FINANCIALS
- Investment bank revenues surprised positively (see graphic): GS was the clear winner with a balanced performance, JPM much less of a bellwether than normal. FICC overall was less bad than expected (and DCM good) so positive for Deutsche and Barclays in Europe, we feel.
- Credit quality points towards soft landing: non-performers were up across the board but early indicators appeared more benign, such that mgmt teams were comfortable enough to slow the rate of provisioning in places. BoA looked most exposed, noting that one-third of its US office book is now “criticized”. We did see decelerations in the rate-of-weakening in places though. Spreads for PBB and Aareal are already discounting a lot of negatives and there was little here to increase fears.
- Revenue expectations mixed with NII (net interest income) looking lower across the board (weak lateral for US regionals). Most mgmt teams were looking for 2H24 improvements as US rate cuts are pushed out in time.
- Capital: B3E (Basel III endgame) is in a state of flux from a US perspective such that we saw no new equity return commitments and, if anything, mgmt teams are looking to retain higher capital buffers, at least until they get clarity. This should be a spread positive.
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