Strong Bank Earnings Fuel Markets… And Impact Of China’s Rare Earth Crackdown 10/15/25

0:02Live from the Nasdaq market site in the heart of New York City's Times Square this is Fast money. Here's what's on tap tonight. Bank on gains, major money centers soaring as they wrap up earnings season with some of the biggest names trading at all time highs. Is there more upside to come? We'll debate that. And rare earth blitz. We'll talk to the CEO of a company making magnets that do not rely on the critical metals at the center of trade tensions, what they're doing differently and how geopolitics could impact their growth. Plus, United shares take off after earnings. AMD jumps on an expanded deal with Oracle and AI in Hollywood, media veteran and JibJab founder Greg Spiridelli talks about the future of entertainment in the world of AI.

0:41I'm Melissa Lee. Coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Karen Feinerman, Dan Nathan, and Guy Adami. Well, big bank earnings in the books. A number of financial giants jumped to records on the back of results. Morgan Stanley, Wells Fargo, BlackRock all notching all-time highs today. Bank of America, which reported this morning, trading in your levels not seen since 2007. But while strong investment banking and trading revenues help boost results, potential credit concerns loom over the industry. JPMorgan CEO Jamie Dimon saying the bank upped its reserves for loan losses by$810 billion in the wake of the bankruptcy of auto parts supplier first brands and warned there may be more trouble.

1:19I probably shouldn't say this, but when you see one cockroach, there are probably more. And so everyone should be forewarned on this one. So with the stocks trading at or near records, it begs the question, Should banks get re-rated, or are they fully valued right now? Let's bring in Tom Michaud, CEO of KBW, a Stiefel company. We're bringing him at the top because you're better than I did. I'll plug, Tom, man. I'll plug, Tom, man. I'll plug, Tom. Thank you very much. Thank you. So we'll start off with you. It does feel like we're at a moment where you can believe in the virtues of deregulation, what the banks will be able to do now with regulators off their backs, but at the same time there are these underlying credit concerns.

1:57How do you view valuations at this point? So first of all, the fundamental story is very good. There's a broader narrative, which is we think earnings per share are going to be 13 percent higher next year. We are raising estimates for most of the banks. Just the revenue side is good. The expense side is good. And the pipeline talk is good. I'll tell you, coming into the quarter, there was a lot of concern about credit. We had had the first branch bankruptcy, the Tricolor bankruptcy, and there's concerns about consumer subprime credit. The numbers that we've seen so far, we were expecting benign credit costs.

2:32I'd say they've even been better. So the story out of the banking industry is that credit continues to remain very solid. Now, I heard you just play Jamie's comments. The reality is, is the industry is currently over earning on credit. A lot of our provision expectations are about 26, 25 basis points. That is too low. The industry is over earning credit. It will go higher at some point. The question is, is it manageable? We think it's manageable. We haven't seen anything that scares us on the credit side. But there will be credit challenges in financial services. We've had a huge run in private credit.

3:10And I would look to the financial institutions that have grown the fastest as possibly the places for the most risk. Over my career, that has always been the first place to look. And I think it still is in play today. What are those areas? Well, it would be private credit. And I don't mean to throw an arrow at the whole sector. But that is where I would look just because of the growth rate that they've had. They've grown so quickly in the last four and a half years. M &A activity was sort of what we heard at the beginning of the year. Now, over the last couple of weeks, we're starting to see it.

3:42Continuation into 26 because that's part of the bull case as well. I believe it's going to happen because we have a confluence of many forces that would support it. The economy is in good shape. The stock prices are in good shape. And also, consolidation has been working. Generally, scale has led to more profitable banks that are more highly valued by investors. So those are the drivers. But I'll tell you, it is night and day in Washington. We had seen mergers that had happened that would take 16 months to get an answer. If you get an answer, you're now getting answer within the six month time frame.

