>> is not bad news and good news anymore, it is bad news reflecting a really painful couple of months ahead for the economy. >> you have all of the telltale signs of a bull market at play here. >> the recessionary trade has lagged in the near-term because i think darkest before the dawn. >> volatility kills people's confidence. >> but volatility is when you can make a buck. >> if we just have a recovery in 2021, that is a failure. we need to have a boom. >> this is "bloomberg surveillance," with tom keene, jonathan ferro and lisa abramowicz. tom: good morning, everyone. jonathan ferro, lisa abramowicz and tom keene. jamie dimon and the same angle as the president-elect, both looking at near-term economic uncertainty. that from jamie dimon moments

ago from the jp morgan earnings. we will get right to it on radio and television. wall street is booming. lisa: yet the picture for mainstream is uncertain. one of the most notable aspects of this report that was stellar on most aspects was the increase in credit loss revisions for the fourth quarter. about what people expected. interesting, income coming in better than expected. trading revenues better-than-expected. $1.4 trillion of cash. tom: it is killing me to see the moonshot of jp morgan coming out of this pandemic. last time that i saw jamie dimon, i said do not release these earnings at 6:58. so much for him listening to me. [laughter] we will get to that in a moment.

sonali basak is here to save the day, our lead wall street reporter. sonali, 24 reasons for mr. dimon to celebrate today. sonali: he has a record profit of $24 billion-and a reserve takedown of 2.9 billion dollars. another thing that can be concerning. but he is saying, do not consider those as core or recurring. this period of time is being painted as a blip on the radar. tom: it is so interesting, you will see it with other banks today as well, is the idea of how big these institutions are. give us just one measurement of the scope and scale of jp morgan. sonali: jamie dimon points out, $200 billion of deposits in the last quarter. tom: just coming in in the last quarter? sonali: in the last quarter.

tom: what else? sonali: close to $3 trillion in asset management. people think of jamie dimon as having one of the biggest banks in america, but he also one has one of the biggest asset managers in the world. lisa: i am not seeking information on how many shares they will purchase. what do we glean from the front? sonali: it is something we will get from the call. we have a media call coming. it is a big part of the capital returns story, they have a ton of excess capital on hand. people want to see buybacks. and eventually, dividend. we know that jamie dimon in particular is one of the ceos the will be looking for mergers and acquisitions. tom: sonali basak, thank you so much. as we consider the comments of mr. dimon. it is the font she can read and

i can't read. -- "while positive vaccine and stimulus development contributed to reserve releases this quarter, hour credit reserves of over $30 billion continue to reflect significant near term economic uncertainty." kenneth leon of cfra joins us now. what does jamie dimon need from president biden? kenneth: he needs to set the tone for confidence of the country, and to make sure that we are going back to a period of normalcy as it relates to how people think and live. as it relates to the economy, the stimulus is coming and it will help the consumer and small business. probably we will see that benefit by the second quarter. and this covid-19, we did see a reserve release of $2.9 billion after building up to 33.8

billion. that tells me that other than distressed industries like energy or leisure, the economy has strong footing for 2021. banks will benefit from that. tom: when miss basak walked into the studio, her first figure was -- percent. the rest the scope and scale of that number. cam: it is a norm is, and it speaks to the buildup of capital and the opportunity of the return of capital with buybacks and dividends to shareholders. with yield and cash flow and that type of return, it is obviously going to flow to investors. can they sustain that? it is questionable. certainly, you want to be above certain regulated capital ratios , which they are. but suddenly, there is a chance to both invest in the business

and return capital to shareholders. that is a positive story for this year. we did not have that last year. lisa: just to refresh where we are now, j.p. morgan shares are little changed ahead of the open. they just reported earnings that blew away expectations. adjusted revenue in the fourth quarter of $30.2 billion. it was estimated at $28.7 billion. there is a question of how long the trading boom can last, especially as we see volatility dampened by fiscal monetary policy. do you sense that that that trading and equity trading revenues beat will continue for 2021? ken: we are in a risk-on environment, which means that for both corporate issuers, equity and debt, and also for investors it will continue,, certainly for the first half of this year. earlier it was mentioned about a more normal second-half, but we

are seeing acceleration in main street banking. not interest revenue. the fourth quarter it was up nearly $2 billion even though that interest income was lower by 900 million. we continue that trend, we could see capital markets flat from a high-level. certainly, the equity market does not reward bank stocks just for having the capital markets firing on all cylinders. so i think it will really be back to traditional lending and how they are contending with getting the wallet share from the consumers and business, with fintech coming into the market. lisa: when you talk about traditional lending, i am looking at the fourth quarter provisions for credit losses, that actually were more than expected, 1.8 9 billion versus the estimated 1.3 billion. is there anything we can take away from this in terms of what they are seeing on the ground with consumers in the fourth quarter, of the pandemic continues to worsen?

