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Goldman Sachs Posts Best Stock-Trading Quarter in History · Bloomberg Intelligence

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  Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the
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  Speaker 1: Listen on demand wherever you get your podcasts, or watch
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  Speaker 1: us live on.
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  Speaker 2: YouTube Asertao Paul Swiney live here in our Bloomberg Interactive
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  Speaker 2: Broker studio. We are streaming live on YouTube as well,
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  Speaker 2: so go check us out there. I've been doing the
• 0:31
  Speaker 2: stock market thing at leasta for like forty years almost
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  Speaker 2: still have.
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  Speaker 3: No idea how this whole thing works.
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  Speaker 2: I mean, look at Goldman, Sachs, Morgan, Stanley, b of A,
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  Speaker 2: what I thought were really pretty darn good quarters in
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  Speaker 2: a world where we're not really sure what's going on.
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  Speaker 3: So of course all the.
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  Speaker 2: Stocks are trading down today, so I can't figure it out.
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  Speaker 2: But our next guest is an expert.
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  Speaker 3: She knows what's going on.
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  Speaker 2: Alison Williams, senior analy she covers all the big banks
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  Speaker 2: and all that kind of good stuff for Bloomberg Intelligence.
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  Speaker 2: She joins us here in our studio here. So as
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  Speaker 2: you looked at you know again we've had two days
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  Speaker 2: of the big banks Alison, and you've been covering these
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  Speaker 2: guys for a very long time. You've seen it all
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  Speaker 2: come and go. How are the big banks investment banks
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  Speaker 2: doing this quarter?
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  Speaker 4: Well, you mentioned you've been doing this forty years and
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  Speaker 4: you've never seen a corner like you saw Goldman Sachs
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  Speaker 4: equity trading record YEP trading. I mean, the really stand
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  Speaker 4: out for Goldman is they're the biggest inequity trading. They
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  Speaker 4: are the biggest in M and A and they had
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  Speaker 4: the biggest jump, so really solidifying that leadership. I mean
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  Speaker 4: the equity trading up thirty six percent, prime brokerage, cash derivatives.
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  Speaker 4: We talked about the fact that we saw record trading
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  Speaker 4: on the equities exchanges this corner. We certainly saw that
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  Speaker 4: come through with the banks, M and A. Goldman talking
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  Speaker 4: about the fact that announce volumes are up thirty percent
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  Speaker 4: and we're running above average now, so that bodes well
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  Speaker 4: for the future. And I think, you know, in terms
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  Speaker 4: of the stock reactions that you refer to, I think
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  Speaker 4: you know, so as I said, we can see that
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  Speaker 4: they're there was a lot of strength in the exchange volumes.
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  Speaker 4: We could see that you know, IPOs had rebounded the
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  Speaker 4: last couple of months. Even though you know it wasn't
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  Speaker 4: an analyst numbers, I think there was some visibility there.
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  Speaker 5: So I think in terms of.
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  Speaker 4: What the stocks are reacting to, Morgan Stanley had a
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  Speaker 4: really strong quarter, you know, beat everything, but just not
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  Speaker 4: as good as Goldman, And I think people are looking
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  Speaker 4: at that equities trading. Morgan Stanley was in the lead
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  Speaker 4: for a few years and now Goldman is really pulling ahead.
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  Speaker 6: Yeah, and I see because the whole morning I was like,
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  Speaker 6: why is the stack where?
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  Speaker 1: Ever?
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  Speaker 6: Since the bell opened, it is.
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  Speaker 4: And by the way, like wealth, wealth is the business
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  Speaker 4: that people watch for them the wealth flows. You know,
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  Speaker 4: the numbers were good, so again, what are people worried about?
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  Speaker 4: So it could be the market share. Morgan Stanley did
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  Speaker 4: point out that they had a record quarter in Europe.
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  Speaker 4: They said that they're gaining share. We'll see what happens
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  Speaker 4: when the Europeans report and Asia. The other thing is
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  Speaker 4: capital so buybacks better than expected at Goldman, weaker at
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  Speaker 4: Morgan Stanley. And keep in mind we've seen these big
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  Speaker 4: moves in the financials, A lot of that is really
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  Speaker 4: about the capital return story well and.
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  Speaker 6: The consumer resilience. We look to Bank of America for
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  Speaker 6: that So did you did you see it?
