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Speaker 1: Bloomberg Audio Studios, podcasts.

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Speaker 2: Radio news. The CFO of Wells Fargo joins us now

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Speaker 2: on Bloomberg. Mike Senamassimo. Great to see you once again here.

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Speaker 2: A relatively upbeat quarter, at least based on the reaction

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Speaker 2: that we've seen out of investors and also by some

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Speaker 2: of the comments that you and Charlie Sharf made on

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Speaker 2: that conference call about the resiliency of the consumer. Can

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Speaker 2: you expand on that a little bit more, Mike, what

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Speaker 2: exactly are you seeing?

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Speaker 1: Yeah, well, first thanks thanks for having me again.

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Speaker 3: And you know, as you saw on the results, so

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Speaker 3: the quarter, you know, the consumer has been quite resilient

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Speaker 3: actually now for the last number of quarters. And I

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Speaker 3: think you can see that in the activity levels. You

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Speaker 3: can see that in the credit performance in the quarter,

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Speaker 3: and you can see that in the underlying deposit franchise

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Speaker 3: as well as you were just mentioning. And so when

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Speaker 3: you look just more broadly at the results, it's not

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Speaker 3: just the consumer side, it's the commercial side as well.

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Speaker 1: You know, we saw good growth across most of.

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Speaker 3: The businesses, and the FEA side we saw it and

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Speaker 3: expected decline in an interesting income. But you know, we

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Speaker 3: feel like we're likely at the trough of the NII

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Speaker 3: trend at this point. So there's a lot of good

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Speaker 3: things underneath that underpin the what you saw in the quarter.

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Speaker 2: Is there a sense I mean when you talk about

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Speaker 2: the trough potentially that we are, is that largely a

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Speaker 2: function of the move that we've seen in FED rates

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Speaker 2: or is there something more to that?

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Speaker 3: Well, I think the reduction in rates does help, right,

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Speaker 3: because we've been able to adjust client pricing as a

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Speaker 3: result of that. But you're also still seeing you know,

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Speaker 3: rates are still quite high on a releative basis over

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Speaker 3: from the last few years, have the last few years,

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Speaker 3: and so you are still seeing repricing happen on the

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Speaker 3: asset side. But in the near term, what really drive,

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Speaker 3: what really drive where we end up over the next

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Speaker 3: couple of quarters, is the deposit side, and we've seen

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Speaker 3: some good trends there or now over the last couple

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Speaker 3: of quarters where you've seen this this cash sorting and

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Speaker 3: the mixed different mix changes really moderate. It was the

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Speaker 3: slowest quarter where you know, so far since over the

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Speaker 3: last couple of years, you know, for that in the portfolio,

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Speaker 3: and we've been able to adjust pricing as just as

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Speaker 3: we thought we would as the rates came down, So

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Speaker 3: that'll be the that'll be the factor that really drives

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Speaker 3: near term performance.

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Speaker 4: So Mike, it's good to chat with you.

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Speaker 1: To that point.

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Speaker 4: Then, does that mean that the move into higher yielding

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Speaker 4: say CDs or money market funds, et cetera, like that's

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Speaker 4: definitely done as rates cuts tunk come down.

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Speaker 3: Well, I wouldn't say it's it's necessarily done, but I

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Speaker 3: think we saw the lowest migrate, lowest pace of migration

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Speaker 3: since rates started increasing, Alex And so I think, you know,

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Speaker 3: that's a good trend. And I think eventually what you do,

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Speaker 3: what you see generally or expect to see generally, is

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Speaker 3: that you know, what's left in checking accounts ends up

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Speaker 3: being operating cash for a lot of people. So a

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Speaker 3: lot of that shifting into other other alternatives has happened already.

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Speaker 4: Yeah, my highield savings account already coming down there. All right,

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Speaker 4: let's get to the loan part of your portfolio. When

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Speaker 4: do you think you see a really big uptake in

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Speaker 4: loan growth? What's going to be that?

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Speaker 3: Yeah, it's really hard to say exactly right, And I

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Speaker 3: think when you look at what's what we're hearing from

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Speaker 3: clients and what you're seeing, you know, rates coming down helpful,

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Speaker 3: right because borrowing costs come down. I think there's still

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Speaker 3: some uncertainty related to the election that's coming up, and

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Speaker 3: then I think people want to see this space case

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Speaker 3: kind of soft landing economic scenario play out a little

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Speaker 3: bit longer, and then I think a combination of those

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Speaker 3: things will start to build confidence. And then I think

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Speaker 3: you may start to see people either build inventories or

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Speaker 3: make additional capital expenditures that they've been holding off on

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Speaker 3: now for a little bit.

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Speaker 1: But I don't think it's just one thing.

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Speaker 3: I think you really need to see a confluence of

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Speaker 3: these things come together. And so it could take a

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Speaker 3: little bit of time for that to really materialize in borrowing.

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Speaker 2: With regards to that client activity, Mike and the election

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Speaker 2: and the idea that once we get past that maybe

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Speaker 2: we see more activity, is that irrespective of who wins

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Speaker 2: or are they trying to hedge their bets.

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Speaker 3: Well, you know, I think you know, what people don't

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Speaker 3: like is uncertainty romain and and so I think once

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Speaker 3: there's some certainty of the path and you you know,

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Speaker 3: you feel like that economic you know, outlook is going

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Speaker 3: to play out the way they think. I think those

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Speaker 3: things are going to what really matter, and then assuming

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Speaker 3: rates continue to come down and reduce barring costs. So

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Speaker 3: I really do think it's going to be a combination

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Speaker 3: of all those things. But it's the it's the it's

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Speaker 3: the uncertainty part that I think causes people to hold off.

