Big Bank's Earnings Breakdown Continues

Bloomberg Business Weekend iTunes, SoundCloud, or Bloomberg dot Com. You can also listen to our radio show at two pm Eastern Time on Bloomberg Radio or watch us on YouTube search Bloomberg Clovel News. So we had another big batch of bank earnings, the Big Bank, City Group, equity sales, trading revenue topping estimates, Fick disappointing investment banking fees, a little bit of a surprise there, uh Bag of America struggling to build back its landing income wells Fargo, average

loans tumbling in the second quarter. We know that consumers and businesses, because of some of those stimulus programs, refrain from more borrowing. Tim Well, let's get right into it with Anton Show, its president and chief investment officer at Menden Capital Advisors, joining us once again on the from Florida. Anton. It's always great to have you on the show, especially when we're talking banks, because I know you follow the

regional banks very closely. But how are you thinking about or how would you characterize what we've heard from from the big banks this week as they've reported earnings for their second quarter. Yeah, for the most part, not a surprise. Um, you know loan growth if you if you, of course I watched the weekly loan growth numbers. No surprise, There isn't any long growth because there's so much liquidity out there, and part of that liquidity is finding its way into

deposits of the banks, which is lovely. It would be really nice if they could offset it with some loans instead of the low yield on some of the securities they're buying out there. Well, okay, right, it makes sense. Um, you know we talked about during the pandemic that was a pretty good environment for these big banks. What's the outlook for them or what stands out among the big ones Anton, that you have um that have reported, whether it's City, whether it's Bank of America, whether it's Wells

JP Morgan Goldman. Is there anybody in particular that you really kind of hone in on because as maybe an indicator where the financial world, the banking world is going well. You know, if you look at the big their national right, and you can't you can't pick on regions. You know, I love picking on regions of the world because some some regions have above trend growth, so on a national basis, you know, banking is tough because too much liquidity on

the bigger banks. I like Wells Fargo. It's a self help story, right, I mean, they're getting out from underneath this regulatory stuff. They've got insane amounts of excess capital because it has not been allowed to grow their balance sheet. You know, buybacks are a really big part of all of the big banks. And you know JP Morgan bought what five billion dollars of its own stock Glass Quarter

Goldmen bought a billion, you know, Bank America. I didn't didn't see the numbers this morning, but they're way up there as well. At Wells As, I think something like eighteen billion dollars worth of stock to buy over the next you know, year, year, a year and a half, so that's a lot of its market cap. And that's a lot of good support will lead to earnings growth. But the real, the real grail for these banks is you know, a faster g DT, a lot of long

growth materializing. It'll do wonders for their earnings. And you know, the interesting thing is they were all punished last year because they built all these giant loll loss reserves. Now they're releasing them, and you you see these giant earnings numbers on the surface, you all just releasing the loss reserves. That doesn't count well if you punish them on one side when you're punishing them again when they're releasing them.

But the point is they have really great credit. They have lots of capital um and they'll be buying back a lot of stock. And the dividends are being raised with a lot of these banks, so on the big I look at them as capital return stories, buy backs, uh, dividends. Those are very important for those and and wells I think is going to be able to eventually have higher earnings and estimates are gonna have to get raised if long growth materializes. This entire group estimates have to get raised.

How how are the results from the big banks? How are they informing you about the regional banks, the smaller banks that you follow so closely their results. Sure, So first of all, you know, JP Morgan really did actually talk about some long growth. Where it's not having long growth which doesn't impact the regionals is it's the credit card balances. The consumer is flush with cash, they've got lots of stimulus. So no, none of the big banks

are having growth there. So if you're a consumer lender other than on auto, which a lot of smaller banks are, you're really not getting a lot of long growth. You know, mortgage, the re five booms sort of ended. Um, you know, so that's tapid. But I think you're going to see good commercial long growth out of the southeast, out of Texas, out of Florida, um. And I think you're going to see more tapid growth in other parts of the country.

