00:00I do want to kind of unpack this from two separate angles. I mean, there is a
00:02the fundamental story of what these companies will report, but there's also a valuation concern
00:07given the big run up that we saw in the prices, at least of some of these companies
00:11over the last few months. What takes priority for you?
00:17Well, Romain, thanks very much for the question. And nice to be here and see you in 2026.
00:22As we lean into earnings on Tuesday, what we are looking for is
00:29earnings to come pretty much in line with expectations. I'm a little bit above most of
00:36my names and I'm above 3% versus consensus on both JP and BNY. So our setup is a positive for
00:45Tuesday kickoff. And what I think matters is both the outlook here for earnings as well as the
00:55pent up backlog building in the capital markets. As we look into 2026, we are expecting that estimates
01:06will be moving higher throughout the course of the year as the backlog is executed on. I'm talking
01:13about M&A. I'm talking about equity capital market activity like IPOs. Yeah. As well as
01:21just the global trends that we're already seeing playing out in a way that is positive for loan
01:29growth. So I think estimate revisions will be higher. I am curious, at least on the capital
01:34market side. I mean, we know that certain companies, particularly JP Morgan, has done pretty well in this
01:39space. But you've seen companies, particularly like Wells Fargo, trying to make more strides in
01:43the capital markets business. Do you see the potential that they, at least in 2026, not
01:48necessarily next week, that they will be more aggressive in guiding investors towards returns
01:54from that segment of their business? Well, specifically, I would say that on, you know,
02:02this earnings season, that as we look to what Wells will be doing in 2026, it's going to be a function
02:09of their execution. I don't think Charlie Scharf will be looking to overpromise. I feel that there is much
02:18more of an outlook here for execution on their goals and their targets, which include getting back some
02:27share that they had lost during the period when they had the asset cap on in a variety of businesses.
02:32But I don't expect that management is going to tell us exactly what they will do in 26. I think they
02:40will point to opportunities for investment spend to deliver in a variety of different areas of the
02:48business, not just investment banking. Well, Wells Fargo is so interesting right now, because I feel
02:52like they really exemplify what Romain was asking about, you know, the fundamentals versus the valuation.
02:58We were just having this conversation with David George over at Baird, that the fundamentals look
03:03very good for Wells right now. As you say, a lot of that comes down to execution, though. But also,
03:08how are you thinking about the valuation of Wells, given that there's a lot of good news in this stock
03:13right now? Right. So I think I would like to start off by talking about the sector overall,
03:22that as we're thinking about large cap banks, we're looking for a year of earnings,
03:26positive earnings revisions and multiples staying where they are. I am not calling for multiple
03:33expansion for the group, but I do see a pathway for the stocks to perform in line with estimate
03:43revisions. That's how I'm thinking about it. And when you look at valuations, I get the point.
03:51You look at valuations and you say, wow, these valuations look high relative to history.
03:54Remember, we're also dealing with an industry with significantly higher levels of capital than we
04:01have seen in the past. So they're less risky. And that should give you some premium multiple.
04:09I'm not as worried about the multiples. I think this is more a story of 26 about earnings,
04:15positive earnings revisions driving the stocks. And I mean, zooming out, I mean, you think about the
04:21positioning of the large banks versus some of the regionals. We talked a little bit about M&A, but
04:26where are you feeling like you have the most conviction when it comes just to breaking it down
04:31by size buckets? Well, in my coverage, which is U.S. large cap banks and includes the money centers,
04:40B of A City, Goldman, J.P. Wells, as well as super regional banks like Truist and Wells Fargo,
04:50we count as a super regional bank, as well as PNC, USB, names like that, as well as the trust banks,
05:00BNY, State Street, where we are skewed for our overweights are on the large cap names,
05:09the money centers, where we see the capital markets really driving revenues into 26.
05:14And we're overweight on BNY and on State Street on positive operating leverage, in part driven by
05:23the benefits of AI rolling through. And these business models, as I'm sure you well know,
05:29are very skewed to being beneficiaries of AI. And that's already beginning to come through
05:35in the positive operating leverage. And then in the super regional banks we cover,
05:41that I cover, we are equal weight, primarily because these are models where we need to see
05:48more loan growth acceleration to really move more positively in terms of estimate revision expectations.
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