JP Morgan 3Q17 Earnings Call Notes

Mariane Lake

We are constantly under attack

“not to diminish the importance of any individual breach or situation, is that we are honestly under constant attack, both in a more general side but also from a fraud perspective, and so while we always react and learn lessons from every individual situation, this is not the first breach nor will it be the last breach, so as a result we have been constantly evolving and refining the way we think about fraud prevention, detection, underwriting, continuing to move to multi-factor protocols around customer identification, looking to leverage all of our data to better inform our underwriting decisions.”

Nothing really has happened much since last quarter

“obviously apart from the rate hike in June, nothing has really happened much since last quarter, and so the landscape is looking pretty similar, and not because that’s surprising, so I’ll come back to that in a second, which is to say that there’s been very little to no movement in the re-pricing of deposit account”

Tax reform a factor but not a driving factor

“Tax reform, so fiscal stimulus, the reality right now is although I think everyone, and ourselves included, are hopeful, obviously that tax reform is done for the right reasons and that the economy responds accordingly, at this point it’s not front and center in the dialog we’re having with our clients about whether they should or shouldn’t do a strategic deal or take an action, so I would say it is neither holding up business nor spurring business, but that could change. So at this point, I’d say it’s a factor but not a driving factor, and that could change.”

Not seeing any deterioration in credit

“although we absolutely expect at some point that we’re going to see normalization of credit, we haven’t seen that yet – I just want to make that clear. We are appropriately cautious and staring at everything, but we’re not seeing any deterioration or any thematic fragility in our portfolio that we’re concerned about at this point.”

Wells Fargo at Barclays Conference Notes

Tim Sloan – Chief Executive Officer

Loan losses are the lowest I’ve seen in my career

“As I mentioned, our loan losses in the second quarter were 27 basis points, it is the lowest that I have seen in my 30-year career in the company. If you take apart the various parts of our portfolio, the residential first mortgage portfolio is continuously performing incredibly well. As I mentioned, we had net recoveries in the second quarter, similarly the home equity portfolio, the second portfolio, I think the losses in the second quarter are 21 basis points, so it is again the lowest that we have seen that I can remember.

On the auto side because of the changes that we made in our auto business, we experience a slight decline in auto losses. I would caveat the expectations for the third and the fourth quarter in that, there are a lot of cars right now that are underwater in Texas and in Florida, and so there may be some issues there. We do not have a sizing of that right now, I don’t think anybody does. The credit card business continues, the losses have ticked up across the industry and up slightly for us, but it’s not something that we’re overly concerned about.

On the commercial and C&I and CRE side of the house again, some of the lowest in history and we really don’t see anything on the horizon that’s going to drive higher losses in that portfolio. There will be some impact I’m sure from the hurricanes, but we don’t believe at this point that it’s going to be significant. So overall, we’re in a very benign credit environment, I think you got to be careful when you are in a benign credit environment like this that you believe because you do want to believe that it’s going to continue forever, but geez while it lasts, it’s absolutely terrific. And I think it reflects not only a slow but steady growth in the economy, but also some good credit decisions that have been made by my colleagues over the last few years.”

BB&T at Barclays Conference Notes

Kelly King – Chairman and Chief Executive Officer

Loan growth lower because higher payoffs amid lower rate environment

“When we announced our second quarter earnings in July, things were actually moving at a pretty good pace, and we were more optimistic. So we had a higher guidance for loan growth at 1% to 3% from the third quarter. We’re now revising that to be slightly down for the third quarter. And here is why. So, obviously, you will not to see – not like to see average loan growth go down. But in this case, after analyzing, what happened is loan production, loan pipelines have continued. It’s just that in late July, early August, when we saw a material reduction in long-term rates, there was a huge spike in payoffs. And so that’s kind of an uncontrollable event.”

Not concerned about loan growth

“What I think the importance is, as rates begin to creep backup and as those payoffs exit the systems, you’ll see a more return to more kind of normalized loan growth in this period of time. So we’re not concerned about loan growth. We believe it will be steady and solid as we go forward. Hard to know exactly what it will be for the fourth quarter right now, because it’s hard to predict those level of payoffs. But certainly as we head into 2018, we think those payoffs will subside and we will continue to have a good solid loan growth.”

