on. we look at some of the reaction in the market. jp morgan is down 6% today. there shares have fallen for seven or eight quarters. they beat expectations. what do you think is the essential thing to focus on with these bank earnings? cheryl: i really think the word of the day was "expenses," and clearly, we saw jp morgan's stock higher than analysts expected in terms of 2022 outlook. by contrast, we saw better forward guidance from wells fargo. when we look at the fundamental backdrop for financials broadly, there is a lot. that has been reflected year to date in terms of turning the quarter -- corner, looking to hire rates and sooner than expected likely, and working
down the excess liquidity the banks have. clearly, the surprise today, you know, not just from an inflationary perspective but the amount of investments to think about to maintain and gain share over a long-term. taylor: a lot of people felt the sticker shock today but it is not just what they are spending. it is the fact that what they are spending, relative to the net interest income they can bring in. does the end justify the means? cheryl: that is certainly the question with jp morgan. we saw gutting up $6 billion on nii and spending more than $7 billion year-over-year on an expense basis. does that play out in the long term? will that be enough to gain share across the board in all businesses as they highlighted, but also a more competitive environment in many areas, in cars, against fintech's, for example? i think jp morgan is very
disciplined and does a good job of managing, but the question is the long-term game versus short-term valuation and growth trajectory. will those investments be coming to for ration? caroline: as a portfolio manager looking to put money to work and assess the financial strategies you have, is it where it will outperform in 2022 and we have seen such outperformance with the financials in the bigger banks where the yield curve goes? where do you start to look now? cheryl: i think we are more positive due to the regional banks and community banks. it turns the spread based lending tied -- dynamic. when we think about the large money center, there is a lot of moving pieces. there is more intense competition and a need to spend more to keep up with fintech. you have tougher year-over-year
comps in capital markets, which you have from the regional and community bank space, the pure play on accelerating growth, on steepening higher rates, and projected improvement. and plus, that is where you see likely nii continuing and we work through those things, bank transactions, by year-end and we think the sweet spot will. relative to the universals. romaine: let's talk about that because we see that reflected in share prices. a lot of focus on regional names. a year ago, we talked about the banks needing to start to consolidate. the only way they complete -- could compete with jp morgan and bank of america is by joining forces. is that necessary or can some of these banks, the mid tier banks, stand on their own? cheryl: really, where we think the value in the regional banks
face, i would characterize them as niche market players. names like signature, silicon valley, that have very differentiated growth strategy -- higher growth strategy. i still think there is space for inorganic growth. i think the business model matters here. stock-digging will be critical. taylor: i think about the long-term strategy. we have huge private equity firms that can keep balance sheets with fintech if they want to be. how then does a bank stay competitive, if all of that is happening on the outside? cheryl: i think it is the differentiation of the leading models. we see a lot of community banks that have specific landing -- lending niches, just more businesses or dental practices. it carves out a competitive advantage for themselves within
that space. that is not to see we -- say we don't see value across financials. that is predicated on positive fundamentals. there is room for the banks to grow and take share. the footprint and execution is the key along with the strategy. caroline: do you want to get into financially focused investment? cheryl: we are very positive on fixed income side as well. we like subordinated debt on the bank side. we think there is excess yield to be had there. we like the very short duration of the strategy. i think that is really critical in moving into a higher rate environment. we have been positive on the credit side as well as the smaller cap equities. romaine: we will have to leave it there. great stuff. hope to catch up with you. portfolio manager at angel oak capital. coming up, we will talk about
♪ ♪ caroline: who would guess it? goldman sachs received millions in payout, a record set of earnings. the man who got the scoop is with us now. i suppose it started with the junior pays. the money comes they're right and i'm sure that those at the top want to have their case and eat it, too. >> that seems to be the case after what has been a phenomenal year for the banks, smashing a
record for the first nine months of the year. in a sector report next week, which will scale new heights in revenue and profits, clearly the partners at the highest rank, the top 400 employees inside goldman sachs, were offered hefty fares in addition to their annual incentive and base pay. they are getting a special one-time award that will pad their healthy pay packages by an extra 7-figure amount. i'm sure they will be happy about that. sonali: speaking of the existing bonuses that are hefty, there is this line in your story yesterday that the top of -- performers will surpass $30 million. how does that compare with other places on wall street, as we know, that goldman, jp morgan, has lots of significant talent already? sridhar: that has been the reality on wall street for the last 10 years. the big banks have been in a
position where they do not match up with the buy side. for the first time in well over a decade, banks are in a position to pay really well. . the last time goldman sachs will be paid like this was back in 2010. the phenomenal 2009 they had and what happened after that? they wondered why they were paying their employees so much. romaine: with regards to the competition and talent, obviously it is the buy side issue. anecdotally, there are folks who have to go to trade cryptocurrency and entities. -- nfts. that whole fintech world where you can make a lot of money, way more money than you can make with some of these banks and do so with more freedom. sridhar: that is a serious problem that senior bank executives not just at goldman sachs but every major bank, all the executives there are dealing
with that issue. you are in an environment with lots of riches to be made. you could become an overnight crypto billionaire. making a phenomenal amount of dough. you want the bank to regain their footing. for one, they seem to be doing well. that's good for the others we will have to see how they deal with the downturn, but we recognize there on the defensive and they have to take some aggressive steps to make sure they can be paced and keep their top employees happy. sonali: how aggressive can they get with the eye of the regulators and the palatable -- unpalatable nature of bonuses for the broader community? sridhar: with the biden administration and democrats in power, there is already some talk floating around of possibly capping bonuses.
would you see the good old days of 2006 and 2008, the years when somebody like goldman signs -- sachs could get a $70 million pay package, even though it is lower than what we will see for 2021? we are not quite there yet. they're all trying to push the envelope and see what they can get away with without any harsh scrutiny. romaine: we are all going to be focusing on that. most of our viewers, i'm sure you are always over this report. there helping ups -- us wrap up our coverage. our triple take was a focus on the big bank earnings of wells fargo, jp morgan, citigroup. caroline: three banks. romaine: triple. that is very alliterative. i wanted to focus on the regional banks. cheryl touched on this issue. they have been doing well. m&t is up 11 straight days and a
lot of people bet those will outperform big banks. sonali: what will happen to their margins as they don't see the consumer come back? romaine: she will talk about those niche businesses or other banks like signature that are not mentioned. they cater to a specific customer. i guess if you can carve one out and dominate that, that is good. caroline: what about asset managers? sonali: it is interesting. there is a big conversation on wall street on whether accumulat ing assets is enough. $10 trillion. it is not about accumulating assets. it is about accumulating fees. romaine: what is the trendline? sonali: so much of that is going to private equity but if you look at those firms, a lot of them are under pressure because of rising rates. double-edged sword. romaine: nft's? caroline: crocs, are that top of the market?
>> from the heart of where innovation, money, and power collide in silicon valley and beyond, this is bloomberg technology with emily chang. ♪ emily: i'm emily chang and this is bloomberg technology. in the next hour, a reality check for apples headset facing a new delay. what this means for the iphone makers push into the metaverse.