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One of the big news items out there in today is China. Over the last twenty four hours, AT's say China saying we're not going to buy any more Boeing jets. So just another escalation in the trade war between the US and Canada. I'm looking at the Boeing stock today, it's off about nine tenths of one percent. George Ferguson joins us. He's a senior Aerospace, Defense and Airlines zentos for Bloomberg Intelligence. George talk to us about China and Boeing. How big of an issue is this for Boeing?
So I don't see it as being a big issue, right.
So this is one of those things that the relationship has deteriorated over a period of time. You know, we were basically writing right now a focus idea on.
Boeing we'll publish in the Bloomberg Terminal.
And as we're doing that research, we took another look at when we saw orders from the Chinese airlines for Boeing, and there's been like fifteen or sixteen this decade. I think fifteen came in I think last year of two hundred and forty two orders.
From China that are on the books right now.
The last real material size and orders from the big Chinese airlines we saw back in twenty eighteen. So this is a relationship that's been broken for a while. Frankly, the Chinese haven't really been, like I said, ordering from Boeing. So the bigger issue here, I think is Boeing delivering some of the airplanes they've already built for the Chinese. Like I said, there's some two hund forty of them.
Sitting in the order books.
I suspect a bunch of them are already made and Boeing would like to get rid of them. Part of the shadow factory elimination they're trying to do to streamline operations is the pain in the neck to have an airplane on the tarmac that's sold that you've got to maintain, but the customer isn't taking delivery of.
It'll slow that down.
I think it might hasten some of Boeing's push to sell some of those airplanes. The Indians have bought a bunch of them, maybe they're game for more, But I just don't This is China admitting what they've already been doing.
Frankly, So, George, what exactly is the goal here? I mean, to your point, and also Jeffrey's analysts, they're noting that Boeing has largely de risked from China, they said of the country contributing roughly about five percent of the skyline over the next couple of years. But also a source of upside. What do you think the goal is here if there seems to be marginal impact here to Boeing.
Yeah, look, I think.
It's splashy right for the Chinese to make this kind of commentary. And look, I do think there's potentially some upside. So look, there's a couple of things that's been going on right China. One is growing a lot slower since the pandemic. Prior to the pandemic, China would take in three hundred narrow bodies a year, more than half of them would be Boeing. And so you know, since the pandemic last year, we saw about one hundred and fifty
deliveries of narrow bodies in a China. They were Airbus airplanes. So and look, you know, in a global trade battle, China could see a diminishing GDP. Right this is a country grown eight percent last decade, fourish percent this decade. But if they get that, you know, if they decide they're going to negotiate with the US, they get some of that growth back on the rails. I think inside some of that negotiation you could see a requirement to
order Boeing airplanes. Donald Trump cut a similar deal in his last administration, So there is some silver lining. And like I said, I think the Chinese sort of they know that the Boeing is at one of our biggest exporters. They know they'll get some good headlines out of saying we're not going to take any more bowing airplanes. But again I think this is already this is a microcosm of the US a kind of beginning uncoupled from China right now.
So this isn't a major headwind here for Boeing Boeing, But what do you think are some headwinds that they could be facing? What are some near term hurdles.
You know, I think Boeing has been down for so long that I think most of the hurdles are clearing and you're going to see a pretty good year. I think the big issue this year is they've really got to get Spirit Aerosystems bought and integrated into Boeing. I think that's well underway. I'm hearing good news from people I know in the industry about quality coming out of Spirit.
They've got to get rid of that shadow factory.
These airplanes already built sitting on the tarmac that they're maintaining.
You know, that's just a huge dragon expenses.
They got to get them delivered out to customers, sold off to new customers. And it's all about in the back half of the year building more airplanes in the factory. We've been watching it in the first quarter of the year. I think they're getting about twenty twenty five through the factory month. They got to keep building on that cadence. That's going to generate the cash and the profitability they need.
