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Welcome about Bloomberg Intelligence. I'm Lise Matteo alongside Paul Sweeney. Big day for bank earning some mixed reports though. Taking a look at the stock, we have JP Morgan they're down their shares down about half percent, Wells Fargo down five percent, we have City up about one and a half percent. So here to break it all down for us and what happened with each bank is Alison Williams, who else Bloomberg Intelligence, Senior analyst, Global Banks and Asset Managers. Alison,
Thanks for joining us here in the studio. Good to see you. So let's start with JP Morgan, right, they had some surprise deal making gains. I mean, is that a sign that taraffears are easy or how do you take it?
I mean they had a solid quarter.
There's always a high bar for JP Morgan, but I think a really good quarter, strong returns, good organic growth, and I think, you know, about a billion dollars of upside with trading and fees, and so I think that we you know, we did see that that fee pick up we saw April stall, then we saw fees really did pick up in May and June. As you said,
it really is. The advisory business was big upside, you know, for both JP Morgan and City and we also saw IPOs better and so we have seen that improving sentiment. I think there is going to be a little bit of a lift in terms of some of the expectations for those banking fees going forward as well.
Red Headline crossing the Bloomberg terminal, Tesla's top North America sales executive, Troy Jones exits.
That's according to the Wall Street Journal. So when it rains at.
Pours there all right, here we go. So we had JP Morgan, City Group in Wells report today. Guess what I worked at all of the firms Chase and Hatton Bank not part of JP Morgan, Salomon Brothers now part of City Group, and Wheat First Securities, which is.
Now part of Wells Fargo.
That's what Wills Fargo got its original broker deal license by acquiring my firm Wheak for Securities, Richard Virginia.
So I got I'm biased all over the place here. Let's start with Citygroup.
I think that's got the most upside because I think it's underperformed for such a long time. It was just begging for really, really, really good management. Is this, I mean, a stock's hitting fifty two weeks high today? Is this the turnaround that everybody's been waiting for?
You think, think, yeah, Jane is getting it done right.
So and and to be fair, you know, her predecessor's made some changes, but I think she's She's made some tough decisions, you know, especially the sale of the you know, the Mexico business, where she really cut her teeth. I think that is a sign that she can be objective in terms of deciding what's right for the business. And they are working there way up to some better return. So, you know, there's a lot of talk about the evaluation for City Group. We know that they trade at a
discount to their book value. They traded assistant to their peers. Wow, that's what happens when you don't earn your cost of capital and your returns are below peers. But I think the changes that they're making are moving them in the right direction.
So when I look at Wells Fargo, I'm trying to go through the information. So the big thing that kind of stands out to me is that across the one point nine to five trillion asset mark, is that a big milestone?
Well, the removal of the asset cap that is really I think that the big structural benefit. And I think that goes to the number that you're talking about, where you know, for years they had to.
Limit their balance sheet growth.
They finally got the go ahead that you know, we don't have to be so concerned about what that exact number is.
I think the stock has really.
Priced in a lot of the optimism around getting that ass cap remove. I mean basically has been you know, a huge gainer since the US election. I think the shares are responding today to the lower debt interest income outlook, and I think there's a couple of things there.
The core net interest income, that's what people focus.
On, right because the income that you get from trading generally has an offset to fees. But if you're just focusing on top on, you're just focusing on that number. People are disappointed in that outlook.
For Welsbargo.
What are you hearing from these banks today and over the coming days about loan growth because it seems like what the yield curve steepening, it's a good time to be making loans. How's the demand out there? Because only hear about is private credit here?
Private credit there? How about the banks?
I mean, we are we did see like things a little bit better. I would say that, you know, the grow loan growth is still a bit modest, but the expectation in terms of reduced risk to the economy is really a positive these banks going into the second half, and so I think there's there's certainly room for improvement in the loan growth.
But I think things were fine.
Well, there's been the loosening and regulations capital requirements for the banks. I mean, did this show up in the results or or when will it?
I think that's that is something that is going to come over time. I mean, we did see some some some good buybacks at Wells Fargo for example, But I think the big news was the stress tests that we saw in June basically are signaling that their capital hurts are going lower. Further, a proposal out there that you know there we're going to have sort of average results over time, So that for this year means that the the you know, the decreases might not be as much
and they might come a little bit later. But we think that's positive over time because what that means is that there'll be more stabilization and not sort of these ratios moving around a lot, so lots of outside excess capital at the banks. Even more as those ratios go lower, that means more buybacks, especially since we expect that any further regulations are not going to be as drastic.
Goldman Sachs, Morgan Stanley they report tomorrow. I always love looking at, you know, the way you guys analyze kind of league tables and how people are doing competitively. Would expect to hear from those two investment banks.
