1 00:00:02,640 --> 00:00:07,360 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,800 --> 00:00:09,959 Speaker 2: I shares it, Well Spargo are down about one percent. 3 00:00:10,000 --> 00:00:12,040 Speaker 3: The bank reporting a revenue beat and a net interest 4 00:00:12,080 --> 00:00:12,840 Speaker 3: income missed. 5 00:00:12,880 --> 00:00:14,480 Speaker 2: Now this is the struggle. 6 00:00:14,520 --> 00:00:17,360 Speaker 3: We heard this from JP Morgan also muted loan growth 7 00:00:17,600 --> 00:00:21,000 Speaker 3: and increase pressure to pay out more for deposits. All 8 00:00:21,079 --> 00:00:23,760 Speaker 3: that eats into profits. Will joining us now for more 9 00:00:23,760 --> 00:00:27,080 Speaker 3: as a CFO of Well Spargo. Mike Santamassimo, thank it, 10 00:00:27,120 --> 00:00:29,000 Speaker 3: joins us now. Thank you so much, Mike. It's really 11 00:00:29,000 --> 00:00:31,319 Speaker 3: good to chat with you. We always appreciate you coming 12 00:00:31,320 --> 00:00:33,120 Speaker 3: in every earning's day around this time. 13 00:00:33,360 --> 00:00:36,400 Speaker 2: Let's talk about deposits for a moment. How much do you. 14 00:00:36,360 --> 00:00:38,800 Speaker 3: Think you're going to have to increase those deposit rates 15 00:00:39,159 --> 00:00:40,800 Speaker 3: to keep the deposits that you still have. 16 00:00:41,960 --> 00:00:44,280 Speaker 1: Well, first, thanks thanks again for having me. You know, 17 00:00:44,360 --> 00:00:46,240 Speaker 1: I think you know, what we're seeing in the quarter 18 00:00:46,440 --> 00:00:49,320 Speaker 1: with net interest income and deposits is exactly what we 19 00:00:49,520 --> 00:00:52,560 Speaker 1: thought we would see, you know, for the most part. 20 00:00:52,720 --> 00:00:55,000 Speaker 1: And I think when you look at you know, overall 21 00:00:55,040 --> 00:00:57,520 Speaker 1: sort of levels, they came in slightly better than we thought. 22 00:00:57,600 --> 00:01:00,440 Speaker 1: Loan growth is so slightly less. That's offsetting some of that. 23 00:01:01,320 --> 00:01:03,680 Speaker 1: But what we're seeing, you know in the book, both 24 00:01:03,720 --> 00:01:06,640 Speaker 1: on the consumer and the commercial sides, exactly what we expected. 25 00:01:07,000 --> 00:01:09,200 Speaker 1: You know, on the commercial side, we're not we're not. 26 00:01:09,360 --> 00:01:12,560 Speaker 1: You know, those deposits have been competitive from a pricing 27 00:01:12,600 --> 00:01:15,959 Speaker 1: perspective now for a while, and that'll stay that'll stay 28 00:01:16,000 --> 00:01:19,160 Speaker 1: the case as we look forward. On the consumer side, 29 00:01:19,200 --> 00:01:21,920 Speaker 1: what we're seeing really is people spend money that's in 30 00:01:21,959 --> 00:01:25,160 Speaker 1: their checking accounts and in some cases reallocate money to 31 00:01:25,319 --> 00:01:28,840 Speaker 1: CDs or savings vehicles, and that's what's causing sort of 32 00:01:28,840 --> 00:01:32,360 Speaker 1: the increase in interest expense, you know, on the consumer side. 33 00:01:32,160 --> 00:01:34,479 Speaker 1: But overall, it's exactly kind of what we thought would 34 00:01:34,520 --> 00:01:35,959 Speaker 1: be happening as we came into the quarter. 35 00:01:36,240 --> 00:01:38,520 Speaker 3: But Roman and I were just talking about this before 36 00:01:38,520 --> 00:01:40,240 Speaker 3: the show. That was so interesting to both of us 37 00:01:40,240 --> 00:01:43,120 Speaker 3: that non interest bearing deposits fell eighteen percent in the 38 00:01:43,200 --> 00:01:45,520 Speaker 3: quarter compared to the same period a year ago. 39 00:01:45,640 --> 00:01:47,880 Speaker 2: You guys still have non interest bearing deposits. 