So among I'm looking at your R and B A mend in financial services fund um ANTI and it's up. It's up about three according to Bloomberg data year to date, so ninety one percent of I look at twelve months now, the fourth percent up almost a D three. What kind of allocations are you looking to do? Is there anything in your portfolio that you think is getting ahead of itself. How do you see some of those names. Yeah, that's

that's really you know. You sit there and you say, wow, you're up a hundred percent over twelve months, and there are things ahead of themselves. And I've had some people say that to me and things were so overdone. We were talking twelve months ago and how crazy the valuations were. On the downside. The interesting thing is is if I look at my average holding and I did this exercise about a week ago, so the numbers even better. They're

down about fifteen from their highs. So you know that a lot of things have not gotten ahead of themselves. Obviously rotated into some things that are cheaper. But I look at a number of my my positions that are trading it less than ten times next year's earnings, and you know, I want to own those. They have excess capital, they have good loan growth. I think they'll eventually get revalued higher. UM one of them and I'll first, Horizon closed a merger with Iberia last year, so that's got

some some really good evaluation here. I look at a pending merger between Bankcorps South and Cadence, and again Great Geographies four billion dollar Bank. Post the merger, you get a special divnated O owning Caden and I'm going under ten times next year's earnings. Yeah, I want to own as much as I can. And uh yeah, I mean so yeah, I see lots off side in those names.

They're well off there fifty two weeks. Well, always good to get a check with you and a lot of those regional banks, of course, their earnings to come, so we'll be tracking them here at Bloomberg. Anton take care. Anton shuts He's president, chief investment officer at Minden Capital Advisors, on the phone from Florida, wondering about all the M and A in if it's going to consolidation, right, consolidation. It's interesting as he went through some of those names

and talked about, uh, the activity that's still so highly regulated. Yeah, exactly. All right, you're listening to Bloomberg Radio. Today's Bloomberg Big Take. It's all so this week's cover story of Business Week magazine. It's about the future for the drug company that's become a household word during the pandemic. We're talking about Maderna and really what is its second act? Joining us now? Is Joel Weber, Editor at Bloomberg Business Week. He's with

us in the Bloomberg Interactive at Broker Studio. Also Bob Langrath, the healthcare reporter for Bloomberg News, joining us on the phone, the healthcare Star, the healthcare Star. He's also the author of this other story and lost track, like so long ago, and it was at the beginning of the pandemic. Who I was like, right, who can write about pandemics? Well a year ago, I think it's fair to say maybe Bob was thinking about m R and A, but most

of us in this room I don't think weren't. And I wonder what Moderna's second act is here right after the pandemic. Actually, I remember that exact conversation with Bob about a year and a half ago, and he was like, so, there's this company called Maderna that has this technology. It's

gonna be really interesting to see if it works. So here we are, um uh, and Bob, let's just bring you in, you know, Like the what we set out here to do was to say, look, like Maderna has been one of the big heroes of the pandemic, and if you can solve COVID nineteen, what else do they have and what else does? What else is mRNA capable of?

So what are they working on? Yeah? So yeah, it's efficacy has definitely been demonstrated very powerfully for vaccines, and so now they're working on a whole host of other vaccines. There's like about fifty or more viruses discovered the last forty years, only tiny handful of vaccines. You know. Maderna thinks that the technology, which is kind of modular and fast moving, can be you know, make vaccines to a lot of them. They're working on a food vaccine, They're

working on several of the respiratory viruses. They ultimately want to combine it to one kind of super booster that you might get like once a year, and they deal with the whole host of like you know, fall winter type respiratory viruses. They're working on long term kind of HIV and even starting I think, uh and have some early trials in cancer vaccines, which has been a long promising but very difficult area. Well, we've got a hundred billion questions for you about that. I mean, this company

hit a hundred billion dollar market cap today. The expectations on it are incredibly high in terms of what Maderna can do. Can this messenger RNA technology science really be trans translate to a lot of different vaccines ultimately or do we still not quite know. Well, we're gonna have to wait and see there's something gonna be testing a lot of things. Uh and uh. And you know, one of the things we talked about and the story is