I mean, so we expect strength.
I mean the results that we saw today in terms of fixed income trading better than expected, equities trading better than expected, fees almost across the board better than expected. We talked about the IPOs like that's a really good sign for Morgan.
Stanley and Goldman, the M and A.
You know, Goldman is typically an M and A leader there, although JP Morgan has really been catching up, So those are all very positive signals. I mean, twenty seven percent growth year every year in City Group's rates and currencies business. That is a really strong result. And you know Goldman and Morgan Stanley lead and the equities they earn the most from these businesses, so I think that you.
Know, the bar is definitely hire for them tomorrow. All right, good stuff, appreciate it.
Alison Williams, Senior anos Global Banks Asset Managers Bloomberg Intelligence.
She's been doing it for a long time.
She worked on the buyside at Morgan's Stanley Investment Management, investing in these big banks, so she knows what she's doing. She's got a great team there at Bloomberg Intelligence on a global basis looking at some of the big global banks around the world. So I appreciate getting a couple of minutes of her time.
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, or watch us live on YouTube.
We want to turn our attention to healthcare company Managed care Company, United Health Group It's a big company, two hundred and sixty seven billion dollars in market cap. Its sound forty percent year to date, but it's had a distinction of having I think sixty consecutive quarters that kind of beat earnings estimates out there. But I think the analysts are starting to take another look at some of those earnings numbers, and they're going to look at how
this company put those numbers up. And I remember this kind of story back in the day from General Electric, where they would just beat by a couple of pennies every single quarter.
But that turned out.
To be a little bit of a mirage when you go back and look at.
Some of the data there.
Michelle Davis Joints is here, Bloomberg Senior Deals reporter, Michelle. What you find when you're looking at United Healthcare? How are they making some of those numbers recently?
So, Yeah, as you mentioned, they had kind of a pristine record for more than sixty quarters. They beat estimates. Analysts love them, and at the end of last year that got a bit harder for them to keep up. You know, medical costs arising. The government's been cracking down on reiinbursements and that was eating into profits. And so what we reported is that at the end of last year they approached several private equity firms and asked them if they wanted to buy stakes off of them of
their businesses, and a couple interesting things happen here. Not only did they quietly do this, but the deals were structured such that United Health can be forced to buy the businesses back down the road, so it's temporary in nature. And United booked the gains in an interesting place. They booked them as part of operating earnings, which is or adjusted earnings, which is normally where you look to see kind of how a business is doing, you know, excluding
one off gains or one off events like this. And so it was just interesting to say, not only the fact that they stealthily did this, but where they put them, and without these gains they would have missed estimates and profit would have dropped in the last quarter of last year.
So, as I'm going through this article, this certain quote stands out for me from an analyst that you spoke to. He said, if the company is manufacturing earnings by chopping up their furniture or selling their assets, that's not exactly a great business model. Okay, so is the risk that it might be kind of masking this weakness in the operations.
That's the concern.
And just to be clear, you know, there's nothing illegal about what they're doing, per se. You know, they disclosed that they did this, most people didn't see it. It was in a footnote in their ten K that kind of went under the radar, and there are no details about what exactly they sold. That's what we're trying to you know, report on here. But yeah, the concern is it clouds, you know, your ability to see how the
business is actually performing. And we heard from sources that there's a culture inside United Health of you know, kind of there being this pressure to do whatever you can to meet targets every quarter. Yep.
So again the stock it's a huge company, huge player in the managed care business. Stocks down forty percent. What's the underlying concern for investors out there? Do you think around this company?
United Health has been dealing with a lot of things. I mean, even before we knew about this, there was obviously the tragedy of you know, one of their executives being murdered last year, and then you know, there was a Wall Street Journal investigation this year about potential medicare fraud, which they have denied. They also in the first quarter reported their first earnings miss in you know, more than sixty quarters, so that shoe finally dropped. They ousted their CEO.
So investors are just concerned about the story here. You know, what, what is the United Health story? I think that's what the big concern is.
So are there any other companies, like maybe other health companies or something like that where this same story that you've been talking about it kind of plays out?
Not that we could find. It seems like United Health is really you know, unique in its ability and history of you know, really carefully managing it's reporting every quarter.
So new management team here, what's kind of the focus now at the company? What's kind of the message to Wall Street about how they're I guess going to try to turn this thing around.
So they brought in their former CEO, who is a accountant by by nature, and it seems like the market's pretty uh, they've been put at ease by him. The view or the hope from analysts is that the last quarter was kind of an anomaly and they were just bleeding out all the bad stuff and now they'll have a lower base to kind of beat off of They report earnings later this month, so we'll see, you know,
how the business is actually doing. But the big surprise in the first quarter was that, you know, medical costs were a lot higher than they say they anticipated. That was confusing to people because their job is to anticipate that.