4:21That's been the case for the last four decades. So you're getting a reset to a more traditional approach to consolidation, which, frankly, I think the industry thinks it's a little bit on the clock because as the president emphasizes that all these agency heads work for the president, it means the next president will probably be in the same position, which means to the industry. if you feel like you have a pro-growth administration, you probably ought to act now. And I believe that that's some of the thinking. So let me ask something about re-rating in the context of Bank of America's results, which I thought were excellent on so many fronts.

4:55All the big ones that we've seen about, you know, M &A business and capital markets. Also, the credit quality was better than thought. So it's now trading at 14 times earnings, which is high for this. But we're at a market now that's 24 times earnings. So we know there's always a big discount between bank multiples and S &P multiples. Where could you see a multiple for something like a Bank of America? So it gets to something that, like Melissa was talking about earlier, which is that these stocks are trading near all-time highs. But I think that if I were to boil it all down to one point that they made, which is return on tangible common equity, okay?

5:38That is, we think, the main driver for valuation relative to book value. And Bank America today alluded to the fact it's likely to reset the target. It's having its first investor day in years in two weeks in New York. Citigroup, after many years, is having an investor day. They're not doing that to get bad news. They're doing that because they're really positive. And usually at these investor days, they reset. Wells Fargo reset. So you're seeing these banks, which are major broad corporations, say, we think our business models are going to drive more profitability. I think that's how you re-rate.

6:14If you look at the relative P.E. multiple of the market, like you just said, we're still 30 percent cheap to the market. We still think there's upside in these stocks. And don't forget the dividend yields. Citizens raised theirs 9.5 percent. That's not a minor bump. So, Tom, financial conditions, they're pretty easy. They're about to get easier, right? We're seeing, like you just mentioned, deregulation has kind of unleashed a sort of pro-growth environment, that sort of thing. When you put it together, though, and you say to yourself, okay, if we're deregulating, if we don't have to go that far back, let's go back 20 years.

6:45You know, you give the banks enough rope, they're likely to hang themselves. Not you guys, okay? But I think about this. You get rid of the CFPB. You allow a bunch of regulations to go by the wayside. How do you think, aren't there risks associated with this? We can go back to 2018 and some of the deregulation we saw in and around regionals. And we did have a regional banking crisis, you know, in 2023. So it's all relative. And I'll bet you it is all in the eye of the beholder. And I've done this for several decades. I can tell you the intensity of regulation on the banks was intense after the global financial crisis.

7:20I've been watching a lot of Secretary Besant speeches. If anyone wants a homework assignment, go watch what he said at the Fed last week for their community bank. You need more homework. I like homework. That would be homework, because this is what he said, which I think alludes to your point. He said after the global financial crisis, so much regulation came down on the banks that it shifted due to arbitrage lending and activities to the non-banks. It may have gone too far to the point where now the policy has been shifting finance away from banks to non-banks, and the country might not be happy as that happens.

7:54What needs to happen is a reset where you keep private equity, but you keep it alongside the banking industry. You don't force banking to it. And if we get just that reset where you continue to keep the industry safe, because I agree with you, we shouldn't go back to having no rules. Let's not do some of the things we've done before. But I think there could just be enough of a reset that's going to be very good for these stocks and for these companies. And I also think it's appropriate. So, Tom, then with all these tailwinds and everything from D.C. and everything from even the street looking to possibly re-rate, we've heard equity.

8:31Morgan Stanley equity is up 35 percent year over year. We've heard investment bank. We've heard M &A. We've heard financing. Of all these areas or whether it's, you know, balance sheet and just net interest income, what are you most excited about looking for the next 12 months or even six months? Because, again, the trends from every one of these players, including capital ratios and what they plan to do with less capital. What are you most excited? I mean, you pick any part of the orange profile. OK, so we well, can I pick which part of the banking industry and then we can get to that? You can do whatever you want.