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  Speaker 4: We did see it, and I think that is what
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  Speaker 4: we've what we saw in the quarter. So net interest
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  Speaker 4: income as well as charge offs, those are kind of
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  Speaker 4: the two bank business lines, if you will, that are
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  Speaker 4: most revolving around lending and consumer health, and you know,
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  Speaker 4: interest income. It was like a little bit soft in
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  Speaker 4: the quarter, but the outlooks are fine or better and
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  Speaker 4: credit coming in in line to better than expected, and
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  Speaker 4: the reserve building really telling you that, look, there is
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  Speaker 4: some conservative conservatism baked in for some uncertainty in the
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  Speaker 4: second half, but in general things are improved.
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  Speaker 2: When President Trump was elected for this second term, almost immediate,
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  Speaker 2: people are saying, by the banks they're going to be
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  Speaker 2: the beneficiaries of reducing regulation and reduced oversight.
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  Speaker 3: Has that happened? Do we still expect that to happen?
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  Speaker 3: Is that still part of the story.
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  Speaker 7: I think, you know, we're on a journey.
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  Speaker 4: I guess if you if you'd say, isn't that the
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  Speaker 4: current rhetoric? But I think that's why the good buybacks
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  Speaker 4: were important. Right. So the reason one of the things
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  Speaker 4: that people are very excited about in terms of reduced
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  Speaker 4: regulation is holding less capital returns our equity, you're going
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  Speaker 4: to go up mathematically, there'll be more money to return
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  Speaker 4: to shareholders. I mean, Goldman had really that leading dividend
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  Speaker 4: increase that we saw after the stress tests, buy backs
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  Speaker 4: better than expected, you know, And meanwhile I saw the
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  Speaker 4: weakness of Morgan Stanley Wells Fargo another one that was
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  Speaker 4: another bank that investors were really optimistic about. After the
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  Speaker 4: US election, they did get the asset cap removed, so
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  Speaker 4: I think there's there's a long term overhang over the stock.
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  Speaker 4: But in the current quarter, people were a little disappointed.
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  Speaker 4: Like you know, they didn't give any guidance on buybacks,
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  Speaker 4: it didn't change their retre earned target, and you know,
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  Speaker 4: it just might be that that's that's going to come.
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  Speaker 4: But didn't get the news yesterday.
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  Speaker 6: Private credit, Where did banks stand with private credit? Your
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  Speaker 6: JP Morgan say they would have best like fifty billion
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  Speaker 6: dollars in private credit. So what kind of examples that
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  Speaker 6: set for the industry.
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  Speaker 4: You know, I think, And Jamie Diamond also, I think,
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  Speaker 4: you know, made some comments around private credit that I
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  Speaker 4: know we're picked up in the headlines. I think that again,
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  Speaker 4: you know, private credit, it's it's it's been sort of
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  Speaker 4: you know, the hot the hot item for us all
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  Speaker 4: to talk about. But you know, maybe you know and
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  Speaker 4: we are seeing, you know, continued strength. I think we
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  Speaker 4: do expect continued fundraising, but you know, I would say
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  Speaker 4: nothing really stands out.
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  Speaker 3: This quarter from any of the banks.
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  Speaker 2: Yeah, at least was asking before we went on here,
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  Speaker 2: can she ask you about private credit? I said, you
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  Speaker 2: can ask Alison about anything and still having a formed opinion.
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  Speaker 3: That's why I'm going going down this alley.
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  Speaker 2: Strong results out of the US big banks this week,
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  Speaker 2: we're going to hear from the European ones. I guess
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  Speaker 2: next week, when is a European Union going to say,
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  Speaker 2: if we ever want to compete in global finance, we
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  Speaker 2: have to allow across murder merger deals. Is that even
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  Speaker 2: on the table?
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  Speaker 4: I mean, I think that it does come up, and
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  Speaker 4: I think we have heard regulators talk about it like yo,
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  Speaker 4: yes we should do something. But the question is, you know,
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  Speaker 4: everyone wants to be the one, you know, the victor.