Main street is coming back

“Main Street is beginning to come back. When I travel around, I just completed my tour of our 26 regions, visiting with business people and our lenders in those marketplaces. I’ll tell you that small and medium-sized business people are much more confident, much more optimistic, they’re beginning to make replenishment type investments and that is beginning to cause more activity for us in that marketplace. ”

Digital is happening even faster than it was

“The digital focus is a really big deal today for all of us in banking. Frankly, it is changing really fast and a bit faster frankly than a few years ago. I might have guessed, but it is moving in a very, very fast and positive direction. The key there is for banks to be investing properly in their digital platform, in the digital marketing, and all aspects on digital interaction with our clients and BB&T is doing.”

Small business has been more optimistic since the election but still waiting to make expansion investments

“Consistently what I have found is, after the election they immediately became more optimistic and started moving towards investing what I call passive or replenish investment. These companies will tell you consistently that they have been driving folks with 350,000 miles, they’ve using 20 year old computers, and they just been scared to death laying, because all of the taxes, all the health reform, all the regulations are just in place. So after the election they became more optimistic, they started making replenishment, replacing their fleet, now they are not doing expansion or investment, yes they are not building expanding the plant, they are not adding a lot of new products and services. In that case, that – they are waiting on I think mostly tax reform. I think when you see tax reform, I personally believe will happen by the first quarter or so of next year, and I’m saying that will move then from just passive or replenishment investing to expansion oriented investment, which will call the GDP to kick up from the 2% kind of range to 2.75% to 3%.”

Capital One 2Q17 Earnings Call Notes

Richard Fairbank

Exceptional opportunity has run its course, now just a good opportunity

“we believe the opportunity to grow continues in the card business. What I would say is the exceptional opportunity has mostly run its course and now there’s a more just there is just a good opportunity let’s talk about the exceptional opportunity for a second while a lot of people were not — they weren’t as heavily marketing and not as seeing the growth opportunity that we saw, we pretty much captured several years of outsized growth and I think that it served us very well even though we all know of course the upfront costs of that in terms of credit and allowance have been little rough on the P&L. What I think has happened over time, the competition has definitely intensified but it’s not irrational. ”

Banks have to do a better job of taking the impact of disruption into account

” even before the day finally comes when we down the road we’re all doing our work in the back seat and there is no driver long before that I think we all have to be very vigilant about what is the impact of technology change is there come to be I mean generally the quality of technology has sometimes allowed cars to last longer and has been a good guy in the auto business. But the question is will there be a tipping point where the old cars just don’t cut it and the new ones are so much better. So this in fact I just want to pause for a second and just kind of seize the moment that one of the — one of the things that I don’t I think banks don’t do that well I think Capital One did not do that well on things like Uber story is pull way up across all of our lending businesses and ask what is the impact given that industry after industry is being revolutionized, what is the impact especially I think in the commercial C&I business of the revolution that’s going on in our clients’ businesses and if we just go and make one loan at a time and do our nice underwriting standards we could wake up and have a lot of rude surprises like we did in the taxi kind of business.”

JP Morgan at Deutsche Bank Conference Notes

Marianne Lake – Chief Financial Officer

The reality is that these policy things take time

“I mean, I think we still remain very hopeful that there will be [indiscernible] policy and reform on the agenda. I think it’s hard because everybody was super enthusiastic out of the gate, but the reality is all of these things is they’re extraordinarily hard and there are reasons why tax reform hasn’t been successful over the course of the last several decades. It’s because it’s complicated, and so I think it’s–you know, we’re four or five months into the new administration, and while it would have been helpful to have some more scores on the board, I don’t think it’s time to give up the belief that–you know, we know a few things. We know that they’re deadly serious about reform in multiple facets, we know that they have smart and capable people around them, there’s bipartisan support particularly for certain aspects of tax reform and regulatory reform, and anything that’s constructive for the country and the economy and pro-growth is constructive for our clients, so we are trying to be as engaged and constructive as we can be, and we still see all of those things on the agenda, it’s just they take a little time and I think that’s a reasonable expectation.”

Confidence levels are still high

“So meanwhile, we have to keep the wheels turning and doing what we’re doing and serving our clients, and so there’s no actual change. The levels of optimism are still high, they’re still higher than pre-election. They may be off slightly from their peak, but I think generally people are still feeling that the pro-growth agenda is real. How exactly it ends up being manifested in reform and policy action over the course of the next six, 12 months is still an unknown, but I think the seriousness with which it’s being approached is something to applaud and we should all welcome it and be as constructive as possible, and so that’s the approach we’re taking.”

