Big Banks Make a Big Splash in Q1

We recently got a look at first-quarter results from JPMorgan Chase (JPM 0.49%), Bank of America (BAC -0.13%), Citigroup (C -0.32%), Wells Fargo (WFC -0.56%), and Goldman Sachs (GS -0.23%). And all five beat estimates for revenue and earnings. In this episode of Industry Focus: Financials, host Jason Moser and Fool.com contributor Matt Frankel, CFP, discuss the strong numbers and what investors need to know. Also, we speak with Nick Ludlum, senior vice president with CTIA, about the impact the 5G rollout will have here in the U.S., the state of the digital economy, and much more.

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This video was recorded on April 26, 2021.

Jason Moser: It's Monday, April 26. I'm your host, Jason Moser. On today's Financials show, we'll catch up on what's been happening with banks this earning season. We'll also talk about the 5G economy with Nick Ludlum, the senior vice president at CTIA, an organization that represents the U.S. wireless communications industry and all of the companies throughout the mobile ecosystem. Joining me today, as most Mondays, it's Certified Financial Planner Mr. Matt Frankel. Matt, how's everything going?

Matt Frankel: Pretty good. It's a warm and sunny day in South Carolina. I hope it gets warmer up there so you could wear some T-shirts or something.

Moser: [laughs] Well, it's coming around. The mornings are still chilly, man. But I think this week, we're slated for some warmer weather right as we wrap up April here, but that's the argument Northern Virginia really is. It doesn't seem like we really get spring up here, man. It goes from winter into just sort of sprummer. Maybe that's what we need to coin it, sprummer. Because you get a little bit of spring, but really it just transitions right into summer. You just don't get that lovely Augusta, Georgia, vibe for very long up here.

Frankel: I feel like every year, about April or May, either Virginia has a spring or we [laughs] have a spring. It's never both. Either you'll have a long winter and then just jump to summer, or we'll just jump right into summer. Only one of us gets a spring each year.

Moser: Maybe that's it. We're just trading off, I guess. Well, I mean, it's going to have to warm up eventually. Time just demands it. I think we're at least heading in the right direction. Matt, terrific interview last week. I really enjoyed checking that out. I appreciate you taking the time to do that. We put some earnings on the back burner because of that, and so we wanted to get to those earnings this week. Earnings-palooza has begun.

Of course, the banks are really what kick off earnings season for most of us. This quarter, no exception. We have a lot of banks on tap that we weren't able to get to last week, so we want to get to them this week. Let's just go ahead and dive right in. Let's start with the bank probably everyone is wanting to hear from first and foremost, just because of the CEO, if for no other reason, Jamie Dimon, probably the most famous banker in the world -- JPMorgan. What stood out to you in regard to JPMorgan's quarter, and how does this year look to be setting up for the banks?

Frankel: Well, aside from that 66-page shareholder letter that you just alluded to, [laughs] Buffett's is 19 pages for comparison.

Moser: Yeah.

Frankel: Jamie Dimon is not a man of few words.

Moser: No, he had a lot to say. [laughs]

Moser: But beyond that, just some general themes in the banking industry before we dive into JPMorgan specifically. First of all, and this applies for all of these. It's really tough to compare year over year right now. Think about the first quarter of this year, we've seen a lot of reserve releases this will get into, banks have had really good results. But what happened in their first quarter of last year, the sky was falling, banks were setting aside billions of dollars, everyone was posting losses. It's really tough to compare year over year, so you're not going to hear me say stuff like, "Oh, their earnings went up 10% this last year." [laughs] That's just not a thing in this quarter. I'm not leaving that out of laziness, it's just that it's not a very good comparison right now. The other thing, the SPAC boom is really distorting some of these in a good way. SPACs were going public 30 a day in some cases this spring, every bank that has an investment banking unit has been through the roof.

Then the last general theme is that everyone is saving money, there's a ton of money out there, there's stimulus being injected, there's added unemployment benefits. Add to that the uncertainty that people don't want to go out and spend, and the fact that a lot of people are still at home most of the time, and savings rates have gone through the roof. As we go through these, you'll see this. But just to get to JPMorgan. JPMorgan, they were the first bank to report, and they got us off to a pretty impressive start. They beat earnings expectations handily. And revenue. Revenue came in about $2.6 billion more than the market was looking for.

Moser: Wow.