And oh, by the way, they added twenty six billion dollars to inventory since I think twenty eighteen we have it and supported some five hundred equivalent to five.
Hundred and seven thirty sevens.
As they start building from the inventory on hand, their cash generation is going to be super charged. They could have a really nice back half of twenty twenty five.
George Ferguson, thanks so much for joining us. Always appreciate getting a couple of minutes of your time. George Ferguson, Senior Aerospace, Defense and Airlines Centers to Bloomberg Intelligence covers all the aerospace companies and all the airlines. He sees it from the entire three hundred and sixty degree picture the whole global aerospace business.
You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarclay, and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts world Watch US live on YouTube.
Bank of America reported today, City Bank reported today. I worked for both of those services back in the day, Merrill Lynch, which is now part of Bank of America and Solomonbros. Which is not part of City, So I always pay attention to these two names both trading up here today. So that's a good news. Let's get Alison Williams in here. She'll tell us the details here. She's a senior alist. She covers all the banks for Bloomberg Intelligence.
She's been working super hardless last four or five days as all these big banks put out their numbers. Also, what she like when I think of BFA and I think of City, I think is the corporate investment banks making loans for big global corporations and that kind of stuff, as well as going down to the local branch level. What are they telling us today?
So on the capital.
Markets side of things, so your your friends, the traders and bankers, you know, really good quarter for trading across the board. We've had sort of everyone come in equities trading better. You know, City did a little bit better, and Fick and banking, so that was a key positive. But generally we're seeing strength and trading that's helped by volatility and fees stalling, so which we know kind of
as a pause. So that's broadly across the banks. The other thing is, you know Q one was good, but of course we have not seen the impact of the last couple of weeks, but banks are preparing for that in perhaps different ways. Bank of America kept their interest income guidance stable. But the positive thing there is that they are factoring in the four interest rate cuts that they're factoring in what we've seen in April, So I think that is generally helpful to the shares. You're seeing
them respond today. Also on the credit provision, you know, Bank of America always provides these extra slides. As you talked about, there's all different types of businesses. There's concerns certainly on the consumer business tends to be higher loss in Bank of America showing a slide the shift in their portfolio over the long term, but also making the point that look, they're reserved at about a six percent unemployment rate. That's similar to what we heard from City.
I'm sorry, that's similar to what we heard from JP Morgan and Wells. We're going to hear more from City on there call in a bit, but their losses tend to be lower. This, you know, responsible growth is something that moynihan has championed, championed. Some have been critical when things are better, are you taking enough risk? But in a period like today, when we're worrying about risk, I think that gives the.
Cushion Allison so up today we're seeing shares up today. But if you look here today, we've got Bank of America down fourteen percent, City Group down eight percent, Broader Financials down about you know, one and a half percent. But that being said, what do you think has really been the drag for them as of late? Because I mean, this sounds like pretty decent news, but you know, on a broader scale, that's not necessarily the case.
So I think that what we saw was a big rally in these shares after the election. People were very excited about less regulation under the new administration, and we saw evidence of that this quarter in terms of buybacks. Buy backs were bigger than expected for everybody except for Morgan Stanley, a huge announcement by Goldman Sachs and so
capital return. Being able to return more capital is one of the positive benefits that is coming through and that, you know, So we had the big rally on less regulation. M and A being helped by less regulation was part of that. We did get the buybacks. M and A is not coming through because there's so much uncertainty in the environment. That goes to some of the comments we heard earlier just in terms of you know, pipeline are
they broken or bent. So I do think it does depend like if we can get things, you know, changing course, if we get some level of certainty, that can improve.
But if there is more volatility, perhaps not.
And it really comes down to the economy. So if there is a weaker economy, if there is a recession, not good for financials.
So City Group in particular, Jane Freezer, she's about a little over halfway through this five year plan for a turnaround for the bank.
How's that going?
Are people liking what she's doing?
I think people are.