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  Speaker 4: They want to be the one you know where you
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  Speaker 4: know they're champion, is the buyer. And so I think
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  Speaker 4: that's you know, where the rubber meets the road. If
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  Speaker 4: you will, it will be interesting to your point, when
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  Speaker 4: we see those Europeans report again Morgan Stanley wreckerd quarter
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  Speaker 4: in Europe, they said the first half, they called it
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  Speaker 4: extraordinary in Asia. Obviously, we know Asia is a lot
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  Speaker 4: a lot of diverse parts, but the Europeans, like UBS ten,
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  Speaker 4: have tended to be stronger there. So so if this
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  Speaker 4: quarter we don't see them participate and kind of follow
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  Speaker 4: that Morgan Street Stanley lead, that will give us further
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  Speaker 4: proof that they're actually losing share in their home market,
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  Speaker 4: and that should be a little bit more concerning.
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  Speaker 2: I mean, you could argue that the horse is already
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  Speaker 2: out of the barn. They've missed it. I'm just thinking
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  Speaker 2: twenty years ago, it was so much more competitive. They
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  Speaker 2: were so much more competitive. I remember just going up
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  Speaker 2: against some of those big European banks, and now it's
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  Speaker 2: almost like an afterthought. It's just amazing how that's evolved.
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  Speaker 2: Alson Waims, thank you so much.
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  Speaker 7: Appreciate that.
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  Speaker 2: Alison Willims, she's a Seene analyst covers all global financials.
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  Speaker 2: If you have any question on anything on Global Wall Street,
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  Speaker 2: you can.
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  Speaker 3: Just go up to Allison on the Street and answer.
• 7:38
  Speaker 3: So have an answer for you.
• 7:41
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 6: This is Bloomberg Intelligence. I'm Lismiths Matteo along as I'm
• 7:58
  Speaker 6: Paul Sweeney. We do have some news at a Hewlett
• 8:01
  Speaker 6: Packard enterprise. So it's creating this new strategy committee. Turning
• 8:04
  Speaker 6: to Elliott Investment Management for help with this. Here with
• 8:08
  Speaker 6: all the details and to break it all down for
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  Speaker 6: us is Woodin, who Blueberg Intelligence, Senior technology analyst. Woodin,
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  Speaker 6: Thank you for joining us. I want to start with,
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  Speaker 6: of course, who is involved in Who is part of
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  Speaker 6: this committee?
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  Speaker 8: Yeah?
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  Speaker 9: Sure, thanks Lisa. So it is a handpicked board member
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  Speaker 9: by Elliott Management. Keep in mind Elliott is an activist
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  Speaker 9: investor that has a ten percent plus shareholding of HPE.
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  Speaker 9: I believe they made their position early in this year
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  Speaker 9: and who they appointed was Bob Calderoni, who has done
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  Speaker 9: similar type of deals in terms of taking companies private
• 8:50
  Speaker 9: or more importantly operational streamlining. So any changes I think
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  Speaker 9: Elliott is going to try through Bob to affect a
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  Speaker 9: lot of changes at HP.
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  Speaker 5: Mooch, just remind us what HP is today?
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  Speaker 3: Number one?
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  Speaker 5: And number two, what do they need to fix to
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  Speaker 5: move this thing forward?
• 9:09
  Speaker 9: Yeah, hey, Paul, so, HPE is one of the leading
• 9:14
  Speaker 9: enterprise IT infrastructure vendors. They provide servers, storage, now a
• 9:21
  Speaker 9: bigger networking presence with the Juniper acquisition, and actually, quite
• 9:26
  Speaker 9: quite frankly, there's quite a bit to fix from an
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  Speaker 9: operational standpoint. They fumbled the first quarter results by mispricing
• 9:35
  Speaker 9: their server business and it seems to be reconciled now,
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  Speaker 9: but it flags some of the operational issues Number one,
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  Speaker 9: Number two, they have made a lot of M and
• 9:46
  Speaker 9: A that just didn't create the synergies that they had hoped. So,
• 9:49
  Speaker 9: you know, they did hire the former HPCFO to streamline
• 9:56
  Speaker 9: the financials, and with the Juniper merger UH starting underway,
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  Speaker 9: I suspect that, you know, the new strategy board will
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  Speaker 9: try to find more operational synergies between the two networking businesses.
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  Speaker 6: Wiji And can you dig more into how it's under
• 10:14
  Speaker 6: pressure kind of like lagging behind Dell and growing AI
• 10:17
  Speaker 6: What kind of pressure is it facing in that in
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  Speaker 6: that market?
