July 16, 2025 • 23 mins
Watch Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Lisa Mateo
Alison Williams, Bloomberg Intelligence Senior Analyst, Global Banks and Asset Managers, discusses U.S bank earnings. Goldman Sachs Group Inc.'s stock traders posted the largest revenue haul in Wall Street history, with equity-trading revenue of $4.3 billion for the second quarter. Morgan Stanley's stock traders scored their best second quarter on record, earning $3.72 billion in equity-trading revenue, a 23% jump from a year ago. Bank of America Corp.'s traders posted a record second quarter as the company reaped the benefits of volatile markets and net interest income topped analysts' estimates.
Woo Jin Ho, Bloomberg Intelligence Senior Technology Analyst, discusses Hewlett Packard Enterprise creating a new strategy committee and agreeing to work with Elliott Investment Management to help boost value. Other members of the committee will include Gary Reiner, Raymond Lane and Charles Noski.
Duncan Fox, Bloomberg Intelligence Senior Consumer Staples Analyst, discusses Diageo Chief Executive Officer Debra Crew stepping down after a bruising run in which the company’s stock has plummeted. The maker of Guinness and Johnnie Walker whisky said Wednesday Chief Financial Officer Nik Jhangiani had been appointed interim CEO, with a search already under way for Crew’s permanent replacement.
Herman Chan, Bloomberg Intelligence Senior Analyst for US Regional Banks, discusses regional bank earnings. They include results from First Horizon, PNC Financial, and MT&T Bank.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Applecarplay and Android Auto with the Bloomberg Business App.
Listen on demand wherever you get your podcasts, or watch
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Speaker 2 (00:22):
YouTube Asertao Paul Swiney live here in our Bloomberg Interactive
Broker studio. We are streaming live on YouTube as well,
so go check us out there. I've been doing the
stock market thing at leasta for like forty years almost
still have.
Speaker 3 (00:34):
No idea how this whole thing works.
Speaker 2 (00:35):
I mean, look at Goldman, Sachs, Morgan, Stanley, b of A,
what I thought were really pretty darn good quarters in
a world where we're not really sure what's going on.
Speaker 3 (00:44):
So of course all the.
Speaker 2 (00:45):
Stocks are trading down today, so I can't figure it out.
But our next guest is an expert.
Speaker 3 (00:49):
She knows what's going on.
Speaker 2 (00:50):
Alison Williams, senior analy she covers all the big banks
and all that kind of good stuff for Bloomberg Intelligence.
She joins us here in our studio here. So as
you looked at you know again we've had two days
of the big banks Alison, and you've been covering these
guys for a very long time. You've seen it all
come and go. How are the big banks investment banks
doing this quarter?
Speaker 4 (01:09):
Well, you mentioned you've been doing this forty years and
you've never seen a corner like you saw Goldman Sachs
equity trading record YEP trading. I mean, the really stand
out for Goldman is they're the biggest inequity trading. They
are the biggest in M and A and they had
the biggest jump, so really solidifying that leadership. I mean
(01:30):
the equity trading up thirty six percent, prime brokerage, cash derivatives.
We talked about the fact that we saw record trading
on the equities exchanges this corner. We certainly saw that
come through with the banks, M and A. Goldman talking
about the fact that announce volumes are up thirty percent
and we're running above average now, so that bodes well
(01:51):
for the future. And I think, you know, in terms
of the stock reactions that you refer to, I think
you know, so as I said, we can see that
they're there was a lot of strength in the exchange volumes.
We could see that you know, IPOs had rebounded the
last couple of months. Even though you know it wasn't
an analyst numbers, I think there was some visibility there.
Speaker 5 (02:11):
So I think in terms of.
Speaker 4 (02:12):
What the stocks are reacting to, Morgan Stanley had a
really strong quarter, you know, beat everything, but just not
as good as Goldman, And I think people are looking
at that equities trading. Morgan Stanley was in the lead
for a few years and now Goldman is really pulling ahead.
Speaker 6 (02:27):
Yeah, and I see because the whole morning I was like,
why is the stack where?
Speaker 1 (02:31):
Ever?
Speaker 6 (02:31):
Since the bell opened, it is.
Speaker 4 (02:33):
And by the way, like wealth, wealth is the business
that people watch for them the wealth flows. You know,
the numbers were good, so again, what are people worried about?
So it could be the market share. Morgan Stanley did
point out that they had a record quarter in Europe.
They said that they're gaining share. We'll see what happens
when the Europeans report and Asia. The other thing is
(02:55):
capital so buybacks better than expected at Goldman, weaker at
Morgan Stanley. And keep in mind we've seen these big
moves in the financials, A lot of that is really
about the capital return story well and.
Speaker 6 (03:08):
The consumer resilience. We look to Bank of America for
that So did you did you see it?
Speaker 4 (03:12):
We did see it, and I think that is what
we've what we saw in the quarter. So net interest
income as well as charge offs, those are kind of
the two bank business lines, if you will, that are
most revolving around lending and consumer health, and you know,
interest income. It was like a little bit soft in
the quarter, but the outlooks are fine or better and
(03:35):
credit coming in in line to better than expected, and
the reserve building really telling you that, look, there is
some conservative conservatism baked in for some uncertainty in the
second half, but in general things are improved.
Speaker 2 (03:52):
When President Trump was elected for this second term, almost immediate,
people are saying, by the banks they're going to be
the beneficiaries of reducing regulation and reduced oversight.
Speaker 3 (04:02):
Has that happened? Do we still expect that to happen?
Is that still part of the story.
