bank of america post record profit on strength of consumer banking, and goldman disappoints. and grosslity low concerns hi, ken earnings provide some leadership? -- growth concerns high, ken earnings provide some leadership can earningsngs -- provide some leadership? >> what a day of earnings we have ahead of us. we did get the earnings from johnson & johnson. raise theiry full-year adjusted earnings-per-share estimates. in general, they are raising their view. you are seeing the shares pop by about 8%. the actual estimate for earnings-per-share, $2.10, came in higher than the estimate. revenue also beating.

just interesting to see how the pop in the shares is not that big. there was a lot of positivity baked in, even with the beat here. david: they did really well on pharmaceuticals. at the same time, they've got some real ethics concerns, and there is this overhang from washington on whether they will regulate drug prices. we will have more in our next hour with johnson & johnson's cfo. will go now to bank of america. lisa: let's figure out what exactly was driving the action with bank of america. they had some beats, some missus. -- some misses. the most interesting thing i've is that savers are starting to make changes with higher rates. they are taking money out of non-interest-bearing deposit

accounts, falling by 7%. those that pay interest rose 7%. they are voting with their money for the higher interest-bearing. david: which is critical to bank of america because they are a deposit taking interest to should -- taking institution. williams, now alison and on the phone is jeff hart. rating for bank of america with a price target of $34 per share. what do you take away from the bank of america earnings? are going to want to hear about the guidance, and to your point, what is happening on the deposit side. we did see very strong growth on the interest-bearing side, up 20% year-over-year.

we are seeing some increase at bank of america. but still, it looks like some decent positive growth. looks aboutrading, in line. equities trading a little bit light. i would call it about in-line, similar to what we've seen with peers. lisa: jeff, we will have to get your reaction. what is the most important data point in bank of america's results we should focus on? people willk what primarily be focused on is net interest income in general for banks given the change in the yield curve we have seen in the fed going from cutting to pausing. that looks pretty good. it was $16 million below what i was looking for, which is essentially a rounding error.

the net income margin came in a basis point better than we were looking for. the next thing people should be looking at is expense levels because be of a -- because b of a is really an efficiency story. and we are looking for, there's a lot of data to get through, the expense levels look pretty good, assuming there isn't some sort of nonrecurring surprise. david: when it comes to bank of america, we want them to loan a lot of money. we also want to get repaid for the money they loaned. is there some indication that they risk softening in the credit market? alison: i haven't dug in to see where the increases are, but that is where we should be looking.

i would call it a marginal surprise, but we are seeing weakening at citi and wells fargo. interestingly, it is not the provision line, which we would expect to increase with growth. the question is how far, how fast. lisa: when you talk about net interest margin, i find it interesting the best of times may be behind us. how much of the good news is already baked in, and how much can bank of america and the rest of the banks increase tryst margins if the fed is on hold for the foreseeable future? argue fors hard to much more margin expansion with the curve flattening the way it has. i think interest margins can there ishere because

some benefit on the asset side. stope hoping deposit betas going up, certainly on the wholesale side. the other link to that is the volume, or what loan balances are. that is a bit of a wildcard. we are getting loan growth, not very strong, but that should still drive net interest income up. as we are sitting here now, that still leads to income interest growth. it is not going to grow as fast as it had become a but it still should work its way up. lisa: jeff hart, thank you so much. alison williams, thank you so much as well.

joining us now, pinewood head of global investment. we are seeing banking stocks lagged behind the s&p 500. there are some signs of diversification. guest: that's right. the banks are typically very cyclical groups. we were coming to a dual policy of, forhe potential china to go too far in slowing down their credit debt, and the fed to go too far in tightening conditions. the markets in the fourth quarter said at the very least, this is going to lead to a short and shallow dip in growth and earnings if they reverse immediately. it could be longer and deeper if they don't. and the market came down.

what we are seeing in the bank earnings is this is the brunt of the slowdown, and they are handling it just fine. we are not hearing shortfalls. everyone is looking for the uptick. lisa: i'm sorry, this is the brunt of the downturn? guest: this is the brunt of the slowdown china caused the growth and the u.s. caused liquidity. this is it right now, and the banks are coming through it with flying colors. david: but can the banks really be a good investment for the future if the fed sits on the sidelines? guest: yes. david: because we've heard forever what they needed was higher interest rates. guest: or loan growth, and what we've seen again is many .ompanies poised to invest more companies have been under investing for nearly a decade postcrisis, and they paused to paused due to the trade scuffles. we will not see it this quarter, maybe not even next, but i

believe in the backstab -- in the back half of next year you will see companies investing again. millennials haven't been buying homes for numerous reasons. one was very high rates. those have come down. loan growth, we are pivoting from egg testing -- from obsessing about net interest margins to come by the end of the year, loan growth. david: michael kelly of pine ridge investments are going to be staying with us. lisa: and i went to hear what is going on with respect to this being the brunt of the slowdown. to a check on the markets right now, pretty much positive in risk assets. thestoxx 600 rising to highest level since october. s&p futures a bit higher. two year yields unchanged. david: let's get headlines right now from outside the business world. uma pemmaraju is here with first

word news. uma: the central bank may need to cut interest rates. if inflation were to fall, that would be a sign that monetary policy is too restrictive. he is predicting rates will be on hold until the fall of 2020. it is one of the most highly anticipated government reports in years, special counsel robert mueller's report on his investigation into robi -- into russian meddling in the 2016 campaign. thursday. released on in paris, it took firefighters more than 12 hours to extinguish flames that gutted the iconic notre dame cathedral. the structure's spire collapsed and those flames, but the two bell towers were saved. so was the crown of thorns jesus

was supposed to have worn before his crucifixion. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm uma pemmaraju. this is bloomberg. back to you. david: i don't know where you were when you heard the news, but i was just second. my wife actually texted me. i thought she was talking about the university of notre dame. then i look at these photographs that were just sickening. lisa: this was a structure built in the 12th century. it took 200 years to build. it is absolutely a landmark, and frankly, a representation of a lot of what people believe that paris has come to stand for. people have vowed to come and rebuild it. there are a number of very wealthy french investors who are pledging hundreds of millions of dollars to rebuild it. you just have to wonder, how did it start?