She's making progress, So we saw some of that this quarter. It's certainly a very long term story, and a lot of that has to do with, you know, to some extent, when you're fixing things that the regulators want you to fix, that can take some time and it's not fully within your control.
I mean, it's within your control to deliver on things.
But it's it's a negotiation and you have to you know, sort of meet those standards as we've seen it Wills Barger.
That can take a seriously long time. But I do think for City Group it's the best thing that could have happened to them, because really, you know, the City Group is the house that Sandy built and has all these different businesses, and I think finally taking the steps to nationalize and integrate things and improve the risk management systems are good thing in the long term, even though there's some pay in your term.
Brian Moynhan of BIAVE on the conference call this morning, did he acknowledge the uncertainty and the decline and consumer sentiment just in the last several weeks, in corporate sentiment as well. We've seen polling on that. You look at the University of Michigan data, people concerned about things. Did he acknowledge that and maybe think about how they might impact their business?
You know, he did talk about sort of the pivot since a quarter end. He talked about that, especially with regard to the reserve build. So again, I think that's one of the things that we're seeing a little bit different at banks JP Morgan taking.
A big preserve. Of course, they had a game.
That helped to fund that whiles doing very little, but they were already pretty well conserved. And Bank of America saying, look, we do our reserve at the end of March. But then there are different factors. We can use judgmental factors and different factors to sort of shore up that reserve.
A little bit.
And so even though the headline numbers don't look like, you know, they're taking big reserves, their credit is good, the charge offs are good, and so the fact that you know, even just kind of keeping those reserves stable, you know, when your credit is improving, shows a level of conservatism.
So big being earnings kicked off on Friday, we're sitting here Tuesday. You've gotten so many names that you're kind of parsing through right now. But of course, to your point, this is a really uncertain period. So what is a general expectation. Do we expect that investors are going to punish companies harshly if they were to miss or does it seem like people are kind of just going along with the flow and seeing what's going to happen given the you know, tumultuous time period.
I think it's you know, for for investors, like so many other stocks out there, right there's a level of uncertainty. And I do think that as you said that, so the stocks have come right down, they're factoring in a level of risk, but investors have to feel more comfortable that they have a handle on those risks or clarity, so that that could stop people from from getting involved.
But in terms of you know.
It depends on what happens for prere do things get worse at the risk of recession rise. You could see bigger provisions in the second quarter, and so investors were wondering what we see banks being conservative, and I think what we saw was back to really saying like, look, we're going to wait and see. Okay, you know, as of March things are good. We recognize that things are getting.
A little weaker, but we're going to wait and see.
Allison, thank you so much, as always appreciated. Alison Williams, Senior Alice covering all the global banks for Bloomberg Intelligence, City Bank of America.
Today, you're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
One of the big stories that's getting a ton of readership on the Bloomberg terminal is Harvard has hit with financial retribution after rebuffing Trump. So Harvard University President Alan Garber rejected the Trump administration's demands to combat anti Semitism, saving concerns over academic freedom and government interference and higher education. Let's break this story down with Janet Lawren. She's a higher education financial reporter for Bloomberg News. She joins here
in our Bloomberg in Active Brokers studio. Janet, Harvard seems to be one of the few institutions or entities openly defining presidential peer what's the view from Harvard's perspective.
Well, it's true, Harvard is the richest university in America. They have a fifty three billion dollar endowment. No one comes close. Seventy percent of that money is restricted, so it doesn't appear as massive as it seems. But in theory, you know, they could afford to try to spend some of that endowment. Last year, the endowment contributed two point four billion dollars to Harvard's budget of about six point
five billion. But you know, the federal government has, you know, get a lot of money from the federal government, and I guess the question is are they willing to risk it? And you saw President Trump on True Social just a few minutes ago saying, well, he's perhaps going after their tax exempt status, so's it's unclear.
Wow.