ken: the only thing i think still remains in the shadows is related to mortgage payments, and whether collections have improved, or there has been either with state regulation, forgiveness in terms of payments for a period of time. but when you go through the provisions for loan losses, it is not alarming at all. again, i am actually seeing in the fourth quarter, somewhat of an improvement with home lending. home lending has been great, also for new mortgage origination. i don't see any respite for auto. it really gets back to the consumer with that narrative of, can they make their monthly payments? seeing this in the rearview mayor issue, unless they will be a surprise where both the

economy and the consumer moves into a weaker position early this year, and i don't see that. tom: kenneth leon with us of cfra. greatly appreciate you this morning. more bank earnings to come not only here, but in europe as well. sonali basak is with us. i want to ask a silly game of bonuses. ubs talks about bonuses. i never hear about jp morgan bonuses. are they the most overpaid people on wall street? do they get no bonuses? why do we hear silence about payday it jp morgan? sonali: there is no silence, we know they are planning on paying people well, people who perform well. jamie dimon talks about economic uncertainty. banks tend to downsize when they plan for tougher days ahead. their net income outlook is supposed to be roughly flat. tom: are you saying that these

numbers will downsize? sonali: you have to repair for tough times. it is a question that should be posed to jamie dimon on the call, how does he prepare for tough times? in 2019, they brought in almost $58 billion of net interest income. this income they -- this year they are about to bring in about $2 billion yes. lisa: we are a few minutes away from wells fargo and citigroup reporting earnings. j.p. morgan is the want to beat. does its earnings provide any insight to what to expect from wells fargo in citigroup in 50 minutes time? sonali: i would be concerned about the reserve bill. will it look worse than other banks. remember for jp morgan, they more flexibility. much better than their peers. their ability to pay people and also keep their costs in line, they have a lot more flexibility than the other two. tom: sonali basak, our chief wall street -- it is friday --

wall street correspondent. lisa,[laughter] a lot more going on. to me, the most interesting thing is $1.9 trillion. it is going to run through the committee of the senator from vermont. lisa: yes, we did see a bit of a cooling in wall street. people are expecting the actual stimulus plan to end up being closer to $1 trillion. this is a plan built to negotiate, built to try to establish some bipartisan consensus. unclear if they can do that and what that means in terms of concessions, higher taxes and other issues that may be headmans to the economy. tom: i welcome you all to the television. lisa, there has been a farro citing in the bar last night in key west, florida. lisa: key west, florida? tom: i think he is down there.

he is in key west and on his way back. lisa: last time you were there, you were having a martini? tom: it don't have martinis in key west. there is no ice. [laughter] i don't know if he is incoming monday or incoming wednesday or incoming february, farro is incoming. >> also incoming is patrick armstrong of plurimi wealth management as he abducts to the markets. down futures -- dow futures -59. the vix, 24. this is bloomberg. ♪ ritika: with the first word news, i am ritika gupta. president-elect joe biden will go a again asked congress for $1.9 trillion for the next coronavirus relief package. more than $1 trillion in direct relief spending, and $440 billion for communities and

business. it is twice as big as the stimulus bill, and it is expected to attract swift republican opposition, no doubt. president trump plans to list at his mar-a-lago resort in florida after he leaves the white house. the plan is for him to fly their the morning of inauguration. several current members of his staff are expected to work for him, and his son-in-law, jared kushner. the death toll from the coronavirus is about to surpass $2 million, and there are a few expectations for the numbers to start dropping soon. the u.s. leads the way with almost 290,000 deaths. experts say that even with vaccinations, the odds are slim that the outbreak will be controlled by summer. the economy in china is beating the world, a year after its first coronavirus lockdown. on monday, china is expected to report that gdp rose in 2020,

on the economy to have avoided a contraction. global news, 24 hours a day, on air and on bloomberg quicktake, powered by more than 2700 journalists and analysts in over 120 countries. i am ritika gupta. this is bloomberg. ♪ by than doing this pandemic, millions of americans through no fault of their own have lost the dignity and respect that comes with a job and a paycheck. just as we are in the midst of a dark winter in this pandemic as cases, hospitalizations, and that spike at record levels, there is real pain overwhelming the real economy. a crisis of deep human suffering is in plain sight, and there is no time to waste. we have to act, and we have to act now.