8:59All right. So we follow 200 banks from really small to the biggest. The 50 to 100 billion banks are the cheapest today. There are 18 banks in America that we follow. We rate nine of them by many of them have eight and nine. P.E. ratios for next year. Big dividend yields, double digit growers and consolidation is likely to happen, I believe. I would say that's the sector that we like the most. In the biggest banks, the stocks have gone up a lot and they have a high bar, but we think they can meet them because I think this pent up demand for investment banking activities is really high. And we're going through this capital reset that we were talking about earlier.

9:38I have found even if stocks are fully priced, but estimates keep going higher, there's a lot of momentum here, I think, that will still be good for these big banks. So I would say in the near term, I think investment banking is going to continue to be robust because we haven't cleared all the activity that needs to happen. I want to go back for a moment to cockroaches in the system that may come crawling out. And let's say that they are isolated to non-depository financial institutions, so non-banks. How will those blowups, though, manifest itself? Will it just be bank exposure like we've heard in drips and drabs?

10:13Or is there some other transmission mechanism that you would be concerned about? Well, I think, first of all, like I said, we are over earning on credit and and no one should be surprised when credit costs go up. We should all be surprised for how long it was essentially zero. So I think it's coming and we should expect higher credit costs, even in the banking industry. But what I find is there's been a big push to banks not to go down the commercial real estate route. The regulators actually have pushed this with some limits that they've set. When you lose money in real estate, you usually don't lose 100 cents on the dollar.

10:52When you lose money in C &I lending, you can lose 100 cents on the dollar quickly. What I worry about this is this regulatory push away from collateral lending has caused some of these banks to get into commercial CNI lending late and that they might not like the outcome when we get a cycle. So I think that would be the area that I would worry about. I would worry about CNI lending for new entrants, even banks, because there's no collateral behind it. And if you make a mistake, it can be costly. One more for me. So the Fed made it clear in Wyoming that unemployment, the employment picture was their primary concern.

11:29So how important to this overall thesis is an unemployment rate sticking around here at 4243? Where does it get ugly, do you think, for the banks? I mean, I think it kind of generally does start with employment and unemployment. I mean, if you saw what we do in our models have it ticking up, but we don't have it going north of 5 percent, for example. But I think the health of the consumer really does matter. So I think minor changes around here. Everything's OK. The reality is the economy is probably growing too slowly at like 1.9 percent, let's say, over the next 12 months. It would be better if it was faster.

12:08But it's also there's no talk of recession. And we don't have that in our model either. But I would say if you did see the consumer really peter out, I think that slows the whole economy. Tom, thanks for being part of the conversation. Really enjoyed it. Thank you so much. Tom Michaud, KBW. So in terms of the argument about re-rating, ROTCE, I mean, that's a pretty good argument. Right. Resetting higher, yeah. Yes, it is a good argument. I think that, I mean, I feel like we're early on in this renaissance for banks in that the regulatory environment has been so difficult for so long. and they're just getting over that sort of.

12:45And so that allows for that increase in your balance sheet. And, you know, we saw Wells Fargo with that huge reaction. I really was impressed with Bank of America, who I've not always been totally impressed with. Still, their, you know, hold to maturity is not great. But there really was a lot to like in this. You know, it's interesting what Tom just mentioned about private credit in general, right? And Jamie Worman, Jamie Dimon at J.P. Morgan, there you go. You know, he had a warning about private credit. Now, you could say that, you know, these are generally loans that they make to private companies or, you know, companies in general, but they're actually loaning to the private credit companies.

13:20So it is interesting that there is a chain right there. And for him, I mean, that's probably good business. They loan to the private credit companies. They don't take the risk that the private credit companies are. But the fact that he's out there, you know, warning about that, I think it's something to pay attention to, because, again, as money gets easier, we're going to see probably worse and worse loans being made or investments from the private credit companies. First of all, it's good to have Tom on because he was extremely bullish about these trends, you know, six months ago when we had him on.

13:49And he talked about D.C. And it's just interesting because this is a conversation that we've had on this desk, the rewriting of banks because of their ability to give capital back because of what's going on in Washington. David Solomon's comments yesterday, we said it, you know, strategically being able to do what they want to do. It's exactly what Tom just said. So the banking sector, I think they're in play. And I think they're going to be able to be finding new revenue streams that were certainly in the digital economy and in the underwriting of all this debt that needs to be built out for AI and data center.