Speaker 7 (04:06):
I think, you know, we're on a journey.
Speaker 4 (04:08):
I guess if you if you'd say, isn't that the
current rhetoric? But I think that's why the good buybacks
were important. Right. So the reason one of the things
that people are very excited about in terms of reduced
regulation is holding less capital returns our equity, you're going
to go up mathematically, there'll be more money to return
to shareholders. I mean, Goldman had really that leading dividend
(04:31):
increase that we saw after the stress tests, buy backs
better than expected, you know, And meanwhile I saw the
weakness of Morgan Stanley Wells Fargo another one that was
another bank that investors were really optimistic about. After the
US election, they did get the asset cap removed, so
I think there's there's a long term overhang over the stock.
(04:53):
But in the current quarter, people were a little disappointed.
Like you know, they didn't give any guidance on buybacks,
it didn't change their retre earned target, and you know,
it just might be that that's that's going to come.
But didn't get the news yesterday.
Speaker 6 (05:06):
Private credit, Where did banks stand with private credit? Your
JP Morgan say they would have best like fifty billion
dollars in private credit. So what kind of examples that
set for the industry.
Speaker 4 (05:16):
You know, I think, And Jamie Diamond also, I think,
you know, made some comments around private credit that I
know we're picked up in the headlines. I think that again,
you know, private credit, it's it's it's been sort of
you know, the hot the hot item for us all
to talk about. But you know, maybe you know and
we are seeing, you know, continued strength. I think we
(05:38):
do expect continued fundraising, but you know, I would say
nothing really stands out.
Speaker 3 (05:44):
This quarter from any of the banks.
Speaker 2 (05:46):
Yeah, at least was asking before we went on here,
can she ask you about private credit? I said, you
can ask Alison about anything and still having a formed opinion.
Speaker 3 (05:53):
That's why I'm going going down this alley.
Speaker 2 (05:56):
Strong results out of the US big banks this week,
we're going to hear from the European ones. I guess
next week, when is a European Union going to say,
if we ever want to compete in global finance, we
have to allow across murder merger deals. Is that even
on the table?
Speaker 4 (06:17):
I mean, I think that it does come up, and
I think we have heard regulators talk about it like yo,
yes we should do something. But the question is, you know,
everyone wants to be the one, you know, the victor.
They want to be the one you know where you
know they're champion, is the buyer. And so I think
that's you know, where the rubber meets the road. If
(06:38):
you will, it will be interesting to your point, when
we see those Europeans report again Morgan Stanley wreckerd quarter
in Europe, they said the first half, they called it
extraordinary in Asia. Obviously, we know Asia is a lot
a lot of diverse parts, but the Europeans, like UBS ten,
have tended to be stronger there. So so if this
(07:01):
quarter we don't see them participate and kind of follow
that Morgan Street Stanley lead, that will give us further
proof that they're actually losing share in their home market,
and that should be a little bit more concerning.
Speaker 2 (07:12):
I mean, you could argue that the horse is already
out of the barn. They've missed it. I'm just thinking
twenty years ago, it was so much more competitive. They
were so much more competitive. I remember just going up
against some of those big European banks, and now it's
almost like an afterthought. It's just amazing how that's evolved.
Alson Waims, thank you so much.
Speaker 7 (07:29):
Appreciate that.
Speaker 2 (07:29):
Alison Willims, she's a Seene analyst covers all global financials.
If you have any question on anything on Global Wall Street,
you can.
Speaker 3 (07:36):
Just go up to Allison on the Street and answer.
So have an answer for you.
Speaker 1 (07:41):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (07:55):
This is Bloomberg Intelligence. I'm Lismiths Matteo along as I'm
Paul Sweeney. We do have some news at a Hewlett
Packard enterprise. So it's creating this new strategy committee. Turning
to Elliott Investment Management for help with this. Here with
all the details and to break it all down for
us is Woodin, who Blueberg Intelligence, Senior technology analyst. Woodin,
(08:15):
Thank you for joining us. I want to start with,
of course, who is involved in Who is part of
this committee?
Speaker 8 (08:22):
Yeah?
Speaker 9 (08:22):
Sure, thanks Lisa. So it is a handpicked board member
by Elliott Management. Keep in mind Elliott is an activist
investor that has a ten percent plus shareholding of HPE.
I believe they made their position early in this year
and who they appointed was Bob Calderoni, who has done
(08:47):
similar type of deals in terms of taking companies private
or more importantly operational streamlining. So any changes I think
Elliott is going to try through Bob to affect a
lot of changes at HP.
Speaker 5 (09:01):
Mooch, just remind us what HP is today?
Speaker 3 (09:04):
Number one?
Speaker 5 (09:05):
And number two, what do they need to fix to
move this thing forward?
Speaker 9 (09:09):
Yeah, hey, Paul, so, HPE is one of the leading
enterprise IT infrastructure vendors. They provide servers, storage, now a
bigger networking presence with the Juniper acquisition, and actually, quite
quite frankly, there's quite a bit to fix from an
operational standpoint. They fumbled the first quarter results by mispricing
(09:35):
their server business and it seems to be reconciled now,
but it flags some of the operational issues Number one,
Number two, they have made a lot of M and
A that just didn't create the synergies that they had hoped. So,
you know, they did hire the former HPCFO to streamline
(09:56):
the financials, and with the Juniper merger UH starting underway,
I suspect that, you know, the new strategy board will
try to find more operational synergies between the two networking businesses.
Speaker 6 (10:11):
Wiji And can you dig more into how it's under
pressure kind of like lagging behind Dell and growing AI
What kind of pressure is it facing in that in
that market?