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  Speaker 7: Yeah?
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  Speaker 9: So, so if we if we think about AI, right,
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  Speaker 9: you know, HP actually owns Cray and we think about
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  Speaker 9: high performance compute.
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  Speaker 7: They are the market leaders there.
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  Speaker 9: They weren't a HP has not been able to transition
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  Speaker 9: that Cray business elegantly uh to uh the to the
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  Speaker 9: AI side of things. So let me put this into context.
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  Speaker 9: I think HPE should be on track for about three
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  Speaker 9: to four billion dollars in AI sales UH this year,
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  Speaker 9: possibly you know four to five. Right, Dell is going
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  Speaker 9: to be on track for about fifteen billion dollars this year,
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  Speaker 9: and super Micro is probably on track for about twenty
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  Speaker 9: twenty billion this year. So you know, they've lagged on
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  Speaker 9: the AI front even though they have some of the
• 11:10
  Speaker 9: leading technologies on high performance compute. That's an area that
• 11:13
  Speaker 9: you know, could be fixable under the right hands.
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  Speaker 2: One more here before we let you go, which is
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  Speaker 2: just you mentioned they owned craye, they owned Juniper. If
• 11:24
  Speaker 2: I'm Elliott Management, am I thinking about maybe they can
• 11:27
  Speaker 2: be selling or spinning off some of these businesses to
• 11:30
  Speaker 2: enhance value.
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  Speaker 9: Well, you know, Bob Calderoni used to be on the
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  Speaker 9: Juniper board and they actually helped with the operational streamlining
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  Speaker 9: of Juniper. Right, So I think that you want to
• 11:42
  Speaker 9: keep Juniper. Okay, there are other aspects of the networking
• 11:47
  Speaker 9: business that you could probably probably pars away. Right, the
• 11:52
  Speaker 9: CRAG business you'd want to keep because AI is going
• 11:55
  Speaker 9: to be the growth engine and also help you transition
• 11:57
  Speaker 9: to the enterprise AI.
• 11:59
  Speaker 5: All right, Jinho, thank you so much for joining us.
• 12:01
  Speaker 2: Wuojin host is senior techanalyst for Bloomberg Intelligence based down
• 12:04
  Speaker 2: there are BI offices down there in Princeton, New Jersey.
• 12:09
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 12:22
  Speaker 2: All right, let's get back to a story that crossing
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  Speaker 2: the tape over in Europe.
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  Speaker 3: Earlier this morning, the.
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  Speaker 5: Agio CEO, Deborah Crew steps down.
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  Speaker 3: What's going on there?
• 12:32
  Speaker 2: Duncan Fox Bloomberg Intelligence senior consumer staples analyst joins this year, Duncan,
• 12:37
  Speaker 2: what's happening at Diagio?
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  Speaker 8: Well, I suppose the performance of the shares and the
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  Speaker 8: organic growth and sales et cetera haven't been very good
• 12:48
  Speaker 8: for the last couple of years since she became CEO,
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  Speaker 8: so there was sort of rumors, a bit of pressure
• 12:54
  Speaker 8: that she should go. But it's ironic that she has
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  Speaker 8: performed the other Spirit companies in Europe period, So I
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  Speaker 8: think it just shows you have to show something to
• 13:05
  Speaker 8: shareholders not to sort of have rumblings of discontent in
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  Speaker 8: the background.
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  Speaker 6: So how long has she been there? And then who's
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  Speaker 6: stepping in for now?
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  Speaker 8: Well, at the moment, well, she's been there two years
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  Speaker 8: a CEO, and she was she was sort of going
• 13:20
  Speaker 8: to take over from the previous CEO, and she'd been
• 13:25
  Speaker 8: there about six to nine months before that to sort
• 13:27
  Speaker 8: of get to know the business. Tempory CEO is going
• 13:30
  Speaker 8: to be Nick Jingyangi through the CFO. He's only been
• 13:33
  Speaker 8: there nine months, so that's quite clear. They now have
• 13:36
  Speaker 8: to go out and get the right CEO to take
• 13:38
  Speaker 8: them to the next phase, which essentially is getting through
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  Speaker 8: tariffs and now that they've got rid of the excess
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  Speaker 8: inventory in most of the countries around the world, actually
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  Speaker 8: driving organic growth again.
