While no gov't data, still some great earnings call commentary

Before I get to the key earnings comments, I’ll start by saying we’re seeing rally in French bonds as it seems the political crisis there is calming down but I argue only temporarily. That is because Prime Minister Lecornu (which he got, lost and got back all within a week) can keep his job because he got support from the socialist party after he backed off from the pension reforms of a few years ago that raised the retirement age to 64 from 62. So calm for now, but a costly concession. Bonds in the region are rallying too.

I’m next going to the earnings calls and starting with comments from JP Morgan as there were a lot of interesting comments on key things like the macro and the situation in private credit. Generally, banks are talking about a resilient consumer, mixed comments on corporate (large companies more steady than small) while those selling to consumers are still seeing a very bifurcated customer.

From JP Morgan:

“Consumers and small businesses remain resilient based on our data. While we are closely watching the potentially softening labor market, our credit metrics, including early stage delinquencies, remain stable and slightly better than expected.”

When talking about private credit generally, “It probably is true at the margin that some of the new direct lending initiatives involve underwriting at slightly higher expected losses. And that’s significant, because as we’ve been discussing here, the wholesale charge off rate has been very, very low for a long time. And I think simply having that normalized would produce some increases in wholesale charge-offs.”

Specifically for JP Morgan, they had zero exposure to First Brands but took a $170mm hit from Tricolor.

On a question about their exposure via loans to private credit and the like, otherwise known as Non-Depository Financial Institutions, “the vast majority of that type of lending that we do is highly secured or in some way structured or securitized. In other words, it’s not like we’re doing extremely high risk, low rated lending to the NFDI community. And so that doesn’t mean that there’s no risk. That doesn’t mean things can’t go wrong. And obviously if you’re doing secured lending and there are problems with the collateral, that’s an issue, which is clearly evident in the case of Tricolor.”