tom: the signals on bloomberg radio and bloomberg television. imagery of the president-elect with a little flag action in the background than more than what we've seen from president trump. kevin cirilli, our chief washington correspondent. i must admit, in new york today, it is a lighter tone. we are all exhausted from the first 15 days of this year. it is not a lighter tone in your washington. what will occur today after the stimulus is -- a notch to word or the steward inauguration. what will happen in the streets of the capital city today? kevin: to be candid, there is a sense among the lawmakers that they made it to the end of the week. they have a holiday weekend. there are over 15,000 national guard troops that arrived here, for context, more

than the city of baghdad, so there is a heavy military presence. everyone is washington is trying to get through inauguration. actually -- tom: i would suggest that reverend warnock, the senator from georgia, will celebrate martin luther king day like no one else in america. what is the importance of these two senators as they come to washington? kevin: they arrive to washington, d.c., they have become, for all intents and purposes, the two lawmakers who will be giving the democrats and majority in the upper chamber. there is an historic nature to reverend warnock's now senatorial election, and likewise for the democrats, it comes as an opportunity to really hammer home this ability to get another round of economic stimulus through at $1.9 trillion.

lisa: let's talk about that stimulus plan, it really a talking point for negotiations. what in that bill looks like a certainty and what looks like a pipe dream? kevin: i think the 250 billion dollars for state and local aid will be fought over. in addition to the $50 billion for additional funds for the vaccine. the 15 dollar minimum wage could be a potential bargaining chip. republicans will say, wait a minute, we have nothing able to open small businesses, restaurants, we are strapped for cash, to put it mildly, and now we have to put $15 on the table. that's a very difficult vote for republicans not in districts where there are large restaurant chains, but in districts where there are very small restaurants. tom: i think the last time i talked to you in this historic week, and from all of us at "surveillance" thank you for

extending your 12 hour week to 16 hours, whatever it is. the fourth district of washington state the congresswoman and the congressman, there that were two of the 10 republicans, are their jobs at risk? kevin: right now, it is too early to tell, that for congressman newhouse, for example, he is a moderate republican from a part of the country that, for all intents and purposes, has not been as much of a stronghold for trump than in other parts of the country. the issues in his district that are important for -- pertain to agriculture, trade as well as lumber. it is a different type of conservatism in that region them than, say the heartland. that is in new ones of conservatism that has not been

explored for a few years. tom: kevin cirilli, tonight at 5:00 p.m. nationwide, sound-on as kevin advances the discussion, as washington moves to an inaugural. joining us as you look at, the markets chanel a bas eickhout with a note. 24% return on tangible equity. patrick armstrong, plurimi wealth. what is the symbolism of jp morgan returning capital, or just having a common equity ratio like a swiss bank of 40 years ago? patrick: i think it is a function of asset prices being higher, so they are getting the tailwind on asset management, they have the fed and central banks buying trillions of bonds. their whole trading operations basically get free money, so those kinds of things basically create a strong trillions. the company may have been worth

about -- they have probably less debt than the company may have been worried about a few months ago. lisa: what of this is actually a surprise? we have seen the optimism increasing. we knew it was going to be a terrific quarter for them. patrick: it was just the magnitude of everything. there was nothing weak. everything was a little bit better than expected. lisa: how much is actually in their control and how much is reliant on 10 year treasury yields? patrick: their efficiency is very good. the 10 year treasury yield, the steepening of the curve is another incremental driver for bank profitability. if we keep a relatively steep yield curve, interest margins go up for banks. it might even drive some earnings in the future. not in their control. lisa: a lot of people will be

looking to share buybacks. other people will be saying, look at all the cash in their balance sheet, what are they going to buy? what do you think they will do in terms of consolidating their market share, which is already enormous? patrick: i expect the default will be buying back their own shares. i don't know if they will be making acquisitions. buying their own shares is probably the most attractive to them. they don't have to worry about anyone else. profitability is great the way it is. they probably like their business model. tom: what is the best value in the market, not on the racial basis, i mean the think -- not on a ratio basis, i mean what is cheap. patrick: i am attracted to technology companies that have an arm into the 5g, whether selling the headset.