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  Speaker 2: All right, looking at the stock over the last five
• 13:53
  Speaker 2: years on a compounded annual basis, the agio down per
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  Speaker 2: year and when you put against the foot sea up
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  Speaker 2: almost eleven percent a year.
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  Speaker 3: You see the real underperformance there.
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  Speaker 2: But if you just look at a relative to the
• 14:05
  Speaker 2: foot Sea All Share Beverages index, that's down more than
• 14:10
  Speaker 2: two percent, So it's not that bad relative to the industry,
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  Speaker 2: but it's a tough industry. Duncan aredner growth drivers for
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  Speaker 2: the Spirit's business.
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  Speaker 8: Long term. Yeah, So in the short term you had
• 14:23
  Speaker 8: obviously the excesses after COVID where shutdowns of cup clubs
• 14:27
  Speaker 8: and bars really hurt, so they had a nice benefit
• 14:31
  Speaker 8: when everybody restocked. Then interest rates went up inflation that
• 14:36
  Speaker 8: really killed people going out, and that's really the problems
• 14:39
  Speaker 8: they've had to get over. And subsequently you had tariff
• 14:42
  Speaker 8: in China thirty nine percent of not actually affecting Diazure,
• 14:47
  Speaker 8: but obviously President Trump, which I heard talking about just earlier.
• 14:53
  Speaker 8: I could not tell you what European taris. We know
• 14:55
  Speaker 8: the UK will be ten percent, so it's good for
• 14:57
  Speaker 8: Scotch but I have no idea it's going to be
• 15:00
  Speaker 8: for anything else that they've got within their portfolio. So
• 15:03
  Speaker 8: you know, this is the problem. It's very difficult to
• 15:05
  Speaker 8: pin down your earnings estimates and they've obviously been falling
• 15:09
  Speaker 8: for about eighteen months two years now to really say
• 15:12
  Speaker 8: that the recovery is coming, because we just don't know
• 15:15
  Speaker 8: whether it's going to be two hundred percent, which was
• 15:18
  Speaker 8: rumored at some point after April, or it could go
• 15:21
  Speaker 8: down to ten. It really is up in the air
• 15:24
  Speaker 8: of the moment, and that's the problem for the whole
• 15:25
  Speaker 8: spirits industry. I'm afraid.
• 15:27
  Speaker 6: Yeah, now, duncan you mentioned tariffs. But also there's a
• 15:30
  Speaker 6: lot of stories we were talking about about people drinking less.
• 15:33
  Speaker 6: I mean, does that play into this as well?
• 15:35
  Speaker 5: Please, except for Paul.
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  Speaker 8: Well, well done for we needed to drink a lot more,
• 15:41
  Speaker 8: by the way. There's a couple of issues that I mean,
• 15:45
  Speaker 8: it's true that the gen Z's have at some point
• 15:48
  Speaker 8: we're sort of abstaining a little bit from alcohol, and
• 15:51
  Speaker 8: I think people took that a little bit too fast,
• 15:54
  Speaker 8: assuming that people were going to switch to cannabis based
• 15:57
  Speaker 8: beverages or something else. But what is happening, is what's
• 16:02
  Speaker 8: happened for the last twenty years, is that people are
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  Speaker 8: drinking less, but they're drinking better. So that actually plays
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  Speaker 8: into the spirit's portfolio better than probably beer beer, to
• 16:11
  Speaker 8: be honest, because you know you'll probably have an expensive cocktail,
• 16:15
  Speaker 8: we'll shut out with friends rather than four or five beers.
• 16:19
  Speaker 8: So it's the way they set the strategy up. Every
• 16:23
  Speaker 8: company our follow has that as their strategy. They push
• 16:25
  Speaker 8: you towards the premium brands. But to do that you
• 16:28
  Speaker 8: need inflation to be tamed, and that is still not
• 16:32
  Speaker 8: a guarantee, just as we sit here today, as we
• 16:34
  Speaker 8: saw from US and UK inflation today US yes, and
• 16:38
  Speaker 8: in the UK today. So yeah, there's still question marks
• 16:43
  Speaker 8: over when the volume and the mixed sales growth will
• 16:46
  Speaker 8: return in the spirits industry.
• 16:48
  Speaker 5: Well, we'll pay close attention to that.
