US Bancorp 2Q17 Earnings Call Notes

Andy Cecere

Strong growth in middle market

“the areas of growth continue to be in few — middle market is doing exceptionally well, that’s in excess of 2% on a linked quarter basis and we continue to see that accelerating or being about that level in future quarters, that’s doing well. As Terry and I both mentioned, we saw some growth in the second half of the second quarter in the large corporate wholesale part of the category. And then a lot of leasing as Terry mentioned, very high quality but given the great platform relationships we had that shows some growth. So those are areas that I would say are our principal areas of focus.”

Terry Dolan

Will likely be more competition for deposits as the Fed pulls liquidity out

“I do think that as — or we think as excess liquidity comes out of the market you could expect to see and you will expect to see more competition with respect to deposits, I would also expect that the long end of the curve on a relative basis would be a little bit higher; as a result some of their activities — that have [indiscernible] from a deposit standpoint is most likely to come on the wholesale side of the equation.”

We remain cautious in commercial mortgage markets where environment has created unfavorable conditions

“Commercial real estate lending reflects our prudent approach to certain CRE segments such as multi-family and retail given current market conditions. We did have opportunities for growth in construction lending. However, remain cautious in commercial mortgage markets where the competitive environment has created unfavorable conditions from a risk and return standpoint.”

TD Ameritrade FY 2Q17 Earnings Call Notes

Tim Hockey – President and Chief Executive Officer

Investor engagement has been resilient

“Investor engagement has been resilient. High trading volumes despite ongoing volatility. We’re seeing very, very healthy trends and new funded account growth, and asset inflows from both new and existing accounts. Asset gathering itself is a quarterly record, and we’ve already met our previous fiscal year record for net new assets with nearly a quarter yet to go. ”

Close to receiving final approvals for Scottrade acquisition

“We believe we are close to receiving final regulatory approvals for the Scottrade acquisition and we hope to make everything official in the coming weeks.”

We are seeing very broad based engagement in the market

“Yes, so we have seen you know both this quarter was sort of the perfect storm in terms of those numbers right, so we saw our clients with net buying activities, so cash was down linked quarter and then we saw very strong returns in the markets, so the denominator was up, so I think that’s why you are seeing that percentage decline so significantly. We are seeing this quarter very broad-based engagement in the market, so everyone from brand-new customers opening their first account to very active traders seem to be engaged in the market. We saw a good activity across pretty much all of our products, futures were down a little bit year-over-year, because we had such a strong comparable. In terms of holdings, we are still seeing the trend where the ETF’s are increasing a bit as a percentage of assets. We continue to see good holdings in mutual funds and really across all of the products that we typically see.”

Broader retail engagement but multi decade los in the VIX

“Yes, so it’s actually a bit of a conundrum, on the one hand we’ve got broader retail engagement, generally as we say, if you look our June quarter after June quarter after June quarter, the engagement rates of our clients are up, their trading levels annualized are up, as we said their activity rate. And part of that is the shift to mobile, we know we get a lift in trading when a client becomes mobile active, again easier for them to do that business. So on the other end, the conundrum part is, as we said, we’re at multi-decade lows in the VIX, which tends to drive more trading activity. So, if you do get a bump in VIX, then with that broader based trading it will be interesting to see whether you get a real spike or not, but it’s sort of a steady drumbeat of higher growth rate in clients with slightly more trading levels even – even over and above the fact that we have volatility that’s quite low.”

Bank of America 2Q17 Earnings Call Notes

Paul Donofrio

Changed disclosure to headcount from FTE

“Please note that we have changed our disclosure on employees from FTE to headcount this quarter. By the way, that was the same idea from one of our associates. FTE is much more complicated to calculate and less relevant today given our shift from part time associates, as you can see the headcount is down more than 4,000 from Q2 2016.”

Consumer and investor are very bullish on America

“I think Marty across all the years since the crisis there has been ebbs and flows in customers’ views about where they want to invest and the cash portion of our balances has come up and down. But I think the consumer and the investor are very bullish on America and they continue investing in consumers through their spending and activity and investors on a personal side through their investments and you’ve seen those investments in equities and risk products continue to rise almost without fail. And then when there’s real market disruption concern you see a pullback a little bit, but basically without fail has been a steady investment and that’s why we’ve had assets under management levels of record levels at this point.”

Feel good about loan growth pipelines

“We feel good about long growth unless the economy changes significantly we wouldn’t expect much change from the past quarters. We did see a little bit of dissemination this quarter in commercial that could slow growth in the future. But having said that, we haven’t changed our medium term outlook on our ability to grow loans, we expect total long growth for the company to be a low single digit. And we expect to grow mid-single digits in our lines of business. That obviously excludes the headwind from loans and all other mortgage one-off and now U.K. card is gone.”

