BI Weekend: Oracle Earnings, Novo Cuts, Anglo Deal

22:20So it seems like that they want to make it much harder, focus on you've got to deliver because we need the growth. So that's interesting all to watch. You know, Sam, I think to a lot of casual investors who don't deep dive into, you know, Novo Nordisk, the way you might say, would look at this and say, listen, they have the most popular weight loss drugs, right? Wagovi, Ozempic. Why is this company having these problems? When you drill down, or is it just a problem with having to scale too quickly? Is it that the company isn't nimble enough to sort of change with the times? Well, Novodordisk has been a poster child of how you grow from a small company selling to a relatively basic set of products 20, 30 years ago to one that's become essentially one of the innovators in the space.

23:11They brought the first GLP-1 to market. So we can't fault them for that. It's just that I think this growth that they had to go through where the planning was done, you know, a lot of, I mean, we have$100 billion market potential for obesity as a whole, right? So it's just difficult, I think, to judge into this space. And maybe the previous CEO had looked and said, I'm pretty sure we're going to be 50 % of that market. We need to plan for that growth. and then two things changed competition from really is super intense they have what i would call a better drug in terms of the efficacy profile that's been shown in head-to-head trials and then of course you've got on top of that compounders that don't seem to be don't seem to be going away they keep taking cheaper generics or not generics manufactured they'll try and making the drugs so that's where i think the the the new area issue is in that We all expected the FDA to really clamp hard down on that.

24:07And they haven't made statements, but they're allowing them. They even found areas outside the U.S. where these compounders can get their drugs from, which is counterintuitive.

24:20Scarlet Fu:Our thanks to Sam Fazelli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals Analysts. This week, we focus on a Bloomberg Big Take story entitled Trump is Unwinding Climate Science at a Dangerous Pace. You can find it on Bloomberg.com and The Terminal. This story looks at how mass firings, regulatory rollbacks, program closures, and funding cuts across agencies have threatened the U.S.'s ability to gather and assess data on climate change. And this is under the current Trump administration. For more, guest host Alexis Christophorus and I were joined by Eric Rosten, Bloomberg climate reporter.

24:51Scarlet Fu:We began by asking Eric to explain how President Trump's policies are impacting the ability to gather data. Whether you are a mayor of a city or a head of an insurance company or a head of an agriculture company, everyone throughout the economy, public or private sector, needs good information to make good decisions. and the U.S. in recent decades has had the global leadership role in developing the kinds of data that everybody needs in order to see what's coming, to set insurance rates, to understand whether we should build a house here, to understand if this flood plain is going to be like a bad place to build houses.

25:38And so that's the data we're talking about here, is actionable data that people in the economy have come to rely on to make decisions. To cite one of the many examples we talk about in the story, the U.S. produces, it's supposed to be not more than every four years, a national climate assessment, which is a huge amount of time. A huge amount of time. I mean, they take years to develop, hundreds of people to write, and thousands of papers that they're based on. And you see these reports cited in Travelers earning calls, in Chipotle earning calls and reports, in Marriott. You know, brands we see every day understand the material and understand the needs of this material.

26:28I'm not putting words in their mouth. I'm just pointing out that they say things like this. Those were taken away from public view. So I think that's an interesting place to start on because like, yeah, the government, like any government can be cut, right, and save money. And it's just the nature of bureaucracy. But why are some of the most authoritative and well-vetted scientific reports ever written being taken away from public view where they've been for many years?

27:04Scarlet Fu:All good questions. And I'm sure that we won't get answers to them right away either. So what does it mean if you're a company like Travelers and you're relying on that data? Can you go to private sources for that kind of information? Does that exist? That's a great question. And if we had like another two hours, I'd love to, you know, because we've spent a lot of time in the last few years on the private sectors, you know, filling a hole in useful climate data that businesses need. So the short answer is yes. Some of this data, a lot of it is translated into the language of risk for companies.

27:47It does exist. The bigger concern is that's a tiny fraction of what we're talking about here. We're talking about very sophisticated computer models that the entire world relies on. to make sense of observations we see in weather stations and other sources. And particularly, I don't know, I'll get in trouble for saying this, but this could be described as the most boring kind of data is also some of the most important. And that is -

28:24Scarlet Fu:It's unsexy data. Unsexy data. It's like continuous monitoring data. It's very important for some kinds of data that you have a complete unbroken record. The most iconic one in this space is the CO2 measurements from Hawaii on Mauna Loa that have been going on since the late 1950s and are largely responsible for the discovery of global warming. Like that data set, one of the most famous data sets ever collected, was slated for closure in the recent White House budget.

29:23Scarlet Fu:Scarlet Fu. This is Bloomberg.

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31:42Scarlet Fu:This is Bloomberg Intelligence with Scarlett Foo and Paul Sweeney on Bloomberg Radio. I'm Scarlett Foo. And I'm Norma Linda, filling in for Paul Sweeney. We move to some news in the banking sector. This week, PNC Financial Services agreed to buy First Bank for about$4.1 billion, adding more than$26 billion in assets and branches in Colorado and Arizona. The acquisition will triple the number of PNC branches in Colorado, and it will give the combined company more than 15 % of deposits in the state. Guest host Alexis Christophoris and I were joined by Herman Chan, Bloomberg Intelligence Senior Analyst for U.S.