40 00:01:50,560 --> 00:01:52,200 Speaker 1: Yeah, no, Look, I think you know, when you look 41 00:01:52,240 --> 00:01:55,360 Speaker 1: at kind of core you know, operating accounts, checking accounts, 42 00:01:55,400 --> 00:01:57,320 Speaker 1: you know, that's what makes up the bulk of that. 43 00:01:57,440 --> 00:02:00,160 Speaker 1: Plus you know, some commercial deposits sort of fallen of 44 00:02:00,160 --> 00:02:03,280 Speaker 1: that category, you know, but the decline you've seen is 45 00:02:03,320 --> 00:02:05,720 Speaker 1: just have been a natural progression throughout the year as 46 00:02:05,720 --> 00:02:08,280 Speaker 1: people spend down and the biggest driver really continues to 47 00:02:08,320 --> 00:02:13,160 Speaker 1: be consumer spending and some reallocation into CDs and and 48 00:02:13,200 --> 00:02:13,919 Speaker 1: other products. 49 00:02:14,360 --> 00:02:16,400 Speaker 4: So what do we talk about, Mike, when you look 50 00:02:16,440 --> 00:02:18,840 Speaker 4: forward into the year. I know on the conference call, 51 00:02:19,120 --> 00:02:21,359 Speaker 4: you guys talked a little bit about your credit cards 52 00:02:21,400 --> 00:02:23,520 Speaker 4: and some other products here the idea that there is 53 00:02:23,520 --> 00:02:26,840 Speaker 4: something coming down the pipeline that maybe maybe can sort 54 00:02:26,880 --> 00:02:29,280 Speaker 4: of help boost growth here, what are you hoping for? 55 00:02:30,320 --> 00:02:31,720 Speaker 1: Yeah, well, I think you have to look at the 56 00:02:32,080 --> 00:02:34,360 Speaker 1: revenue line in total when you sort of think about that, 57 00:02:34,400 --> 00:02:36,000 Speaker 1: and I think, you know, in the quarters, I think 58 00:02:36,000 --> 00:02:38,280 Speaker 1: a good example, we've had really good fee growth, you know, 59 00:02:38,320 --> 00:02:42,040 Speaker 1: across most products and most businesses, and when you look 60 00:02:42,080 --> 00:02:44,360 Speaker 1: across the year, you know, hopefully we'll continue to see 61 00:02:44,360 --> 00:02:47,480 Speaker 1: some good benefit from those investments we've been making that's 62 00:02:47,520 --> 00:02:49,840 Speaker 1: been driving some of that some of that growth as well. 63 00:02:50,200 --> 00:02:53,440 Speaker 1: And an interesting come it's going to be a function 64 00:02:53,560 --> 00:02:55,720 Speaker 1: of what we continue to see with rates, what we 65 00:02:55,760 --> 00:02:59,680 Speaker 1: continue to see with how how clients behave with deposits 66 00:02:59,680 --> 00:03:02,400 Speaker 1: and how much they reallocate to other products. How much 67 00:03:02,440 --> 00:03:05,400 Speaker 1: they spend, how much loan growth we see from, you know, 68 00:03:05,440 --> 00:03:07,679 Speaker 1: both the consumer and the commercial side. So there's a 69 00:03:07,720 --> 00:03:10,280 Speaker 1: lot of variables that sort of go into it. But 70 00:03:10,360 --> 00:03:11,800 Speaker 1: as we said on the call, you know, we feel 71 00:03:11,840 --> 00:03:14,480 Speaker 1: better about where we are today than we did in January. 72 00:03:15,240 --> 00:03:16,720 Speaker 1: But I think there's a lot to play out through 73 00:03:16,760 --> 00:03:18,280 Speaker 1: the rest of the year and we'll see, you know, 74 00:03:18,360 --> 00:03:20,040 Speaker 1: we'll see how things progress. 