Goldman Sachs 2Q17 Earnings Call Notes

Martin Chavez – CFO

Rising market values and low volatility

“many of the themes that we discussed during the first quarter continued into the second, rising market values and low volatility. On one hand, rising market prices were supportive of capital markets activity, investment management performance and our investing and lending activities…On the other hand, low levels of volatility sequentially lower in several fixed asset classes, negatively affected the FICC environment.”

CEOs are confident

“I look at the backlog and really, it’s driven primarily by underwriting but looking at banking broadly I would say the CEOs are confident, the conversations are happening all the time and strategic M&A in the U.S. those discussions are occurring especially in technology and consumer retail in natural resources in Europe. I would say it’s hard to predict given the Brexit uncertainty there is healthy activity and we certainly see opportunities in Europe for debt underwriting. In Asia, we’re still seeing the trend of Chinese buying and international assets. And we remain optimistic over the long-term and as for the debt markets again no predictions here other than to note what we all know which is that trends in rates, and spread and volatility in M&A activity all drive demand for issuance.”

Citigroup 2Q17 Earnings Call Notes

Mike Corbat – CEO

Asia and Mexico growth is reasonable

” sequential growth and positive operating story continuing in Asia and in Mexico. And I would say that those environments are reasonable environments. They’re growing well, we’d like them to grow from a macro perspective. No, we’ve had downgrades in terms of Mexico growth rates. but again, 8% growth – revenue growth coming out of Mexico in a country that’s growing sub 2, again, I think illustrating what we’ve talked about that we believe over the intermediate longer term we’ve got the ability to grow our international front franchises at or in many cases at multiples the pace of domestic growth rates. And the other piece if you look in there is that in Mexico, it’s the combination of our retail business in Asia, it is wealth management. And if you look at wealth management AUM throughout year over year and different metrics continuing to attract AUM into the business. So we feel good about the trajectory of those businesses and the ability to continue to get this type of growth. And as we’ve said, we expect that trend to continue in the near term in the second half of the year. Again, with growth and positive operating leverage.”

Assuming one rate hike each year for the next three years

“Well yeah, I mean again we’re not counting on that type of environment. So again in the projections that I’ve given you, we’re not looking at interest rates suddenly wildly increasing across the board. So it’s not rate – our outlook is not rate dependent. I mentioned in the – when I spoke – when I answered John McDonald’s question that we’ve got one more rate hike for the US built in and its December of this year. And quite frankly we’re assuming one more rate hike in ’18, one more rate hike in ’19 and one more rate hike in ’20. So again, we’re not looking as though this is all going to be rate influenced growth. We like the franchise that we built.”

We want more clarity around CCAR

“it’s likely that CCAR is going to stay the binding constraint and around anything that’s a binding constraint, you just need more transparency. So we’d like more granularity in terms of some of the numbers and have the ability to explore some of the approaches that the Fed has and because Secretary report came back, that’s one of the recommendations that they have. I would say things in there ranging from how do we think about, how do we bring together LCR and SLR and get some of the inconsistencies out.”

PNC Financial 2Q17 Earnings Call Notes

Bill Demchak – Chairman, President and Chief Executive Officer

Consumer side should be more influenced by rates than shrinking of balance sheet

“we will see when the Fed makes the decision to reduce its balance sheet and they have announced that they will do that somewhat gradually and through time that will drive liquidity out of the market. We will see the biggest impact of that in my view coming out of the corporate side first, which has the highest beta therefore it has the least impact on us. I think the consumer side is going to be driven frankly by continued increases in short-term rates by the Fed as opposed to the necessary shrinking of their balance sheet, which is going to occur over the course of years, the way they have scheduled it out.”

Probably a couple of moves away before you start seeing deposit shift

“On the consumer side. There is obviously a small, but growing online presence of deposit gatherers who are paying well above what traditional bank pays, but it’s a tiny percentage of total consumer deposits. I think we are a couple of moves away from the Fed before you start really seeing the positive beta shift on the consumer side.”

Wells Fargo 2Q17 Earnings Call Notes

Timothy Sloan – President and Chief Executive Officer

Don’t really know what’s going to happen

“I mean the Fed has never had a balance sheet of this size. We’ve never been through a situation where they’re talking about reducing a balance sheet. We can talk about history all day long, but since we’ve never been through that, nobody knows exactly what’s going to happen. ”

A lot more transactions in CRE where we think the risk return isn’t there

“Having said that from time-to-time and again, this can be quarter-to-quarter or year-to-year there’s a fair amount of competition in stabilized commercial real estate projects, I mean there’s lots of liquidity out there. And so this quarter there just happen to be more transactions that we’ve looked at where we said, gosh, another risk return it just isn’t there, but I wouldn’t describe it, and that’s more based on underlying risk return in an individual transaction as opposed to stepping away from any region or any product type within CRE.”