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Speaker 2: I do want to ask you about some of the

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Speaker 2: regulatory issues that continue to hang over Wells Fargo. Last month,

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Speaker 2: Bloomberg did report that you had actually entered a new

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Speaker 2: phase here to get out from under that fed's asset cap.

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Speaker 2: I am curious as to the progress that you've made

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Speaker 2: in moving in that direction and whether you are anticipating

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Speaker 2: that cap to be removed soon.

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Speaker 1: Yeah.

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Speaker 3: I mean, as always, my answer might be a little

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Speaker 3: unfulfilling remain but but I think, you know, we we

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Speaker 3: continue to very much focus on getting the work done

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Speaker 3: that we have there, and ultimately it's going to be

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Speaker 3: up to FED to decide, you know, when they're ready.

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Speaker 1: To do that.

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Speaker 3: But you know, we we continue to feel like we're

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Speaker 3: making really good progress. We're confident we're going to get

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Speaker 3: through it, but ultimately it's going to be up to

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Speaker 3: the FED to decide the ultimate outcome there.

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Speaker 4: It definitely has be Mike's favorite question, I think when

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Speaker 4: it comes to our earnings and interviews. But what kind

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Speaker 4: of spend profile do you think you're going to have

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Speaker 4: one ad as a cap is removed, Like, are we

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Speaker 4: going to be like, all right, let's invest a bunch

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Speaker 4: of money, or how's the plan sorting itself out?

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Speaker 3: No, it doesn't change the strategy that we've been you know,

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Speaker 3: executing on now for the.

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Speaker 1: Last number of years.

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Speaker 3: We are already making the investments we need to make

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Speaker 3: into the businesses that grow them over a long period

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Speaker 3: of time, and we're paying for that through the efficiency

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Speaker 3: program that that we've executed now for the last you know,

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Speaker 3: four or five years.

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Speaker 1: And I think we still very much.

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Speaker 3: Feel and I think Charlie talked about it on the

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Speaker 3: call this morning, we very much feel like there's a

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Speaker 3: lot more opportunity for us to drive more efficiency and

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Speaker 3: that'll that'll allow us to continue to make.

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Speaker 1: The investments we need to make in each of the

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Speaker 1: businesses and we're going to keep doing what we've been

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Speaker 1: doing now for the last four or five years.

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Speaker 4: We talked about the election in terms of the demand profile,

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Speaker 4: What about your client activity in training, for example, like

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Speaker 4: how are your client's positioned, how are they thinking about

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Speaker 4: the next few weeks.

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Speaker 3: Well, I think, you know, most people are probably hedging

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Speaker 3: their bets a little bit right and making sure they're

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Speaker 3: not taking too much risk going into what can be

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Speaker 3: an uncertain environment. But you know, volatility, as you know,

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Speaker 3: can sometimes create opportunity for folks, and I think that

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Speaker 3: certainly creates opportunity in a trading business like ours and others.

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Speaker 1: And so we'll see how it plays out.

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Speaker 3: But I think going in, you know, we're going into

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Speaker 3: this next month or so pretty cautiously as we sort

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Speaker 3: of think about the risk we have in the trading side.

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Speaker 2: We haven't had a chance to really ask you about

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Speaker 2: the state of the commercial real estate market, at least

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Speaker 2: as it relates here to the business the Wells Fargo.

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Speaker 2: Does you clearly have some insights into that, Mic, and

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Speaker 2: I am curious as to whether you've seen or seen

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Speaker 2: anything resembling a troth in what has been ailing that space,

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Speaker 2: particularly in the office space.

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Speaker 3: Yeah, well, I think, you know, broadly, commercial real estate's

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Speaker 3: doing quite well. It's really an office story, you know,

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Speaker 3: where you see the most stress, and so I think

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Speaker 3: in the other asset classes, you continue to see a

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Speaker 3: lot of activity. You can see the CNBS market, h

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Speaker 3: you know, securitization market, pretty pretty active in other asset

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Speaker 3: classes like multifamily.

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Speaker 1: So really that stress is.

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Speaker 3: In the office space and I can and it's really

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Speaker 3: going to take some time to play out, you know,

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Speaker 3: you know, we're not quite done working through you know,

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Speaker 3: those issues, and it's hard to call whether it's at

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Speaker 3: a trough or a bottom you know, in that market

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Speaker 3: at this point.

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Speaker 1: And it's still the same trends though that we're seeing.

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Speaker 3: You know, Newer buildings in the right places are doing

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Speaker 3: just fine. Older buildings are are not doing fine. It's

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Speaker 3: pretty consistent across the US, and it's going to take

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Speaker 3: a while to play out. I don't it's not going

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Speaker 3: to be done in the next quarter or two. And

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Speaker 3: for us, you know, we've got you know, we've got

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Speaker 3: a high allowance for coverage you know, coverage ratio in

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Speaker 3: the credit book there in the in those institutions office properties,

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Speaker 3: so we're really prepared for it. And it's for the

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Speaker 3: most part, i'd say, kind of within the expectations that

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Speaker 3: we had for it, but it's still it's still not

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Speaker 3: quite turning yet in terms of getting better for the

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Speaker 3: properties that are most stressed.

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Speaker 4: And Mike, we really appreciate it. It was fun to

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Speaker 4: get your time today. Thank you so much. We'll get

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Speaker 4: you on the next quarter on Mike. Santa Messimo, a

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Speaker 4: CFO over at Wells Fargo,