Frankel: Earnings per share were $4.50, versus $3.10 that was expected. The return on equity, ROE -- we normally consider over 10% to be good -- 23%. I'm going to put a big asterisk on all those numbers. JPMorgan released $5.2 billion of their loan loss reserves this quarter. Remember last year, they were setting aside billions and billions of dollars in anticipation of these COVID-related loan losses. They never really materialized. There is a tone of uncertainty. They absolutely made the right call at the time.

Like I said, banks have done loan forbearance pretty much voluntarily throughout this entire process. They're not allowed to foreclose on mortgages right now. There's the enhanced unemployment benefits that have been going on for most of the pandemic stimulus checks. Things like that. Loan losses never really materialized, at least not to the level that banks thought they might. This was the biggest number of the five banks that we're going to talk about -- $5.2 billion released; that made up to $1.28 per share of their earnings. A lot of the earnings were the reserve releases.

Moser: That's not a surprise. That was the tailwind that you and I have been talking about. I mean, we've been talking about it for the better part of the last 12 months, I feel like it. But we started talking about that tailwind really even as the pandemic had just started. We started seeing the banks really taking that conservative tone, understandably, but this is just all to say, this is a tailwind we really had been expecting.

Frankel: I was admittedly scared when the pandemic first started, that banks weren't going to be able to handle this. As soon as the CARES Act was passed, that was the one at the end of last March. I think that was a real turning point when we all said, "They're setting aside too much."

Moser: Yeah.

Frankel: Financially, I mean, the pandemic dragged on for a while, and it was worse than most people had hoped for. But financially, it wasn't as big of any impact as we thought it was going to be because the government acted quickly and aggressively and really did the right thing. The reserve releases weren't a big surprise. It did distort the numbers to the positive side.

The other thing that distorted JPMorgan Chase's numbers was trading revenue in investment banking. In investing, trading generally benefits from a volatile environment. There are two kinds of trading. There's equities trading, which, the stock market was pretty volatile for most of the first quarter. Remember when the tech stocks were going crazy and up and down?

Moser: Oh, yeah. I remember it very well.

Frankel: Yeah. I mean, pretty much everyone at the Fool remembers that really well. That's good for equities trading. Then we also saw a lot of interest-rate volatility. Remember the 10-year Treasury yield was going up pretty rapidly and was scaring some people for a while there?

Moser: Oh, yeah.

Frankel: That's good for the fixed-income side of trading. So between the two of those, JPMorgan beat trading revenue estimates by $1.8 billion.

Moser: Wow. That's very impressive.

Frankel: That's pretty impressive. That has nothing to do with the SPAC boom. Here is where the SPAC boom comes in. [laughs] Investment banking fee revenue, this is the fees you're getting for things like equity underwriting, which, every time a SPAC goes public, they have to pay underwriters. Investment banking revenue more than tripled year over year to $3 billion, up 222%.

Moser: Wow.

Frankel: That's a crazy gain. Yes, revenue was through the roof. Earnings are through the roof. But from the combination of trading revenue, investment banking revenue, and the reserve releases, take it with a big grain of salt, because it's unclear how sustainable that will be.

Moser: Well, with that grain of salt, I'm glad you said that, because it's not like the stock just exploded, right? I mean, these are numbers that really would make you think, "Oh, man, I mean, this is going to be a banter day for JPMorgan shareholders." But as we all know, the market is forward-looking. It doesn't take a genius to connect these dots and say, you know what? That SPAC well, that is now run dry. Those things aren't launching every other minute like they were last quarter.

Furthermore, the releases of those reserves run dry too, right? You only have so much in reserves to release. Now you've got to get down to brass tacks and tell us how the business is actually doing. What's your takeaway? Is JPMorgan still in a position to succeed this year? Is the banking sector writ large in a position to bounce back from a tough 2020, or is this a one-off quarter? I mean, I think.

Frankel: Well, I'd say focus on the parts of the business that have staying power. Even in normal times, things like trading revenue really jump from one quarter to the other. If you look at things like loan demand and deposit base and stuff like that, Jamie Dimon in his letter called loan demand challenging, and JPMorgan's deposit base is up 36% year over year.

When consumers have that much cash, they don't need to borrow on credit cards as much. They're paying down their loans faster than they have to. So he called the loan demand challenging, but at the same time, their deposit base now sits at $2.2 trillion and their loan portfolio has barely budged year over year. That's a lot of cash on the sidelines that they have available to lend. I think they do it. If the economy really picks up in the second half of the year, these banks have a lot of money to lend. So they could still benefit well, and an economic pickup would help interest margins. Interest margins are generally low this quarter. But if interest rates were to go up, that would help even more.