Speaker 7 (10:20):
Yeah?
Speaker 9 (10:21):
So, so if we if we think about AI, right,
you know, HP actually owns Cray and we think about
high performance compute.
Speaker 7 (10:32):
They are the market leaders there.
Speaker 9 (10:34):
They weren't a HP has not been able to transition
that Cray business elegantly uh to uh the to the
AI side of things. So let me put this into context.
I think HPE should be on track for about three
to four billion dollars in AI sales UH this year,
(10:54):
possibly you know four to five. Right, Dell is going
to be on track for about fifteen billion dollars this year,
and super Micro is probably on track for about twenty
twenty billion this year. So you know, they've lagged on
the AI front even though they have some of the
leading technologies on high performance compute. That's an area that
you know, could be fixable under the right hands.
Speaker 2 (11:18):
One more here before we let you go, which is
just you mentioned they owned craye, they owned Juniper. If
I'm Elliott Management, am I thinking about maybe they can
be selling or spinning off some of these businesses to
enhance value.
Speaker 9 (11:31):
Well, you know, Bob Calderoni used to be on the
Juniper board and they actually helped with the operational streamlining
of Juniper. Right, So I think that you want to
keep Juniper. Okay, there are other aspects of the networking
business that you could probably probably pars away. Right, the
(11:52):
CRAG business you'd want to keep because AI is going
to be the growth engine and also help you transition
to the enterprise AI.
Speaker 5 (11:59):
All right, Jinho, thank you so much for joining us.
Speaker 2 (12:01):
Wuojin host is senior techanalyst for Bloomberg Intelligence based down
there are BI offices down there in Princeton, New Jersey.
Speaker 1 (12:09):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarclay and Android Otto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (12:22):
All right, let's get back to a story that crossing
the tape over in Europe.
Speaker 3 (12:27):
Earlier this morning, the.
Speaker 5 (12:28):
Agio CEO, Deborah Crew steps down.
Speaker 3 (12:31):
What's going on there?
Speaker 2 (12:32):
Duncan Fox Bloomberg Intelligence senior consumer staples analyst joins this year, Duncan,
what's happening at Diagio?
Speaker 8 (12:41):
Well, I suppose the performance of the shares and the
organic growth and sales et cetera haven't been very good
for the last couple of years since she became CEO,
so there was sort of rumors, a bit of pressure
that she should go. But it's ironic that she has
performed the other Spirit companies in Europe period, So I
(13:01):
think it just shows you have to show something to
shareholders not to sort of have rumblings of discontent in
the background.
Speaker 6 (13:09):
So how long has she been there? And then who's
stepping in for now?
Speaker 8 (13:14):
Well, at the moment, well, she's been there two years
a CEO, and she was she was sort of going
to take over from the previous CEO, and she'd been
there about six to nine months before that to sort
of get to know the business. Tempory CEO is going
to be Nick Jingyangi through the CFO. He's only been
there nine months, so that's quite clear. They now have
(13:36):
to go out and get the right CEO to take
them to the next phase, which essentially is getting through
tariffs and now that they've got rid of the excess
inventory in most of the countries around the world, actually
driving organic growth again.
Speaker 2 (13:51):
All right, looking at the stock over the last five
years on a compounded annual basis, the agio down per
year and when you put against the foot sea up
almost eleven percent a year.
Speaker 3 (14:02):
You see the real underperformance there.
Speaker 2 (14:04):
But if you just look at a relative to the
foot Sea All Share Beverages index, that's down more than
two percent, So it's not that bad relative to the industry,
but it's a tough industry. Duncan aredner growth drivers for
the Spirit's business.
Speaker 8 (14:20):
Long term. Yeah, So in the short term you had
obviously the excesses after COVID where shutdowns of cup clubs
and bars really hurt, so they had a nice benefit
when everybody restocked. Then interest rates went up inflation that
really killed people going out, and that's really the problems
they've had to get over. And subsequently you had tariff
(14:42):
in China thirty nine percent of not actually affecting Diazure,
but obviously President Trump, which I heard talking about just earlier.
I could not tell you what European taris. We know
the UK will be ten percent, so it's good for
Scotch but I have no idea it's going to be
for anything else that they've got within their portfolio. So
(15:03):
you know, this is the problem. It's very difficult to
pin down your earnings estimates and they've obviously been falling
for about eighteen months two years now to really say
that the recovery is coming, because we just don't know
whether it's going to be two hundred percent, which was
rumored at some point after April, or it could go
down to ten. It really is up in the air
(15:24):
of the moment, and that's the problem for the whole
spirits industry. I'm afraid.
Speaker 6 (15:27):
Yeah, now, duncan you mentioned tariffs. But also there's a
lot of stories we were talking about about people drinking less.
I mean, does that play into this as well?
Speaker 5 (15:35):
Please, except for Paul.
Speaker 8 (15:39):
Well, well done for we needed to drink a lot more,
by the way. There's a couple of issues that I mean,
it's true that the gen Z's have at some point
we're sort of abstaining a little bit from alcohol, and
I think people took that a little bit too fast,
assuming that people were going to switch to cannabis based
beverages or something else. But what is happening, is what's
(16:02):
happened for the last twenty years, is that people are
drinking less, but they're drinking better. So that actually plays
into the spirit's portfolio better than probably beer beer, to
be honest, because you know you'll probably have an expensive cocktail,
we'll shut out with friends rather than four or five beers.