how did the pinnacle of history burned down like this? david: there's investigation already. coming up here, more on bank of america's record profit. that is next in today's first take. this is bloomberg. ♪

david: now the top stories we are watching this morning. first, bank of america's record profit and what it says about banks. trade friction among the four largest economies in the world. here to talk about all of those is michael mckee. still with us is michael kelly of pine ridge investments. a wealth of michaels we have

today. , one thing ining particular is it wasn't consumer lending. it was institutional and corporate lending that did well. >> we didn't think companies need it is much from the lending market because they all had the money overseas they were supposed to bring back, and they had large valuations, and they couldn't borrow against their own holdings. what stands out to me, and i will look at a little differently, is the consumer sector did do well, and what we are seeing is people move their accounts from non-interest-bearing to interest-bearing accounts as the fed has raised rates, and also more charge-offs. it is still small, but we are late cycle. what is this telling us about the credit cycle going forward? lisa: this is something we were just talking about, which is interesting. this brings us to our second story, which is late cycle.

do you want to be growth or value? we are getting ibm and netflix earnings after the bell. michael, if you take a look at their one-year chart, netflix has absolutely outperformed ibm. they've also burned through about $2 billion of cash each year while posting pretty significant revenue acceleration. ibm generating cash left and right, but it can't see that acceleration. revenue flat year-over-year. guest: i'm going to not comment on those two stocks, but the market has believed we are very late cycle, and late cycle you want to own growth because it will hold up. we beg to differ that we are as late as people think. a lot of yesteryear's overheaters are all of a sudden combing down. inflation is coming down -- is down.g down -- is calming

is all thrown off course. if you look at things like global output gaps, there's no sign whatsoever that we have used up the slack. to be thelack appears unemployment rate, but if you look at things, just participation in the u.s. labor that, inflation validating , profits validating that, we think it is sixth-inning. it is not top of the ninth. lisa: these are really long innings. [laughter] david: taking what michael has just said, does that mean we don't need to be concerned yet with margins for corporations because of increased labor costs? reporter: it is probably going to be a several quarter story. we have to watch that. we are seeing earnings start to rise for workers, but by how much? ,s it going to continue to grow

or come down a little bit? if that is the case, companies appear to be able to hold their margins. all of the earnings you have been reporting this week, we are all trying to hold down expenses. that has come to the forefront because the easy money has been made. now it is time as margins compress, let's cut expenses. david: but you know we are going to look for easy money, trade. we've got at least three different fronts going on. put aside usmca. forget about north america. we've got japan, europe and china. where are we going to see some progress? we have been talking about a deal with japan for a long time. the threat over the european union has been hanging out for quite a while. it has been pushed to the side because robert lighthizer may be

a talented trade negotiator, but he is one guy. they have been laser focused on china. now as they get closer to the end with china, as we have been told, they get to some of these other things. the japanese came to town last week, but we don't even know what they want. we don't know what the trump administration is asking of japan. europe only agreed to start negotiations this week. we don't know where they are going with that, either. lisa: thank you some but -- thank you so much, bloomberg's michael mckee. michael kelly of pine ridge investments, you will be sticking with us. see all of these charts tv . antitrust more on the

battle in federal courts. this is bloomberg. ♪

david: the epic apple versus qualcomm patent dispute is in court today after a jury concluded. -- after jury selection concluded. michael kelly of pine ridge investments is still with us. this is a lot of money. >> absolutely. this is a big deal for qualcomm. what is at stake is the royalty model itself. qualcomm makes chips and has substantial intellectual it hasy it believe monetized above and beyond the

value of the chip itself. the question is do they have a business model on which they can charge a piece of the phone price over and above, or separate from that, of the chip sec? value of how much it is worth and how it is monetized would be the key issue here. lisa: let's say qualcomm wins. what's to say that apple doesn't just develop their own technology and use it for their phone? reporter: i think part of the gambit here for apple is that it is trying to play for the 5g. at the end of the day, apple is top makers in the world. if apple wants to develop its own chipset and wants to divest from any royalty payments to anyone else, having the chipset alone is not efficient because qualcomm's business model says

anybody can make the chipset, but at the end of the day, you still have to give me a piece of the pie because i have intellectual property over and above that of the chipset. that is what apple is fighting to get away from. david: is this just big companies fighting over who gets the money, or does it have implications for tech develop into in the sector? michael: it sounds more like the former, but supply situations are always changing and evolving with technology. , is ity's world, that is qualcomm versus apple? everything is in flux. that is why we have experts like this to guide us through this. lisa: bring us through the benchmarks as far as which trials we need to pay most attention to that could be indicative of the outcome. obviously we've gone

through the free-trade commission. qualcomm was fine. the second part was in san jose, where apple arguably won one, qualcomm arguably won one, but the final decision is pending based on this trial, which starts april 15, and will probably go through mid-may and extend to may be may or to july. the outcome of that will be one of two issues. number one is qualcomm's business practices of licensing the chipset for the intellectual property versus selling the chipset. they are trying to sell one to benefit the other, et cetera. is itcond part is licensing property on a , in anble to basis

anti-discriminatory way, across all of its customers. david: michael, you said there is going to be more investment from corporations. does that make it more like tech companies? yes, business focused technology is under invested. i think it is waiting. it's confidence is up. it is poised to step out and make investments. david: on the eve of all of those big earnings coming out. thanks so much to michael kelly. coming up, we are going to talk with the chairman of societe generale. this is bloomberg. ♪

lisa: this is "bloomberg daybreak." we have a pretty positive tone to markets broadly today. germany hitting the highest

levels since october 2018. green across the screen. 1% aheadq up 4/10 of of the u.s. open. year yields.s. 10 up by a basis point. the dollar getting a little bit of a bid. crude seeing a bit of a lift, but basically flat. david: time to find out what is going on outside of the business world. uma pemmaraju is here with first word news. uma: north korea's kim jong-un is getting ready for his first summit with russian president vladimir putin. a south korean newspaper reporting the two will probably meet next week in vladivostok. they are likely to discuss stalled nuclear talks between north korea and the u.s. the parents indicted in the u.s. college admissions scam have become the first to challenge the government's case.