We feel that accreting further capital is not necessary

“So on capital, we’ve been pretty vocal and consistent for a number of years now that we think that the company can be run safely and soundly at around 11%; meanwhile, for a variety of reasons, we’ve been sort of operating in this capital corridor of 11% to 12.5%, and at this point we’re at the high end of that range. This year at investor day, we made the clear statement that we feel that accreting further capital is not necessary, and moving down in the range over time would be our preferred strategy in the absence of any new news, and so that really hasn’t changed.”

CCAR is the predominant binding constraint to returning more capital

“As you look at the capital agenda, CCAR at the moment is the predominant binding constraint for most of the large banks in the U.S., and so reforming CCAR through the way its implemented and supervised, I think is a real possibility, if not a probability. And even in his outgoing speech, Governor Tarullo laid on the table a number of meaningful improvements that seem somewhat uncontroversial at this point, so number one, let’s phase out or eliminate the qualitative assessment test.”

Second quarter does look better than the first

“some difference of opinion about the second quarter and whether or not it will rebound from the first. Our view is first quarter continued the trend of having seasonal distortion in it. People are looking through that, second quarter does look better. Consumer spending in the first quarter was disappointing – that’s rebounding. Inflation data is disappointing, but other than that, jobless claims are the lowest since ’74, retail sales, industrial production, capex were decent. So I think if you smooth out the noise, the first half is going to be a 1.5 to 2% growth situation, which is pretty in line with our near-term historical averages, and so we’re, I would say, solid, not stellar but not reasons to be concerned at the moment. We’ll keep an eye obviously on the inflation data, and the Fed have said the same thing; but if you look forward and not spot, I think the general assumption is that will be somewhat transitory in nature too, so we’ll have to see about that. We’re seeing that in our businesses, so we’re seeing strong spend, we’re seeing decent loan demand, we’re seeing reasonably healthy capital markets activity, so it feels to us like it’s still a pretty constructive environment generally in the second quarter. While there are small pockets, so you know, auto sales have been a little softer over the last couple of months for maybe obvious reasons, then they’re pretty small and pretty modest in comparison to the bigger picture, so I think generally pretty healthy so far in second quarter. Nothing that we’re seeing in our client engagement, in the dialogue or in the activity is a foreboder of anything different from that at this point.”

I would say our central case for US rates is two hikes this year

“You know, I would say our central case for U.S. rates is two hikes this year, the Fed starts to shrink the balance sheet at the end of the year, slowly and under control such that it’s more in the background, so rates remain the major monetary policy tool that we’ll see a flatter but nevertheless somewhat normal yield curve, and that the 10-year will be, call it 2.75 at the end of this year. Maybe we’ll be wrong, but implies a 2.40 so you pick your number. We’re not seeing it going down.”

Consumers are in good shape

“consumers are in very good shape. Their balance sheets are repaired, they’re pretty liquid, their debt to income ratios are pretty low, debt service burdens are pretty well insulated from interest rate hikes because interest rates have been low forever, and they’ve been able to refi debt at–term out at low rates. I know that someone mentioned yesterday that the household debt burden has gone back to peak levels, but meanwhile GDP has gone up by 30%, so as a relative to income measure, it’s low.”

Wells Fargo at Deutsche Bank Conference Notes

John Shrewsberry – Chief Financial Officer

There was a lot of optimism but that has diminished as there’s been little progress on the policy front

“Well, we saw in the wake of the election and going through the fourth quarter a lot of optimism. It felt like it was going to produce real results as a result of the policy initiatives that have been all the rage. And customers from different segments would have reacted or prepared for that differently from taxes to trade to energy or other highly regulated industries, healthcare, obviously. And as a result of no real forward momentum on any of those fronts and frankly a little bit more of a sense of paralysis in terms of getting that legislative agenda through, my sense is that people are waiting and seeing. There still is a lot of optimism, especially at the small business end of things, but I think confidence is lower that these signature policy initiatives are going to come through.”