The business, this quarter's positive surprise was related to areas of the business that are not terribly sustainable. But the sustainable areas of business do look good going forward.

Moser: Well, let's talk a little bit about Bank of America. Because if we put JPMorgan typically at the top of the list there and Jamie Dimon, it does feel like Bank of America is a well-deserved 1B, right? I mean, this bank and leadership in Brian Moynihan is exceptional, I would just say, I think it is a fair word. I think he's done a wonderful job with the bank since he stepped in. I think it's been seven to eight years now as CEO of the bank, if I'm not mistaken. What stood at you for Bank of America's quarter?

Frankel: Well, here's how good banking in general was. Bank of America reported earnings that were $0.20 a share ahead of estimates. Revenue that was $800 million ahead of estimates. They reported the consumer deposit growth to 25%, and their stock fell after earnings.

Moser: Yeah. [laughs]

Frankel: That's how strong bank earnings were. That was one of the weaker reports in the sector. One of the big weak points or things to note about Bank of America is their loan portfolio dropped by 8% year over year. JPMorgan was down 1%. So that's a big comparative difference there.

Moser: Do you think people are scared? Is it a combination of fear? I mean, I know underwriting standards have tightened. I mean, I think it's more difficult now to get a loan than it has traditionally been. Is it one or the other, or do you feel like it's a combination?

Frankel: Well, it's a combination because most of the drop was credit card loans, and those are falling for two big reasons. One, consumers have a lot of cash and they're more risk-averse right now because of the uncertainty. They're getting their stimulus check, stuff like that. They're paying down their credit card balances in a lot of cases. I know my wife put one of our stimulus checks toward paying down debt.

Moser: Yeah, it's a good use of it. I mean, I get it.

Frankel: Right. So that's one side of it. The other side is people haven't been doing anything that they need to borrow money for in the past year. That's why I said it is because it's mostly credit cards that's falling. That's not necessarily a bad thing for the American consumer. Their credit card balances are getting more under control.

Moser: You're right.

Frankel: It's a supply-and-demand thing. There's a lot of supply of cash, not a lot of demand for spending, or there hasn't been. But I could see that changing as we go forward this year.

Moser: Yeah. It does feel like that's poised to turn here. Another bank we don't talk as much about but it definitely stood out, one you wanted to dig into here, Citi. Talk a little bit about Citigroup. What stood out for their quarter? What's working for them?

Frankel: Well, this quarter, it probably goes without saying that they beat their earning estimates and revenue estimates. [laughs] The reason that I have never invested in Citigroup is because they have way too much international exposure, in my opinion. They are the most international by far of these five banks. They have more international exposure than Goldman Sachs, which is like an international investment bank.

Moser: Wow.

Frankel: But new CEO Jane Fraser made a big announcement that they are going to exit 13 international markets. These aren't just little. Whenever a bank says they're going to exit some international markets, you think some like small countries on the other side of the world, whatever. This is China, India, Russia, Korea, big markets. Citi, they say, "We're going to focus on the U.S. and some areas where there is a lot of concentration of wealth, specifically Singapore, Hong Kong, London." So they don't want to try to build scale in places like China and India. They say that's not a very good use of capital, which I completely agree with.

That is, in my opinion, the biggest news to come out of Citigroup. The other thing is they released $3.9 billion in reserves. That was the second, I believe, to JPMorgan Chase. Their trading revenue was very strong -- $400 million over estimates. Investment banking revenue up 46% year over year, handily beating expectations. That's the spectrum.

If only someone had said on our show a couple of weeks ago that investment banking revenue was going to be stronger than expected. I needed to rewind the tape and see what I said, but I definitely did.

Moser: I feel like you did, too. [laughs]

Frankel: But a strong quarter, but I think the exit of those international markets and really the focus on their core, especially bringing more of their attention back to the U.S., is really the right move.

Moser: Yeah. Yeah, that sounds like it makes a lot of sense. Yeah, we'll have to rewind the tape and go check that out to make sure, but I think you were on to something like that.

Frankel: I'll tweet it out later.

Moser: [laughs] Well, let's jump into another one. I know you're excited to talk about it here for a number of different reasons. But really, I'm going to go ahead and toot your horn a little bit here for you, Matt, because as listeners know, of course, at the beginning of 2021, you called Wells Fargo as your financial stock of the year, the one that investors needed to keep an eye on. You felt like good things were getting ready to happen.