they have argued that prosecutors are overreaching and they claim defendants are part of a single conspiracy. they are among 19 parents indicted in the case. 13 others avoided indictments by a greeting to plead guilty. billionaires in france are pledging to help restore the notre dame cathedral after that devastating fire. gucci's owner will donate $13 million, and the lvmh willt controls donate as well. global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm uma pemmaraju. this is bloomberg. david: thank you. we welcome now societe generale 's chairman.

we have to say at the beginning how badly we all feel about this tragic loss at notre dame. guest: thank you very much. i think all of france, everybody is mobilized to rebuild it. that is the target now. our bank is committing and want to contribute. i think now the next step is to go back and rebuild it. david: we are all with you in that effort. it's move on to europe more generally. this's a lot of talk on program and other programs about the challenges the european economy has in growing right now. how do you see it? how bad is europe right now? guest: it is not that bad in the sense that growth has been revised downwards, but there is no recession overall. it is just that, like in the ,.s., growth is not as expected so interest rates remain low or

negative. we need more investment, private and public. i think europe compared to the u.s. has room on the fiscal side because that is going down. deficits are going down. the problem is how you coordinate all these countries to have a fiscal boost in case it gets worst. that is the big question mark. lisa: one thing people have been talking about is how detrimental rates have been to european banks. this chart shows the volume of negative yielding debt globally rising dramatically. you can see that blue line is , nottoxx 600 banks index flatlining, but barely rising in tandem with the rising negative yielding debt totality. can european banks be successful with a negative rate regime?

lorenzo: if rates were at the u.s.,evels as the we would be as profitable as u.s. banks. then we contribute every year to the single resolution fund, which has been built up. the total sum of negative rates in this contribution are about 15 billion euros. every year, the banking system is giving out, basically. this is a tax. if taxing banks is the best way to stimulate the economy, congratulations. now they have to make the decision. if i look at japan or switzerland, they have a t impactwhich reduces the of negative rates on the economy. that is something they have to look at. david: if you had your old job

on the executive board of the ecb, would you be advocating for raising rates? lorenzo: i would try to look at the impacts. the rates have had positive impacts on the economy. the point is now that qe is , the economy is really not in great shape, banks are not in great shape, is it still useful? i think it is not a night illogical issue. i think it -- not an ideological issue. i think it is pragmatic. light of what you call a tax on the financial system in europe, many are expecting more consolidation. it consolidation a good or bad thing for you?

i am thinking of, for example, which a bank and commerzbank tying together -- deutsche bank and commerzbank potentially tying together. lorenzo: you have seen this consolidation happening together with the creation of a capital market, which is helping the banks. i think we need to see that in europe. consolidation maybe in the first stage within borders of countries, and deutsche bank and factor is part of that , and then cross-border. to do that, we need also to be a bit more profitable, probably. david: speaking specifically of your bank, societe generale, there is a new plan. you are getting rid of something like 1600 people. can you approach success without consolidation?

can you do it on your own? lorenzo: i think it is the first step, to focus on what we do well, where we are really first class. maybe the second stage, take part in a consolidation, which bel give us the scale to able to compete in other areas. right now i think the focus is to improve returns by focusing on the kind of businesses where we excel. lisa: when you say focus on consolidation, does that mean you are actively looking at potential targets? lorenzo: no. the first step is improve profitability. we focus on the business where we excel, where we are good at. then the second stage, when the regulation and political environment, which in europe

still has an impact on the banking system, there is still tendency for politicians to consider banks as kind of a national company. they have to start thinking european instead of national. this may take a few years. david: as chairman of the bank, how would you describe that core area or areas where you really can excel? how would you describe what you need to back off of? bank arewe as a taylor's. we taped -- are tailors. tailor to companies and products instead of mass production. we tailored to the client, and that is where i think we are number one or number two. we want to focus on these areas. we have many other products, in terms of geographically, in

central and eastern europe, africa. we have a very strong african franchise. that is where i think we are good at, and we want to really focus on these sectors. lisa: several years ago, a number of banks saw the u.s. as the bright spot to expand into because capital markets were and have been so robust. i am wondering, is that opportunity over? lorenzo: banks may have different strategies. what i have certainly noticed is the banking sector is much more concentrated in the u.s. , and have market power they start from a basis which is much more profitable because mystic markets in the u.s. are much more profitable, and they go abroad starting from a strong domestic market. in europe there is much more competition, margins are smaller, so it is not as easy to come into the u.s. from europe.

things may change when europe will become like the u.s., but right now i think we are present with an.s., actually, operation that is readily focused and efficient. that is what we think should be our goal. goal off part of the consolidation would be gaining market power that you see u.s. banks have, should we really be looking forst and foremost at consolidation within a country as opposed to cross-border? it would take us back to deutsche bank/commerzbank as opposed to unicredit. doesn't make more sense for french banks to get together with french banks as opposed to looking at a italian or german banks? lorenzo: i would say that france and other northern european countries have reached a level of consolidation which i would say is appropriate. there are two countries which

are big in europe, where besolidation really has to completed, which is italy and germany. you still have 20 banks in these countries. small, often cooperative banks, .hich compete they undercut prices. i would say consolidation needs to take place in germany and italy, and then we will talk about consolidation at the higher level. lisa: lastly, i wanted to get your thoughts on the italian banking system. the doom loop people have been talking about, the fact that they own so much of the government debt and fiscal problems there. are you worried about the italian banking system? it iso: interestingly, true. italian banks holding government bonds, these are largely the small banks. tois not the task of banks

invest in government bonds, but rather to lend to the economy. the small banks maybe are not very profitable, so they decide to invest in government bonds because it is easier and doesn't require a lot of effort, but this is a sign that this is not sustainable. we need consolidation. these banks need to get bigger and more efficient, and do the real work of a bank, which is to lend to companies and households rather than the government. it is a bit more complicated. it is an issue of sustainability of the banking system as it is today in italy, which still model which ats present is not sustainable. lisa: thank you so much for being with us. coming up, deutsche bank in deep

waters. we discuss why congressional democrats issued subpoenas to the german lender and other banks, next in wall street beat. this is bloomberg. ♪

uma: this is "bloomberg daybreak ." coming up in the next hour, johnson & johnson's cfo. ♪ uma: hello, everybody. this is month, raju on "bloomberg daybreak -- this is uma pemmaraju on "bloomberg daybreak."

