Speaker 1: You're listening to Bloomberg Business Week with Carol Messer and
Speaker 1: Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. Well, we're
Speaker 1: very pleased to have back with us this afternoon. Frank Sorrentino.
Speaker 1: He's the CEO of Connect One Bank. He joins us
Speaker 1: via zoom from here in New York City. Connect One
Speaker 1: Bank is a regional bank. They've got branches throughout New
Speaker 1: York and New Jersey as well as a location in
Speaker 1: West Palm Beach, Florida. So we always like to check
Speaker 1: in with Frank, not just to get an idea of
Speaker 1: what's going on with the Fed, what's going on with rates,
Speaker 1: but what's going on with real estate, construction, business, loans,
Speaker 1: deposit accounts, small business, and of course the health of
Speaker 1: the consumer. Frank, could to have you back with us.
Speaker 1: How are you great to see it's him great to
Speaker 1: be back. Yeah, we love, we love having you on
Speaker 1: the program. Um, so answer that question for for us
Speaker 1: right now. Let's just get it out of the way.
Speaker 1: How is the consumer doing from your view, you know,
Speaker 1: to him. From our perspective, our consumers are doing quite well.
Speaker 1: They they at this point, they're all employed, their jobs
Speaker 1: probably are paying wages that are above where they were
Speaker 1: even year or two ago. They have probably have more
Speaker 1: UM cash in the bank today than they may have
Speaker 1: ever had before. Yeah. Still so. So, despite the fact
Speaker 1: that we're at generational highs when it comes to inflation
Speaker 1: is coming down a little bit, despite the fact that
Speaker 1: this has been happening for the better part of a
Speaker 1: year now, we're still seeing cash balances at their highest. Yeah.
Speaker 1: I think that is true. I think we're seeing that
Speaker 1: just not only in the consumer, but we're also seeing
Speaker 1: it in a small business owner. And so these things
Speaker 1: are coming down, there's no question about it, but they're
Speaker 1: still at elevated levels, and I think that's what's driving
Speaker 1: the economy today. Um. While things are slowing down a bit,
Speaker 1: we're still seeing some pretty good demand across the board
Speaker 1: for lots of different products and services. Now all the
Speaker 1: froth is starting to come off the market, and I
Speaker 1: think we're seeing that in the numbers. UM. But you know,
Speaker 1: New York City is back, Restaurants are full, stores are full. UM,
Speaker 1: people are out and they're spending money. Travel is you know,
Speaker 1: you can't get a hotel room. Airlines are reporting big numbers.
Speaker 1: So in general, things are pretty good. There's an air
Speaker 1: of caution, Okay, an air of caution. So where where
Speaker 1: are you starting to see any cracks? And and look,
Speaker 1: I gotta ask. We're getting this economic data that's coming
Speaker 1: in softer than expected retail sales, for example today, disappointing,
Speaker 1: and and that adding to sort of the narrative that
Speaker 1: investors that that consumers rather are pulling back a little
Speaker 1: bit him. Look, while retail sales may have been down
Speaker 1: slightly today for the month, if you look at retail
Speaker 1: sales going back eithern this quarter or a year to
Speaker 1: date or from last year, they're up pretty strongly. And
Speaker 1: so you know, it's all a function of of of
Speaker 1: what time frame we're looking at. Um I think as
Speaker 1: we sit here today, yes there is some caution. Yes,
Speaker 1: there's no more lines around you the house when it's
Speaker 1: being put up for sale, or um, you know, any
Speaker 1: more bidding wars for various assets. Uh. Cars Today you
Speaker 1: can get a car. There's things that are coming back,
Speaker 1: uh to a more normal state from where they were before.
Speaker 1: Our clients at Connect One Bank or telling us it's
Speaker 1: a fairly stable economy. Things are going pretty well. Interest
Speaker 1: rates are starting to change, the dynamic for a lot
Speaker 1: of business decisions, and I think that will slow things
Speaker 1: down a bit. I do believe we are still there's
Speaker 1: still the capability here for some sort of soft landing
Speaker 1: relative to our recession. UH. And I think the FED
Speaker 1: is doing the job that needs to be done to
Speaker 1: get this inflation under control. It's the way, you know,
Speaker 1: I want to talk to you about business spending, and
Speaker 1: you know, I know you can't speak specifically to this,
Speaker 1: and you can feel free if you want to. But
Speaker 1: I was pretty struck by the news yesterday that that
Speaker 1: Charter Communications UH stock fell to UH, you know, the
Speaker 1: most on record because it unveiled this three year network
Speaker 1: spending budget with ten point seven billion dollars next year.
Speaker 1: That's a billion dollars more than analysts estimated. And I
Speaker 1: thought to myself, I thought interest rates were going up.
Speaker 1: I thought this interest rates moving higher was supposed to
Speaker 1: dissuade businesses from making cabin from doing cabin spending on
Speaker 1: this scale. Look, it depends on the type of business
Speaker 1: you're in. All businesses, I think today we've counseled our
Speaker 1: businesses to sort of drown out the noise, think about
Speaker 1: what is going on in your business make good solid
Speaker 1: investments where you need to make them. All businesses today
Speaker 1: have to think about technology. All businesses today have to
Speaker 1: think about their infrastructure spend. And additionally, I say all
Speaker 1: businesses today have to think about the opportunities that are
Speaker 1: going to be presented to them, because there will be
Speaker 1: some you know, some challenges and some turmoil in the
Speaker 1: markets um of relative to competitors or you know, any other, uh,
Speaker 1: you know, any other aspect of their business. So yes,
Speaker 1: I think you we'll see businesses spending money, doubling down
Speaker 1: investing in particular parts of their businesses, and you will
Speaker 1: see very highly capital intensive businesses maybe having to take
Speaker 1: a pause in certain places. We're speaking right now to
Speaker 1: Frank Sorrentino, the CEO of Connect One Bank. It's a
Speaker 1: regional bank. They've got branches in New York, New Jersey,
Speaker 1: and a location in West Palm Beach, Florida as well.