It's been a tremendous year for the stock thus far, Matt. Wells Fargo is up 47% as of today, versus the market's 11.5%. This has been a tremendous outperformer, and certainly we've talked about why there was a coiled spring ready to set off there. But what went on this quarter for Wells Fargo, it feels like this was maybe the first quarter in a long time where you felt like the optimism was really there when it comes to Wells Fargo.

Frankel: You really said it, the optimism. Most of these bank stocks we talked about either fell or were flat after earnings because it was expected that the SPAC boom was going to give them a lot of investment banking revenue. No one thinks that's going to be sustainable, things like that. Wells Fargo posted a great earnings report, and they barely have an investment banking business.

Moser: [laughs] That's true.

Frankel: That's the impressive part. Their earnings came in 50% higher than expected, $1.05 a share versus $0.70 on the analysts' expectations.

Moser: Wow.

Frankel: Revenue beat expectations by over half a billion dollars. The CEO said the bank's charge-off rate is at a historic low after the pandemic. That's pretty impressive. A year ago, people thought the charge-off rates were going to be financial crisis levels. But that never really materialized. The deposit base is up 21%, which, at a bank that's focused on savings alone is really, really crucial.

Moser: That's huge.

Frankel: Yeah. Consumer loans down 8%, just like Bank of America, mostly due to credit cards. People paying down credit card debt. Not all positive news. The fed cap is still in place. That prevents the bank from growing. Interest margins were a little weaker than expected, which no one really knew what to make of interest margins because the yields were just all over the place in the first quarter. Wells Fargo's efficiency ratio still leaves a little to be desired. Let's put it that way.

Moser: Baby steps.

Frankel: But the bank released over $1 billion in reserves. Just a really strong quarter, and it wasn't helped by all this one-time investment banking in trading revenue stuff.

Moser: Well, hey listen, man, I mean, we still have a ways to go for the rest of 2021, but I like the direction that this story is headed. I mean, I got it when you tapped this thing at the beginning of the year. I could see where you're going with it. I mean, it was a tremendous value idea there if they were able to execute it. It does look like thus far they are executing, and hopefully we will see that play out here for the rest of 2021.

Let's wrap it up. You really also wanted to dig into Goldman Sachs. Felt like there was some stuff in that earnings report worth highlighting. What stood out to you with Goldman Sachs?

Frankel: Before too long, we are going to be talking about the big five banks, not the big four. [laughs] It's going to be Goldman Sachs at that No. 5 spot if they keep this up. You really saved the best for last here. Goldman Sachs posted its highest quarterly revenue and earnings ever, ever, in the bank's 100-year history. Trading revenue went crazy. As we all know, their trading revenue was up 47% year over year. That's the biggest part of Goldman's business. It's not like these other ones, where they were traditional banks and then they have an investment banking division. That's what Goldman does. That's the biggest part of their business, and it grew 47% and it grew year over year.

Moser: Wow.

Frankel: Investment banking revenue, up 73% year over year. There are underwriting fees and stuff like that. Listen to how bad the estimates were for Goldman Sachs. Analysts were expecting $10.22 a share on earnings. That would have already been more than double a year ago. Goldman Sachs posted $18.60 a share on earnings. That is 498% growth year over year.

Moser: Wow.

Frankel: Revenue. Goldman was expected to produce $12.6 billion in revenue for the quarter. That alone would have been great. They beat that by more than $5 billion.

Moser: Wow. That's huge.

Frankel: It's pretty crazy how good they did. Consumer banking revenue, it's a small part of the business, but I have high hopes for it. Consumer banking revenue was up 32%, and unlike all these other banks I'm talking about, they said they had higher credit card balances that were fueling the growth. Remember, they have the Apple Card.

Moser: That's right, yeah.

Frankel: That's that they really fuel their growth. People are still buying Apple products in large numbers.

Moser: I've heard. [laughs]

Frankel: They released a little bit of reserves, but that wasn't the big story with them -- 31% ROE. Return on equity. 31%. Ten percent is considered good for a bank.

Moser: What was that you quoted with JPMorgan, I think a little bit earlier, is 23?

Frankel: 23%, which is unheard of.

Moser: Man.

