1 00:00:02,400 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:07,120 --> 00:00:08,840 Speaker 2: Well, it's hard to believe it's been a little more 3 00:00:08,840 --> 00:00:10,600 Speaker 2: than a year since a key lender in the world 4 00:00:10,640 --> 00:00:13,880 Speaker 2: of technology and startups came undone, collapsing and requiring the 5 00:00:14,000 --> 00:00:17,720 Speaker 2: US federal government to step in. That failure the second 6 00:00:17,800 --> 00:00:20,200 Speaker 2: largest in US history, in the largest since the Financial 7 00:00:20,239 --> 00:00:22,680 Speaker 2: Crisis of two thousand and eight. It wasn't alone in 8 00:00:22,760 --> 00:00:25,960 Speaker 2: terms of troubles in the regional banking sector. Signature Bank, 9 00:00:25,960 --> 00:00:30,040 Speaker 2: First Republic, and the group continues to be on everyone's radar. 10 00:00:30,160 --> 00:00:32,040 Speaker 1: It does, indeed, and with one perspective, and why we 11 00:00:32,080 --> 00:00:34,080 Speaker 1: have heard a lot of senior execs in the banking 12 00:00:34,120 --> 00:00:37,640 Speaker 1: sector talk about the value of being boring. Boring that 13 00:00:37,760 --> 00:00:40,519 Speaker 1: is including Our next guest with us now is none 14 00:00:40,560 --> 00:00:43,839 Speaker 1: other than the chairman and CEO of PNC Financial Services, 15 00:00:43,880 --> 00:00:46,879 Speaker 1: home to PNC Bank, Bill Demchek. He's joining us now 16 00:00:46,920 --> 00:00:47,680 Speaker 1: from Pittsburgh. 17 00:00:47,840 --> 00:00:48,040 Speaker 2: Bill. 18 00:00:48,040 --> 00:00:49,840 Speaker 1: Great to have you here with us. And I got 19 00:00:49,840 --> 00:00:51,400 Speaker 1: to ask, is that a Bloomberg behind you? 20 00:00:52,640 --> 00:00:56,280 Speaker 2: Of course it's a Bloomberg, alright, So nobody sent, nobody 21 00:00:56,360 --> 00:00:57,040 Speaker 2: sends Bill, and. 22 00:00:57,000 --> 00:00:58,320 Speaker 3: I b right now. 23 00:01:00,080 --> 00:01:05,720 Speaker 4: I am probably one of your earliest Bloomberg clients. Interesting 24 00:01:05,920 --> 00:01:08,640 Speaker 4: way back to the early nineties on the trading flour. 25 00:01:08,680 --> 00:01:11,200 Speaker 1: All right, there are some stories there not only about that, 26 00:01:11,480 --> 00:01:15,360 Speaker 1: but also about what you have seen. Well, let's start there. 27 00:01:15,480 --> 00:01:19,600 Speaker 1: I mean, I really appreciate someone who has been within 28 00:01:19,840 --> 00:01:22,959 Speaker 1: the financial industry and then the banking industry for a while. 29 00:01:23,680 --> 00:01:26,199 Speaker 1: You've seen a fair amount of cycles, You've seen crises. 30 00:01:27,440 --> 00:01:30,280 Speaker 1: What's the best word to describe today's banking environment and 31 00:01:30,400 --> 00:01:33,600 Speaker 1: kind of business and economic environment? And they don't have 32 00:01:33,600 --> 00:01:34,319 Speaker 1: to be the same word. 33 00:01:35,760 --> 00:01:40,160 Speaker 4: Yeah, Look, I think banking is a little bit unique 34 00:01:40,200 --> 00:01:44,840 Speaker 4: at the moment because we're in this uncertain period. You know, 35 00:01:44,840 --> 00:01:49,440 Speaker 4: it's a function of pending regulation, you know, the impact 36 00:01:49,480 --> 00:01:52,120 Speaker 4: of interest rates and when the fedskin ease or nineties, 37 00:01:52,160 --> 00:01:53,080 Speaker 4: so it's a little bit different. 