So it's the way they set the strategy up. Every
(16:23):
company our follow has that as their strategy. They push
you towards the premium brands. But to do that you
need inflation to be tamed, and that is still not
a guarantee, just as we sit here today, as we
saw from US and UK inflation today US yes, and
in the UK today. So yeah, there's still question marks
(16:43):
over when the volume and the mixed sales growth will
return in the spirits industry.
Speaker 5 (16:48):
Well, we'll pay close attention to that.
Speaker 3 (16:50):
I can guarantee you that.
Speaker 2 (16:52):
Duncan Fox Senior Consumer Staples and Nanos were Bloomberg Intelligence
just breaking down what we're seeing in the global spirits business,
had some turnover senior management at the and just kind
of get into lowdown on that side of the consumer.
Speaker 1 (17:04):
Right now, you're listening to the Bloomberg Intelligence podcast. Catch
us live weekdays at ten am Eastern on Apple Coarcklay
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on YouTube.
Speaker 2 (17:20):
It's kind of the commercial banks we've been talking to
Allison Williams of Bloomberg Intelligence. The past couple of days
on the big money center banks, the big global investment banks.
Now it's time to focus on the regional banks. And
what I learned during a regional bank crisis a few
years ago is the United States has about five thousand
regional and community banks around the country.
Speaker 3 (17:39):
I had no idea it was that money that many.
Speaker 2 (17:43):
I don't think Herman Chan follows all of them, but
he follows a lot of them. Herman Chan, Bloomberg Intelligence
senior analysy covers the US regional banks. What are you
expecting nath to hear from your banks this quarter? How
is their business right?
Speaker 10 (17:54):
So earning season's kicked off today for a number of
region halls, and what we've seen as just a resilient economy.
Credit quality was really stable. A lot of the banks
reduce their bad debt provisioning, so provisioning for credit losses,
and that just shows that you're not seeing charge offs
(18:16):
really rise from here. Consumers are active in spending, and
commercial barroers are really transacting. They're preparing for terrorists, and
you've seen an increased in lending activity because of that.
Speaker 6 (18:30):
Now, when we look at local banks. I look at
my local bank and sometimes it seems like more of
a billboard.
Speaker 7 (18:35):
I don't see it as so busy.
Speaker 6 (18:38):
I mean talk about the trend of how these local
branches are changing. I mean some are cafes.
Speaker 7 (18:44):
Even right right. Yeah.
Speaker 10 (18:47):
Banks view their branches as a marketing ploy and really
to help support their customers. One thing that they're doing
is they're reducing the real estate footage within these branches,
so that's helping reduce costs. But a lot of the
regionals that I cover are really expanding as well. They're
growing in new markets, particularly where the growth is right.
(19:10):
So I cover a number of Midwest banks like PNC
and Huntington, and they're growing in the higher growth areas
in the sun belt areas. So that's something that we
see ongoing and just changing the mix of the demographic
growth for that company's How.
Speaker 2 (19:27):
Did the regional banks compete with private credit? A lot
of the private credit funds that we talked to, at
least at the beginning, they started out targeting the mid market, right,
middle sized market companies, not like the big multikajillion dollar reels.
But that's right where those regional banks like to play, right,
how's that dynamic competitor that dynamic work.
Speaker 7 (19:48):
Yeah, it's been interesting.
Speaker 10 (19:50):
I would say that for a lot of the regionals,
there's not a lot of direct competition quite yet. I
would say the private credit folks are are catering to
a more riskier company. So, for example, we've taken a
look at this a little bit. Where the private credit
companies are you're talking about loan yields north of ten percent,
(20:13):
whereas the traditional middle markets bank borrower is much more stable,
so we're talking about six eight percent yields. So it's
a different company, but we do see private credit really
will continue to encroach over time.
Speaker 6 (20:30):
So you talked about some of the risks, some of
the challenge that regional banks are facing. What are some
of the things that they can kind of look forward to.
Speaker 7 (20:37):
Yeah, Really, what a lot of the regional.
Speaker 10 (20:41):
Banks have talked about thus far in the second quarter
earnings is there's some pent up demand in lending and
that's been positive. Their customers are preparing for tariffs and
really increasing their line utilization, which is helping commercial and
industrial lending. And they've been really saying when about the
(21:02):
risk of terrace and we haven't seen really the credit
quality deterioration that folks may have anticipated in April after
Liberation Day.
Speaker 2 (21:12):
Credit quality, specifically commercial real estate. There was concern that
if there was going to be a problem in our
financial system from some falling particularly office real estate that
we've seen in the middle sized regional banks.
Speaker 10 (21:26):
Have we seen that, Yeah, I would say that's an
ongoing issue. We've seen losses continue, but they're manageable.
Speaker 7 (21:35):
Office commercial real estate.
Speaker 10 (21:37):
On average, for the companies that I cover in the
large regional bank space, it's about two percent of their
total loan portfolio, So it's manageable. P ANDZ just talked
about this earlier, just a few moments ago on their
earning scar and they said that charge offs could rise
in future quarters because of deterioration and commercial real estate,
but they're already fully reserved for that and they prepared
(21:58):
for that eventuality.
Speaker 8 (22:00):
Now.
Speaker 6 (22:01):
I cover a lot of different conferences here at Bloomberg,
and one of them is with banks and AI. So
how to regional banks because they're not as big as
the you know, the big bank. So where do they
stand as far as AI and how much money they
put into.