Frankel: Twenty-three percent is like internet bank territory. It's unheard of for a brick-and-mortar bank. Goldman did 31% without releasing reserves. They just had an absolute blow-out quarter. The stock was only up 5% after earnings because a lot of this is not sustainable revenue growth. But an extra $5 billion of revenue is nothing to really -- I mean, the bank's market cap in revenue, even if it's a temporary pop, is pretty significant.

Moser: Yeah. I mean, sustainable or not, it matters. It's something worth noting. I think to your point, I mean, there was a lot of one-off stuff, and we'll have to see how the remainder of the year plays out for the banks. But it certainly seems like they're in a pretty good position here. Any one of them, it seems like Goldman was the report that impressed you the most out of all five. Is that right?

Frankel: Yeah. I think it's alone there. I think that was just an insanely good quarter. I mean, all five of these banks beat estimates. Just to say that a bank beat its earnings expectations for the quarter, so did everybody, that's like a participation trophy at this point.

Moser: We can say they walloped them.

Frankel: Yeah. Goldman Sachs takes on the gold medal.

Moser: [laughs] OK. Well, that's all really great stuff. Matt, I appreciate you taking the time to go through a review of all those earnings for us, and I'm glad we're able to get to them. I think that's going to do it for us this week, though. I really appreciate you taking the time to dig into all that stuff and talk to our listeners about what stood out to you.

Frankel: Yeah, absolutely. It's always fun to go through the earnings. I'll see you in three months to do it again.

Moser: Absolutely.

Nick Ludlum is senior vice president at CTIA and lead strategy on behalf of CTIA's members around critical national wireless issues, including the deployment of next-generation 5G networks and wireless spectrum matters. Recently, I had the opportunity to chat with Nick about a report CTIA has published in conjunction with Boston Consulting Group on the impact of the 5G rollout we'll have here in the U.S., the state of the digital economy, and much more. We hope you enjoy our conversation.

Nick, thanks so much for joining us. First question I guess really I have, if you can tell our listeners, our subscribers, tell us about your work with the CTIA. I know long ago, it stood for the Cellular Telecommunications and Internet Association. That's a mouthful. So now we just refer to it as CTIA. What is it that you all do there at CTIA?

Nick Ludlum: Sure. CTIA is the wireless industry trade association, and our members really reflect the full breadth of the wireless ecosystem, from carriers to equipment manufacturers, infrastructure companies and many, many others. We represent the industry, we promote the industry, and specific to, I think, this conversation, we are out there talking about educating people about 5G and the impact of 5G is going to have.

Moser: Yeah. Obviously, 5G being a very big focus for us, not only just at The Motley Fool, but our investment service in particular because that really is what the service is focused on, is investing in not only the 5G infrastructure but the digital economy that's developing from it. That's what I felt was so interesting about not only what you do in CTIA, but this report that was published recently. Let's talk about that for a few minutes. The CTIA with Boston Consulting Group, you recently published a report on the 5G economy. I'm wondering if you could talk a little bit about that collaboration and how that all came to fruition.

Ludlum: Sure. Well, we commissioned this report from Boston Consulting Group. It is their report and their analysis. But what we were seeking to do is to try to help understand and help others understand the type of impact that 5G is going to have over the next 10 years and really understand what that's going to mean both for communities across the countrywide but also for individual industries, at least at some level. We're at the very early stage of 5G, so it's still early. But based on our experience with 4G in the past 10 years, we think the time is right to start looking at this type of analysis.

Moser: This was a really interesting report from a number of different angles, and we'll talk a little bit more about that. But before we do, I wonder why is the 5G economy or this digital economy that we referred to, and I think it's important. I reiterate this with our members all the time. The service is not just focused on 5G and the infrastructure and the tech behind it, but it's really about all of the companies in the markets and industries that are going to be benefiting from this technology. How do we view this digital economy? How important is it to our overall economy as we think about this post-COVID recovery?

Ludlum: Well, I think there's a couple of ways that you can look at that. Maybe the place to start is to understand what the wireless ecosystem means for our economy today, and one way to do that is to think about the 4G economy, the economy that we're at the tail end of as we enter the 5G economy. The 4G economy, as I said, we've been living in for 10 years. Ten years ago, when the first 4G networks launched, we had some inkling of what that might mean, but probably not a full understanding of how smartphones would change our lives, how apps in the app economy would change our lives, ride-sharing, and on and on and on. Now, as we talk and particularly in the current circumstances, where we're all remote and our lives have been turned upside down, it may be hard to remember and imagine what the pre-4G economy was like. It wasn't that long ago, but it was very different. The way we consumed information, the way that we did our work, the way that we interacted with each other was totally different not that long ago, thanks largely to this 4G economy.