But that's what I've when we're reporting on that story a couple of weeks ago, I said, Yeah, isn't that the job of the company to know, Hell, that's going to go?
All right?
I'm looking at the an R function on the Bloomberg kermninal that tracks analysts recommendations, and if you're not at health they're twenty one buys, six.
Holds and two cells.
So yeah, I think the streets still generally buying off on this maybe this turnaround story. But maybe we'll take a look at your story here today. Michelle Davis, thank you so much for joining us. Michelle Davis is a senior deals reporter for Bloomberg News. Joining us live here
in our Bloomberg Interactive Brokers studio. But it's interesting to see on the healthcare space, and again I always come in here every Mondayly said, it's like there's an M and A deal coming out of the healthcare space, which keeps the likes of Michelle Davis busy on the deal front. But it's again, we see it time and time again in a healthcare space. If you can't come up with that next drug or that next you know, procedure.
Whatever in your R and D lab, you got to join up.
You got to go buy somebody. You know, you go go go buy somebody. And that's how that business has played.
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, or watch us live on YouTube.
All right, Lisa Matteo, Paul Swhen you were live here in our Bloomberg Interactive Brokeer Studio streaming live on YouTube. So check us out there. You know, to an extent, I at any luck in meeting other people. It's been at a bar and no dating apps here.
I know, I know, I met my husband at the grease trucks at Rutgers after who doesn't having burgers?
There you go.
Now, dating apps must evolve, as gen Z redefines romance. That's according to it bloom We're going to tell survey We're going there, folks, We're going down that rabbit hole. Nicole Desuza joins its Internet and software equity analysts for Bloomberg Intelligence. Nicole, what's your survey? What are the questions that asked and what did you find?
Yeah, so we have Bloomberg Intelligence conducted the survey to better understand how people are navigating dating, how they use dating apps, and then also how they feel about AI within dating apps. And so some really interesting findings. First that you know, specifically, gen Z tends to be single but not dating.
Gen zs what age again, sixteen to twenty eight?
Sixteen to twenty all right, so yay single, two of my four into that one, Okay, And so they're not using the apps.
They're not even dating, single and not dating. So this is I mean, there's a few reasons. Studies have kind of shown they do have higher rates of loneliness, but they are also prioritizing independence. They are also you know, feeling a reduced stigma around being single. So it could really change dating patterns generationally.
I can kind of say my son was on a dating app and then he stopped because he got tired of it and it just and he's in that gen Z kind of group and they're not going to pay for them too. So how does that change for these different you know, dating apps out there? How do they have to change their approach?
So right now a lot of what we're seeing from gen Z is that even though they are dating less, they are looking for long term relationships. Those that are dating,
they are looking to form meaningful connections. So, you know, some of the products we've seen from these dating apps that really introduce AI are more around how to create a profile, how to make it easier to talk to people, you know, using AI to generate prompts that might not necessarily you know, correlate with what gen Z is looking for in terms of forming a meaningful connection.
I'll tell you Lisa go to the Parker House and seeing her in New Jersey on a summer Saturday, thousands and thousands of kids of gen Z type are there yet like four o'clock in afternoon, they're not on the They're all made up, dressed to the nines. I think they're looking too to meet somebody.
Right now, I've been here, I had to wait on dress.
I mean, I don't know what's going on. How about millennials? How did they fare?
So millennials are they kind of came of age during the time of dating apps, so a lot of dating apps are really created to target dating patterns of millennials. So millennials have a more favorable relationship with dating apps, and they also are much more like comfortable with AI in dating apps versus gen Z, which was surprising to us.
Now what about Okay, people always forget about gen X, the.
Gen X folks.
Yeah, so what about gen X? And then you know my my mom, you know, single, like she wants to find out about these apps. I'm telling you, what about the older generation? They're on dating apps, so they're on it.
There are Yeah, there are a lot of gen X and baby boomers on dating apps, and there are a wide variety of dating apps to kind of address different age groups, different you know, things that people are looking for. So they're they're available.
How does AI have to ask the AI questions?
Because we had a guest on earlier about it. I walked out of there thinking AI is going to take over Wall Street? How about AI and dating apps? That I would think could be helpful to better select somebody who might be a good match or something.
So we've seen dating app companies roll out a lot of AI products. I would say, right now, it seems at least based on our survey, that they haven't been that well received. It seems like people don't necessarily need AI to build a better profile, they don't need AI to help them engage in conversation. I think where it has been helpful is user safety, so to weed out profiles that are fake or you know, potentially send people who are sending harmful messages, and that is a common complaint.