14:17I think it's going to be good times. We want to play the re-rating game. And I think we've collectively done a good job with Citi. You know, we thought it could get to 105. It did. It pulled back. They just reported, I think, tangible book of about 108-ish. So if Wells is going to get re-rated, if Bank of America is going to get re-rated, if JP Morgan deserves that three times price, then you've got to think Citibank could go to 1.215 in this new order, which puts it somewhere between 125 and 150. All right. Meantime, we do have an earnings alert on United Airlines. Shares just turning negative after an earlier jump, the company beating EPS estimates, but missed on revenue.

14:53The conference call taking place tomorrow morning. CNBC's Phil LeBeau has got more details on this quarter. Phil. And Melissa, this wasn't a bad quarter. I think you might see some of the pullback due to the fact that compared to other airline stocks, United has come further in the last six months. That may be one factor. People saying, OK, let me take some money off the table. Here are the numbers for the third quarter. As you mentioned, they did beat the street, beat it pretty easily. $278 a share compared to the street at$263. Revenue, a slight miss there, but not by much. Revenue per seat mile was down 4.3 % and a pre-tax margin of 8%.

15:29In the third quarter, a couple of things on domestic as well as international revenue per seat mile. That's the metric so many people are focused on. Domestic revenue per seat mile was down 3.3 % compared to Q3 of 24. International revenue per seat mile was down 7.1%. Keep in mind that the available seat miles, which is one of the key factors in what you ultimately get when you look at revenue per seat mile, the available seat miles, say domestically, it was up 6.6%. So that did put some pressure on the overall PRAZM stats that we just read there. Take a look at their revenue, though, in terms of basic economy, premium, and loyalty.

16:08This is where United has had a lot of success and continues to have success. Basic economy up 6%. Basic economy 4%. Premium 6%. Loyalty up 9%. Bottom line is this, Melissa, and we'll get more details on the conference call tomorrow. As you take a look at Shares of United, keep in mind that they have also raised their guidance relative to the street for the fourth quarter. 3 to 350 is the expectation. The street is at 287. And again, the conference call comes tomorrow morning. Melissa? Phil, thanks. Phil LeBeau. And capacity was boosted more than 7 % in the quarter. Tim, where do you go with this one?

16:46I like United. I like Delta more. I think airlines, though, as a group, have some room to run. I think they haven't been given kind of the operational leverage story in the economy after April. And I just, you know, again, by the way, he was using a lot of acronyms there. We like to, you know, I heard RASM. I heard Trump. No, Phil always explains better probably than I do, definitely better than I do. So, I mean, what he also is explaining is the efficiency in the sector. Talk about re-rating. Airlines need to trade higher. These Delta especially, but United too, these two are run better than they've ever been run.

17:22And, yes, United's outperformed Delta, but Delta's the premium. If there's a minor concern, it's on a technical basis, United traded up in February or January of this year about 115-ish, sold off like everything else, traded back up there recently in early September, and it's traded off. So if we can't hold these gains here, maybe you get it back and fill back down to the low 90s. A breakout's above 115, though, Melms. I got a question for Tim. It's not what does prasm mean. OK. We all know. But the question is, oil prices have moved a lot in the last quarter. What do you think that does for these?

17:56I think airlines hedge a lot of their fuel costs. And I think from what I've seen over the years, airlines don't get credit in the lower kind of fuel environment where they get punished in a higher fuel environment. I don't it should be in the multiple. I don't think it is. So I think your observation is a good one. Is this a driver? I don't think it will be. Coming up, the A.I. deal spree continues. A headline sending shares of AMD surging and how it positions the chip maker in the A.I. race. Plus, strength and retail and some alternative energy plays. But not everyone held their gains. The details behind the big intraday reversal in one nuclear name ahead.