volkswagen sales failed to pick up in china last month. six former employees at anadarko petroleum have told bloomberg stories of a toxic culture for pany'sin the com denver office. alleged thataint o executives had relationships with board members. that's your bloomberg business flash at the moment. back to you.

lisa: we turn now to wall street beat come over recover three things wall street is buzzing about this morning. first off, blackrock reports. the world's largest asset manager closing $65 billion of net inflows in the first quarter, reversing three quarters of institutional outflows. then, new delay on the block trade. traders argue the move will improve liquidity. deutsche bank in deep waters. house democrats issued subpoenas to deutsche bank and other lenders, escalating probes into , aspresident's finances well as any outside influence on u.s. politics. david: we welcome jason kelly to take us through these stories. on blackrock, they are back. jason: money was coming out, now it is coming back in. we will see what the color

around this is because if you see the stock is down and it , therket -- if you see stock is down in premarket. lisa: blackrock specializes in passive funds and etf's that don't charge big fees, so where are they going to generate revenue going forward? jason: that's exactly right. one thing we should note is that those flows were down from the $37 billion.r at they were at a record $81 billion in the fourth quarter. are: the second story we looking at is near and dear to my heart. this is fascinating. test saying they going to the laying mandatory reports of pricing on block trades, big trades of corporate bonds, for 48 hours. currently you have about an hour

to report pricing on bond trade to give people a sense whether they are being ripped off or not. people say that actually move the market against investors trying to sell big chunks of debt, so they want to have a blackout of having to report anything for a long time so they can sell everything first, and then people can find out the pricing. kind of amazing. 2019, less information for the bond market. jason: it is like we need less transparency. it is amazing, right? david: imagine if we never told them. huge liquidity than. lisa: here's the question. there is a problem. block trades have a difficulty getting done. jason: because they have an outsized effect on the market. lisa: exactly. if you are trying to sell five apples, nobody notices. if you are trying to sell 3 million, people are going to notice and not want your apples. you would think more disclosure

made the market more liquid because people had more disclosure. jason: i don't think you are really interested in the story, i'm sorry. [laughter] washington is interested in deutsche bank. we have the house democrats saying we'd like to have all of your records about all of your dealings with the president of the united states, if you don't mind. this is maxine waters and mr. schiff. jason: what is so fascinating is this is a follow-up to a number amitted investigations -- to number of investigations ongoing, and the testimony of bank ceos where this question was posed to everyone. can't really talk about ongoing investigations. interesting,ially the timing this week, because in two days we get the full, at least redacted, mueller report. you have to think those of us

who have followed it as closely as you have, that this is something at the heart of this investigation. david: you can see the president's son saying it is an unprecedented abuse of power. he is none too pleased. or hiss the president family, i would be worried about adam schiff saying this is a friendly subpoena. signature bank is wanting to cooperate -- so deutsche bank is wanting to cooperate. lisa: they are between a rock and a hard place. they said they would not give an extra loan to trump organization members during the campaign because they didn't want to be involved in this political quagmire, and yet here they are still involved at a time when they cannot afford to be involved in yet another high-profile political case. this is the last thing they need right now. they still got some money outstanding trump organization. jason: that is notable in part

because they were one of the very few banks left who would post numbers with the bankruptcy the president had. david: as you said, it all fits together with the mueller report, which is very exciting. lisa: we are going to get the redacted report later. david: many thanks to bloomberg's jason kelly. tune into jason on bloomberg radio every day from 2:00 to 5:00 eastern. coming up, here's one for atari fans. elon musk may get a chance to zap asteroids for real in space. more on what i'm watching next. this is bloomberg. ♪

♪ david: spacex and asteroids. when i heard this on bloomberg radio, i literally couldn't believe it. elon musk has been given $69

million by nasa to shoot a affect theo space to moon of an asteroid. it is going to take more than a year and demonstrate the fact that if an asteroid was headed toward earth, they could do something about it. lisa: this is every 10-year-old's dream, and i can speak for experience because i have a 10-year-old. basically saying i am going to blow that thing out of orbit and show how much power we have. honestly, that is literally what they are doing here. david: there have been movies made about this, but i didn't know they were so worried we had to demonstrate. nasa wants to make sure we can do it in case an asteroid comes our way. lisa: not to take something that is fun and make it serious, but it shows the sort of cold powers that elon musk can have -- the sort of cult powers that elon musk can have. spacex $69 to give

million in order to show ourselves we can protect from an asteroid. david: such a powerful point, and it is broader than just asteroids in the sense that we had almost given up on space. we had given up on going back to the moon or to mars, and elon musk is helping us basically have imaginations about space again. lisa: although it is science fiction, it does have a purpose, and dreaming about science is not the worst thing. david: it is cool, fair to say. coming up, more on bank of america's record profit. york, this is bloomberg. ♪

♪ david: steady as she goes.

bank of america posts record profit on strength of lending, and goldman disappoints on equity trading. looking for a pattern in all of the financials. johnson & johnson beat estimates for earnings and revenue with strong prescription drug sales despite fx and pricing headwinds. we talk with the cfo. and it is all about trade as the u.s. presses forward with china and get started with japan, with europe on deck. the markets all wait. welcome to "bloomberg daybreak." i'm david westin, right here with lisa abramovitz. alix steel is on assignment. lisa: today we are definitely focused on the unfortunate, horrible fire from the notre dame cathedral. i will say what we've heard this morning is a resounding chorus of both wealthy and just pedestrian, average person saying we will put in whatever we can to rebuild. david: they were well up over $300 million already this morning.

we had the chairman of societe generale who said their bank and employees are stepping up. i suspect that will happen across france. lisa: without a doubt. let's get you cut up on the market action ahead of the u.s. open. generallyave been feeding to the upside. the s&p futures up about 1/3 of 1%. yields up about one basis point. riggs.bloomberg's taylor taylor: bank of america is all about responsible growth and expense management. the cfo kicking off their call by saying that continue to show, even in a slowing economy relative to last year, they can continue to deliver on growth. they've lower-cost cost and better manage risks, showing better stability given the mix and diversity of their individual businesses.

