00:00 Speaker A
JP Morgan CEO Jamie Diamond said the US economy faces a series of increasingly complex risks amid the spreading impact of the conflict in the Middle East. Diamond’s comments came as the bank reported its second-best quarterly results ever. City and Wells Fargo followed suit as both banks reported first-quarter profits. However, now Wells Fargo’s stock is seeing its biggest drop in a year.
00:20 Speaker B
between uh, you know, the kind of AI risks that are going to happen this year and the market volatility. Um, then there’s the private credit momentum, which I think overall, I think is an okay story through earnings to date. But then, so is Iran and is trying to offset the volatility it’s creating in the market, but then, with oil prices rising, will consumers be affected at all? Um, it’s complicated, but I think what you’re seeing is that the banks are navigating it relatively well.
00:54 Speaker B
And um and I would also say that most of the perspectives that you get on the calls are quite constructive on all of those points. and so, you know, stocks are reacting. I’d say mixed, but I think part of it is because the income threshold is relatively high. Everyone knew that these results would be good.
01:10 Speaker B
So, um, I think they’re navigating the complexity well and really around the edges, I would say some of the forward-looking commentary has been a little bit better.
01:15 Speaker A
When you think about Wells Fargo seeing its biggest decline in a year, it was largely due to net interest income results. What do you do about that? What does that tell you? What kind of insight do you get from that?
01:25 Speaker B
Yeah, I guess I wouldn’t overreact. I know the market is on the day and earnings are, you know, a little bit off and so there’s not a lot of room to miss in this market, especially for some of the stocks that have been more resilient. So I think that’s part of it.
01:42 Speaker B
We’re about to have a really good investment banking quarter for some of these companies. Goldman reported yesterday. M&A advisory fees have increased by more than 80% and all say the backlog is being filled. So there’s a little bit of an impact in terms of timing mainly from the war, but companies are on the other side of it. So I would say, you know, Wells’ reaction today was just a little bit higher, a little softer, you know, forward guidance on net interest income, but the non-interest income streams, not um, broader are actually doing quite well.
02:08 Speaker A
When you think about JP Morgan City reporting this record quarterly revenue, we saw City profits increase about 40%. Yes. I mean, how much does this have to do with this war and how does this dynamic maintain?
02:18 Speaker B
Well, I think what it shows is the benefits of diversification. So the investment bank is doing well based on a lot of the deals announced late last year, so that’s not necessarily a forward-looking prediction, but these companies are benefiting from the volatility in deals. And so the trading results, you know, we feel like every year there’s something of an event, right? Last year was going into release day and that helped trading activity early last year and this year it looks like the bar is quite high. it can be difficult to get through and of course here we are this year where the first quarter had all of the events that we just talked about and traded quite well.
02:46 Speaker B
The positive data point I want to talk about is that Goldman yesterday, you know, a really good trading quarter said in the early days of the second quarter, it continues. So at least the read is that it’s not just a blip due to volatility but they’re still seeing customers really engaged. And on the business side, corporate customers, they are used to this fluctuation. Every year something happens. So they have to make strategic decisions. The IPO calendar has some very large deals that we all know are still underway and then on the M&A side, they have to make these strategic decisions with AI risk and everything else. You cannot sit still. So, you know, it’s an effective catalyst for decision making.