that they're certainly pursuing booster shots uh. And we may need them or at least a third booster shot at some point. It's it's you know, not you know, not at all clear how big the you know, the market for COVID nineteen is going to be sort of in a long term, so there is going to be pressure for them to come up with other things and new things and not be dependent on, you know, an endless

market for COVID nineteen boosters. And the other thing going on is that now everyone else knows we other do a company in the world knows that this this technology can really work, you know, at least in the infections vaccinary and they're all pursuing an all kind of all trying to come up, like you know, new or better versions of m RNA. So it's you know, they're in a great position. But there's also a lot more very serious competition now. So you spent some time at one

of the production facilities for Moderna outside of Boston. It's a former Polaroid factory. What is the competitive advantage that the company has now that every other biotech company knows that m RNA has been so successful, at least when it comes to coronavirus. Oh. Yeah, the basic competitive advantage they have is they've done it. They've done a success and the only other companies that achieved that level of success is obviously fiser BioNTech. But not every mRNA vaccine

has worked as well. There's a third one that has tried cure Vac and it's trials came out a few weeks ago and it was only forty eight percent effectives. So not every iteration of things you put in. You can't just put in our mr andy vaccine and have it automatically work. You've got to make the right choices and then it can work, you know, do a powerful,

mean response. So they have you know, they are one of the two companies with real experience that doing this in a large scale now, and you know their production that you know they haven't matched Fizer, which has just been listening incredible. You know, vaccine producing juggernauts. They haven't matched Fiser BioNTech, but you know their their productions still.

You know, they haven't had big problems and kind of more or less made their numbers, uh so, which is you know, which is impressive for a company that hadn't really made until last Yearly they had a plan as a small plant, but it was basically kind of like a pilot plant, never made a hundred thousand doses of anything in a year, and now they're talking about as a billion doses uh this year. So so that's quite

a scale. Bob, you've followed obviously, you know that little story I said at the beginning where we sat next to each other in that conference from all those months ago, and you were like, so maderna uh in person that was it was in the before times, just just before

everything changed. Um. But but Bob, you know, I'm curious because you've written about maderna weekend week out over the past year, and then you got to do a story like this and to the CEO and everything else, I'm wondering, what did you learn while you were working on this story? You know, how they did this, and you know, it's still a very small company relatively what they've done. They

like they're up to people nowaday. You know, they were like eight hundred of the Star last year, so they get all this relatively small number of people, which is, you know, it's impressive they're able to to make this many doses, you know, with a few contractors and obviously some government funding and that was significant, but you know, it wasn't you know, it was until last year, until the pandemic came along. It was a startup company. There was a well funded startup but you know, most of

its most of its products were early trials. It wasn't planning to have anything in the market, you know, even if things went well for a few years. So this is like, you know, a rather you know, impressive scale and they certainly have big ambitions. But what I love about your reporting is you really explain the science right for those who are like, what is a message or it's still even today I get questions, you know, and

I'm sharing articles and links with people. You know, what is it about the science of a messenger RNA or of messenger RNA that makes it so adaptable to create maybe so many more uses and just got about a

minute or so. Yeah, So it doesn't like solve every miracle known to medicine, but it is relatively straightforward to produce because you're not you don't have to produce a whole new protein, which because a lot of biotech products are produced produced inside live cells chicken chicken eggs for X, some flu vaccines and even for monocolon antipole's producing vats of live cells, and that's very complicated. And this is actually just kind of a prototypes instructions and for the

body's own cells to produce a protein. And that makes it very module and very easily adaptable to new users. Very briefly, what the rails moderna with these ambitions? You know, uh, you know it doesn't work in other applications. You know, other competitors get their first or you know they don't you know, they don't have they don't have an intellectual

property stranglehold over the whole field. They can't like if they can't say, you know, we're the only ones with m R and so I think that's a really interesting point, you know, because you're gonna have all these other competitors and Bob goes into others now like a Chinese m R and a dark horse out there. But you know it may work for coronavirus as a vaccine, but whether or not that can translate into something that is a

therapeutic that works with cancer, big big question mark. Still right, Well, and as Bob Wright goes, you know, we rush this through right the f D. A approval process for anything else that they do is going to take years. So remember that when you look at the market cap and the valuation, it will take some time to play out. Um, great stuff. You make a smarter Bob Landreth, healthcare reporter oft Bloomberg News along with your Weber, editor of Bloomberg