For people who are interested, we have done and commissioned an economic analysis of what the past 10 years means and how many hundreds of millions of dollars the industry as a result of 4G has helped drive into the economy and the millions of jobs that have been created. As we look at the 5G economy, we're looking at a similar transformation, but probably one that's even greater when you think about the types of capabilities that 5G has. We're in the early days of this new economy. In the U.S., we have three nationwide proxy networks, but we know that they're going to improve and get better and the speeds are going to keep improving such that at some point in the next few years, they're going to be 100 times faster than today's networks. They're going to connect 100 times more devices, and really, really importantly, although it's a tough one sometimes to explain, they're going to have five times the responsiveness and really, really reduce the latency, which is where a lot of really interesting applications come in. That holds tremendous potential for pretty much any industry, pretty much anywhere in the country.

Moser: I mean, it's a really good point there, because that holds a lot of potential for a number of industries. Seemingly endless, almost. It seems like everyone's going to be impacted by this in some way, shape, or form. What are some of the industries or markets, and I know we can't really go into specifics. Don't want to name any companies or anything, but in regard to industries and market opportunities, what are some that you're most excited about, ones that you have your eyes on there at CTIA that you think could have a really profound impact?

Nick Ludlum: Well, I can tell you what the study says, and I think first I should probably top-line the study a little bit. It looked at the impacts over the next 10 years and found that 5G will deliver up to about $1.5 trillion in GDP directly to the economy and add about 400 million jobs. That's nationwide over the next 10 years. But it also looked at specific industries and saw really tremendous impact in industries like construction, manufacturing, in healthcare, even a little bit lower down the list, in education, sorry, agriculture, information services, professional services. There's a really long tail here of different industries that are being affected in the early days, the days we're in right now.

A lot of those economic impacts come from the build-out itself, which, a lot of that's already been done, but a lot of it's still going on as we speak. A lot of the impacts in, say, construction and information services directly relate to installing 5G equipment and infrastructure or building out the networks and the Edge data centers and so on that are going to be part of this network. But as time goes on, and as 5G-equipped devices become prevalent in all the industries that I mentioned, the types of impacts get really different. Looking at things like how automated transportation affects city life or manufacturing, if we think about automated machinery or even construction, think about automated diggers and loaders and so on and so forth.

Then you think about AR and VR, which 5G really brings out into the world in a really interesting way, and you think about how that could make manufacturing really interesting when you're working on some machinery and you're building something out and you've got the complete picture of what you're working on around you, or even in healthcare, where we've already seen examples of people conducting remote surgeries and using AR to see inside the patient that they're operating on.

I think your question to me was what maybe am I most excited about or interested in, and it's hard to say. I think what excites me the most is the potential. There's just so much potential in all of this that is really, really exciting, and when you realize the speeds and the latency and the things that 5G enables, with a little bit of imagination, you can start to see how that could affect and really transform any industry.

Moser: Yeah. You mentioned so many different opportunities there, and that really is in line with a lot of the stuff that we're doing here at the Fool.

Another one of the services that I run focuses specifically on immersive technology, AR and VR, and obviously, that being one of the markets that is going to be greatly impacted by this. We're obviously very excited there in regard to that. I wonder, when we look back through the history here of our mobile technology -- 1G, 2G, 3G, 4G -- I think the way this always seems to work is we talk about all of the merits, the excitement behind it, all of the things that are going to come from it. It's a bit squishy in the beginning. We can't really fully pinpoint it. Then we know it when we see it. In hindsight, it's a little bit more obvious.

I think with 4G, for example, even maybe think about it at the time, we didn't really think many people would be that willing to watch video on their phone, for example, but now, that's commonplace. Netflix on your phone, Spotify music streaming. There are a lot of things that 4G really brought to the table that we couldn't really pinpoint at the time, but in hindsight, it's like, "Well, duh." I know it's a little bit squishy right now, but is there something in 5G where you feel like there's that type of innovation that is at the precipice here, something that could really change the way we do things? Even if it's daily consumer behavior or even daily work behavior, I don't know, but is there something in there that you feel like is becoming a little bit more obvious now as 5G starts to roll out?