75 00:03:20,280 --> 00:03:22,160 Speaker 4: But I do want to kind of stay on credit 76 00:03:22,240 --> 00:03:24,880 Speaker 4: cards because on one hand, that did appear to be 77 00:03:24,960 --> 00:03:26,519 Speaker 4: a bright spot. You had decent growth. I think it 78 00:03:26,560 --> 00:03:28,720 Speaker 4: was something like six percent, correct me if I'm wrong, 79 00:03:29,040 --> 00:03:31,640 Speaker 4: but that came because of higher loan balances, which of 80 00:03:31,639 --> 00:03:35,000 Speaker 4: course would raise the question about the ability the capacity 81 00:03:35,040 --> 00:03:37,600 Speaker 4: of those folks to repay that. What's the balance looking 82 00:03:37,680 --> 00:03:38,520 Speaker 4: like right now. 83 00:03:38,720 --> 00:03:40,560 Speaker 1: Well, I mean, a lot of the fund a lot 84 00:03:40,600 --> 00:03:42,480 Speaker 1: of the growth we're seeing in the in the credit 85 00:03:42,480 --> 00:03:44,560 Speaker 1: card business is a function of what we've been doing 86 00:03:44,560 --> 00:03:47,200 Speaker 1: and investing in over the last three years. So we've 87 00:03:47,240 --> 00:03:49,640 Speaker 1: launched a whole bunch of new products in the last 88 00:03:49,680 --> 00:03:51,960 Speaker 1: two and a half years. Those are getting really good 89 00:03:52,040 --> 00:03:55,680 Speaker 1: traction from both our existing customers and new customers, and 90 00:03:55,680 --> 00:03:57,840 Speaker 1: that's what's driving a lot of the growth there not 91 00:03:58,040 --> 00:04:02,640 Speaker 1: necessarily just existing customers growing their their balances higher. Some 92 00:04:02,720 --> 00:04:05,800 Speaker 1: of that's happening as well, and as you would expect, 93 00:04:05,880 --> 00:04:08,280 Speaker 1: you know, there's some customers that need to do that 94 00:04:08,440 --> 00:04:11,760 Speaker 1: to continue to you know, deal with with all the 95 00:04:11,800 --> 00:04:13,440 Speaker 1: things they need to deal with in their life. But 96 00:04:13,600 --> 00:04:16,560 Speaker 1: what we're seeing there is just some natural progression of 97 00:04:16,640 --> 00:04:19,880 Speaker 1: charge offs, natural deterioration of that portfolio that you would 98 00:04:19,920 --> 00:04:22,200 Speaker 1: expect coming off really the historic cloths that we saw 99 00:04:22,320 --> 00:04:25,320 Speaker 1: during COVID, so and everything is really performing as we 100 00:04:25,320 --> 00:04:27,000 Speaker 1: thought it would at this point when you look at 101 00:04:27,040 --> 00:04:29,960 Speaker 1: all the different products, the vintages, the different types of customers. 102 00:04:30,000 --> 00:04:32,560 Speaker 1: So we're not seeing anything that would fall outside of 103 00:04:32,600 --> 00:04:35,320 Speaker 1: what we would have thought in our expectations. 104 00:04:35,680 --> 00:04:39,520 Speaker 3: What about growth, say internally with investment, banking and trading 105 00:04:39,560 --> 00:04:42,159 Speaker 3: as well, Like when is the asset cap kind of 106 00:04:42,200 --> 00:04:44,120 Speaker 3: get put to the side and you can really make 107 00:04:44,120 --> 00:04:45,760 Speaker 3: the investments that you want to be making in there. 108 00:04:45,760 --> 00:04:46,680 Speaker 2: What does growth look like? 109 00:04:47,480 --> 00:04:50,000 Speaker 1: Well, again, we've been investing in those businesses too now 110 00:04:50,040 --> 00:04:52,080 Speaker 1: for the last number of years, and I think you're 111 00:04:52,200 --> 00:04:54,120 Speaker 1: you know, you saw some of the benefit of that 112 00:04:54,240 --> 00:04:57,239 Speaker 1: those investments coming through in the quarter On the investment 113 00:04:57,320 --> 00:04:59,839 Speaker 1: banking side, we had a you know, we participated in 114 00:04:59,839 --> 00:05:03,479 Speaker 1: what was a pretty strong fee quarter for the industry. 