The stock market still reflects a lot of optimism but the bond market is not showing us that.
You can see it in loans

And the stock market still reflects a lot of optimism, but the bond market is not showing us that. And you can see it in loans, first quarter it was pretty soft in C&I, second quarter is about the same I think. We have had a big reduction in outstandings in energy-related loans over the last year. So C&I overall would reflect that as well, but it’s still pretty flattish. On the consumer side, mortgages coming into the season, where more mortgage activity, more home buying happens, so with jobs where they are and rates where they are for that matter, my expectation is that, that will look pretty good. But it might have looked even better had there been more forward momentum. Autos, there will be probably be 0.5 million fewer autos, new autos sold in the U.S. this year. We have backed away from the lower tiers of credit in auto a little bit, but that isn’t raging quite the way that it was, 16.5 million cars is still a lot of new cars, but it’s not what it was a year ago. Card, for us, is a smaller business, but the consumer payment patterns and card fee type activity still seems actually quite strong, kind of mid single-digit growth rates, but balances tick down in the first quarter after a higher fourth quarter and the second quarter reflects normal seasonal activity. Commercial real estate still feels pretty full and there isn’t a lot of growth opportunity there rather it’s making sure market-by-market and property type by property type that things are where they should be. So I think we are in a holding pattern from an optimism and momentum point of view until something breaks policy or legislative wise.”

I don’t think folks are getting ahead of themselves

“Well, so I think the wholesale customer, on average, is going to wait and see to figure out what the tax consequences, the trade consequences, the regulatory consequences are of deal activity or expansion activity. That’s, for the reasons I mentioned, I think that they are going to wait it out. And I think the consumer housing isn’t getting ahead of itself, right. People are, in terms of first-time home buying, we are getting back into a phase where it feels like more of that is going on. In spite of recent stories, we haven’t seen that much cash coming out of mortgage borrowing activity. So, I don’t think folks are getting ahead of themselves there.”

Something is going to have to change to not flatten if short term rates come up

” I think something is going to have to change to not flatten if short-term rates come up, because there hasn’t been any stimulus for long-term rates to move up and stay up since the fourth quarter. I mean, we had a big realized move after the election, because I think people thought that there was going to be a great big tax stimulus, a lot of growth oriented initiatives, more borrowing going on from greater deficits, more borrowing going on from infrastructure, things that were going to put big strains on markets and none of that has happened. The Fed balance sheet could be a catalyst for something to happen. There is multiple schools of thought about that whether it happens – whether it results in higher rates and how quickly it results in higher rates. But clearly, that’s one thing that could happen that could increase the opportunity for people looking to earn more in the 10-year area.”

I don’t think that the US consumer is overburdened with debt

“I don’t think that we believe that today that the U.S. consumer is overburdened with debt, either with respect to cash flow in terms of the ability to service it, or with respect to the value of their assets given what’s gone on in home price appreciation over the time frame that you described. And in part I would give credit to the way mortgage origination has changed post Dodd-Frank in the modern era. There is the real effort made to underwrite exactly what a borrower’s resources are and what they can afford. And there’s consequences for people who originate in a different way than that.”

Probably an opportunity for banks to be higher returners of capital

” I do think that, in general, that this is probably true, that there will be banks this year – banks who haven’t been big returners of capital over the last few years who have earned their way into – built their capital level to a full level, gotten to something like a stable run rate of profitability. There’s probably an opportunity for some of those banks to have gotten more aggressive in their ask for return of capital this year. “

Toronto Dominon FY 2Q17 Earnings Call Notes

Bharat Masrani – CEO

Greg Braca

*We’ve seen some slow down in commercial markets

“I would just also call out that Q1 and Q2 we’ve seen some slow down in general across all commercial markets, a couple of things have been going on higher interest rates, we’ve seen clients staying on the side lines or hitting the bond market and retiring bank debt that we’ve also seeing less CapEx spend. And in the U.S., we’ve decidedly seen a lot of our commercial clients sitting on the side lines for the last couple of quarters with a wait and see attitude with everything from decisions on taxes to infrastructure spend and the rules of the road in the U.S. with the new administration”

Mark Chauvin

You can’t have lower losses forever

“Now, I’m not looking for major increases, but you can’t have really lower losses for the extended period of time. So, I would look for the modest increase maybe in next quarter, but from a quality perspective I prefer to look at loss rates. And we’re really in the current economic environment and borrowing a significant change in that, we’re looking at the loss rates in the U.S., staying relatively consistent to what we’re seeing for the — in this quarter and for the balance of the year.”

Mike Pedersen

Deposit beta has been low but rising with Fed rate increases

“Now, I’m not looking for major increases, but you can’t have really lower losses for the extended period of time. So, I would look for the modest increase maybe in next quarter, but from a quality perspective I prefer to look at loss rates. And we’re really in the current economic environment and borrowing a significant change in that, we’re looking at the loss rates in the U.S., staying relatively consistent to what we’re seeing for the — in this quarter and for the balance of the year.”