Business Week. I'm so glad you have those conversations with your reporters. They never stopped. That's a good thing. All right. You're listening to Bloomberg Business Week, and this is Bloomberg Radio. Your list du Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Yeah, you're listening to Bloomberg Business Week Wednesday, July fourteenth. As we mentioned,

but steal day Apple shares check it out. Another record high today there's a couple of Apple stores you want to get to. We mentioned one yesterday about Apple teaming up with Goldman for a buy now, pay later services is a big deal. We saw a firm trade lower on that news Bloomberg exclusive. In fact buyer Mark German and Tree Ndarajan, who was also Mark, is reporting along with Bloomberg's DEBUTU today on how Apple is looking for an up to increase in new iPhone output for Apple.

By the way, one of my gainers today for the for the close as two point five trillion dollar market cap getting very close to it. Mark German, technology reporter for Bloomberg News, joins us on the phone from l A. Mark. Let's start with Apple looking to boost iPhone output by why is Apple so confident that it can sell more iPhones or needs to make iPhones to satisfy demand for

this next phone. Yeah, I think there's a lot of people who despite the millions and millions of upgraders to the iPhone twelve line last year, there's still a lot of people on the iPhone ten and earlier. And I think now this is the second version with five G, you have stronger five G penetration in the US, China and elsewhere. Now, after a year of new towers being placed up that you're going to see, you know, additional upgraders were also entering sort of the beginnings of the

end of the pandemic. So, you know, in two months from now, when these new phones will roll out, Apple likely feels that there will be you know, additional people who were looking to buy uh these devices. Well, it's interesting what along their channel checks tells in this mark. You know, the channel checks you know are basically you know, economic based, Right, they put traffic to Apple stores increase,

and you see more Apple stores opening. Right a year ago, right when they launched the phone, the majority of Apple stores were still closed. Now you have their entire retail footprint, plus that third party reach l footprint reopening for you know, in time for this new you know, iPhone launched not only the US but in many places around the world. What do we know? What do we know about this new iPhone? This is gonna be a fairly iterative update.

The design is going to be the same. The notch sort of that cut out on the top of the display is going to be smaller, So it's gonna look a little bit better, you'll have a little bit more screen real estate for all intents of purpose. Wait wait, wait, I just bought a new phone. That's why you gotta be like me, carolinshone every five years ahead, Carol, Well, where are they come out the new phone every year? Right?

And I know now at the same time every year, I want to know the market German thinking of okay, this is when I do actually step up and buy the phone, Like, how do you do it? Okay? Well, I mean it's different for me, right because what I live and breathe and it's my passion. So you know, I hate to tell you that I've had every I home since the original. But am I a consumer? A

normal consumer? Absolutely not. And I recognized that what I would recommend to you know, the average consumer is probably every three to four years in order to keep getting those soft roup grades or until the phone stops working. On the other hand, there are programs now where you can get a new iPhone without paying additional money out of pocket. So if you are a tech fan, you are looking at this pretty economically. There is a way to get the phone every year without showing out a

thousand dollars. I dropped mine and it kind of shattered the screen on a New York City streets. Try to drop it in a body of water because it'll fare better. Just put it in a bag of rice, all right, so the waterproof. I know, I know this Goldman story. Huoa so impressive Mark Exclusive. Yeah, and you a firm stock was moving down on the news by now pay later service. I am all in on Apple and Apple Pay now using it because of the pandemic. What could

this potentially mean for Apple's business? For Apple's business, They're just going to make more percentage of a pr interest through the loans that Goldman is doing. You're going to see penetration and usage of Apple Pay probably likely increase. They take a load double double digits sense amount on every transaction. So this is just going to push people to use Apple Pay, because we have to understand this is a layer on top of any Apple Pay transaction.