John Shrewsberry

We became concerned about the underlying values of auto loan collateral

“I think a year-ago, we look at the market and what we saw in the market was the following. And that was that – remember that majority of our originations are for our used car loans. And so we saw – we would became concerned about underlying values of the collateral because of production levels by the industry. The number of cars that were coming off leases, we got concerned by the risk return in terms of pricing as well as term and we took that all into consideration in terms of ramping down our originations in improving the underlying quality. And on the short-term we gave up loan growth and so the metrics are not as good. We gave maybe some short-term revenue. But over the long-term, this is how we think about credit.”

JP Morgan 2Q17 Earnings Call Notes

Marianne Lake

Expect normalization in September and rate hike in December

“So on the balance sheet, it is still the case that we expect to start seeing normalization in the balance sheet, in September, if not in September by the end of this year with the actually calling for the next rate hike in December the market is calling for March of next year. And as we said the communication has been pretty consistent and pretty clear across the Fed space, which is to say that is mostly price into the market at this as far as we can tell.”

Fed shrinking balance sheet is likely to slow deposit growth

“we would see the balance sheet shrink about $1.5 trillion over about the next four years. So that would ultimately slow growth not stock price and if we saw a $1.5 trillion come out of the Fed’s balance sheet empirical evidence would suggest that we don’t see dollar for dollar reduction in deposits. So if you just pick a point between 500 and a $1 trillion of deposit outflows at our 10% market share that would be about $75 billion over full-year. So it would slow growth. It would not stop growth and it is what we’ve been expecting and what we’ve been talking about now for an extended period and gradual is good enough. In respect of which deposits we would like to see, so that’s the sort of growth scenario.”

Jamie Dimon

Jamie Dimon’s diatribe

“we would see the balance sheet shrink about $1.5 trillion over about the next four years. So that would ultimately slow growth not stock price and if we saw a $1.5 trillion come out of the Fed’s balance sheet empirical evidence would suggest that we don’t see dollar for dollar reduction in deposits. So if you just pick a point between 500 and a $1 trillion of deposit outflows at our 10% market share that would be about $75 billion over full-year. So it would slow growth. It would not stop growth and it is what we’ve been expecting and what we’ve been talking about now for an extended period and gradual is good enough. In respect of which deposits we would like to see, so that’s the sort of growth scenario.”

Bank of the Ozarks 2Q17 Earnings Call Notes

George Gleason

Construction is likely to pullback a bit

“We do have the expectation that construction nationally across all product types and all markets across country is likely to pullback a little bit and whether that number is 10% or 20% I don’t know, but in talking with our customers as RESG guys do and they are passing that feedback along to me, cost of labor and materials in some markets are going up significantly. Cost of construction financing is going up. Cost of feds moved interest rates now four times and probably spreads on construction financing at least in our experience have gone up over the last 18 months to 2 years. So, it’s costing more in labor materials and capitalized construction period interest for our customers to build things and we are working against a period of years coming out of the great recession, where supply did not keep pace with demand and supply of product and lot of product types is caught up with demand now and lot of submarkets. So, there are lot of markets around the country where you might have had 5 projects coming to market a year ago, but there is really only a need for two more projects coming to market this year and that is slowing the volume to some extent.”

We wish we could invest more in securities but we can’t

“We are not – our securities portfolio right now is at a very low percentage of earning assets compared to where we were say 7 years ago or 10 years ago and we would like to be in an environment where that securities portfolio could become a much higher percentage of our earning assets. We are unfortunately not in an environment today where we feel like we can add a lot of securities for yield purpose as we did add securities last year that we retained a lot of the kind of short and medium-term mortgage-backed securities and other short-term securities from the CSB acquisition for liquidity. And then we added securities as we have talked about at length on this call in the last quarter for liquidity. So, we are keeping the liquidity element of our securities portfolio where we feel like it needs to be. But as far as really investing a much higher percentage of our earning assets and securities because we love the risk reward profile from an interest rate risk we think – we are a long way from that at this point.”

Citigroup at Morgan Stanley Conference Notes

John Gerspach CFO

Slow trading environment

“I guess I will call it a slower trading environment, we would expect revenues in our fixed income and equity markets to be down year-over-year in the, I guess I’d call it the low double-digit range maybe 12% to 13%. Yes. And so that would mean that we were down 12% to 13% this year. Of course, that also means we would be down sequentially and maybe just a little bit more than we otherwise would have anticipated given the environment. I’d also say though at the top of the house for the overall firm, expenses should also be down sequentially, probably not enough to completely offset the seasonality in revenues. So, you might see our efficiency ratio pop up to 59% this quarter. But again, it should decline in the second half of the year and then we are still very, very comfortable with our target of 58% for the full year.”

I don’t think the Fed is really going to impact our LCR

“I don’t think the Fed shrinking the balance sheet is really going to impact our LCR. When we look at the constraining factors on LCR right now, it’s really more driven by resolution requirements as we need to preposition liquidity throughout the firm in order to make sure that we have got a very good resolution plan”