32:18Scarlet Fu:Regional Banks. We first asked Herman if bank regulators are going to be okay with a deal of this size. The regulatory landscape has been really great for banking and getting bank deals done. That's why you've seen some more bank deals over the past couple months. You saw Huntington, which is based in Ohio, go into Texas for Veritex. And you've seen a merger of equals in the southeast with Synovus and Pinnacle. And this is sort of like the third large regional bank deal over the past couple months. So it just sort of signals that the Trump administration is really open for a bank of an aim. And this is not PNC's first attempt at really expanding its Colorado presence.

32:57Scarlet Fu:It had previously sought to open 16 locations in Colorado. Why is Colorado such a hot market for PNC? Right. I would take a step back and sort of highlight that PNC, which is mostly in the Northeast, Mid-Atlantic, Midwest, that they've expanded across the Sunbelt states and Colorado with the 2021 deal for BBVA USA. And they sort of doubled down on those markets with this expansion plan to grow organically by opening up new branches. And this deal that they announced really sort of supports that growth and accelerates it in Colorado and in Arizona. So I'm just wondering, as you look out onto the landscape now, who might be the next takeover candidate?

33:40Who might we be talking about in the not too distant future? Yeah, so you've seen some of these deals where these slower growth Midwest banks grow into areas like Texas, Florida, Colorado. So the banks are sort of smaller in size. And we're talking about the first banks about 20 billion in assets. So banks of slimmer of that size in these higher growth markets are really attractive to some of these larger institutions.

34:10Scarlet Fu:So with this purchase, PNC's total assets approaches 600 billion dollars. It will bring it closer to the number one regional bank, which is U.S. Bancorp. Is U.S. Bancorp still a regional bank? Yeah, I would say there are three super regional banks. And I would put PNC, U.S. Bancorp, and Truist, where they're sort of below that 750 mark, but larger than your typical regional bank. And PNC now is a coast-to-coast lender and have operations all from the Northeast all the way down to Florida, Texas, California. So you can't really call them a regional bank at this point. I would view them as more super regional.

34:53And I want to tie it back to the Fed and interest rates because don't all roads really lead there at this point? That's right. I want to talk about what, again, if this is going to be an environment of lower interest rates for the foreseeable future, what is this going to mean for the banks, but especially these smaller regional banks? Because I'm thinking it may even squeeze their profitability more. Yeah, yeah. It's interesting because we had a few Fed rate cuts at the end of last year. And the regional banks that I cover were able to navigate that pretty well. They were able to keep their net interest margins, which is a key metric for profitability, fairly stable.

35:25And that's one of the reasons why they've been able to do that is they've been able to lower their deposit costs, which was one of the things that really is a key metric for banks to really show top-line growth. On top of that, lower interest rates could help loan growth. You've seen some companies like Rockets Mortgage be very ebullient for lower interest rates. And so that could help improve some of the demand for lending. And that's something that we're seeing so far over the first half of the year.

36:01Scarlet Fu:So they'll make it up in volume. What they lose in profitability, they plan to make up in volume. They can make it in volume. You'll see some dents in the rates that they charge for loans. But they'll also make it up in volume and lowering their funding costs. When you look at the landscape overall of M &A in the banking sector, it feels like we've been waiting for something to happen for a long time. And maybe this is kind of the domino, the first domino that falls. Will the big banks, and here I'm talking about the JP Morgan's, the Bank of America's, Wells Fargo's, will they play any role in this consolidation?

36:32They're already too big. So they are prohibited from doing such deals because they just have dominant market share in their markets. One thing that we did see during the height of the regional banking crisis a couple years back is that JPMorgan bought First Republic in an FDIC failed bank acquisition. So if we, in the sense that if there we do get to a place like that, that's when the big banks can play. But in a straight M &A type scenario. To clean up messes. They can clean up messes. They can clean up messes, but they can't outwardly buy a bank at this point. They're just way too big. And just what about the consumer out there always shopping for the best deal?

37:16You know, it used to be that these smaller regional banks would be the place to go for the better CD rates, right? Or a more friendly, friendly mortgage terms. Is that still the case? Yeah, sure. So that's what's really great about these markets that PNC is going to, where they can have really dominant market share in Denver and Arizona. And just having that marketing and having the branches really helps with deposit taking and helping your consumer out.

37:44Scarlet Fu:Our thanks to Herman Chan, Bloomberg Intelligence Senior Analyst for U.S. Regional Banks. This week, we focus on another Bloomberg Big Take story entitled, Tesla's Dangerous Door Design Can Trap People Inside. You can find it on Bloomberg.com and The Terminal. This story looks at how some of Tesla's design features like door handles are confusing occupants and first responders. And this is worsening injuries and damage caused by survivable crashes. So for more on this, guest host Alexis Christophorus and I were joined by Craig Trudell, Bloomberg Global Auto's editor. We began by asking Craig to give us his main takeaways from this story.