Speaker 10 (22:15):
Yeah, I view AI as a tool for the regional
banks to continue to reduce their expenses, so it should
help them in ways like reducing their the employees in
the cost center is one where regional banks use chat
bots and AI power chat bots to really help their
(22:35):
customer base with in a more efficient manner and things
that are more you know, human intensive. It could help
reduce some of and streamline operations. Right now, it's more
feeling it out. I don't think a lot of the
regional banks have really jumped full board, but they are
exploring ways to reduce costs over time.
Speaker 3 (22:57):
All right, Hermi Chan, thank you so much. We appreciate that.
Speaker 5 (22:59):
Hermie.
Speaker 2 (23:00):
Senior analysts for US regional banks for Bloomberg Intelligence, join
us live here on our Bloomberg Interactive Broker studio.
Speaker 1 (23:06):
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Speaker 2 (00:22):
YouTube Asertao Paul Swiney live here in our Bloomberg Interactive
Broker studio. We are streaming live on YouTube as well,
so go check us out there. I've been doing the
stock market thing at leasta for like forty years almost
still have.
Speaker 3 (00:34):
No idea how this whole thing works.
Speaker 2 (00:35):
I mean, look at Goldman, Sachs, Morgan, Stanley, b of A,
what I thought were really pretty darn good quarters in
a world where we're not really sure what's going on.
Speaker 3 (00:44):
So of course all the.
Speaker 2 (00:45):
Stocks are trading down today, so I can't figure it out.
But our next guest is an expert.
Speaker 3 (00:49):
She knows what's going on.
Speaker 2 (00:50):
Alison Williams, senior analy she covers all the big banks
and all that kind of good stuff for Bloomberg Intelligence.
She joins us here in our studio here. So as
you looked at you know again we've had two days
of the big banks Alison, and you've been covering these
guys for a very long time. You've seen it all
come and go. How are the big banks investment banks
doing this quarter?
Speaker 4 (01:09):
Well, you mentioned you've been doing this forty years and
you've never seen a corner like you saw Goldman Sachs
equity trading record YEP trading. I mean, the really stand
out for Goldman is they're the biggest inequity trading. They
are the biggest in M and A and they had
the biggest jump, so really solidifying that leadership. I mean
(01:30):
the equity trading up thirty six percent, prime brokerage, cash derivatives.
We talked about the fact that we saw record trading
on the equities exchanges this corner. We certainly saw that
come through with the banks, M and A. Goldman talking
about the fact that announce volumes are up thirty percent
and we're running above average now, so that bodes well
(01:51):
for the future. And I think, you know, in terms
of the stock reactions that you refer to, I think
you know, so as I said, we can see that
they're there was a lot of strength in the exchange volumes.
We could see that you know, IPOs had rebounded the
last couple of months. Even though you know it wasn't
an analyst numbers, I think there was some visibility there.
Speaker 5 (02:11):
So I think in terms of.
Speaker 4 (02:12):
What the stocks are reacting to, Morgan Stanley had a
really strong quarter, you know, beat everything, but just not
as good as Goldman, And I think people are looking
at that equities trading. Morgan Stanley was in the lead
for a few years and now Goldman is really pulling ahead.
Speaker 6 (02:27):
Yeah, and I see because the whole morning I was like,
why is the stack where?
Speaker 1 (02:31):
Ever?
Speaker 6 (02:31):
Since the bell opened, it is.
Speaker 4 (02:33):
And by the way, like wealth, wealth is the business
that people watch for them the wealth flows. You know,
the numbers were good, so again, what are people worried about?
So it could be the market share. Morgan Stanley did
point out that they had a record quarter in Europe.
They said that they're gaining share. We'll see what happens
when the Europeans report and Asia. The other thing is
(02:55):
capital so buybacks better than expected at Goldman, weaker at
Morgan Stanley. And keep in mind we've seen these big
moves in the financials, A lot of that is really
about the capital return story well and.
Speaker 6 (03:08):
The consumer resilience. We look to Bank of America for
that So did you did you see it?
Speaker 4 (03:12):
We did see it, and I think that is what
we've what we saw in the quarter. So net interest
income as well as charge offs, those are kind of
the two bank business lines, if you will, that are
most revolving around lending and consumer health, and you know,
interest income. It was like a little bit soft in
the quarter, but the outlooks are fine or better and
(03:35):
credit coming in in line to better than expected, and
the reserve building really telling you that, look, there is
some conservative conservatism baked in for some uncertainty in the
second half, but in general things are improved.
Speaker 2 (03:52):
When President Trump was elected for this second term, almost immediate,
people are saying, by the banks they're going to be
the beneficiaries of reducing regulation and reduced oversight.
Speaker 3 (04:02):
Has that happened? Do we still expect that to happen?
Is that still part of the story.
Speaker 7 (04:06):
I think, you know, we're on a journey.
Speaker 4 (04:08):
I guess if you if you'd say, isn't that the
current rhetoric? But I think that's why the good buybacks
were important. Right. So the reason one of the things
that people are very excited about in terms of reduced
regulation is holding less capital returns our equity, you're going
to go up mathematically, there'll be more money to return
to shareholders. I mean, Goldman had really that leading dividend
(04:31):
increase that we saw after the stress tests, buy backs
better than expected, you know, And meanwhile I saw the
weakness of Morgan Stanley Wells Fargo another one that was
another bank that investors were really optimistic about. After the
US election, they did get the asset cap removed, so
I think there's there's a long term overhang over the stock.
(04:53):
But in the current quarter, people were a little disappointed.
Like you know, they didn't give any guidance on buybacks,
it didn't change their retre earned target, and you know,
it just might be that that's that's going to come.
But didn't get the news yesterday.