• 16:50
  Speaker 3: I can guarantee you that.
• 16:52
  Speaker 2: Duncan Fox Senior Consumer Staples and Nanos were Bloomberg Intelligence
• 16:55
  Speaker 2: just breaking down what we're seeing in the global spirits business,
• 16:58
  Speaker 2: had some turnover senior management at the and just kind
• 17:02
  Speaker 2: of get into lowdown on that side of the consumer.
• 17:04
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• 17:20
  Speaker 2: It's kind of the commercial banks we've been talking to
• 17:22
  Speaker 2: Allison Williams of Bloomberg Intelligence. The past couple of days
• 17:25
  Speaker 2: on the big money center banks, the big global investment banks.
• 17:28
  Speaker 2: Now it's time to focus on the regional banks. And
• 17:31
  Speaker 2: what I learned during a regional bank crisis a few
• 17:34
  Speaker 2: years ago is the United States has about five thousand
• 17:37
  Speaker 2: regional and community banks around the country.
• 17:39
  Speaker 3: I had no idea it was that money that many.
• 17:43
  Speaker 2: I don't think Herman Chan follows all of them, but
• 17:45
  Speaker 2: he follows a lot of them. Herman Chan, Bloomberg Intelligence
• 17:47
  Speaker 2: senior analysy covers the US regional banks. What are you
• 17:50
  Speaker 2: expecting nath to hear from your banks this quarter? How
• 17:53
  Speaker 2: is their business right?
• 17:54
  Speaker 10: So earning season's kicked off today for a number of
• 17:57
  Speaker 10: region halls, and what we've seen as just a resilient economy.
• 18:03
  Speaker 10: Credit quality was really stable. A lot of the banks
• 18:06
  Speaker 10: reduce their bad debt provisioning, so provisioning for credit losses,
• 18:12
  Speaker 10: and that just shows that you're not seeing charge offs
• 18:16
  Speaker 10: really rise from here. Consumers are active in spending, and
• 18:21
  Speaker 10: commercial barroers are really transacting. They're preparing for terrorists, and
• 18:26
  Speaker 10: you've seen an increased in lending activity because of that.
• 18:30
  Speaker 6: Now, when we look at local banks. I look at
• 18:32
  Speaker 6: my local bank and sometimes it seems like more of
• 18:34
  Speaker 6: a billboard.
• 18:35
  Speaker 7: I don't see it as so busy.
• 18:38
  Speaker 6: I mean talk about the trend of how these local
• 18:41
  Speaker 6: branches are changing. I mean some are cafes.
• 18:44
  Speaker 7: Even right right. Yeah.
• 18:47
  Speaker 10: Banks view their branches as a marketing ploy and really
• 18:52
  Speaker 10: to help support their customers. One thing that they're doing
• 18:56
  Speaker 10: is they're reducing the real estate footage within these branches,
• 19:01
  Speaker 10: so that's helping reduce costs. But a lot of the
• 19:04
  Speaker 10: regionals that I cover are really expanding as well. They're
• 19:07
  Speaker 10: growing in new markets, particularly where the growth is right.
• 19:10
  Speaker 10: So I cover a number of Midwest banks like PNC
• 19:13
  Speaker 10: and Huntington, and they're growing in the higher growth areas
• 19:17
  Speaker 10: in the sun belt areas. So that's something that we
• 19:19
  Speaker 10: see ongoing and just changing the mix of the demographic
• 19:24
  Speaker 10: growth for that company's How.
• 19:27
  Speaker 2: Did the regional banks compete with private credit? A lot
• 19:31
  Speaker 2: of the private credit funds that we talked to, at
• 19:34
  Speaker 2: least at the beginning, they started out targeting the mid market, right,
• 19:37
  Speaker 2: middle sized market companies, not like the big multikajillion dollar reels.
• 19:42
  Speaker 2: But that's right where those regional banks like to play, right,
• 19:46
  Speaker 2: how's that dynamic competitor that dynamic work.
• 19:48
  Speaker 7: Yeah, it's been interesting.
