What It Takes to Build One of the World's Biggest Banks

Joe Weisenthal (0:02)

Bloomberg Audio Studios, podcasts, radio, news. Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:23)

And I'm Tracy Alloway.

Joe Weisenthal (0:24)

So Tracy, one of the motifs, I guess, of some of our recent conversa-

Tracy Alloway (0:28)

Motif is a good word.

Joe Weisenthal (0:29)

Yeah, it's a good word, isn't it? Thank you. One of the motifs of some of our recent conversations, and also, I guess, one of the mega trends of our time, is this idea of just like, scale is a competitive advantage. Size, returns to size, returns to scale, the ability of someone to like pick up a phone and say, I need a lot of money right now, and the advantage that accrues to financial players. We see it across a lot of sectors, but it really stands out a lot in our finance conversations.

Tracy Alloway (0:58)

It feels good to be big in business, right? Like once you get big, you have all this competitive advantage that allows you to get bigger. The place where this is most noticeable, I would argue, and it's been this way for a while, is the banking industry, right? Like the long run trend among US banks is the big get bigger, and we've all seen those charts of like all the little banks that compose Bank of America or JPMorgan. I love those charts, by the way.

Joe Weisenthal (1:25)

I do too.

Tracy Alloway (1:26)

And that's the direction the industry seems to be heading, right?

Joe Weisenthal (1:29)

Right. It's so interesting to me to think about these analogues with tech, because it's the same in tech, right? If you look at big tech, and we talk about the Mag-7, etc., they've really outperformed middle tech or small tech. It is truly incredible. And we have intuitive reasons for understanding of that, network effects, lock-in and so forth. And it's so fascinating that some of our story that we tell in tech must be a little bit insufficient, because we see the same story replicated as we're talking about with banks. And with banks, it seems to be a couple fold.

One is balance sheet capacity, right? And the ability to do big deals and so forth. And then, of course, there's the other thing, which is just the menu of services that you can offer a client if you're a big bank.

Tracy Alloway (2:12)

Right, and also just the fact that, well, balance sheet, you have a lot of money, so if a juicy deal comes up, you can deploy it quite quickly, and you get first dibs on issuance, which has been good in the recent credit market.

Joe Weisenthal (2:26)

So, we haven't done a ton of pure banking episodes, although we've done some, but we did the most probably right in the wake of Silicon Valley Bank, obviously, and we talked about the challenges of some of the community banks or the smaller regional banks, etc., and then we know the huge scale of the JPMorgans of the world, but also, what about the banks just sub-JPMorgan scale, not super-regionals, I believe they're called. Super-regionals, interesting perspectives of their own, and so, and I've always said, I love talking to bankers, people who understand how banking works, just like, I think they're usually some of our most interesting guests.

Tracy Alloway (3:05)

Have you looked at the KBW Bank Index, by the way?

Joe Weisenthal (3:08)

Not today, actually, not in a few days, or maybe not in a few weeks.

Tracy Alloway (3:12)

Not in a few days.

Joe Weisenthal (3:12)

Yeah, how's it been doing?

Tracy Alloway (3:14)

It's up quite a lot. In fact, I think over the past 12 months, it's outperformed the S&P 500, so that kind of tells you how people feel about banks and bank regulation at the moment.

Joe Weisenthal (3:23)

Absolutely right. One of the things when Trump won was this sort of deregulation trade, and that was one element. And arguably, I would say in finance, by and large, though 10% credit card caps does not scream deregulation, I would say that's one of the areas in which the expectations of Wall Street have actually been met by and large by this administration. Anyway, I'm very excited to say we really do have the perfect guest to talk about the banking world in 2026 We're going to be speaking with Bill Demchak, CEO of PNC Financial, which is the sixth biggest bank in the country, I guess, a super regional. So Bill, thank you so much for coming on Odd Lots.

Bill Demchak (4:00)

It's great to be here, but I'm going to correct you. We're a national bank.