Prof G Markets

Episode: Why Big Banks Are Selling-Off
Date: January 15, 2026
Hosts: Ed Elson (B), with guest Saul Martinez from HSBC (C), and Rohan Goswami of Semafor (A)

Episode Overview

This episode of Prof G Markets dives into the drivers behind a recent sell-off in big bank stocks following fourth quarter earnings. The hosts unpack why strong banking results weren't enough to prop up share prices, discuss the impact of political headlines (notably President Trump's floated cap on credit card interest rates), and analyze the shifting dynamics on Wall Street in an election year. Later, they explore the ongoing bidding war for Warner Brothers Discovery, and what Delta Airlines' earnings reveal about the K-shaped American economy.

Key Discussion Points & Insights

1. Big Bank Earnings Recap & Sell-Off (01:32–08:55)

• Bank Results Overview

  • Major banks reported mixed Q4 earnings:
    • Citigroup: Beat estimates, but profits slid.
    • Bank of America: Beat on revenue/net income, profits up 12%.
    • Wells Fargo: Missed expectations on net interest income, stock down 5%.
    • JP Morgan: Beat expectations but profits fell 7% (Apple Card impact), stock down over 5% in two days.
  • Wall Street’s reaction was blunt: "Sell." Most big banks fell 3–5% post-earnings.

• Why the Negative Market Reaction?

  • High Expectations Not Met:
    • Quote (Saul Martinez): “The divergence between what were generally good results and outlooks and negative share reactions is telling of high expectations going into these results. So I’d characterize these results as is good, not great.” (04:12)
  • Valuations Were Already High:
    • Bank stocks had outperformed in 2024 and were “darlings,” so the market expected guidance upgrades or real upside for 2026.
  • Guidance Was Just ‘Okay’:
    • Bank guidance for 2026 “pretty much in line with where analysts are at and likely doesn’t trigger material upgrades from analysts.” (04:52)
  • Net Interest Income Mild Disappointment:
    • Banks were expected to be more bullish; actual net interest income guidance came in at consensus, not above.
    • Quote (Martinez): “I think there was some hope that the traditional revenue driver of banks…would actually be a little bit better than it actually was.” (06:48)

Notable Quote

• “Good, not great. And they're not necessarily going to lead analysts and investors to really ramp up their expectations, their baseline expectations for earnings and profitability going forward.” – Saul Martinez (05:41)

2. Political Pressures: Trump’s 10% Credit Card Interest Rate Cap (08:55–12:39)

• The Proposal:

  • President Trump’s floated 10% ceiling on credit card interest rates is roiling the sector.
  • Quote (Ed Elson): “Trump’s proposal to put a 10% cap on interest rates on credit cards…Wells Fargo didn’t like it. Citi didn’t like it. JP Morgan CFO said everything is on the table to push back against this proposal.” (09:06)

• Potential Impact:

  • Quote (Saul Martinez): “A 10% interest rate cap on lending would make…large swaths of a credit card business unprofitable. Broad swath of the population would lose access to credit.” (09:29)
  • Especially devastating for pure-play card issuers like Capital One.
  • Would force banks to cut rewards, hike late fees, and overhaul business models.

• Political and Regulatory Uncertainty:

  • While analysts see implementation as unlikely (would likely require legislation), the proposal “threw cold water” on the pro-bank, deregulation bull case.
  • Quote: “Policy can cut both ways. It's not a one-way track to…more favorable regulation. And so this really threw cold water on an important part of the bank bull thesis.” (11:36)

3. The DOJ’s Investigation Into Jerome Powell & Bank CEO Response (12:39–15:15)

• Topic: DOJ is investigating Fed Chair Jerome Powell.
• Bank CEO Reactions:
  • Mentioned in JP Morgan’s call, but CEOs were cautious.
  • Quote (Saul Martinez): “The view of the banks…and I think Jamie did express this, was central bank independent is important and it’s important for…pretty obvious reasons.” (13:41)
  • Overall, CEOs stayed neutral and careful in public comments.