i think some of the telecom companies will get some incremental revenue out of the 5g. videogame companies. companies trading on earnings are not cheap, i like companies that are beneficiaries of 5g in terms of handsets, as well as demand in terms of video games. fintech, things like that. that is the thing that has led. tom: you have been a wonderful optimist in the market and i hope you are awarded in 2021. we got all sorts of emails, articles, proclaiming gloom and caution. what did they get wrong? patrick: i am probably naturally cautious. we did well on stock selection in 2020. i did not go away from equities even once. even in march, we added risk, started buying credit and sold treasuries.

i was cautiously optimistic. it wasn't full optimism that he would've led to the incredible returns. we had a very good year last year. exuberance is something that -- something to be scared of. if you are worried about something, the market is very exuberant. everyone was scared in march, and the pendulum swung. the conversations i am sure you are having on your show, people are looking, where do i get return? the question of risk is not front and center the way it was in march. tom: is that symbolized by the ipo market and the so-called spac stocks? patrick: i think it is symbolic, if anything. you can't use traditional measures to evaluate. the are selling the dream -- traditional measures to valuate . spacs are about that in spades. tom: patrick armstrong of plurimi wealth. selling the dream,.

lisa abramowicz, we started the show with j.p. morgan earnings. let's reset with the stronger dollar pushing against the weak crude. selling the dream and making adjustments. lisa: yes, you would think i would sell -- you think i sell the dream everyday? [laughter] tom: the barrel is great to come back. and if setting of farro in key west last night. lisa: rum runners, is what he was having. another ipo yesterday, #, doubled in its first day of trading -- poshmark. the idea of just incredible enthusiasm and the inability for bankers to keep up with that enthusiasm. here is the bigger question, i was thinking about this when i was reading through the transcript of jay powell yesterday -- they have the markets back. how could it go down? i am just emotional, tom. [laughter] how could it possibly go down?

tom: you have been wrong for so long. what is the distinction of poshmark versus the 80 other internet fashion sites? lisa: it is a marketplace. it makes it feel similar just scrolling through social media operations. i can't tell you, but it doubled. [laughter] there is incredible enthusiasm in the markets, that is all you can say. but with yields low end with the fed ready to stand by, that seems to be the mood. so why not buy the bubble? tom: the afterthought is not wearing freepeople from poshmark. [laughter] it ain't going to happen. -14 on sbs futures. dow futures down -21. it is an up-and-down trading week. we are still nicely above 30,000 on the dow. lisa: hard to read into any small dip falling the

announcement -- following the announcement of the $1.9 trillion plan. tom: stay with us on radio and television, on a friday, as washington prepares for an inaugural. this is bloomberg. good morning. ♪

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tom: "bloomberg surveillance." good morning. maybe we will see jonathan ferro next week. j.p. morgan down a little bit off the earnings announcement. really interesting statistics again, 24%, and equity. i believe i have never seen that -- 24 common equity. stronger dollar. 90.50 on dxy, an important statistic, with a weaker euro. we have a good stock review with romaine bostick. romaine: we start with j.p. morgan. that equity figure catching people offguard.

the treating numbers came in where the street was expecting, 33% jump in equity trading volumes. fixed income did well as well, a lot of that on the back of that in eem as well as in commodities. when we talk about that draw down, some of the reserves they had set aside, that seems to be underpinning the enthusiasm we see, that j.p. morgan seems to be providing a better outlook going forward. pnc also reported pretty strong lending numbers. that will also be in net positive if you are trying to read the tea leaves as to how the banks will do. still waiting for wells fargo, totally different basket case. citigroup will be out as well. tom: are you casting shade at wells fargo? [laughter] romaine: the shade has been there for quite some time. no disrespect to the ceo, he has got humans work to do, but they