With any credit card you use, you can buy whether it's a cup of coffee, a bagel, or a purse, and you can split that over for interest free payments every two weeks over eight weeks, so not paying additional money. So if it's a thousand dollars, you're paying to fifty four times plus, you're gonna have easier access to loans for multi thousand dollar purchases with you know, lower Goldmen interest rates too, are getting kind of expensive. What does this say to you Mark about how Apple is thinking

about its expansion in further into financial services. I think they're doing basically, you know, everything they can to move into fintech. Apple has a long payment spintech roadmap. Another thing they're working on UH is for small businesses to be able to accept payments through an eye phone or an iPad. So for example, I can have my little lemonade stand and if I wants to buy some of my you know, not so tasty lemonade, they can tap their credit card or their phone in the back of

my phone and transfer over that money. Have you heard of that before? Well, it's called Square, but now it's built into every iPhone at some point when they rolled this out, and I think it's gonna be another pretty cool payment method for some people. So when this story broke yesterday, Tim and I were looking at um market caps and we were looking at the balance sheets and the amount of cash what that Apple has its over

I think two billion dollars or something like that. I mean they could technically go out and buy Goldman Sacks. They could buy a firm. Is that likely to be part of the strategy or they are really a build out from internally kind of company. Let's say I don't

know the market cap of a firm, but let's say billion. Okay, so you know rule of thumb, maybe they would cost thirty billion, right, Okay, So Apple could either pay thirty billion to buy a firm, or they can spend three billion to copy their product and make a better version. So they have no reason to buy these companies. That's why they only make small acquisitions. They rather invest in building it themselves. They're not going to buy now pay later for a firm. They're not going to spread it out.

But I get it. They do it internally and they can kind sorry, Uh does this get people to buy more iPhones? Mark? No, I don't think so. I would be shocked if they had any impact on iPhone hardware sales, which which in its sense is a difference from Apple strategy in the past, right, And it kind of speaks to the way that Apple has shifted its strategy. Well, the strategy is keeping people from switching away from the iPhone.

If you have a bunch of monthly installments for some items you bought right through your iPhone, you can't switch the Android because you have your your all your payments hook through your phone. So you know, this is just about them turn the phone into your wallet, into your keys, into your way. It's how I get on the subway every day, getting into my phone right there. Every every incremental new feature makes it that much harder to get rid of your phone. Mark, You're the best. Thank you

so much. Mark German. He is must read on the Bloomberg terminal at Bloomberg dot com all the time. Mark Urman, his technology reporter at Bloomberg News, on the phone from Los Angeles. What I just want to say the story about that he wrote about the iPhones. Um Rick chang around the internet in the last twenty four hours because it's everywhere. Well, you know, he's always ahead of the

game when he comes to Apple. This is Bloomberg Business Week with Carol Masser and Bloomberg Quick Takes Tim Stenovic on Bloomberg Radio well time. Earlier today, I caught up with the Belvidere Vodka CEO Rodney Williams. He's also president of the company. Belvidere is part of the LVMH family of luxury brands. We did this at the Bloomberg Sustainable Business Summit, and in this excerpt from our conversation, Rodney Williams talks about the changes the alcoholic beverage industry has

gone through during the pandemic. Check it out. Well, you know, we are all well poised for return to some sense of normalcy, but we're calling it a new normal because so much has changed. You know, during the pandemic um in our industry, there was always off and on trade. Either you consume the product in a restaurant bar or you take it home to consume it elsewhere. But home itself. Now is this whole new channel where people are entertaining

at home. They're making cocktails at home because they've had all this time during the pandemic to UH to become more comfortable doing those sorts of things. So there's almost three channels versus two UH in the industry itself. So it's interesting because and we're gonna move on in a second, but in terms of a recovery, because people were doing so much at home, I'm assuming there was a fair

amount of demand right over this past year. So how do you determine whether or not the market environment is getting to kind of pre pandemic levels and then maybe something a little extra because people are doing more things at homes and experimenting with making cocktails. It's a great question, and you don't if if we had a crystal ball,

uh were in great shape. But what what we really are drawing from our lessons from China and Asia, countries that have sort of moved through the pandemic um at an earlier pace than the North America, Europe, And what we're certainly seeing is that the home consumption is continuing, but consumers have a huge, huge interest in going back to restaurants, going back to bars and nightclubs, you know.