38:17This is a company that, you know, from the beginning, you've heard Musk talk about, you know, just how safe his vehicles are. And, you know, even just very recently, the company has posted on X, if you love them, put them in a Tesla. That's the kind of language that you see and hear from Tesla and from Musk. I think what happened here with the doors is, you know, So sort of from the beginning, an attempt to kind of innovate what I think Tesla's critics would say didn't need innovating. We didn't need to change the way that, you know, a door opens and closes. It's intuitive. Everyone knows how to do it.

38:54You sort of know how to do it when you're three or four years old. and the company wanted to go to this new, different sort of path-breaking approach of handles that would be flush to the doors for better aerodynamics. And also, if you think about a battery-powered car, it's very quiet, right? You don't have engine noise to drown out any sort of whistles or anything like that. So the smoother the surfaces, the flatter everything, the better in terms of not just aerodynamics, but also, you know, this sort of getting rid of any noise. And so while those all, you know, are understandable reasons to sort of make some design changes, what we found in the course of reporting of this story is just, you know, some sort of tragic consequences of those decisions in terms of, you know, how difficult it is both for you as an occupant to get out and also for first responders to get to you, to open the doors and get to you in situations where maybe you're incapacitated or you're having trouble with the doors.

40:00Yeah, I mean, the stories that you highlight, Craig, were really eye-popping and disturbing. I mean, one little 18-month-old girl was stuck in the car. Her parents couldn't get her out. And that was one of the better stories. It had a better ending. They were able to get her out. I mean, I'm surprised that the National Highway Traffic Safety Administration isn't really cracking down on Tesla. What are they saying about all of this? I think that was one of the more interesting, you know, issues with this story is that NHTSA, you know, a lot of complaints, a lot of safety concerns come across their proverbial desk, if you will.

40:37And at times it will take all of a single complaint or, you know, a handful of owner surveys that will sort of get its attention and lead to communication with manufacturers of, hey, you need to take a look at this. And sort of, you know, the agency will sort of put its thumb on the scale in terms of, you know, a potential recall. In the case of this story, what NHTSA told us is that they are in communication with Tesla to gather additional data and determine whether a, quote, full investigation, unquote, is warranted. That does allude to this idea that there may be some sort of initial investigating going on.

41:21But in terms of a formal probe, that has not been initiated, at least as of yet.

41:28Scarlet Fu:Okay, so that's where the regulators stand. What's interesting to me as well is that other EV makers have kind of taken Tesla's design and copied it. They are also doing the same thing. So this now goes beyond Tesla vehicles, doesn't it? Yeah, and I think what was interesting to us and sort of, you know, kind of trying to get a sense for just how problematic this is for other manufacturers, I think, you know, there was nothing that stood out more for me was, you know, looking at J.D. Powers study that they do every year. It's called the Initial Quality Study IQS. You might be familiar with, you know, car companies, you know, making this, you know, a point of emphasis in their ads or their commercials when they do well in that study.

42:16And in 2023, they had a record high number of problems per U.S. vehicle in the U.S. market. And one of the things that they pointed to as a reason for this was was doors. And they kind of poked fun a little bit at the industry that they researched by saying this wasn't something that we needed to change. You know, it was working. We weren't getting complaints from people that we survey for this study. And, you know, now this is a percolating problem area was the phrasing that they used. And seven of the 10 most problematic models in this respect were EVs. So what we're seeing is a lot of sort of, you know, taking after Tesla in terms of door design.

42:56And for the most part, what we're seeing is sort of, you know, copycatting or taking after EV for EV, right? You know, trying to field a Model Y fighter that also has, you know, doors that are similar to the Model Y. I'm wondering, I don't think your story got into this, Craig, but what's the legal ramifications here for Tesla. You know, I would imagine the lawsuits are piling up. I mean, certainly if my child was stuck in a Tesla and I couldn't get him out, I might be suing Tesla. We are aware of a handful of lawsuits. And I think, you know, one of the complicating factors here is Tesla pushes its customers into arbitration for these sorts of suits, that this is part of the sort of purchase agreement when you buy a Tesla.

43:42That is something that, you know, Litigants are going to have to sort of overcome because of that sort of policy on the part of the company. I think another sort of complicating factor here is that, you know, one of the, you know, a couple that we speak with in this story, they had no inclination to sue Tesla immediately after the crash. It took one of the first responders coming to them after the fact and saying, you know, hey, we really had a hard time getting to you and it was because of your vehicle. That is part of the issue here. You don't necessarily know right off the bat, hey, something wasn't right here.

44:18I need to do some investigating.

44:21Scarlet Fu:Our thanks to Craig Trudell, Bloomberg Global Autos editor. That is this week's edition of Bloomberg Intelligence on Bloomberg Radio, providing in-depth research and data on 2 ,000 companies and 130 industries. And remember, you can access Bloomberg Intelligence via BIGO on the terminal. I'm Nora Melinda. And I'm Scarlett Fu. Stay with us. Today's top stories and global business headlines are coming up right now.

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