Goldman Sachs 1Q17 Earnings Call Notes

Harvey Schwartz – President, Co-Chief Operating Officer

Martin Chavez

Ultimately we didn’t navigate the market well

“Having said that, we did underperform, and the underperformance was driven by commodities and currencies. Ultimately we didn’t navigate the market well, but no quarter defines the franchise. There is always things that we can do better, and it’s important to note we’re constantly analyzing our results with an eye towards continuing to improve on them.”

Cautiously optimistic on M&A advisory

“So the pipeline is good and we’re cautiously optimistic. Many of the factors that one would look for remain in place, so CEO confidence, attractive financing levels, relatively supportive equity market backdrop. So I’ll say cautiously optimistic.”

We have a Brexit plan but not taken any action

“Sure. So I think not crystal clear what all the different terms around Brexit mean, including hard Brexit. Obviously it continues to evolve. We’ve all seen Prime Minister May calling a snap election this morning, as we all know. The U.K. triggered Article 50 a couple weeks ago. We have our Brexit contingency plan in place, and as far as that plan is concerned, we’ve taken no material actions yet along that plan, and we have a plan.”

Citigroup 1Q17 Earnings Call Notes

Mike Corbat – Chief Executive Officer

Positive about growth in the US economy

“We also continue to be positive about growth in general and the U.S. economy. While the details of potential policy changes in area such as tax code and infrastructure spending have yet to be worked out and will take a little longer than originally projected, we continue to believe that it’s a matter of when and not if these changes will occur. As that process unfolds and outcomes become clear, I expect business will react accordingly as sentiment shifts from optimism to confidence.”

Yet to have anyone tell me why it would be helpful to bring back Glass Steagall

“anytime I hear this term 21th century glassed eagle, I ask what it is and I have yet to have anybody really tell me what’s there. And as you can imagine that not just myself but I’m sure others have been involved in those conversations. And I would say that the administration is focused around trying to harmonize regulations, focus around trying to take things away that are either duplicative or don’t really add value. And I have yet to have anybody really explain to me what value there is in terms of either a reinstatement of glassed eagle, which in itself is strange or what 21th glassed eagle is. So we continue to ask about it but not necessarily be that focused on it. We think our business model is the right model.”

John Gerspach

Consumer confidence in Mexico appears to have come back

“Well, I do think that the Mexico economy, at the beginning part of the year, I’d say that there was somewhat of a decline in consumer confidence that did occur. I was in Mexico three weeks ago. My sense was that that had changed, it was beginning to come back. But there was definitely a drop in consumer confidence at the beginning of the year”

PNC Financial 1Q17 Earnings Call Notes

Bill Demchak – Chairman of the Board, President, Chief Executive Officer

Pleased and a little surprised by Fed hike

“We were pleased and frankly a little bit surprised to see another interest rate hike by the Fed in March. Of course, we welcome news of economic indicators that seem to suggest a confidence amongst consumers and business leaders. Now, as I said before, PNC is positioned to benefit should environmental factors turn more favorable. But still, we remain focused on execution against our strategic priorities.”

CRE growth replaced by C&I

“This time last year, growth was dominated by real estate. This quarter, real estate loans are actually down but have been replaced by growth in the rest of C&I which seems to run counter to recent industry data. The C&I growth was very broad based across equipment finance, ABL, large corporate, middle market and for the first time in seven years, straight commercial loans, which we categorize as loans declines in the $10 million to $50 million range in revenue.”

Rob Reilly

Credit quality stable

“Turning to slide nine. Overall credit quality remained stable in the first quarter. Total nonperforming loans were down $146 million or 7% linked quarter with improvements in both commercial and consumer loans. Total delinquencies decreased by $192 million or 12% reflecting improvements in all past due categories. Provision for credit losses of $88 million increased by $21 million linked quarter attributable to loan growth and normalizing trends in our commercial loan book. Net charge-offs increased $12 million to $118 million in the first quarter, largely driven by seasonal increases in home equity and credit card loans. The annualized net charge-off ratio was 23 basis points, up three basis points linked quarter. Our credit quality metrics remain near historical lows and these results fully reflect the outcome of the recently completed Shared National Credit examination.”