still have the regulatory overhang. still questions about not on the the trust of investors and regulators, but the trust of consumers. this is a consumer lender, and right now the consumers -- tom: spotify, are they a too big to fail bank? [laughter]? romaine: it is a downgrade from the folks at citi. the big bet on podcasting has not shown results. remember, the executive who had been overseeing this left last month. a lot of concern that they have been spending a lot of money on those big deals for joe rogan, michelle obama. tom: get your scope and scale right. romaine: but a lot of money being spent an analyst saying that the returns are not there. tom: let's give it to apple. this is important. apple music, i will say, it has been a failure. is this, romaine, the year that apple music finally gets its act

together? romaine: i didn't realize you guys editorialized so much on the show. [laughter] i am actually in your camp, tom. apple music has been trying to claw its way back. when you look at companies like spotify, it is in the second tier. nevertheless, talk about the user base, apple has that going for it, and as long as it has all those people walking around with apple iphones, i am sure up with music will survive. lisa: also a question, just to give you a sense, when you come on and tom starts interrupt and you, just go over you, or just switch topics. real quick here, are we still seeing the reflation trade pick up steam? romaine: we are. in a few hours we will get the retail sales numbers in the u.s.. expected to be flat. autos will be down, third straight month we have seen

that. there is concern that some of the discretionary spending in the summer months has tapered off particularly for department stores, the macys and targets. some concern that that spending is not holding up. lisa: romaine bostick. he doesn't have to be told twice to go out there and spend. he will be back, romaine bostick, for the close this afternoon on bloomberg television, and next week to fend off the war that is me and tom keene. jonathan ferro will be joining us as well. tom: rumored. we can't pencil that in yet. it is speculation, as we say, in bloomberg. [laughter] lisa: speculation that he will be back. meantime, we have not talked about this, and i think we would be remiss not to mention the fed chair jay powell putting the can kibosh on taper talk. no intention on raising rates or tapering bonds, which raises the

question, why not by the bubble? because the fed will make sure it stays elevated. robert tipp from pgim, investment strategist, is that the takeaway here? robert: on the one hand, you have powell saying we will stand with both feet on the accelerator. the market looks at that and gets concerned about inflation. then overnight you get the announcement of fiscal stimulus. so this is a transition where there is a lot of monetary stimulus coming in, a lot of fiscal stimulus coming in, and the recovery from covid. kind of like a 2009 here. you have to make a call as an investor should you be neutral or be strong? that reflation trade you are talking just moved to an extreme. we were at 50 basis points on breakeven inflation not that

long ago. now we are up at 2%. that swing happens frequently. the market is not just pricing in a recovery from covid, it is pricing in a return to an economy that was stronger than what we had at the end of 2019. tom: someone will say a single sentence, and i just stopped. you just did that. i just stop. . you said it is a kind of 2009 here. a year of total return. no one is calling for that. are you saying that this could be a solid year for bond returns ? robert: this is a transition, that's right. we have gone from a low yield environment. now the market has swung to the other extreme. it has priced in an optimistic feature that is unlikely to happen. you are going to get the short-term stimulus -- we saw that with the trump administration.

they came in. they had momentum yields. . >> went up and they went down -- they had momentum, yields went up and they went down. tom: let's go back to bloomberg digital and listen to tipp, and then listen to greg peters, four or five days ago, from the same shop, with this gloom and doom. that the crew will just get it wrong. robert, they have gotten it wrong so many times. why do they get it wrong? robert: i think what they are missing is the secular tied, it is continuing to move in one direction -- secular tide. it is continuing to move in one direction and that is toward reducing workforces. we saw that the fed needed to keep cutting rates until they can get 2% inflation. the ecb got 2% inflation. that was cyclical, but that was

secular. those demographics are now worse and accelerating. the workforce in china, the world's biggest driver of growth, they went from growing to shrinking a few years back, and that will accelerate in the years ahead. on top of that, you will be looking at a lot of countries -- maybe not the united states -- but other countries six years down the road, retrenching on the fiscal side into that demographic headwind. you will not go back to where you were in 2019. you will go back to a world that is more dampened. the u.s. has seen an experience that is different from what you saw in europe or even if a fast-growing economy like australia, when yields went up, but we are still quite a bit lower than the 2% or 3% we were at before. australian, japanese, european heels were already low before covid, they didn't even really decline -- european yields.