But as of right now, it doesn't seem that you know, at least gen Z and even some millennials are really really adopting these new AI products.
So and there are certain a dating apps that are more po popular than others, I mean, which are the hot ones right now?
So right now, at least by users, Tinder has by far the most users that's owned by match Group. And then Hinge is actually one of the few dating apps that is continuing to grow users, and that's probably because Hinge focuses a little bit more on kind of long term relationships, building meaningful connections. Tinder still has a reputation of kind of a hookup app.
Yes, which one is that?
Yeah, that's how my son was on.
And I mean I'm looking at Nicole's research report.
I mean she's got graphs here.
Of like I'm in a monogamous relation, I'm single and currently dating. I'm in an open relationship, single but not dating, in a casual relationship by demo, by baby boomers, gen X millennials. I mean, this is a lot of research here, dudes on dating. I mean, go to a bar, you know, have a cocktail, relax. I don't know, I don't know.
It's good stuff here. But Nicole, thanks so much for joining us.
Great research again at Bi's cut and research Bloomberg Intelligence using some survey data here to go out and take a look at how some of these apps are working out there.
Nicole Desuza.
She covers all the internet stuff and all the software stuff for Bloomberg Intelligence.
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.
Black Rock. You know, the stock's down, but I mean it's black Rock. I mean, twelve and a half trillion and assets under management. I can't get my mind around that. It's just an extraordinary story. And by the way, it's separated from Blackstone.
I mean, imagine if those two were together. Holy yew.
Anyway, I mean, it's got a market cap up one hundred and sixty billion. Black Rock is down six percent today, up about one percent for the year. Neil Sips's in stew He's got to explain to us what's going on here. He covers all the asset managers for Bloomberg Intelligence, you know, talk to us about Blackrock gear.
They never seem to have problems getting money in the past. What's going on?
Yeah, And I think what you're seeing a little bit in the second quarter is the net inflow figure was about half the first quarter, so perhaps a little bit slower than the analysts we're expecting. But what I think is encouraging and sort of what we're seeing with the transition you even mentioned Blackstone, Blackrock is trying to enter some of those businesses in a more meaningful way that
Blackstone is involved in the private markets. We saw the handful of transactions last year Global Infrastructure Partners HPS, and what this is going to do is really sort of improve the organic base feed growth. So while we're seeing a little bit slower on the net inflow figure in terms of broader asset growth, what it means is as we push further into those private markets, those higher fee products, that organic growth is actually more meaningful to the fundamentals
of the business. So we're going to see a little bit of a transit here. I think perhaps that's what you're seeing in the second quarter results today, is that sort of slower inflow growth, but perhaps still pretty robust based feed growth. And let's not forget the second quarter was really a tale of two stories, a rather unique quarter with a very challenging April and an incredible May in June, so that is also sort of balanced in the results.
Now, a lot of messers look to what the executives are saying. So what kind of tone did did CEO Larry think take?
Yeah, I think he struck a generally positive tone, especially considering the sort of broader macro uncertainties that are still out there. It feels like we've certainly moved back from some of the more worst case scenarios we'll call them. But there's still certainly quite a bit of uncertainty. But when you look at equity markets, you don't necessarily see it, right all time highs pretty much in the global equities landscape, and so that's generally a positive for asset managers, particularly
someone like Blackrock. And what they've talked about is they experienced momentum exiting the second quarter to the third quarter. Clients continue to remain engaged. They haven't necessarily pulled away in sort of the volatility that we saw in some of the uncertainty that we talk about. So that sort of creates a solid setup for black Rock moving forward.
All right, So for the asset managers that you find, like when I grew up in the business, the biggest customers on Wall Street were the mutual funds, and then hedge funds became big.
Now it's ETFs. How do the asset.
Managers that you deal with, you know, think about it? It just seems like all the money is going to ETFs. How do your asset managers deal with that?
Yeah, Well, there's the way you deal with it is enter the ETF space to sort of capture that flow. But that is a business where scale is paramount. Because you talk about ETFs, you're thinking about average ten basis point fee rate. Right, You're not going to earn quite a bit. The margins are going to be razor thin. Unless you're the size of black Rock, who garners thirty percent of the market in US ETFs. That can be a profitable business, yep, and that's actually been from over
forty percent. Vanguard's the one that's sort of nipping at the heels. But again it's sort of an oligopoly with Vanguard, Blackrock, and Fidelity in the ETF space. But how do you compliment that in a business where the flows are increasingly going to ETFs. Well, they're also going to private markets and that's why you saw again Blackrock push into that space last year.
All right, Neil, thanks so much. We appreciate it.
Neil Sipes covers all the banks and asset managers for Bloomberg A Tonza.
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