38 00:01:53,080 --> 00:01:53,559 Speaker 3: I think the. 39 00:01:53,440 --> 00:01:57,360 Speaker 4: Economy is kind of what you read about. It feels 40 00:01:57,360 --> 00:02:00,559 Speaker 4: pretty healthy. It's slowing at the margin from a rapid 41 00:02:01,120 --> 00:02:05,280 Speaker 4: labor is good, you know, And at least inside of 42 00:02:05,320 --> 00:02:07,560 Speaker 4: P and C, we're largely on the same age with 43 00:02:07,640 --> 00:02:10,200 Speaker 4: shar Paul on his recent comments. 44 00:02:09,880 --> 00:02:12,800 Speaker 2: Well, can you tell us about your customers right now? 45 00:02:13,120 --> 00:02:15,280 Speaker 2: And I asked because we had a really interesting conversation 46 00:02:15,480 --> 00:02:18,160 Speaker 2: with the President's CEO of Citizens Bank of edmund. I 47 00:02:18,160 --> 00:02:22,480 Speaker 2: mean this is a tiny bank in Oklahoma, one physical branch, 48 00:02:22,520 --> 00:02:25,480 Speaker 2: and they have an online business with a thousand customers, 49 00:02:25,520 --> 00:02:29,079 Speaker 2: So I mean we're talking tiny. But Jill Castilla told 50 00:02:29,200 --> 00:02:32,600 Speaker 2: us yesterday that she's never seen a better environment for 51 00:02:32,639 --> 00:02:35,800 Speaker 2: her customers. Things are really really good right now. 52 00:02:37,880 --> 00:02:42,320 Speaker 3: It's Jill's actually a good friend. It's she's not wrong, 53 00:02:43,720 --> 00:02:44,079 Speaker 3: you know it. 54 00:02:45,480 --> 00:02:48,399 Speaker 4: On the corporate side, there's areas of weakness, but there's 55 00:02:48,440 --> 00:02:52,880 Speaker 4: a lot of areas of strength, particularly as we kind 56 00:02:52,880 --> 00:02:59,160 Speaker 4: of lean into manufacturing and on shoring again. The consumer, yeah, 57 00:02:59,160 --> 00:03:03,119 Speaker 4: it varies by come level. We've obviously seen basic wages 58 00:03:03,200 --> 00:03:07,400 Speaker 4: increase a lot, particularly at the lower level, but at 59 00:03:07,400 --> 00:03:10,919 Speaker 4: the same time, we've seen the prices of their staple 60 00:03:11,000 --> 00:03:16,640 Speaker 4: goods increase more compounded through time than and their wages have, 61 00:03:16,720 --> 00:03:21,200 Speaker 4: even though in many instances wages of double. So you know, 62 00:03:21,240 --> 00:03:23,119 Speaker 4: it varies well. 63 00:03:23,160 --> 00:03:24,920 Speaker 1: And you know, we kicked off here, you know, Bill 64 00:03:25,040 --> 00:03:27,600 Speaker 1: getting into you that one year essentially a little bit 65 00:03:27,639 --> 00:03:29,520 Speaker 1: more than one year since Silicon Valley Bank and the 66 00:03:29,560 --> 00:03:31,960 Speaker 1: collapse of it, do you feel like we're out of 67 00:03:31,960 --> 00:03:34,480 Speaker 1: that environment? And I think one thing we have learned 68 00:03:34,520 --> 00:03:37,720 Speaker 1: is right that not every bank, not every regional, is 69 00:03:37,760 --> 00:03:40,400 Speaker 1: the same and in terms of their exposure. But we're 70 00:03:40,440 --> 00:03:42,920 Speaker 1: still kind of a little concerned about commercial real estate, 71 00:03:43,040 --> 00:03:45,120 Speaker 1: not sure that we've gotten through that. So when it 72 00:03:45,160 --> 00:03:48,400 Speaker 1: comes to concerns within some of the banking sector, do 73 00:03:48,440 --> 00:03:51,880 Speaker 1: you think that we could see more troubles still depending 74 00:03:51,880 --> 00:03:53,320 Speaker 1: on their exposures. 75 00:03:55,320 --> 00:03:58,480 Speaker 4: At the margin, probably in smaller banks, most of which 76 00:03:58,520 --> 00:04:02,720 Speaker 4: you will never have heard of. I think, first of all, 77 00:04:02,760 --> 00:04:05,600 Speaker 4: as you know, I don't particularly like the term regional. 