JS Earnings Call Notes BLK, USB, UNH, CSX, BAC

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Jeremy S., an investment analyst here in Southern California, has started to contribute to Avondale’s company notes database. Below are quotes from some of the calls that Jeremy has read this week.


Blackrock (BLK) CEO Larry Fink says one of the strengths of the firm’s business model is that clients can switch asset allocation and funds internally rather than leave Blackrock & take their funds to a different asset manager

“A number of those outflows from institution clients, however, have been offset by inflows by the same clients into BlackRock’s active strategies. This is a very important component that we all should be focusing on, because as we discussed how we are building our unique business model, having the ability to have clients internally move assets around whether it’s from beta to active or active to beta, this allows us to continue to build deeper and more elongated relationships with our clients.”

Blackrock (BLK) CEO Larry Fink says a large majority of their fixed income investors are pension funds and insurance companies 

“70% of our fixed income investors are pension and insurance companies. They’re not influenced by market moves. They’re trying to match a liability, and that’s the problem with the narrative, they’re not the players who’re going to whip around the interest rates.”

Blackrock (BLK) President Robert Kapito downplayed his enthusiasm of “active” ETF’s

One of the benefits of the ETFs is the transparency, the diversification, and that enhances the trading and the liquidity of these. So, we’re not sure that this is an opportunity we’re going to pursue. We’re thinking about it, and we’ll just see how the market continues to evolve. So, we’re not ruling it out, but right now, we’re not looking at that, and we view that as something that will compete more directly with mutual funds than it will with the normal ETFs.”




U.S. Bank (USB) CEO Richard Davis, who has been notoriously patient on the yield curve rising, finally expects to see a stronger 2nd half for the U.S. economy and thus a potentially rising yield curve

I’m actually more optimistic on the revenue for the second half because things have turned the corner.”

While the compliance costs for his bank have kept increasing

“Expenses will come down as we watch our nickels and dimes, but I will tell you the cost of compliance has erased a lot of the benefits I would otherwise hope to have gotten a year-and-a-half ago when we started this as we’ve continued to add the compliance personnel, audit personnel, and not just in those areas but in the front line where we have that same compliance responsibility that’s gone up substantially.”




UnitedHealthcare Group (UNH) CEO David Wichmann said his firm is using games to incentivize his insurees to stay healthy and reduce costs

“We are bridging the direct link between consumer engagement and lower per member cost trend and with employers’ help further engaging consumers in their own health and wellness. This includes our product development efforts like Rally in cutting-edge areas like incentives, gamifications, missions and social networks. Engaging people on their own care informs them as real consumers and translates into better care, better care resource use and lower costs.”




CSX CEO Michael Ward said even though revenue fell, reducing expenses helped lead to a record quarter of profitability

“we have the resources in place to meet customer demand across the network, supporting improved service performance and operational efficiency. That efficiency coupled with lower fuel prices helped decrease expenses by 9% and delivered all-time records in operating income at $1 billion and an operating ratio of 66.8% for the quarter.”
And they’re seeing reduced labor expenses as well as productivity initiatives across their workforce 
“We expect labor inflation to be around $25 million in the third quarter, which is a reduction from the level seen in the first half as union wage inflation becomes less of a headwind. In addition, we expect labor and fringe expense to benefit from further network fluidity improvement and efficiency as we remain focused on increasing train length and aligning crew starts.”
CSX CEO Michael Ward said railroads continue to take market share from trucking
“Strong intermodal performance will continue as our strategic network investments support highway to rail conversions and growth with existing customers.”
Bank of America (BAC) CEO Brian Moynihan says the firm continues to focus on reducing expenses and rightsizing the business

“Revenue was up and expenses were down comparably against both periods.  On the expense side we told you that we achieved this new BAC cost savings back in the third quarter of last year. However we didn’t give up on our focus on expenses and you can see those in the results. It’s the lowest non-litigation expense base since 2008.  So we just continue to apply technology to continue to long-term reduce expenses. So the goal we have in some is to keep the expenses flat as revenue increases.”

Bank of America (BAC) CEO Brian Moynihan says the firm will close more banking branches as a result of customers placing an emphasis on mobile transactions 

60% of our sales are all digital now.  There are about 10,000 appointments scheduled in the mobile device a week at the branch, that allows us to have a more efficient branch structure, even though we may have less, we may have bigger branches because you have more sales going on in them.”