Speaker 1: Frank Moore on the business what you're seeing from small
Speaker 1: businesses right now? Are you still seeing are are you
Speaker 1: seeing any concern about businesses that are not able to
Speaker 1: pay back their loans right now? So I think we
Speaker 1: across the industry, we're seeing that credit trends still remain
Speaker 1: quite quite mild, uh, pretty much a big zero relative
Speaker 1: to credit that's today. I would I would suspect that
Speaker 1: there will be some sort of crack somewhere in the future.
Speaker 1: I don't think they're going to be, you know, terrible.
Speaker 1: I do think that we will have a pretty strong
Speaker 1: economy going forward. The biggest, you know, sort of the
Speaker 1: biggest car relation for me relative to those credit trends
Speaker 1: are what's happening with employment. And you know, here we
Speaker 1: are at the lowest, pretty much the lowest unemployment we've
Speaker 1: ever had, and there's really no sign that that's going
Speaker 1: to change dramatically. So if that doesn't change dramatically, then
Speaker 1: the FED. What does it mean for the Fed's mission
Speaker 1: to get inflation under control? Look, I think, you know,
Speaker 1: I certainly would only speak towards what we see in
Speaker 1: our local economy. I think having a well employed economy
Speaker 1: is a good thing. I don't know that we're going
Speaker 1: to be able to get to a two percent inflation
Speaker 1: rate by the end of next year. I don't even
Speaker 1: know if that's what the FED wants to do they
Speaker 1: want to do it, I mean, that's what that's what
Speaker 1: J Pelli said yesterday, they're not changing that goal, okay,
Speaker 1: but they're also mandated to keep full employment. So I
Speaker 1: do think if we see that commodity prices come down,
Speaker 1: if there's um, if wage inflation appears to be whipped,
Speaker 1: but we have full employment, I think the FED consider
Speaker 1: its job done even if inflation settles in the three
Speaker 1: percent range. UM. I don't think we need to go
Speaker 1: all the way back, at least not in the immediate
Speaker 1: terms or the you know, the tomorrow. I think that
Speaker 1: can be done over a period of time. So I
Speaker 1: do think we're gonna have to see how this will
Speaker 1: plays out. But I think we're seeing some big components
Speaker 1: of the economy are actually coming back into line. Right.
Speaker 1: We don't we see don't see housing prices going crazy anymore.
Speaker 1: We don't see uh, energy, which is a big portion
Speaker 1: of our economy, uh, you know, out of control from
Speaker 1: a pricing perspective, UM, goods and services, other commodities, things
Speaker 1: that are driving inflation are pretty stable. And I do
Speaker 1: think that there is some level of employment fears. I
Speaker 1: think people are happy in the jobs that they have
Speaker 1: and maybe may not be searching as often as they
Speaker 1: did before. There's some concern about the economy slowing down,
Speaker 1: so maybe wage inflation will will tamp down. What about
Speaker 1: when it comes to the housing market. Speaking of people
Speaker 1: being happy where they are, people with mortgages under three
Speaker 1: for a thirty year, I'm wondering if they ever move,
Speaker 1: and you know what that does to the housing market. Look,
Speaker 1: people move for a variety of reasons. Right, Yes, it's
Speaker 1: very nice to have a three thirty year mortgage, But
Speaker 1: if you want to move to a different part of
Speaker 1: the country, or your house is too big, or you
Speaker 1: have more kids and need more room, you're gonna have
Speaker 1: to do something. Um. That being said, we we definitely
Speaker 1: do not have enough houses in the United States. People
Speaker 1: need to buy homes, and they will continue to buy homes.
Speaker 1: We actually just saw a little bit of an uptick
Speaker 1: in a residential real estate portfolio of people purchasing homes.
Speaker 1: The refinance market is, as you would well expect, is
Speaker 1: not really there anymore. But certainly, um, people that need
Speaker 1: a place to live and decide that home ownership is
Speaker 1: right for them are going to do it. Rates today
Speaker 1: are not that terrible. They're in the five to six
Speaker 1: percent range, depending on the type of product that you pick,
Speaker 1: and so to me. Look, you're talking to someone who
Speaker 1: had thirteen and three quarter percent mortgage when I first
Speaker 1: bought my four So you know, a five or six
Speaker 1: or seven percent mortgage sounds like a bargain for me.
Speaker 1: It does. But the thing, the thing that's different about
Speaker 1: then versus now is the housing prices have gone up
Speaker 1: so much with respect to wages. So in the last
Speaker 1: thirty seconds that we have with you, when do you
Speaker 1: think we'll start to see housing prices come down in
Speaker 1: a way that's commensurate with the rising rates. Well, again,
Speaker 1: I think we saw some of the froth in the
Speaker 1: Connect One Bank marketplace. We're definitely seeing some of the
Speaker 1: froth come off, and we're seeing more realistic pricing um
Speaker 1: and we are seeing some prices coming down to help
Speaker 1: with that level of additional interest expense, and we're seeing
Speaker 1: additional deposits being made, more equity going to the homes. Frank,
Speaker 1: we love it when you join us. Thanks so much
Speaker 1: for taking the time. Really do appreciate it. Frank Sorrentino
Speaker 1: is CEO at Connect one Bank. He's joined us this
Speaker 1: afternoon via zoom from New York City. The Connect One Bank,
Speaker 1: it's a regional bank They've got branches in New York,
Speaker 1: New Jersey. They've also got a location in West Palm
Speaker 1: Beach of Florida,