And it's, uh, it's sort of validation that at the end of the day, the humans are really social beings and and people really did miss that connection during the pandemic. All right, so let's dig down and let's talk about sustainability, because you guys have been talking about things for a while. It's really in your DNA in terms of a brand. But let's talk about the last couple of years. Last year you launched your Made in Nature platform this year.

We have Belvidere organic infusions that came out in the spring. You have a new biomass facility, biomass capture facility that I want to talk about. So how long has this all been in the works. Tell me how it kind of all comes together. What's the thinking and the conversations that go on at Belvidere that really guide you in a sustainable way? Yeah? Should um. Well, you know, when we look at Made with Nature, UM, it's more than

just a campaign for us. It's frankly a whole platform around which we organize all of our activities, communications, innovation and certainly sustainability and and cs are UM and it.

The g stalt behind it is that when Velvetire was launched, it was really about being on natural and a lot of people miss that part of our narrative that Velvitire has always been on natural, no additives, no sugar, because Poland was one of the first countries to appelate vodka the way France, Italy US appelates wine such that we can have no additives where non GMO all of distilled spirits are gluten free. UM and we're Kosher certified, so

we operate at these standards. And you know, prior to the pandemic, this was kind of nice to have information, except for for maybe the younger gen z S who are really really into this, but we all lived with the consequences and the forces of nature, and this has all become much more on top of mind and relevant for a much broader consumer base. And that's what it's curious, and it's the consumer. It sounds like that's leading it right.

The consumer wants to as you said, you know, you guys have always been natural, you know, purified water, free of additives. As you said you talked about your Polish rye. It's been there, but you needed to communicate that to the consumer exactly, and we also needed to provide valuable

proof points for what we're doing. So with organic confusions, the vodka is organic, the the rye that we're using as organic, the herbs of botanicals, everything about it is organic um and we've seen we do big research in our key markets, five different countries and three different continents, and pre pandemic across the board, you had millennials and older gen Zer saying, yes, the ingredients are important to me UM and now post as we're moving out of

this era, we're finding that, you know, some of it is because of the influences of kids being home from college on their parents Across generationally, people are much more interested in in simple ingredient lists, things that they definitely recognize and um and and things that they understand what they are wholesome ingredients. So that's the Devideer of Vodka CEO Rodney Williams. Again, as I said earlier, they're part

of the LVMH family of luxury brand. You can check out more of that conversation, all the interviews from the Bloomberg Sustainable Business Summit Global, you can find that at Bloomberg Live dot com. Fascinating tim and kind of pre prepping for that interview. They've got this new platform called Made you Know with Nature, and you go to their website you look at these incredible films that they put out.

It's all about nature and wheat fields or rye fields, you know, like it's just incredible and what a few years ago and it was all a very different ad. Yeah, it's amazing the way that the consumer messaging has shifted. And if you were watching on YouTube you saw that right exactly, and it is. And what they said is they're responding to the consumers specifically that consumers want to know what their products, what their vodka is made of, They want to know that it's much more sustainable and

much more natural, much more organic. And that's the direction they're going in. That's direction we're going in as consumers. Totally, totally, all right, you're listening to Bloomberg Business Week, Carol Master, Tim Stanvic, and this is Bloomberg. Thanks for listening to Bloomberg Business Week. Download the podcast on iTunes, SoundCloud, or Bloomberg dot com, and you can also listen to our radio show at two pm Eastern on Bloomberg Radio or watch us on YouTube search Bloomberg Global News