Frank Holland (Anchor) 00:00.150
what's leading to this rally when we're looking at financials is it simply the idea of rate cuts or some other factor here i think there's
Gerard Cassidy (Co-Head of Global Finance Research) 00:06.470
a combination of factors frank but rate cuts are certainly front and center a steeper yield curve is very positive for lenders and when you think about it frank you got to go back twenty years where we had a fed funds rate at over three percent with a positive slow curve of
Gerard Cassidy (Co-Head of Global Finance Research) 00:24.230
seventy five to a hundred basis points we're not there yet the three month and a ten year but if the fed cuts once or two more times going into june of next year we could see that type of yield curve so that's been the main driver but second it's also the deregulation that this
Gerard Cassidy (Co-Head of Global Finance Research) 00:41.430
administration has brought to the banking industry and that has also been another factor playing into this and third the capital markets business in twenty twenty five was very strong which really led to the strength in the money center banks and the investment banks you know
Frank Holland (Anchor) 00:55.310
the last couple quarters we've seen very strong trading revenues and outcomes for a lot of the big banks a lot of that due to the volatility however we seem to be coming down a bit going into the new year do we need to see are the banks need to the volatility to continue to see
Frank Holland (Anchor) 01:08.990
those kind of revenues or are there other parts of the business do you expect a seller to accelerate in the new year a lot of people look at the IPO market possibly picking up and there is some some backlog due to the government shutdown so early on we'll more than likely see it
Frank Holland (Anchor) 01:20.350
but what are what are some of the like the tailwinds for banks that maybe are a little bit under the radar there's
Gerard Cassidy (Co-Head of Global Finance Research) 01:26.590
a couple of things frank and you put your thumb on it in the capital markets business now volatility is always good for trading and if it's less volatile you may be the trading numbers come in a little less than expected but on the investment banking side you know the ECM
Gerard Cassidy (Co-Head of Global Finance Research) 01:42.030
business equity capital markets which was where the IPO business sits the initial public offerings we anticipate that the initial public offerings could have a strong first quarter of next year particularly because of the government shutdown this year in the fourth quarter
Gerard Cassidy (Co-Head of Global Finance Research) 01:57.390
pushed i think a handful or number of those IPO 's into the first quarter the advisory business that's M and A this administration is very open to supporting industries consolidating therefore not just in the banking industry but all industries but the other part of the equation
Gerard Cassidy (Co-Head of Global Finance Research) 02:15.870
is lending i think you're going to find that lending is going to pick up the nominal GDP number yesterday if i recall correctly was over eight percent now lending going back seventy five years in this country when you compare the growth of nominal GDP to bank lending it's about
Gerard Cassidy (Co-Head of Global Finance Research) 02:34.310
a one to one relationship so loan growth could accelerate that's the big surprise potentially in twenty twenty six all right
Frank Holland (Anchor) 02:41.590
so you see the potential for loan growth acceleration i also want to talk to you about M and A i'm thinking comerica i'm thinking synovus and its merger are you expected to see more of that and are there certain regions that are more likely to see this M and A are there certain
Frank Holland (Anchor) 02:53.800
lines of business because everybody 's been talking about ma but not really the rationale behind it like what's gonna make a big bank want to acquire a smaller bank yeah
Gerard Cassidy (Co-Head of Global Finance Research) 03:03.430
the frank is a good question and bank M and A has been going on our entire careers and if you go way back to the early eighties we had about eighteen thousand banks and thrifts in this country we're down to about forty three hundred and so that trend is it's not linear but it
Gerard Cassidy (Co-Head of Global Finance Research) 03:19.230
goes in you know peaks and valleys and we're currently entering a peak period last year or twenty twenty five M and A was very strong in banking we expected to remain that way in twenty twenty six now we haven't seen many big deals you mentioned already the comerica fifth third
Gerard Cassidy (Co-Head of Global Finance Research) 03:35.390
deal which was a big deal at a very good deal if we're the combined companies in our opinion the synovus pinnacle deal was the big deal but that's a merger of equals as they call it and the market didn't react favorably to that transaction but we should see more deals because of
Gerard Cassidy (Co-Head of Global Finance Research) 03:51.550
economies of scale to your question why do they do it for economies of scale and we anticipate you'll see more deals because again this bank regulatory environment is very supportive of bank M and A for example in the last administration it took twelve to fifteen months to close
Gerard Cassidy (Co-Head of Global Finance Research) 04:08.390
the deal now the deals are closing in about four to five months which is very positive for M and A activity alright now it's
Frank Holland (Anchor) 04:15.390
a shock we haven't said the words artificial intelligence yet during this whole interview we talk a lot about the fintechs and some of these other companies getting into prediction markets and things like that our banks are they in in in should they be concerned or in any way
Frank Holland (Anchor) 04:27.950
about real disruption from some other players trying to enter their space we've