• 19:50
  Speaker 10: I would say that for a lot of the regionals,
• 19:54
  Speaker 10: there's not a lot of direct competition quite yet. I
• 19:58
  Speaker 10: would say the private credit folks are are catering to
• 20:01
  Speaker 10: a more riskier company. So, for example, we've taken a
• 20:06
  Speaker 10: look at this a little bit. Where the private credit
• 20:08
  Speaker 10: companies are you're talking about loan yields north of ten percent,
• 20:13
  Speaker 10: whereas the traditional middle markets bank borrower is much more stable,
• 20:20
  Speaker 10: so we're talking about six eight percent yields. So it's
• 20:24
  Speaker 10: a different company, but we do see private credit really
• 20:28
  Speaker 10: will continue to encroach over time.
• 20:30
  Speaker 6: So you talked about some of the risks, some of
• 20:32
  Speaker 6: the challenge that regional banks are facing. What are some
• 20:34
  Speaker 6: of the things that they can kind of look forward to.
• 20:37
  Speaker 7: Yeah, Really, what a lot of the regional.
• 20:41
  Speaker 10: Banks have talked about thus far in the second quarter
• 20:43
  Speaker 10: earnings is there's some pent up demand in lending and
• 20:47
  Speaker 10: that's been positive. Their customers are preparing for tariffs and
• 20:53
  Speaker 10: really increasing their line utilization, which is helping commercial and
• 20:58
  Speaker 10: industrial lending. And they've been really saying when about the
• 21:02
  Speaker 10: risk of terrace and we haven't seen really the credit
• 21:05
  Speaker 10: quality deterioration that folks may have anticipated in April after
• 21:10
  Speaker 10: Liberation Day.
• 21:12
  Speaker 2: Credit quality, specifically commercial real estate. There was concern that
• 21:16
  Speaker 2: if there was going to be a problem in our
• 21:19
  Speaker 2: financial system from some falling particularly office real estate that
• 21:23
  Speaker 2: we've seen in the middle sized regional banks.
• 21:26
  Speaker 10: Have we seen that, Yeah, I would say that's an
• 21:29
  Speaker 10: ongoing issue. We've seen losses continue, but they're manageable.
• 21:35
  Speaker 7: Office commercial real estate.
• 21:37
  Speaker 10: On average, for the companies that I cover in the
• 21:40
  Speaker 10: large regional bank space, it's about two percent of their
• 21:42
  Speaker 10: total loan portfolio, So it's manageable. P ANDZ just talked
• 21:46
  Speaker 10: about this earlier, just a few moments ago on their
• 21:49
  Speaker 10: earning scar and they said that charge offs could rise
• 21:52
  Speaker 10: in future quarters because of deterioration and commercial real estate,
• 21:56
  Speaker 10: but they're already fully reserved for that and they prepared
• 21:58
  Speaker 10: for that eventuality.
• 22:00
  Speaker 8: Now.
• 22:01
  Speaker 6: I cover a lot of different conferences here at Bloomberg,
• 22:03
  Speaker 6: and one of them is with banks and AI. So
• 22:07
  Speaker 6: how to regional banks because they're not as big as
• 22:10
  Speaker 6: the you know, the big bank. So where do they
• 22:12
  Speaker 6: stand as far as AI and how much money they
• 22:14
  Speaker 6: put into.
• 22:15
  Speaker 10: Yeah, I view AI as a tool for the regional
• 22:18
  Speaker 10: banks to continue to reduce their expenses, so it should
• 22:24
  Speaker 10: help them in ways like reducing their the employees in
• 22:28
  Speaker 10: the cost center is one where regional banks use chat
• 22:32
  Speaker 10: bots and AI power chat bots to really help their
• 22:35
  Speaker 10: customer base with in a more efficient manner and things
• 22:39
  Speaker 10: that are more you know, human intensive. It could help
• 22:44
  Speaker 10: reduce some of and streamline operations. Right now, it's more
• 22:49
  Speaker 10: feeling it out. I don't think a lot of the
• 22:52
  Speaker 10: regional banks have really jumped full board, but they are
• 22:54
  Speaker 10: exploring ways to reduce costs over time.
• 22:57
  Speaker 3: All right, Hermi Chan, thank you so much. We appreciate that.
• 22:59
  Speaker 5: Hermie.
• 23:00
  Speaker 2: Senior analysts for US regional banks for Bloomberg Intelligence, join
• 23:04
  Speaker 2: us live here on our Bloomberg Interactive Broker studio.
• 23:06
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