78 00:04:05,640 --> 00:04:07,120 Speaker 3: It's not very descriptive of. 79 00:04:07,080 --> 00:04:10,040 Speaker 4: Anything anymore, particularly in a digital age. 80 00:04:10,760 --> 00:04:13,160 Speaker 1: But I'm not going to call you a super regional, 81 00:04:13,160 --> 00:04:14,960 Speaker 1: which people call you sometimes. 82 00:04:15,440 --> 00:04:18,279 Speaker 3: No, I don't know what we're national, but I know 83 00:04:18,400 --> 00:04:19,760 Speaker 3: I know you are in that. 84 00:04:19,839 --> 00:04:23,520 Speaker 4: Campaign in the second But you know, practically and you 85 00:04:23,560 --> 00:04:26,279 Speaker 4: see the same numbers I do. Is banks get smaller, 86 00:04:26,320 --> 00:04:28,960 Speaker 4: they tend to have a higher concentration of real estate. 87 00:04:29,520 --> 00:04:34,960 Speaker 4: Their concentration of real estate tends to be more fixed rate, 88 00:04:35,400 --> 00:04:38,960 Speaker 4: medium term in length and B and C properties, you know, 89 00:04:39,000 --> 00:04:42,160 Speaker 4: so permanent financing on older B and C properties, which 90 00:04:42,200 --> 00:04:44,160 Speaker 4: is kind of the area that's going to get hit 91 00:04:44,240 --> 00:04:47,960 Speaker 4: the most in a higher rate environment with you. 92 00:04:47,920 --> 00:04:49,880 Speaker 3: Know, increased office vacancies. 93 00:04:49,920 --> 00:04:53,280 Speaker 4: But it's not a systemic issue, certainly for the for 94 00:04:53,360 --> 00:04:56,479 Speaker 4: the banking industry, not for any of the names you 95 00:04:56,760 --> 00:05:00,360 Speaker 4: will otherwise know, and we'll make our way through. Right. 96 00:05:00,720 --> 00:05:03,120 Speaker 2: Well, let's talk more broadly, just about about real estate 97 00:05:03,120 --> 00:05:05,120 Speaker 2: and talk to us a little bit about your own 98 00:05:05,240 --> 00:05:08,400 Speaker 2: exposure to real estate and commercial real estate. How can 99 00:05:08,440 --> 00:05:09,520 Speaker 2: you characterize that for us? 100 00:05:11,520 --> 00:05:14,760 Speaker 4: You know, look, it's a small percentage of our total loans, 101 00:05:14,800 --> 00:05:17,640 Speaker 4: that not a big percentage of our capital. We have, 102 00:05:20,520 --> 00:05:22,760 Speaker 4: you know, plus or minus eight and a half billion, 103 00:05:22,839 --> 00:05:26,640 Speaker 4: I guess in total what you would define his office. 104 00:05:26,720 --> 00:05:30,520 Speaker 4: And that is where all the spotlight is starting to 105 00:05:30,560 --> 00:05:32,960 Speaker 4: shine on multi family. But we're not seeing stress and 106 00:05:33,040 --> 00:05:36,960 Speaker 4: multi family at the moment, notwithstanding you know, news that 107 00:05:37,040 --> 00:05:39,520 Speaker 4: you might see out of New York and affordable in 108 00:05:39,560 --> 00:05:43,440 Speaker 4: other places, generic multifamilies do and just fine. But inside 109 00:05:43,440 --> 00:05:45,360 Speaker 4: of office, you know, say we have that eight and 110 00:05:45,360 --> 00:05:50,640 Speaker 4: a half billion, there's about four and a half billion 111 00:05:50,640 --> 00:05:52,920 Speaker 4: to five billion that is multi tenant, and that's where 112 00:05:52,960 --> 00:05:57,080 Speaker 4: the problem is, and we expect problems there and we're 113 00:05:57,240 --> 00:06:00,560 Speaker 4: reserved quite a high level against it as far as 114 00:06:00,600 --> 00:06:04,200 Speaker 4: we've cycled through. You know, these projects that going on 115 00:06:04,400 --> 00:06:09,479 Speaker 4: performing we've actually been conservative and what we've been reserving, 116 00:06:09,560 --> 00:06:11,040 Speaker 4: so we feel okay about it. 117 00:06:11,920 --> 00:06:13,279 Speaker 3: We're heavily reserved today. 