00:00So Sri, you know, I saw a story this morning on the Bloomberg saying which banks were expected to beat estimates, which to me, that doesn't make any sense.
00:09Why don't analysts then raise estimates? Well, they can only go about how the management is guiding them.
00:14And management's always smart to guide them to a place where they are sure when they report the numbers that they can try and beat those estimates.
00:20And that's what they've done this quarter. If you look at all the big numbers, especially in capital markets, especially in the investment bank side,
00:26when you look at trading and the deal making side of things, all the banks have done really well.
00:32And that was kind of expected. We knew that. As the year has progressed, you've seen a big tick up in deal announcements.
00:38That is now starting to flow through into fees. There has been heightened trading activities.
00:42And along with the financing side of that business in the markets unit for a lot of these banks, that has meant that the numbers have come in pretty good.
00:50So the next question is, if that's the case, why is JP Morgan trading down? Why is Goldman Sachs trading down?
00:56And the answer to that lies in the fact that when you're up 35 percent for the year, the market was already expecting you to perform well and even outperform.
01:05But in the last few days, especially with all the overnight news out of China, if there is any real risk that this spat grows into something worse than a spat,
01:15that could put a chill in markets again. That could make the big corporate clients uncertain again.
01:20And that would mean that all these businesses that have been firing on all cylinders for JP Morgan, for Goldman Sachs, for Morgan Stanley,
01:26everyone else, that could slow down and that could bring down their numbers and therefore impact their stock again.
01:32Right. So the big macro news affects them as well, obviously.
01:35And, you know, whether or not they beat estimates, that's kind of a numbers game.
01:39It's kind of a parlor trick that we play every quarter. It doesn't matter, I guess, to serious investors.
01:43But there is the color you get specifically from Jamie Dimon every quarter that we wait for on the economy and the involvement or the exposure that they have to these big bankruptcies that we've been hearing about.
01:55Tricolor, first brands. What do we know?
01:58So let's let's start off with the macro factors first, because when you look at the earnings results and try and read the tea leaves,
02:04what is it telling us about the broader consumer economy, about the broader economy in general?
02:08Well, to be frank, not a whole lot other than the fact that the U.S. economy is still very resilient.
02:14But Dimon, in his prepared remarks, in his statement, was very clear to point out that there are a lot of macroeconomic concerns brewing that could have a big impact on 2026.
02:23He's talking about the weakening labor market and his fear that there could be sticky inflation.
02:30That's really not good. And then you look at some of these idiosyncratic issues, if you want, with Tricolor, with first brands and how it has affected banks.
02:38J.P. Morgan was not exposed to first brands. But in the case of Tricolor, it had a one hundred and seventy million dollar charge off.
02:44That's the new news we got from J.P. Morgan today, that their hit from the Tricolor fiasco was about one hundred and seventy million dollars.
02:50That contributed to a roughly eight hundred million dollar credit cause.
02:54They said there's another one off situation where they've been impacted a little bit.
02:57Again, nothing systemic that we could point to. Diamond did say Tricolor was not our finest moment.
03:03And when something like this happens, you can be sure that we are reviewing all our checks and controls.
03:08And sometimes you just kind of avoid these situations.
03:11But we're going to do everything possible to make sure it doesn't happen again.
03:15What do we know about profitability for these banks looking forward?
03:19I heard Alison Williams from Bloomberg Intelligence say that, especially for Wells Fargo, you know, they've raised their return on tangible equity target.
03:27Wells Fargo is actually the most interesting news item today.
03:30And that's why the stock in the pre-market at least is up more than three percent.
03:32Because remember, back in June, that punitive action from the Federal Reserve, from their chief regulator that had placed an asset cap on Wells Fargo for so many years, that had been lifted.
03:43So that immediately led to questions about what would this mean for Wells Fargo?
03:47Can it finally narrow the gap with its bigger rivals like Bank of America and JP Morgan?
03:52Back in June, back in July, you didn't get that level of clarity from Wells Fargo.
03:57And that's why maybe the stock momentum also peeled off a little bit.
04:00But today they said they are lifting their medium-term targets for Rothschild, for their return on tangible common equity, to about 17 to 18 percent.
04:08That means the market can be certain that as their balance sheet grows, they will invest in activities that will surely drive up their profitability.
04:16And they're keen on sort of trying to make a play even in the investment bank segment.
04:20And you've seen their fees grow there.
04:21They're still a minnow compared to the big, big players.
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