I mean, I just actually had some experience over the weekend on this at a place of higher education about the finances there and for top research universities. And this is a private public relationship that really started after World War Two, which is when the America said we need to be the leader in key key industries, technology, healthcare, so on and so forth. We think the best way to do that. This is the US government after World
War two is a public private kind of relationship. And right now the relationship is about two thirds federal funded, one third private funding, including the universities themselves. That's big money for a lot of these universities.
It is big money. And you know we've written that many times. And you know the federal government also gives students millions of dollars to attend universities in the form of federal student loans and pel grants and other grants. So colleges are quite dependent on the federal government, and they're exercising their their views and saying, look, we give you a lot of money, and if you don't make changes,
we have the right to take that away. If they say, if you don't follow the law and in talking about you know, their their issue in some ways, DEI, if if you don't follow the law of their saying discrimination, we can we can yank your moneyway.
So what the sources that you're speaking to, Janet, is the expectation that Harvard will remain resolute in this this you know where they are right now? Or do people think that they're gonna essentially cave. I mean, I saw you wrote a story earlier last month about the Columbia president stepping down, and I remember that they had initially been kind of trying to stand their ground as well. So what are you hearing from sources about what people are thinking Harvard might do?
Well, I don't think it.
Really matters what people think. It matters how they're going to get through this because they are dependent on the government for a lot of money. Now, if you look at Columbia, Columbia is poor compared to Harvard. They only have fifteen billion dollars. So it's you know, it's it's uncertain what happens next. I mean, the ball is in Harvard's court. Are they going to litigate? That could take quite a long time. What happens if labs are closing
or there. You know, from past experience, we're going to get stop work orders. You know, we've sort of seen this already with a couple of schools getting stop work orders and getting money frozen.
I mean, what are some of the alumni? Is there a is there a consistent reaction from the alumni, either in support of Harvard or maybe not supporting them.
Well, you know, I think I think some alumni have posted on various social media's people are happy that somebody has stood up to Trump. But you have to remember the federal government has a lot of power. Yes, and perhaps fifty three billion dollars seems like a lot of money, But I mean, how much does it? How much money does the federal government go through in one day?
So what our next steps here? I mean, I see that the Harvard has officially rejected the administration's demands here, So.
We're in unchartered territory.
Okay, if you asked me to predict any of this, I know it's hard to know.
I see in your story you say that former Harvard president Larry Summers says that the statement drew support from him. He said that he hoped other universities would adopt a similar stance to defend academic freedom. Is he alone in that or are you hearing other people on the same side.
I think there is an interest in having entities try to stand up to Trump. We saw this with some law firms. But in some ways, the federal government holds all the cards.
What are other universities doing? Have we heard from anybody else? Has anybody been in a target like Harvard Princeton has?
Princeton's president has been outspoken. But keep in mind Princeton, while they've produced many Nobel Prize winners, they do not operate a medical school. Most of the grants are NIH funding grants to medical schools, grants for scientific research.
You know, there's only a.
Handful of schools that are receiving the kind of money that Princeton. Stanford MIT also does not operate a medical school, but there had also received cuts in Department of Energy, in Department of Defense. So remember, you know, NIH is one federal agency. It's the biggest, but there's a lot of them out there. I believe Cornell had frozen funding from Agriculture.
Interesting. I mean, and again, these are grants from the US government in most cases to fund research and development. Correct, right, they're not these aren't we're giving you money just to give you money. They're they're investing in research, their buying research.
That is correct.
And earlier in the conversation you mentioned DEI, how has Harvard been really viewing the pushback from the government on that? How have they been responding? In about thirty seconds or less.
Well, we did a big story earlier this year about the decline in black freshman first year law students at Harvard Law School, and you know they they have to follow the law.
All right, Very good, Janet Lauren, thank you so much for joining us. Sir Jena Laurren. She's a higher education finance reporter again talking about Harvard and its discussions and I guess differences with the US with the Trump administration and the financial risk associated with that. So I'll have to see how that plays out.
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