Speaker 6 (05:06):
Private credit, Where did banks stand with private credit? Your
JP Morgan say they would have best like fifty billion
dollars in private credit. So what kind of examples that
set for the industry.
Speaker 4 (05:16):
You know, I think, And Jamie Diamond also, I think,
you know, made some comments around private credit that I
know we're picked up in the headlines. I think that again,
you know, private credit, it's it's it's been sort of
you know, the hot the hot item for us all
to talk about. But you know, maybe you know and
we are seeing, you know, continued strength. I think we
(05:38):
do expect continued fundraising, but you know, I would say
nothing really stands out.
Speaker 3 (05:44):
This quarter from any of the banks.
Speaker 2 (05:46):
Yeah, at least was asking before we went on here,
can she ask you about private credit? I said, you
can ask Alison about anything and still having a formed opinion.
Speaker 3 (05:53):
That's why I'm going going down this alley.
Speaker 2 (05:56):
Strong results out of the US big banks this week,
we're going to hear from the European ones. I guess
next week, when is a European Union going to say,
if we ever want to compete in global finance, we
have to allow across murder merger deals. Is that even
on the table?
Speaker 4 (06:17):
I mean, I think that it does come up, and
I think we have heard regulators talk about it like yo,
yes we should do something. But the question is, you know,
everyone wants to be the one, you know, the victor.
They want to be the one you know where you
know they're champion, is the buyer. And so I think
that's you know, where the rubber meets the road. If
(06:38):
you will, it will be interesting to your point, when
we see those Europeans report again Morgan Stanley wreckerd quarter
in Europe, they said the first half, they called it
extraordinary in Asia. Obviously, we know Asia is a lot
a lot of diverse parts, but the Europeans, like UBS ten,
have tended to be stronger there. So so if this
(07:01):
quarter we don't see them participate and kind of follow
that Morgan Street Stanley lead, that will give us further
proof that they're actually losing share in their home market,
and that should be a little bit more concerning.
Speaker 2 (07:12):
I mean, you could argue that the horse is already
out of the barn. They've missed it. I'm just thinking
twenty years ago, it was so much more competitive. They
were so much more competitive. I remember just going up
against some of those big European banks, and now it's
almost like an afterthought. It's just amazing how that's evolved.
Alson Waims, thank you so much.
Speaker 7 (07:29):
Appreciate that.
Speaker 2 (07:29):
Alison Willims, she's a Seene analyst covers all global financials.
If you have any question on anything on Global Wall Street,
you can.
Speaker 3 (07:36):
Just go up to Allison on the Street and answer.
So have an answer for you.
Speaker 1 (07:41):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple Coarclay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 6 (07:55):
This is Bloomberg Intelligence. I'm Lismiths Matteo along as I'm
Paul Sweeney. We do have some news at a Hewlett
Packard enterprise. So it's creating this new strategy committee. Turning
to Elliott Investment Management for help with this. Here with
all the details and to break it all down for
us is Woodin, who Blueberg Intelligence, Senior technology analyst. Woodin,
(08:15):
Thank you for joining us. I want to start with,
of course, who is involved in Who is part of
this committee?
Speaker 8 (08:22):
Yeah?
Speaker 9 (08:22):
Sure, thanks Lisa. So it is a handpicked board member
by Elliott Management. Keep in mind Elliott is an activist
investor that has a ten percent plus shareholding of HPE.
I believe they made their position early in this year
and who they appointed was Bob Calderoni, who has done
(08:47):
similar type of deals in terms of taking companies private
or more importantly operational streamlining. So any changes I think
Elliott is going to try through Bob to affect a
lot of changes at HP.
Speaker 5 (09:01):
Mooch, just remind us what HP is today?
Speaker 3 (09:04):
Number one?
Speaker 5 (09:05):
And number two, what do they need to fix to
move this thing forward?
Speaker 9 (09:09):
Yeah, hey, Paul, so, HPE is one of the leading
enterprise IT infrastructure vendors. They provide servers, storage, now a
bigger networking presence with the Juniper acquisition, and actually, quite
quite frankly, there's quite a bit to fix from an
operational standpoint. They fumbled the first quarter results by mispricing
(09:35):
their server business and it seems to be reconciled now,
but it flags some of the operational issues Number one,
Number two, they have made a lot of M and
A that just didn't create the synergies that they had hoped. So,
you know, they did hire the former HPCFO to streamline
(09:56):
the financials, and with the Juniper merger UH starting underway,
I suspect that, you know, the new strategy board will
try to find more operational synergies between the two networking businesses.
Speaker 6 (10:11):
Wiji And can you dig more into how it's under
pressure kind of like lagging behind Dell and growing AI
What kind of pressure is it facing in that in
that market?
Speaker 7 (10:20):
Yeah?
Speaker 9 (10:21):
So, so if we if we think about AI, right,
you know, HP actually owns Cray and we think about
high performance compute.
Speaker 7 (10:32):
They are the market leaders there.
Speaker 9 (10:34):
They weren't a HP has not been able to transition
that Cray business elegantly uh to uh the to the
AI side of things. So let me put this into context.
I think HPE should be on track for about three
to four billion dollars in AI sales UH this year,
(10:54):
possibly you know four to five. Right, Dell is going
to be on track for about fifteen billion dollars this year,
and super Micro is probably on track for about twenty
twenty billion this year. So you know, they've lagged on
the AI front even though they have some of the
leading technologies on high performance compute. That's an area that
you know, could be fixable under the right hands.