they are really highlighting some diversification when the call -- diversification on the call. expande on track to their branches by 2021. the second question coming through is about expense management. year-over-year expenses fell about $600 million. they have been working in the last decade to improve some of those expenses from areas like marketing to attack to some of the other investments -- marketing to tech to some of the other investments. how much of a headwind would a fed rate cut really have on the business? the cfo saying it depends on why there is a rate cut. if that sees a slowing economy, then that is one reason. they do say even if there is a rate cut, that would boost corporate borrowing and residential lending. clearly they are

well-equipped to handle any sort of outcome that would have. all about responsible growth as we map up -- as we wrap up the media call. avid: we welcome now alison todd fromand walter columbia, south carolina. what do we make now out of bank of america? alison: solid quarter. better loan growth, interest margin better-than-expected, about asverall expected. equities about in-line, a little light. that matches what we've seen with other peers. the improving loan growth on the commercial side is a positive. posit growth slowing is in line with industry trends. isdeposit growth slowing in-line line with industry trends.

i think some solid deposit growth is better for the industry outlook, and that is one thing we will be listening for on the call in terms of the net interest income guidance. lisa: it was a pretty good report, beat estimates. as an investor, what are you looking for to say stocks of financials are a buy from here? the bullish scenario from financials is you continue to get decent economic growth in the u.s. at 2.5%. then you really need to see yields firm up. i think that is going to go to overseas markets, and china improving, which is going to improve europe, which will move rates higher in should our move rates -- should move our rates higher. the net interest income or net interest margin is going to remain pretty flat with the fed on hold, but if loan growth is

in the mid single digits, expense controls continue to be good. america,se of bank of you only see a case 10 times for that. one of the cost you have is paying interest conceivably on savings, or concept. are you worried about deposits? guest: we should see that start to flatten. with the fed raising rates, that was a buzz word last year. i don't think you were going to hear that is much going forward because that should start to moderate as the fed goes on hold. it is really going to be all about the ability to grow loans. what we saw in the fourth -- fourth quarter cio loansoans -- is continue to pop. david: are you buying -- lisa: are you buying bank of america

here? it meanshe fact we own we are buying it every day. we are comfortable with the current position we have there . alison, one aspect that has been highlighted is the provision for loan losses have priced in. at what point do people get concerned about the level of loan losses we are seeing? ison: i think investors will increasingly look at that as a risk. we did see charge ups coming in the higher-than-expected across the major banks. normalizing from a lower level, there is some seasoning of growth we have seen in previous years, but investors are going to focus on that to continue to watch the health of the loan book. brian moynihan

do to grow his business? he said he is going to redo investment banking. is that an opportunity? on: there's definitely different pockets they have been focusing on. in investment banking, we did see a better fixed than expected. equities a little lighter. the m&a business is an area where they are focusing on in terms of a very profitable part of the business. beyond that, for the basic bank, they are the biggest commercial lender. a lot of that adds to the health of that business, and we did see a pickup this quarter in terms of loan growth. -- atwalter, at on what point do you start to get concerned for the consumer and the type of debt they are incurring? the rates are going up for them.

walter: you mentioned charge-offs slightly higher, so that is something we want to continue to monitor, but the consumer is in pretty good shape. their balance sheet isn't very good shape, but as we get later cycle and you want to watch with unemployment where it is an wages moving higher, that should be a good backdrop for the consumer at this point. david: drawback from the specifics of bank of america or even financials. what do these numbers tell you about the u.s. economy and growth as an investor? walter: i think the word is solid. economic growth was predicted to 2.2%.the first quarter now we are at 2.5%. i think these numbers are much better than the fears of the fourth quarter into the start of the year. we are encouraged by the numbers we are seeing so far. lisa: we are kind of coming to

the end of the financials reporting q1 earnings. what is the big take away? alison: i would say healthy growth is a big take away. the u.s. economy in good shape. in general, healthy growth. the cost-cutting side continues to be positive. i think that is where we broadly banksrnings beats across in terms of controlling expensive, given the outlook was uncertain. the interest income environment which is a little more of a mix, negative for wells fargo, given what is happening with their balance sheet, we will see what we hear from bank of america on their call. lisa: i love that that is that is the only way they can raise money. at what chance today have a

chance -- at what point do they have a chance to expand? when do we see what the plan is? that's one aspect goldman sachs was penalized for. ison: but keep in mind the digital. i think we will hear more about longer-term efforts and how that is helping the bottom line as well. lisa: thank you so much. walter todd of greenwood capital, you are sticking with us. coming up, netflix and ibm both reporting after the bell today, and walter says there is a striking contrast to these giants. that is what we will be talking about next. this is bloomberg. ♪

uma: this is "bloomberg daybreak ." at&t's stakeht out for $1.4 billion, valuing the entire company at $15 billion, and leaves hulu with just a pair of owners, disney and comcast. iger says he may be interested in acquiring the rest. bmw bullish on china as the country -- at the country's annual autoshow, saying they expect sales to grow as much as 10% this year. volkswagen is saying sales picked up last month after taxes. lufthansa cutting its growth plans last month against the backdrop of the european airline industry coming off of a rough year.