lisa: the trade in u.s. -- the reflation trade in u.s. equities right now. robert: we are a fixed income shop. i would say in terms of risk premium, this will be a good enough environment for credit products. you will have an expanding economy that will be good enough for high-quality structured products, european peripherals, or even some of these cyclical corporates. so broadly, spread products is likely to outperform. it will be supported. whether that will be good enough for the equity market which is pricing in a strong recovery over the next couple of years, we will have to see. there is optimism there. but at the end of the day, it will not be a feel-good economy for people necessarily, because you will not go back to a high-growth, high-pressure economy, but it will be a positive investment backdrop across fixed income for the next 2-4 years.

lisa: this raises a real existential question for the federal reserve, which is, how do they backout of what, they have done in terms of market influence should inflation start to pick up, should the economy recover? is there an exit strategy? robert: the first time i can recall the fed really being concerned about the exit strategy was 2009. they called people like myself into big meetings to talk about and to impress the market with the ability that they would have, with their big portfolio, to push that out on loan and take liquidity out of the market to head off any surge of inflation down the road. they were worried about that in 2009. couple of years down the road, they were worried about deflation risk. i think this time it is no different. it is still a contrarian view that we will end up in this zip code for interest rates going forward. this is a deflationary backdrop,

not an inflationary backdrop. that aging demographic is very strongly correlated with declining and low inflation, and this high level of debt is a set up for debt deflation, not reflation. tom: robert tipp, thank you so much. along with greg peters of pgim, superb evaluation. i will go where i have not gone in five days, the high-yield ig world. lisa: we were just hearing the idea that people are expecting the company to be supported, expecting the federal reserve to be supportive. they are expecting growth. the key thing is, has the rally gone too far? people discounted the idea that actual economic data matters? we will get more data in a less than an hour. it is expected to decelerate, possibly decline in december coming after the big disappointment in november, and

when does that matter for markets. tom: what do you think of a forum. entry point of 119 for af firm? lisa: we will see. tom: stay with us on radio and television. this is bloomberg. good morning. ritika fish with your first word news, i am ritika gupta. president-elect joe biden will has unveiled a $1.9 trillion coronavirus relief plan. the question is, will the price tag be too high for republicans? it includes money for the coronavirus outbreak, and direct money for businesses and communities. the president-elect is hoping to get some republican support for his plan. president-elect biden calls vaccination as a dismal failure and has outlined plans for a $20 billion immunization program asking for money for more contact tracing, and to help

schools reopen. it wants to distribute 100 million shots in his first 100 days. house speaker nessie pelosi, and senate majority leader mitch mcconnell are silent about the impeachment process. pelosi has not said when she will send the articles of impeachment to the senate. mcconnell is not talking either. after the inauguration, democrats will be in charge of the senate, meaning they will be handling the trial. in the u.k., prime minister boris johnson faces a threat to his leadership from troubles and his conservative party, demanding a clear path after the country's economically damaging lockdowns. one lawmaker says it could be a disaster if pandemic restrictions last till the spring. china's central bank says the billionaire jack ma ant group is working on a timetable to overhaul the business. the financial giant needs to make beijing happy, and with

days away from -- and less than 60 days away from an ipo in november when the country halted the process. i am ritika gupta, this is bloomberg. ♪

>> we are no longer going to raise interest rates just

because, for example, if unemployment were to be, again, well below our current estimates of the natural rate of unemployment, that would not be a reason to raise interest rates unless we see trouble in inflation or other and balances. tom: chairman powell out with a statement right now as we wells fargo with earnings -- i believe that is early, is that right, we just got wells fargo? yes we did. a little early. we will rip up the script and give you the headlines. we are privileged to have stephen biggar with us is our guest. he has some strong opinions on wells fargo. those numbers are different from j.p. morgan. lisa: on one hand, earnings-per-share beat, $.64 versus the 60 sent estimate. fourth-quarter revenue coming in later than expected, 17.9

billion versus the expected $18 billion. different from j.p. morgan, which across the board, seemed to blow it out of the water. credit losses -- they talked about a recovery of credit losses, basically the economy not being as bad as they previously expected, $179 million. provisions for additional credit losses falling. again, this feeling that the economy is firming up even as the computer -- the pandemic continues to rage. tom: stephen biggar is from argus research. when you go to bloomberg, you can see what people follow. stephen biggar is long the banks. just green on the screen. he says, buy the sector. why the enthusiasm, just buy

