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Radio news. The CFO of Wells Fargo joins us now on Bloomberg. Mike Senamassimo. Great to see you once again here. A relatively upbeat quarter, at least based on the reaction that we've seen out of investors and also by some of the comments that you and Charlie Sharf made on that conference call about the resiliency of the consumer. Can you expand on that a little bit more, Mike, what exactly are you seeing?
Yeah, well, first thanks thanks for having me again.
And you know, as you saw on the results, so the quarter, you know, the consumer has been quite resilient actually now for the last number of quarters. And I think you can see that in the activity levels. You can see that in the credit performance in the quarter, and you can see that in the underlying deposit franchise as well as you were just mentioning. And so when you look just more broadly at the results, it's not just the consumer side, it's the commercial side as well.
You know, we saw good growth across most of.
The businesses, and the FEA side we saw it and expected decline in an interesting income. But you know, we feel like we're likely at the trough of the NII trend at this point. So there's a lot of good things underneath that underpin the what you saw in the quarter.
Is there a sense I mean when you talk about the trough potentially that we are, is that largely a function of the move that we've seen in FED rates or is there something more to that?
Well, I think the reduction in rates does help, right, because we've been able to adjust client pricing as a result of that. But you're also still seeing you know, rates are still quite high on a releative basis over from the last few years, have the last few years, and so you are still seeing repricing happen on the
asset side. But in the near term, what really drive, what really drive where we end up over the next couple of quarters, is the deposit side, and we've seen some good trends there or now over the last couple of quarters where you've seen this this cash sorting and
the mixed different mix changes really moderate. It was the slowest quarter where you know, so far since over the last couple of years, you know, for that in the portfolio, and we've been able to adjust pricing as just as we thought we would as the rates came down, So that'll be the that'll be the factor that really drives near term performance.
So Mike, it's good to chat with you.
To that point.
Then, does that mean that the move into higher yielding say CDs or money market funds, et cetera, like that's definitely done as rates cuts tunk come down.
Well, I wouldn't say it's it's necessarily done, but I think we saw the lowest migrate, lowest pace of migration since rates started increasing, Alex And so I think, you know, that's a good trend. And I think eventually what you do, what you see generally or expect to see generally, is that you know, what's left in checking accounts ends up being operating cash for a lot of people. So a lot of that shifting into other other alternatives has happened already.
Yeah, my highield savings account already coming down there. All right, let's get to the loan part of your portfolio. When do you think you see a really big uptake in loan growth? What's going to be that?
Yeah, it's really hard to say exactly right, And I think when you look at what's what we're hearing from clients and what you're seeing, you know, rates coming down helpful, right because borrowing costs come down. I think there's still some uncertainty related to the election that's coming up, and then I think people want to see this space case kind of soft landing economic scenario play out a little bit longer, and then I think a combination of those
things will start to build confidence. And then I think you may start to see people either build inventories or make additional capital expenditures that they've been holding off on now for a little bit.
But I don't think it's just one thing.
I think you really need to see a confluence of these things come together. And so it could take a little bit of time for that to really materialize in borrowing.
With regards to that client activity, Mike and the election and the idea that once we get past that maybe we see more activity, is that irrespective of who wins or are they trying to hedge their bets.
Well, you know, I think you know, what people don't like is uncertainty romain and and so I think once there's some certainty of the path and you you know, you feel like that economic you know, outlook is going to play out the way they think. I think those things are going to what really matter, and then assuming rates continue to come down and reduce barring costs. So I really do think it's going to be a combination
of all those things. But it's the it's the it's the uncertainty part that I think causes people to hold off.
I do want to ask you about some of the regulatory issues that continue to hang over Wells Fargo. Last month, Bloomberg did report that you had actually entered a new phase here to get out from under that fed's asset cap. I am curious as to the progress that you've made in moving in that direction and whether you are anticipating that cap to be removed soon.
Yeah.
I mean, as always, my answer might be a little unfulfilling remain but but I think, you know, we we continue to very much focus on getting the work done that we have there, and ultimately it's going to be up to FED to decide, you know, when they're ready.
To do that.
But you know, we we continue to feel like we're making really good progress. We're confident we're going to get through it, but ultimately it's going to be up to the FED to decide the ultimate outcome there.
It definitely has be Mike's favorite question, I think when it comes to our earnings and interviews. But what kind of spend profile do you think you're going to have one ad as a cap is removed, Like, are we going to be like, all right, let's invest a bunch of money, or how's the plan sorting itself out?
No, it doesn't change the strategy that we've been you know, executing on now for the.
Last number of years.
We are already making the investments we need to make into the businesses that grow them over a long period of time, and we're paying for that through the efficiency program that that we've executed now for the last you know, four or five years.
And I think we still very much.
Feel and I think Charlie talked about it on the call this morning, we very much feel like there's a lot more opportunity for us to drive more efficiency and that'll that'll allow us to continue to make.
The investments we need to make in each of the businesses and we're going to keep doing what we've been doing now for the last four or five years.
We talked about the election in terms of the demand profile, What about your client activity in training, for example, like how are your client's positioned, how are they thinking about the next few weeks.
Well, I think, you know, most people are probably hedging their bets a little bit right and making sure they're not taking too much risk going into what can be an uncertain environment. But you know, volatility, as you know, can sometimes create opportunity for folks, and I think that certainly creates opportunity in a trading business like ours and others.
And so we'll see how it plays out.
But I think going in, you know, we're going into this next month or so pretty cautiously as we sort of think about the risk we have in the trading side.
We haven't had a chance to really ask you about the state of the commercial real estate market, at least as it relates here to the business the Wells Fargo. Does you clearly have some insights into that, Mic, and I am curious as to whether you've seen or seen anything resembling a troth in what has been ailing that space, particularly in the office space.
Yeah, well, I think, you know, broadly, commercial real estate's doing quite well. It's really an office story, you know, where you see the most stress, and so I think in the other asset classes, you continue to see a lot of activity. You can see the CNBS market, h you know, securitization market, pretty pretty active in other asset classes like multifamily.
So really that stress is.
In the office space and I can and it's really going to take some time to play out, you know, you know, we're not quite done working through you know, those issues, and it's hard to call whether it's at a trough or a bottom you know, in that market at this point.
And it's still the same trends though that we're seeing.
You know, Newer buildings in the right places are doing just fine. Older buildings are are not doing fine. It's pretty consistent across the US, and it's going to take a while to play out. I don't it's not going to be done in the next quarter or two. And for us, you know, we've got you know, we've got a high allowance for coverage you know, coverage ratio in the credit book there in the in those institutions office properties,
so we're really prepared for it. And it's for the most part, i'd say, kind of within the expectations that we had for it, but it's still it's still not quite turning yet in terms of getting better for the properties that are most stressed.
And Mike, we really appreciate it. It was fun to get your time today. Thank you so much. We'll get you on the next quarter on Mike. Santa Messimo, a CFO over at Wells Fargo,