bad weather and air traffic control strikes have cut into profits. that is your bloomberg business flash. back to you. lisa: thank you. netflix and ibm report after the bell today. the two giants could not be more different. on the other hand, netflix boasted, but blew through $2 billion in cash. ibm has been flat in revenue growth, but has $11.8 billion in free cash flow. walter todd, why would you pick ibm without any revenue growth? walter: let me preface this by saying disney is our largest holding, and i am the last person in the country that is not a netflix subscriber. with all of that being said, we just like the cash flow at the end of the day from ibm. we don't own either of these companies for our clients, but if i had to choose, we would go with the cash flow versus

burning or borrowing money to buy content, which is what netflix is doing. with that cash flow that gives you optionality, we have seen the purchase of red hat start to increase revenue going forward. that is why we would favor ibm over netflix if it is forced to choose. david: you own disney. you don't netflix. does that mean you think disney will take a big chunk out of netflix? that is what everyone is talking about right now. can disney really take on netflix when it comes to streaming? walter: we were very impressed by what bob iger and his team had to say about disney plus. we do think they will end up buying the whole part of hulu and bundle those services together, which will be a very competitive offering to netflix. we do think it is not going to be the end of netflix, but

certainly netflix has been going without competition in any major way for a number of years. we do think this increases competition for them going forward, which means they are going to have to continue to spend on content, which is one of the bold cases for them going positive,g cash so we do like disney right now. lisa: i will say that disney will have to spend quite a bit on content, as it made clear in this announcement. it is not like they are getting off scott free with respect to that. go ahead. walter: that is correct, but they have all of these other businesses generating $9 billion to $10 billion of free cash flow , so they will not actually have to borrow money like netflix does to spend that content. lisa: you are looking for a more stable cash generating business given the cycle, especially since we have seen some initial

public offerings that did not do so well. list bank is down now -- lyft is down now 22% since there initial offering. walter: i think it is a little concerning with the types of ipos we are getting over the past year. we have tied or exceeded the -- think like cisco in technology, intel, union pacific. these are companies that are growing revenue, they have positive cash flow, they are not insanely expensive. they are kind of in the middle of a netflix or ibm. we are a little concerned about these ipos that have been coming with no prospect. in perspectives, huber says we

may never be profitable -- uber says we may never be profitable. that is not a business we want to play in. david: coming up, johnson & johnson shares gaining in premarket after showing a beat in the first quarter. their chief financial officer want us next. -- joins usmberg next. this is bloomberg. ♪

♪ david: time now to focus on the khamenei worth watching this morning. johnson & johnson shares -- on the company's worth watching this morning. johnson & johnson shares rising after the company beat earnings for the first quarter. olk,ing us is joseph v cfo for the company -- joseph wolk, cfo for the comedy. . -- for the company.

this is based on prescription earnings, right? guest: i think that is fair. we are looking forward to 2020 to be at market performance are better come about prescription drugs did perform very well across all of our therapeutic areas. not just for the short-term data, but also for the long-term. david: how much better would you have done but for the strong dollar? guest: if you look on a topline basis, it was three to four points of growth, and if you look at the bottom line, about eight cents or 9%. lisa: in january, you said you expected growth to either stall or decline in 2019. what changed? how did you manage to beat expectations and lift expectations a just a couple of months?

said wein january we would grow at an operational headwinds caused by a stronger dollar would have .s reporte pharmaceuticals improved faster than expect it as well, so we raised our operational guidance by 50 basis points this morning. drivingiven the real force behind a lot of johnson & johnson, we are always interested in the pipeline on new prescription drugs and the threats from generics. how do you compare that balance? joseph: once we have a chance to anniversary the impact of generics, probably later this year, that is where our current pipeline kickshe

in. it is great for our business, but even better for patients. just the other day we had a therapeutic for bladder cancer, about 20,000 patients in the u.s.. this product could help about 25% of those patients. help forg has brought indications. johnson & johnson did see a decline in sales of medical devices, as well as consumer product. i am just wondering what the plan is to perhaps accelerate sales a bit. joseph: if you cancel out the noise, take away currency and significant investiture related

to our diabetes monitoring business, the actual growth was 4.3%. that is probably our best growth in about three years. i think we did see a little bit of a market softness, but we are very encouraged by the strong share we saw in our over-the-counter medicines. tylenol has regained its number one spot among all analgesics. and then neutrogena in the beauty space continues to perform well. we will see that play out with competitors reporting later in the earnings season. david: other pharmaceutical companies are getting a lot of attention in washington these days. give us an update on your point of view on potential headwinds from washington. joseph: i spoke about the price -- or the success we've had with our pharmaceutical per polio. -- pharmaceutical portfolio. that is actually in spite of

price decreases. we just issued a transparency report with leaders in the industry. we think we win on innovation, thatng that patients physicians value. important forvery the stability not just of johnson & johnson, but the industry at large. i can tell you the johnson & johnson portfolio had $21 billion in discounts, and we are net price decrease. there's are not getting into the hands of those who need it, so there are more fixes. lisa: you say you see attraction in the consumer-products space, which is a little jarring because i thought there was an increase of spending and beauty products and things like that. what do you mean about the contraction? joseph: if we look at our market share for the quarter, it held up very strong.

our conclusion is that the market is softening a little bit. that could be due to inventory contractions at some of the larger box retailers. e-commerce is pretty efficient with the way they manage their supply chain logistics. we will all just have to get a little more information to see what the drivers of that contraction could be. david: thank you so much for spending time with us today. that is joe woldk, johnson & johnson -- joe wolk, johnson & johnson's chief financial officer. this is bloomberg. ♪

lisa: this is "bloomberg daybreak." we are looking at a constructive tone to markets. equities generally rising.

nasdaq leading the charge in the u.s.. across assets, you can see yields rising, but not a lot of action. the 10 year yield rising. dollar getting strength and crude getting a bit. u.s. trade talks with china continue, as do the trade talks that have just begun with japan, with europe saying it is ready to talk trade. let's welcome michael mckee. very busy around the u.s. trade representative's office. conducting trade negotiations with the biggest economies in the world. this week the japanese came to town. a couple themes that permeate these negotiations. one is agriculture and the other is self-inflicted wounds. both come together in the trade talks with japan. cars are important.