Speaker 2 (11:18):
One more here before we let you go, which is
just you mentioned they owned craye, they owned Juniper. If
I'm Elliott Management, am I thinking about maybe they can
be selling or spinning off some of these businesses to
enhance value.
Speaker 9 (11:31):
Well, you know, Bob Calderoni used to be on the
Juniper board and they actually helped with the operational streamlining
of Juniper. Right, So I think that you want to
keep Juniper. Okay, there are other aspects of the networking
business that you could probably probably pars away. Right, the
(11:52):
CRAG business you'd want to keep because AI is going
to be the growth engine and also help you transition
to the enterprise AI.
Speaker 5 (11:59):
All right, Jinho, thank you so much for joining us.
Speaker 2 (12:01):
Wuojin host is senior techanalyst for Bloomberg Intelligence based down
there are BI offices down there in Princeton, New Jersey.
Speaker 1 (12:09):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Applecarclay and Android Otto
with the Bloomberg Business app. Listen on demand wherever you
get your podcasts, or watch us live on YouTube.
Speaker 2 (12:22):
All right, let's get back to a story that crossing
the tape over in Europe.
Speaker 3 (12:27):
Earlier this morning, the.
Speaker 5 (12:28):
Agio CEO, Deborah Crew steps down.
Speaker 3 (12:31):
What's going on there?
Speaker 2 (12:32):
Duncan Fox Bloomberg Intelligence senior consumer staples analyst joins this year, Duncan,
what's happening at Diagio?
Speaker 8 (12:41):
Well, I suppose the performance of the shares and the
organic growth and sales et cetera haven't been very good
for the last couple of years since she became CEO,
so there was sort of rumors, a bit of pressure
that she should go. But it's ironic that she has
performed the other Spirit companies in Europe period, So I
(13:01):
think it just shows you have to show something to
shareholders not to sort of have rumblings of discontent in
the background.
Speaker 6 (13:09):
So how long has she been there? And then who's
stepping in for now?
Speaker 8 (13:14):
Well, at the moment, well, she's been there two years
a CEO, and she was she was sort of going
to take over from the previous CEO, and she'd been
there about six to nine months before that to sort
of get to know the business. Tempory CEO is going
to be Nick Jingyangi through the CFO. He's only been
there nine months, so that's quite clear. They now have
(13:36):
to go out and get the right CEO to take
them to the next phase, which essentially is getting through
tariffs and now that they've got rid of the excess
inventory in most of the countries around the world, actually
driving organic growth again.
Speaker 2 (13:51):
All right, looking at the stock over the last five
years on a compounded annual basis, the agio down per
year and when you put against the foot sea up
almost eleven percent a year.
Speaker 3 (14:02):
You see the real underperformance there.
Speaker 2 (14:04):
But if you just look at a relative to the
foot Sea All Share Beverages index, that's down more than
two percent, So it's not that bad relative to the industry,
but it's a tough industry. Duncan aredner growth drivers for
the Spirit's business.
Speaker 8 (14:20):
Long term. Yeah, So in the short term you had
obviously the excesses after COVID where shutdowns of cup clubs
and bars really hurt, so they had a nice benefit
when everybody restocked. Then interest rates went up inflation that
really killed people going out, and that's really the problems
they've had to get over. And subsequently you had tariff
(14:42):
in China thirty nine percent of not actually affecting Diazure,
but obviously President Trump, which I heard talking about just earlier.
I could not tell you what European taris. We know
the UK will be ten percent, so it's good for
Scotch but I have no idea it's going to be
for anything else that they've got within their portfolio. So
(15:03):
you know, this is the problem. It's very difficult to
pin down your earnings estimates and they've obviously been falling
for about eighteen months two years now to really say
that the recovery is coming, because we just don't know
whether it's going to be two hundred percent, which was
rumored at some point after April, or it could go
down to ten. It really is up in the air
(15:24):
of the moment, and that's the problem for the whole
spirits industry. I'm afraid.
Speaker 6 (15:27):
Yeah, now, duncan you mentioned tariffs. But also there's a
lot of stories we were talking about about people drinking less.
I mean, does that play into this as well?
Speaker 5 (15:35):
Please, except for Paul.
Speaker 8 (15:39):
Well, well done for we needed to drink a lot more,
by the way. There's a couple of issues that I mean,
it's true that the gen Z's have at some point
we're sort of abstaining a little bit from alcohol, and
I think people took that a little bit too fast,
assuming that people were going to switch to cannabis based
beverages or something else. But what is happening, is what's
(16:02):
happened for the last twenty years, is that people are
drinking less, but they're drinking better. So that actually plays
into the spirit's portfolio better than probably beer beer, to
be honest, because you know you'll probably have an expensive cocktail,
we'll shut out with friends rather than four or five beers.
So it's the way they set the strategy up. Every
(16:23):
company our follow has that as their strategy. They push
you towards the premium brands. But to do that you
need inflation to be tamed, and that is still not
a guarantee, just as we sit here today, as we
saw from US and UK inflation today US yes, and
in the UK today. So yeah, there's still question marks
(16:43):
over when the volume and the mixed sales growth will
return in the spirits industry.
Speaker 5 (16:48):
Well, we'll pay close attention to that.
Speaker 3 (16:50):
I can guarantee you that.
Speaker 2 (16:52):
Duncan Fox Senior Consumer Staples and Nanos were Bloomberg Intelligence
just breaking down what we're seeing in the global spirits business,
had some turnover senior management at the and just kind
of get into lowdown on that side of the consumer.