Ludlum: Well, I think the example that gets used a lot is autonomous transportation. I think that's probably partly because you see that today maybe in a way that's not reliant on 5G. It feels very tangible and very real. I think you can probably easily imagine with 5G and the latency that 5G delivers, layered onto autonomous transportation, some real opportunities there. So I think that's an obvious case.

I think the fact that we're all living in this world, that we're living in, this is maybe a little squishy here, but there's probably some really interesting and exciting applications in the telemedicine space in terms of really making that very robust. Whether it's things like patient monitoring and being able to really communicate with your doctors and share health information in a much more powerful way.

So I think that's interesting, but partly because of where we are in the cycle in terms of autonomous transportation, that one stands out to me. AR/VR probably as well.

Moser: I'm glad you said that. I want to make sure all of our subscribers or members know that we didn't arrange this beforehand. When you brought up self-driving cars, autonomous transportation, and telemedicine, I recommended companies in those spaces in this service because of my excitement in those opportunities as well, those industries as well. I think that as a consumer, if you use a telemedicine service just once, then you realize, "Oh, wow, that was pretty easy. That actually worked pretty well. Maybe there's something there."

It reminds me, my father's a physician, he's still practicing, and I remember talking to him about telemedicine several years ago, and he, as a physician, he had a hard time really, actually believing it can take off because regulatory concerns. Patients and doctors need to be physically in the same place together. It just goes to show you how quickly things do change. I'm happy to hear you pinpoint those two opportunities, because those are two opportunities I'm very excited about as well.

In regard to this report here, is there anything in this report, data points, or otherwise, something in the report here that surprised you?

Ludlum: We commissioned this report with a nationwide scope because, in part, we wanted to understand what kind of impact 5G would have across the country. I think what really stood out to me and to us is the degree to which you can look at any state, any community, and begin to see real economic impacts as a result of 5G. It's not just a big-city technology. It's not just going to have this big-city impact. Now, certainly, population centers drive a certain amount of economic impact just by virtue of what they are. Density of industry, and so on.

But we were able, with Boston Consulting Group, to actually model the impacts down at the congressional district level across the country. You can actually go to our website and drill down at that level and see those impacts. There are smaller rural communities where we're expecting to see impacts which could be as a result of things like connected agriculture, smart agriculture, related applications or telemedicine, as I mentioned earlier. The fact that we can actually start to see 5G having this kind of impact, yes, on a national scale, but also across every type of community in the country is, I think, really exciting.

Moser: I love that you brought up connected agriculture. For all of the hullabaloo on Twitter about fintech, agtech I think is something that doesn't get nearly as much attention but is something poised to have a very profound impact on our society in the next several decades. I'm excited to watch that roll out.

Folks who read this report, there's a lot of information there. Is there a bottom-line big-picture takeaway that you want readers to take away from a report like this?

Ludlum: Well, I think the bottom line is we expect Boston Consulting Group, I should say, expects 5G to add about $1.5 trillion to the U.S. GDP grid, about 4.5 million jobs over the next 10 years. But more importantly, their analysis shows that the effects are going to be broadened and there's going to be real impacts in communities across the country and big population centers and small population centers. That really should be the takeaway. This is a transformational technology that's really going to affect us all.

Moser: Well, it should be very exciting. For folks looking to learn more about 5G and the digital economy beyond our service, beyond CTIA, are there any additional resources that you look to or anything that you would recommend?

Ludlum: Yeah. Absolutely. Of course, we do have more information on our website. I'd encourage people to check that out, but the companies that are involved in 5G and making it a reality, whether it's the carriers or the equipment manufacturers, the chip vendors, are all out there educating people about 5G, educating markets about 5G, but they're also deeply engaged in their own use-case development and demonstrations and innovations around this technology as well. So I think any one of our members who are involved in developing and launching 5G networks have a lot of rich material, which I think could be useful to anyone.

Moser: Well, we'll keep scouring through all of those earnings calls and learning as we go along, but Nick, I know you're busy. Listen, I really appreciate you taking the time out of your day to join us. Nick Ludlum with CTIA. Nick, thanks so much.

Ludlum: Thank you.

Moser: Remember, folks, you can always reach out to us on Twitter at @MFindustryfocus, or you can drop us an email at [email protected]. As always, people on the program may have interest in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. Thanks, as always, to Tim Sparks for putting the show together for us. For Matt Frankel and Nick Ludlum, I'm Jason Moser. Thanks for listening, and we'll see you next week.