we talked a lot about cars for the trump administration, but agriculture also. when donald trump came to office he took the u.s. out of the trans-pacific partnership. look what has happened to japan since tpp was agreed to. imports into japan have been imports intoeat japan have been soaring. none of that is coming from the u.s. u.s. farmers are losing out. aniculture could be important part of these talks if the japanese agreed to talk to the u.s. about it. so far they say with a will not. is going ont what with china. the thing you need to know is these are the chinese figures. the chinese trade surplus with the united states keeps growing, rebounded a little bit in the last month after the chinese new year holidays, but it is still

elevated. the moving average shows you what has happened. donald trump says he will bring down the trade deficit but it is not happening. so many people concerned about what will happen if the talks fail. that is a problem they still have to deal with. finally we get started with the eu trade negotiations. the eu just this week giving its negotiators it's official mandate to go forward. this is the problem donald trump wants to solve. they are buying -- they are selling us a lot more stuff than we are buying from them -- then we are sending to them. a big trade deficit with the european union. cars are a part of that. agriculture also a big part of that. for the first time, the eu has created a mandate or trade negotiations with france objecting because they say the u.s. needs to sign on to the paris climate agreement before they would agreed to talk to

them. they can still go ahead with the negotiations, but it shows how divided things will be. lisa: thank you so much. joining us from washington is bloomberg's sean donovan -- shawn donnan. what are the signs we are moving closer to some sort of agreement? shawn: they are still going on by phone. one of the big focuses we are seeing is the political management. the trumpd administration had asked the chinese to switch their retaliatory tariffs away from agriculture products, which gets to some of what mike was talking about in terms of the impact on farmers and how they are being left out.

a lot of these negotiations and how the trump administration is keen to get wins for agriculture. do youas an investor, take this into account, if for no other reason than it may be distracting or disturbing to ceos because they do not know how to invest? >> i would agree. if you look at business competence numbers in the u.s. have taken a hit around this uncertainty. levels, thent market is pricing in an agreement with china. , if they are not pricing in that agreement or to include a rollback of the existing tariffs , that would present some upside, but where the market is currently trading -- the longer this drags on the more uncertainty this creates and the morbid drag it will create. we've heard from ceos talking about the impact of tariffs on their business. we need to move on from this and

get it behind us for the economy . we do get some sort of agreement, would you buy something in particular in the asset market? an agreement with china and a potential rollback of existing tariffs would be beneficial to certain industrial segments of the market. machinery stocks that have been impacted by some of these tariffs, that would be beneficial. is could have some upside. favor the cyclical areas if you got a better-than-expected deal with china. david: you heard from walter that he wants some quietude. agriculture about both with china and the european union, once you put agriculture

in the center it makes it hard to get deals done. inwn: one of the features the japanese negotiations is there is a set of agricultural results donald trump can seize, those are the ones from the tpp. the japanese have said they will not go beyond those. there is an easy win for donald trump in terms of agriculture. anywhere else you look, agriculture is always where things get stuck. it is an emotional issue. is about food, it is about the heartland, family farms, and so on. for donald trump, increasingly, this is an interesting pivot, he started off the trade wars looking to boost the manufacturing sector and he has encountered one of the byproducts in that the agriculture sector has been hurt and now his focus is on rescuing the agricultural sector from the trade wars. , one thing i'm struck

by is the estimates i have seen and trying to calculate the amount of economic growth lost due to the uncertainty around the trade backdrop. what have you seen that is a reliable quantification of how cfos have responded? michael: you do not have a lot of reliable data because so much of it is a motion rather than specific. the counterfactual -- what would have been spent? lose's an estimate that we .1 to .2 if the tariffs stay on. japan, hee and with is not imposed tariffs but he could and he could use that as a cudgel, as he has done with canada and mexico. if those things continue, they will continue to happen impact. you see that in canada and the payment is going on in the agricultural sector because of the reciprocal tariffs. david: walter, i want to pick up

on something you said. if a trade deal with china rock the tariffs, that would be an upside. i do not see much prospect of that. the talk is about enforcement. yesterday we had the united states say china can retaliate against us. if the tariffs do not come off, but we have some sort of trade deal with china that leads to further discussions and enforcement, what does that do to business? there is potential upside still. as we move through 2019 we will start to laugh those -- start to lap those tariffs. that will start to be in the rearview mirror assuming they do not go up. if they stay flat, that can be upside. obviously would we would like to see them roll back but i agree the prospect for that seems to

be lower and lower every day as we create these multiple fronts of trade war. there not talking about usmca, the new nafta deal, which is ill has to be passed. that is another issue. lisa: i'm wondering about robert lighthizer, the chief negotiator with china, his relationship with president trump. i know there has been ongoing tension over what the goal should be in these negotiations. to those differences seem to have been ironed out? shawn: i think they have. that is a brief moment of tension. in the oval office, president trump publicly corrected robert lighthizer. they are like-minded when it comes to china. they want to be tough on china but they are also pragmatists. robert lighthizer is a guy who knows his stuff. there is bipartisan agreement he is the right guy in washington to lead these talks. david: very experienced trade negotiator.

thanks to walter todd and shawn donnan and michael mckee of bloomberg news. now we turn to bloomberg first word news. billionaires in france are pledging to help restore the notre dame cathedral after the devastating fire. arnore no family -- the family pledged millions. notre dame has been under renovation for some time. ready forn is getting his first summit with russia's president vladimir putin. a south korean newspaper is saying the two will meet in vladivostok. they're likely to discuss nuclear disarmament talks between north korea and the u.s. called forrepeatedly sections against north korea to be called back. sports, quarterback

wilson of the seattle seahawks has agreed on a four year, $140 million contract extension. $55deal is set to include a million signing bonus as well. not a bad deal. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. david? david: coming up, hollywood's latest trauma. writers firing their agents. inside the battle in the entertainment industry. we talked to a cable executive in today's follow the lead. this is bloomberg. ♪

uma: this is "bloomberg daybreak." coming up on balance of power, a nuclear threat initiative ceo and former energy secretary. stay with us for that. the biggest u.s. health insurer, united health, added almost a million new customers in the first quarter. many customers came from companies selling health insurance to employers and individuals. much of the rest came from united health's medicare line, the company raising its forecast for the full year. -- six former employees at anadarko petroleum have been telling bloomberg stories of a toxic culture for women in the denver office. sexual harassment and stunted careers. an earlier complaint alleged

high-ranking executives had relations with subordinates. anadarko says it has taken steps to address this complaints. last week chevron agreed to buy anadarko. massive contest for a real-life version of the arcade game asteroids. space-x will provide -- to demonstrate the ability to deflect an asteroid like crashing a spacecraft into one at high speed. that is your bloomberg business flash. david: time for all of the lead. a deep dive into stories making headlines and moving markets with key insight from industry veterans and insiders. today we are looking at netflix. a company investing enormous amounts of money in new content. we welcome paul sweeney, cohost of bloomberg surveillance. also cohost with lisa

abramowicz. what are we looking for with netflix? paul: another strong quarter of subscriber adds. how fast can they grow the subscriber base locally. about 80% of the subscribers will come out of the u.s. and that is the story for netflix. lisa: how important is it for netflix to come out swinging with respect to disney plus? it is a big deal. since disney unveiled its streaming service, netflix stock fell. the market took notice that disney will be a viable player. they have such a great brand name. netflix is the leader in the business. they have the first mover advantage. they have 150 million subscribers. 12 or $15spend billion on programming just this year. david: the race has begun.