18:30Don't go anywhere. Fast Money's back in two.

18:40Welcome back to Fast Money. AMD, the best performer in the NASDAQ 100 today, surging over 9%. Yesterday, the company announced a deal with Oracle to deploy 50 ,000 graphics processors starting in the second half of 2026. It's a second major deal for the chipmaker this month, with OpenAI also set to deploy six gigawatts of AMD GPUs over the next several years. A couple of analysts today raising the price target on the stock, HSBC, as well as Wedbush, saying this gives them a lot more clarity into revenues for the next few years. So they're getting all bulled up on this one. Let's not forget AMD is the A in band or land, depending on.

19:15So, you know, my view was that they were an underperformer in the two-man or women arms race that was AI. I think the ASML numbers this morning reported over in Europe had a lot to do with AMD's strength. And, again, it's imputed upon some of their core business, especially in data center. You know, it's not about multiple here. It's about where I think positioning is strategically. Right now, AMD is seeing as closing ground on NVIDIA, even if it's in a different part of the space. Yeah, six gigawatts, though, it's dwarfed by what NVIDIA is doing, A. And B, you know, if you think about just the percentage of AI chips that AMD has been selling over the last couple of years, it's not particularly large.

19:54I think it got up to high teens last year. This is a company that still has to execute. This is a company that has not executed to their expectations over the last few years when it comes to AI chips. And I do think it's interesting that, by the way, Tim, AMD is the A in Gen AI, you know, because I actually that was the theme. It was going to broaden out a little bit. We also had Intel in there. We also had EA in there, by the way. It's in the game. It just got taken out. So when I go back to this thing, I just think it's interesting that the market is giving these sorts of multiples to AMD, Oracle, and Intel.

20:24These are three companies that have so badly misexecuted, you know, over the last five or six years into the play into this generative AI. And so if you want to re-rate them and you want to give them the benefit of all these orders that they are booking right now, have at it. I'm hearing, this is coming over the transom, that the A in Gen AI is actually applied materials. Oh, wow. Wow. So you're trying to pull like a. Oh, vicious history. And no one was paying attention. You know, it means that no one was probably even paying attention. I have an email that says it's. The crack staff and he's seen those.

21:02We got it wrong. Busted. I don't know. I don't know. You never know. Busted. The point still stands, though, that you're skeptical as to whether or not they're going to be able to execute, to actually fulfill, to book the revenues that these analysts are recording them at this moment in time. Well, what are those? I was thinking, OK, there's 50 ,000 chips, right, for next year, starting 2026. I don't know. I put a$40 ,000 price on the chip,$2 billion. I thought, well, that doesn't seem so much. Actually, relative to the revenue, that would be a nice bump if that's just the start of something. What's the multiple on that?

21:33I don't know. What's the margin? I don't know that either. The margins relative to NVIDIA are going to be just, I don't know, half. Maybe I'm just throwing that out there. And you think about it, how are they competing with NVIDIA on price? You know what I mean? Yeah, but the market cap is more than one-tenth below NVIDIA. I mean, you're talking about proportionate dynamics. I mean, there's no question it trades at a massive, massive discount. Wow. I mean, that's a heady conversation there. I was just going to ask, Dan, we don't have a lot of time. No, we don't. So I won't ask him. I'll ask him in the break.

22:04I'll say this quickly. The fact that AMD traded down to the prior high,$2.10 from March of 24 in this recent so often held, is actually encouraging. So maybe Tim is on to something. All right, but NVIDIA actually trades much cheaper to AMD, and it's got a 70 % or 71 % gross margin versus AMD at 51%. And if they're going to have to compete on price, you can see those margins going lower. So, I mean, to me, you can make the stronger case for AMD right now. Well, I don't think NVIDIA is expensive, by the way. I'm long both of them. I don't think NVIDIA is expensive here, for the record. Coming up, the single stock moves from today's session, where our traders see these names heading next.

22:41You're watching Fast Money Live from the NASDAQ. MarketSite in Times Square. Back right after this.