the banks? stephen: you see the results coming out from j.p. morgan and from pnc, to some extent, wells fargo, they are a bit in the sweet spot. they took their lumps early last year to mid last year, phenomenal increasing loss provisions. that is easing. you still have a very fantastic capital markets environment. i am looking at jpmorgan with investment banking up 30%. market revenue is up 20%. i don't think that will continue at the same pace. you also have the lapping of margin pressure from the fed that reduced rates to zero in a march. the lapping of that will start to occur this year. lisa: slightly disappointing for wells fargo, net interest income at $9.28 billion versus the

estimated $9.4 billion. it is telling at a time when 10 year yields rising through the fourth quarter. at what point do you say people have gone a little bit too far with their optimism about net interest income for 2021, given exhibitions for higher yields, and given the backdrop for an economy still riddled with potholes from this pandemic? stephen: you have to look at, again, the second half of this year. it is really the lapping impact. with the 10 year yield that moved up notably more recently, banks simply did not get the full benefit of that in q4. so you have to have a little bit of patience for net interest margins, particularly looking into the second half of this year, when you have that lapping impact. there is also a requirement that the economy partly rebound year, and that loan growth, which was

negative for many banks including in the fourth quarter, needs to turn around as well. the consumer has been amazingly healthy. the net charge-offs have not materialized. i think that is part and parcel of the recovery, is to keep the consumer in good shape, and then that will land to at least a flattening of net interest income going into 2021. lisa: right now we are seeing wells fargo shares fall 2.4% ahead of the open reporting disappointing. data yesterday, reuters reporting that wells fargo is thinking of selling it's more than 600 and dollar asset management arm. do you think this is the beginning -- $600 billion asset management arm. do you think this will bolster the autumn and get some more confidence by investors about the prospects? stephen: i think it is in wells

fargo's best interest to pare down, focus on their strengths, free up some of that management capacity and capital, frankly, to invest in the core of the franchise. wells fargo, from a miss or a beat perspective, has had a difficult time in 2020 at large, because they don't have the massive offsets of the capital market businesses that a jp morgan or morgan stanley, goldman sachs, even citi, and bank of america have. they have been a little bit -- they are much more reliant on the lending businesses, and that is the reason for that beat-miss . tom: i am lost on wells fargo. five years from now, the you perceive them as the old wells fargo, or if not, what they look like in five years? stephen: they have to move beyond the asset cap. clearly, that has to be goal one

for the ceo at this point. you have to be able to grow the business. i think they simply have to get past that. but, yeah, they have met a number of exhibitions and what they would like to be. they have the national footprint of branch banking, clearly amongst the strongest in the lending for mortgages, home loans, you know, strong wealth management franchise generally. i think they have made aspirations about increasing some of that capital markets component. i think they want to leverage the relationships they have on the institutional side. like other banks, they have not leveraged them to the same extent. tom: stephen biggar, thank you so much. huge news flow this morning. what a difference, lisa, the partition here of these two

banks. lisa: that has been the story for a long time. j.p. morgan in a league of its own. wells fargo suffering under the weight of revelatory pressure, and under the weight of a challenge in lending and making a profit on it right now given how low rates are. they are really dependent on that. as stephen was saying, they don't have that huge capital markets business in the same size and scope as j.p. morgan, citigroup, and bank of america. tom: we are all wired up. it is a huge advantage of bloomberg. maria tadao confirming the ap news alert, that the dutch government of mark -- is resigning over a scandal involving child welfare. i am not up to speed on this, but we thank maria today are for that important information. this is supposed to be momentarily, that we will see a collapse of the dutch government. it is never boring, even on a friday. lisa: wasn't boring before.

tom: sonali basak -- massive shade. lisa: a lot going on. lisa: retail sales coming up. tom: citigroup is next. this is bloomberg. good morning. ♪

♪ >> it is not bad news and good news anymore. it is bad news reflecting really painful couple of months ahead. >> political risk has been a persistent thing since 2021. >> all of the signs of able market at play. >> the reflation trade has legs because i think it is before the dawn. >> volatility kills confidence. >> this is bloomberg surveillance with tom keene, jona