of the is just one studios that has ramped up its production budget dramatically. , so havee has grown the issues over how the pie gets divided up. the writers guild announcing a new code of conduct for its members that could make them fire its members over something called a packaging fee. to take us through this of stir part of hollywood filmmaking, we welcome charles shreger, the adjunct repressor of the stern school of business and why you and executive vice president of andial project -- at nyu the executive of special projects at hbo. , the agent gets paid by the studio rather than by the writer, but the fee can go on and on. charles: the writers guild has a simple point of view. the writers guild says there is one legitimate way for a writer to be paid -- for an agent to be paid -- paid by the client.

they think there is something unethical and perhaps illegal about the agent being paid from the production entity. that is where it begins. packaging fees have existed for a long time. there is one way to get paid for they are in percent of the writers salary. david: the name packaging came from the fact that some agents have said he will get a writer and a director and the actors and we'll put them together as a package. we have done a lot of your work for you, you should pay us, studio. charles: that is exactly what it is. they say i have the clients, they can combine these clients with the writer, i've done your work and i need to be paid. they say to their clients, this is good news. if i get paid by the studio, you

do not have to pay me. instead of earning 90%, you are 100%. the question becomes why now? this is a long-standing issue. we hear again and again content is king and we look at netflix, how much they are spending on content. is that embolden writers and creators to say you need to pay us. if there is a bubble in content we want to be in the bubble? charles: it has emboldened the guilt. there has never been as much work out there now. 2002 from there were 182 scripted shows. there is almost 500 today. that number, given what is happening at disney and some of the other providers, that number is not going down. i huge amount of work for writers and if you think about

if there was a time the writers guild would have a lot of leverage, it is when the studios need writers. david: part of the issue is a agent,the writers say you didn't eat up making a lot more money than i'm making -- you end up making a lot more money than i'm making off of my work. that the writers argued over the last several years their pay is flat to down. they are saying we will look under rock for the fees. one of the rocks is long-standing packaging arrangement. charles: the question becomes why now? i think it is difficult to actually see if their fees are going down. this has nothing to do with writers who are making the minimum. it has nothing to do with writers who are at the very very top.

these are writer-producers making huge amounts of money. it has to do with the people in the middle. that is difficult to quantify. david: there is another difference in hollywood. we never had agents that were producers themselves and increasingly you have these big mega agencies who are owned by private equity, have substantial investment in our publicly traded and are becoming studios. they are negotiating with themselves. they are saying i as the studio pay me as the agent and the writers are saying that is not right. charles: i understand both sides of the story. i understand how you could say -- you break this pact which is the agent is paid by the client, and there is nothing that should be unethical or look like a conflict of interest. if you are earning money by my

work as a producer, i understand the issue. on the other side, it could be said that the client does not have to pay that 10% and in addition, the agents are providing more work through these production companies. it is a complicated issue, and the important thing is this is not a strike. it is not a labor strike about money. there is ongoing writing. this is not a strike. lisa: thank you so much for being with us. that is charles shreger, nyu school of business adjunct professor as well as hbo special project director. also paul sweeney, my cohost in college joining us as well. coming up, bank of america joins jpmorgan and reporting record profit. we have the earnings call ongoing. we are listening to that. this is bloomberg. ♪

lisa: i'm watching bank of america's record profit in the first quarter. the bank is holding its analyst call at this moment. taylor riggs has highlights. taylor: we just heard from ceo brian moynihan. market related activity was down but nonmarket activity was up 7%. they are laser focused on expects -- on expense management was leading to better than expected earnings per share were profit. bit better than equity trading across the board. the move index is much higher than the ficc. ficc has been the outperform her. i want to look at net interest margins. jpmorgan said they were keeping their guidance. we just heard from the cfo of bank of america, they are

-- a 3% growth in net interest income. expected,l flatness some weakness, and then highlighting the lower for longer late growth -- rate growth is having an impact on net interest income. david: -- lisa: taylor, thank you so much for that. what chan -- what stands out for me is wells fargo did not grow at all. david: tomorrow, morgan stanley. coming up on the open, kathy jones, charles schwab sheet income strategist will be joining jonathan ferro. from new york, this is bloomberg. ♪ moving is hard.

no kidding. but moving your internet and tv? that's easy. easy?! easy? easy. because now xfinity lets you transfer your service online in just about a minute with a few simple steps. really? really. that was easy. yup. plus, with two-hour appointment windows, it's all on your schedule. awesome. now all you have to do is move...that thing.

[ sigh ] introducing an easier way to move with xfinity. it's just another way we're working to make your life simple, easy, awesome. go to xfinity.com/moving to get started. xfinity watchathon week has sadly come to an end. what, what, what! no! but don't let that stop you from watching the best shows and movies from showtime, hbo, epix... jesus, what happened? ...and more. it's just the tip of the iceberg. upgrade now to get more into what you're into. thanks! just say "watchathon" into your x1 voice remote to upgrade and keep getting more of what you love. alix: this is "bloomberg daybreak." i am alix steel. --jonathan: from new york city for our audience worldwide. i'm jonathan ferro. "the countdown to the open" starts right now.

jonathan: equity markets advancing. confidence building. the rally finding support from the fundamentals. bank of america beating estimates. netflix, coming up next. even the european data bouncing back driving european stocks towards a fifth straight day of gains. good morning. here is your tuesday price action. futures up nine points on the s&p 500. in the fx market, muted price action. duringllar at 1.1298 yields up two basis points to 2.58% on the 10 year. we begin with our top stories. investors looking for fundamentals to validate a market rebound. >> for the next like to be supported for the valuations, it is about the earnings. >>