4. Warner Brothers Discovery Bidding War – Deal Drama and Boardroom Politics (18:19–29:38)

Current State of the Bidding War (19:05–21:39)

• Netflix vs Paramount:

  • Netflix: Preparing an all-cash offer for Warner Brothers Discovery.
  • Paramount: After doubts about their financing, Larry Ellison personally guaranteed $40B; sweetened their bid.
    • Quote (Rohan Goswami): “Larry Ellison, right, David Ellison's old man, actually stepped in and personally guaranteed $40 billion—a huge portion of this check and basically said, ‘I'm good for it.’” (19:32)

• Warner Shareholder Frustration:

  • Shareholders prefer Paramount's higher all-cash bid, but Warner's board and CEO David Zaslav continue to reject it.

Is Personal Animosity Sinking the Deal? (21:39–24:51)

• Quote (Ed Elson): “Shareholders think there is a, quote, inexplicable personal animus between Zaslav and David Ellison. This is what you wrote?” (21:39)
• Rohan Goswami confirms many shareholders believe personal animosity is in play, and Zaslav compared the Ellison offer to a ‘leveraged buyout,’ which many found insulting.

Shareholder Actions & Proxy Fight (24:51–26:55)

• Potential for lawsuits and proxy fights:
  • “Shareholders are always going to sue. In fact, shareholders already have… Penwater… has said, 'This is insane, this is crazy that they're not talking. We're going to block the Netflix deal.'” (25:21)
• The focus is on certainty and value, with shareholders angry at the board’s refusal to engage with Paramount despite the attractive cash offer.

Why Is Zaslav Blocking the Deal? (26:55–29:30)

• Rohan speculates that ego and legacy may play a role:
  • “There’s some implication that he [Zaslav] actually thinks of himself as a modern-day movie mogul. And yet he hasn't really been successful in those ambitions... Then you have this guy…Larry Ellison…who have all the money in the world and they go and they pick up…Paramount just like that, because they want it, because it's nothing to them. And now you're David Zaslav…” (27:13)
  • Possibly feels upstaged and resentful that others can achieve what he could not.

5. Delta Earnings & The K-Shaped Economy (29:44–end)

• Delta’s Record Revenue, But…

  • Main cabin sales down 7%, but premium (first class) tickets up 9% YoY.
  • For the first time, premium ticket revenue exceeded main cabin:
    • Premium: $5.7B | Regular: $5.6B

• K-Shaped Economy in Action:

  • Wealthy consumers (“top 10%”) now drive half of all US consumption.
  • Quote (Ed Elson): “Delta CEO Ed Bastian said, quote, there's a lot of discussion about the K shaped consumer. Our consumer happens to sit right at the top end of that K.” (31:04)
  • CEOs now openly acknowledge this divide and pursue high-end segments.

Notable Quotes & Memorable Moments

• On Bank Earnings Disappointment:

  “Good, not great. And they're not necessarily going to lead analysts and investors to really ramp up their expectations…”
  —Saul Martinez (05:41)

• On Trump’s Credit Card Rate Cap Proposal:

  “A 10% interest rate cap on lending would make…large swaths of a credit card business unprofitable.”
  —Saul Martinez (09:29)

• On Boardroom Drama at Warner Brothers Discovery:

  “Shareholders think there is a, quote, inexplicable personal animus between Zaslav and David Ellison…”
  —Ed Elson (21:39)

• On Delta and the K-shaped Economy:

  “Delta's growth is now being kept alive by rich people…The K-shaped economy—it's no longer some theory that people talk about on podcasts. It is an actual reality. It is a law of business…”
  —Ed Elson (31:04–32:33)

Timestamps for Key Segments

• 01:32 — Market wrap, big bank earnings headlines
• 04:01 — Saul Martinez on market reaction and expectations
• 08:55 — Trump’s credit card interest cap and bank response
• 12:39 — DOJ investigation into Jerome Powell and central bank independence
• 18:19 — Warner Brothers Discovery bidding war background
• 19:30 — Paramount’s bid and Larry Ellison’s financial guarantee
• 21:39 — Reporting on Zaslav vs. Ellison personal animus
• 24:51 — Shareholder lawsuits and proxy fight context
• 27:13 — Rohan’s hypothesis on Zaslav’s motivations
• 29:44 — Delta earnings and discussion of the K-shaped economy

Overall Tone

The conversation is brisk, analytical, and laced with both finance-world candor and dry humor typical of Prof G Markets. Guests and hosts do not shy away from calling out ego-driven behavior, regulatory risk, or corporate strategy missteps, but remain balanced and data-driven throughout.

This summary omits advertisements and non-content segments. All content and quotes reflect original speaker tone and attributions, organized for clarity and rich in episode detail.