115 00:05:04,000 --> 00:05:06,560 Speaker 1: You saw that in investment grade deck capital markets, that's 116 00:05:06,560 --> 00:05:08,599 Speaker 1: a business we've been very good in for a very 117 00:05:08,600 --> 00:05:11,599 Speaker 1: long time. We saw some higher advisory fees, you know, 118 00:05:11,640 --> 00:05:13,440 Speaker 1: off the back of some of the investments we've been 119 00:05:13,440 --> 00:05:17,240 Speaker 1: making with people and relationships there. So that's good and 120 00:05:17,279 --> 00:05:20,320 Speaker 1: I think that'll that'll continue to play out over time 121 00:05:20,520 --> 00:05:23,040 Speaker 1: as as you know, assuming the market cooperates with us. 122 00:05:23,360 --> 00:05:25,760 Speaker 1: And on the trading side, it's it's similar. We've been 123 00:05:25,839 --> 00:05:30,880 Speaker 1: investing technology people and you're continuing to you know, see that. 124 00:05:31,040 --> 00:05:33,360 Speaker 1: But that is definitely a business. The trading business is 125 00:05:33,360 --> 00:05:35,719 Speaker 1: definitely a business where it's been more constrained by the 126 00:05:35,760 --> 00:05:38,080 Speaker 1: size of the balance sheet over the last few years. 127 00:05:38,600 --> 00:05:40,520 Speaker 1: And as we have more flexibility, we'll be able to 128 00:05:40,520 --> 00:05:42,360 Speaker 1: deploy more resources there over time. 129 00:05:42,520 --> 00:05:47,080 Speaker 3: So flexibility aka regulatory work that you guys have to do. 130 00:05:47,160 --> 00:05:50,240 Speaker 3: You guys inherited a lot of stuff. The baseball analogy, 131 00:05:50,279 --> 00:05:52,880 Speaker 3: what inning are you in? The ninth inning is sort 132 00:05:52,880 --> 00:05:54,040 Speaker 3: of like you're done, You're off. 133 00:05:53,880 --> 00:05:54,520 Speaker 2: To the races. 134 00:05:55,080 --> 00:05:57,680 Speaker 1: Well, I think you know, as as i've said, you 135 00:05:57,680 --> 00:05:59,920 Speaker 1: know on this, you know, in this forum a number 136 00:05:59,920 --> 00:06:02,520 Speaker 1: of times, like you know, we're we're continuing to make 137 00:06:02,560 --> 00:06:05,279 Speaker 1: that our the finishing that regulatory work is our top priority. 138 00:06:05,279 --> 00:06:07,440 Speaker 1: We're going to continue to do that, focus on it 139 00:06:07,480 --> 00:06:09,920 Speaker 1: with with everything we've got to get through it. You saw, 140 00:06:10,200 --> 00:06:12,680 Speaker 1: you know, one of our consent orders related to sales 141 00:06:12,680 --> 00:06:15,560 Speaker 1: practices terminated in the first quarter. So I think that's 142 00:06:15,560 --> 00:06:18,600 Speaker 1: a good sign, you know, for you know, for all 143 00:06:18,640 --> 00:06:20,520 Speaker 1: the work that we've been doing. We're thankful for all 144 00:06:20,520 --> 00:06:23,200 Speaker 1: the effort people put in for that, and so we're 145 00:06:23,200 --> 00:06:25,200 Speaker 1: going to continue to stay focused on it, and we're 146 00:06:25,200 --> 00:06:27,040 Speaker 1: not going to stop until we're done with all of it. 147 00:06:27,480 --> 00:06:29,560 Speaker 4: All right, Mike, really appreciate you taking time for us. 148 00:06:29,600 --> 00:06:32,600 Speaker 4: As always, Mike sentim a CML. He's the CFO over 149 00:06:32,920 --> 00:06:33,880 Speaker 4: at well as Fargo.