118 00:06:15,040 --> 00:06:18,440 Speaker 4: It's gonna you know, most of our stuff comes due 119 00:06:18,480 --> 00:06:20,480 Speaker 4: over the next year, so you know, it's kind. 120 00:06:20,400 --> 00:06:21,200 Speaker 3: Of project based. 121 00:06:21,200 --> 00:06:24,000 Speaker 4: They come online, so we're gonna we're going to know 122 00:06:24,040 --> 00:06:25,920 Speaker 4: the answer to this pretty quickly. 123 00:06:25,960 --> 00:06:30,159 Speaker 1: I suspect interesting. Hey, listen, we also said that boring 124 00:06:31,240 --> 00:06:33,360 Speaker 1: is something that you guys are tapping into. We've got 125 00:06:33,360 --> 00:06:35,000 Speaker 1: a great chart that we can share with those who 126 00:06:35,040 --> 00:06:39,240 Speaker 1: are watching right now that our producer Elizabeth is going 127 00:06:39,279 --> 00:06:42,400 Speaker 1: to share out with everybody. But it talks about bank management, 128 00:06:42,480 --> 00:06:47,440 Speaker 1: not just your own, but others using boring on calls 129 00:06:47,520 --> 00:06:51,320 Speaker 1: this year, quarterly update calls and earnings calls. It is 130 00:06:51,400 --> 00:06:55,000 Speaker 1: up a lot. Boring not a bad thing. And you 131 00:06:55,040 --> 00:06:58,200 Speaker 1: guys have an advertising campaign that you are stressing. 132 00:06:57,720 --> 00:07:02,120 Speaker 3: That we do. I mean, I'll make a couple of points. 133 00:07:02,600 --> 00:07:05,080 Speaker 4: I think if you look back in history, I've talked 134 00:07:05,080 --> 00:07:07,800 Speaker 4: about our bank and banking in general is kind of 135 00:07:07,839 --> 00:07:10,840 Speaker 4: three yards in a cloud of dust, and you grow, 136 00:07:11,400 --> 00:07:13,800 Speaker 4: you know, with GDP and if and if you're good 137 00:07:13,880 --> 00:07:18,280 Speaker 4: at it, you can outpace that. But we are, by 138 00:07:18,280 --> 00:07:21,280 Speaker 4: our very nature. As in industry, when you see outliers 139 00:07:21,320 --> 00:07:25,520 Speaker 4: so that there tends to be something going on underneath that. 140 00:07:26,840 --> 00:07:29,640 Speaker 4: And and and when we think about you know, we 141 00:07:29,720 --> 00:07:33,520 Speaker 4: use the word boring. I don't necessarily like to think 142 00:07:33,520 --> 00:07:37,240 Speaker 4: of myself as important person, but banking auto be no, 143 00:07:37,720 --> 00:07:40,480 Speaker 4: I get it, but boring. You know, banking shouldn't be 144 00:07:40,600 --> 00:07:43,960 Speaker 4: drama for our clients. It ought to be predictable, consistent, 145 00:07:44,680 --> 00:07:47,520 Speaker 4: stuff works. They know their money's safe. They don't have 146 00:07:47,520 --> 00:07:51,320 Speaker 4: to read about us in the headlines. That that's who 147 00:07:51,320 --> 00:07:53,240 Speaker 4: we are. That's how we define ourselves. 148 00:07:53,280 --> 00:07:53,480 Speaker 3: You know. 149 00:07:53,520 --> 00:07:57,240 Speaker 4: We we to the core of this company, to the 150 00:07:57,360 --> 00:07:59,680 Speaker 4: very best of our ability. We try to do right 151 00:07:59,720 --> 00:08:02,080 Speaker 4: by all of our constituents every day, and when we 152 00:08:02,120 --> 00:08:03,280 Speaker 4: screw it up, we fix it. 153 00:08:03,560 --> 00:08:03,760 Speaker 2: Bill. 154 00:08:03,800 --> 00:08:05,720 Speaker 1: We're going to leave it on that note, but I 155 00:08:05,720 --> 00:08:08,240 Speaker 1: hope we can get you back here real soon. Bill Demtek, 156 00:08:08,600 --> 00:08:11,960 Speaker 1: he's CEO at PNC Bank, joining us from Pittsburgh.