Speaker 1 (17:04):
Right now, you're listening to the Bloomberg Intelligence podcast. Catch
us live weekdays at ten am Eastern on Apple Coarcklay
and Android Auto with the Bloomberg Business App. Listen on
demand wherever you get your podcasts, or watch us live
on YouTube.
Speaker 2 (17:20):
It's kind of the commercial banks we've been talking to
Allison Williams of Bloomberg Intelligence. The past couple of days
on the big money center banks, the big global investment banks.
Now it's time to focus on the regional banks. And
what I learned during a regional bank crisis a few
years ago is the United States has about five thousand
regional and community banks around the country.
Speaker 3 (17:39):
I had no idea it was that money that many.
Speaker 2 (17:43):
I don't think Herman Chan follows all of them, but
he follows a lot of them. Herman Chan, Bloomberg Intelligence
senior analysy covers the US regional banks. What are you
expecting nath to hear from your banks this quarter? How
is their business right?
Speaker 10 (17:54):
So earning season's kicked off today for a number of
region halls, and what we've seen as just a resilient economy.
Credit quality was really stable. A lot of the banks
reduce their bad debt provisioning, so provisioning for credit losses,
and that just shows that you're not seeing charge offs
(18:16):
really rise from here. Consumers are active in spending, and
commercial barroers are really transacting. They're preparing for terrorists, and
you've seen an increased in lending activity because of that.
Speaker 6 (18:30):
Now, when we look at local banks. I look at
my local bank and sometimes it seems like more of
a billboard.
Speaker 7 (18:35):
I don't see it as so busy.
Speaker 6 (18:38):
I mean talk about the trend of how these local
branches are changing. I mean some are cafes.
Speaker 7 (18:44):
Even right right. Yeah.
Speaker 10 (18:47):
Banks view their branches as a marketing ploy and really
to help support their customers. One thing that they're doing
is they're reducing the real estate footage within these branches,
so that's helping reduce costs. But a lot of the
regionals that I cover are really expanding as well. They're
growing in new markets, particularly where the growth is right.
(19:10):
So I cover a number of Midwest banks like PNC
and Huntington, and they're growing in the higher growth areas
in the sun belt areas. So that's something that we
see ongoing and just changing the mix of the demographic
growth for that company's How.
Speaker 2 (19:27):
Did the regional banks compete with private credit? A lot
of the private credit funds that we talked to, at
least at the beginning, they started out targeting the mid market, right,
middle sized market companies, not like the big multikajillion dollar reels.
But that's right where those regional banks like to play, right,
how's that dynamic competitor that dynamic work.
Speaker 7 (19:48):
Yeah, it's been interesting.
Speaker 10 (19:50):
I would say that for a lot of the regionals,
there's not a lot of direct competition quite yet. I
would say the private credit folks are are catering to
a more riskier company. So, for example, we've taken a
look at this a little bit. Where the private credit
companies are you're talking about loan yields north of ten percent,
(20:13):
whereas the traditional middle markets bank borrower is much more stable,
so we're talking about six eight percent yields. So it's
a different company, but we do see private credit really
will continue to encroach over time.
Speaker 6 (20:30):
So you talked about some of the risks, some of
the challenge that regional banks are facing. What are some
of the things that they can kind of look forward to.
Speaker 7 (20:37):
Yeah, Really, what a lot of the regional.
Speaker 10 (20:41):
Banks have talked about thus far in the second quarter
earnings is there's some pent up demand in lending and
that's been positive. Their customers are preparing for tariffs and
really increasing their line utilization, which is helping commercial and
industrial lending. And they've been really saying when about the
(21:02):
risk of terrace and we haven't seen really the credit
quality deterioration that folks may have anticipated in April after
Liberation Day.
Speaker 2 (21:12):
Credit quality, specifically commercial real estate. There was concern that
if there was going to be a problem in our
financial system from some falling particularly office real estate that
we've seen in the middle sized regional banks.
Speaker 10 (21:26):
Have we seen that, Yeah, I would say that's an
ongoing issue. We've seen losses continue, but they're manageable.
Speaker 7 (21:35):
Office commercial real estate.
Speaker 10 (21:37):
On average, for the companies that I cover in the
large regional bank space, it's about two percent of their
total loan portfolio, So it's manageable. P ANDZ just talked
about this earlier, just a few moments ago on their
earning scar and they said that charge offs could rise
in future quarters because of deterioration and commercial real estate,
but they're already fully reserved for that and they prepared
(21:58):
for that eventuality.
Speaker 8 (22:00):
Now.
Speaker 6 (22:01):
I cover a lot of different conferences here at Bloomberg,
and one of them is with banks and AI. So
how to regional banks because they're not as big as
the you know, the big bank. So where do they
stand as far as AI and how much money they
put into.
Speaker 10 (22:15):
Yeah, I view AI as a tool for the regional
banks to continue to reduce their expenses, so it should
help them in ways like reducing their the employees in
the cost center is one where regional banks use chat
bots and AI power chat bots to really help their
(22:35):
customer base with in a more efficient manner and things
that are more you know, human intensive. It could help
reduce some of and streamline operations. Right now, it's more
feeling it out. I don't think a lot of the
regional banks have really jumped full board, but they are
exploring ways to reduce costs over time.
Speaker 3 (22:57):
All right, Hermi Chan, thank you so much. We appreciate that.
Speaker 5 (22:59):
Hermie.
Speaker 2 (23:00):
Senior analysts for US regional banks for Bloomberg Intelligence, join
us live here on our Bloomberg Interactive Broker studio.
Speaker 1 (23:06):
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