Mensah: Some Absorption of Tariff Costs

Bloomberg

10-07-2025

CC-Transcript
00:00What is top of mind, first of all, before we get onto tariffs and macro policy? What is top of mind at the breakthrough dialogue at a time when we're looking at in video at a $4 trillion market cap, we're talking about the talent wars around what is top of mind right now when it comes to tech and the kind of conversations that people are having right now. Thanks, Tom, and good to see you again. I would say that we're trying to make sure it's not all about air high, but I'd say top of mind are all the ramifications around a similar thing. When we did our first summit four years ago, we were on 82.0. Often people forget that was in the summer of 2022. In the November we came out with the generalized release, which cheap, which was basically 3.5. So the evolution of air has been huge. We've moved into areas like a gen take, we've moved into, you know, content engineering versus, you know, prompt engineering and think about all this other ramifications. So I think a lot of people are thinking, where is that story? Where's that had one of the pinch points is it computes as a data. What kinds of data? I think beyond that as well, we're trying to see or there's a lot of interest in how is AI morphing into other areas, synthetic biology in the medtech space? What does that mean? You know, in material sciences is a feed feeding back onto itself. And one of the great things we have is we have a mix of people to be able to debate these. And Bank of America and other banks, of course, are leaning into it. Where are you seeing, Bernie, efficiency gains as you implement some of these solutions across the bank? Well, so we've been on the air journey for a while. What a lot of people are talking about right now is generative AI. So in the air space we've been along, then we've been leaning into that. You know, we have Erica, we have 2 to 3 billion, you know, contact points from our 70 million or so domestic clients in the US that are using our in our retail space, on the generative space we've been leaning and trying to really think through our work processes, think through how we use data, trying to get efficiencies around the place. I was talking to us on the West Coast about a month ago now, so it's a very senior tech leader and he was surprised that the small number of people that we use in our contact centers to support our incredible retail space. So we've we've really made a lot of progress there. And as we look at jobs being reshaped and the question mark, the questions as to whether or not jobs get replaced or enhanced, you know, is it at the back office? Is it the customer service where you see job displacement as a result of some of these? I don't not necessarily. I think that was the point I was trying to make, which is that perhaps some in some of the context census and back office, traditional air, if I may call it that, has really had a lot of innovation, like I said it in trade and we had 23 folks, traders, you'd have three or four effect traders not trading ten times the volume. So that has happened. I think the interesting regenerative air is that it's so creative, so transformational that we all need to step back and rethink how we do things. We have to throw the old orthodoxies away. And so that's the process of working through. So I think every firm has a few specific areas, you know, with with junior bankers, with some of our operations areas. Absolutely. But the idea is to retake some of these proof of concepts and see if you can get better compliance, whether you can get better, you know, trading metrics, better analytics to help you. Do you think longer term, though, you will need fewer junior bankers? Unclear, because I think that, you know, when I look at my knowledge, perhaps might be in the trader space, you might need fewer effects spot traders, but you have a few more effects options traders, you have a few more structured fixed traders, you have more time to talk to corporates about their asset liability management as you have some of the macro gains that are taking place. So the junior bankers might not be creating pitch books in the way that they were, but perhaps they might be, you know, analyzing industry trends a lot better, you know, perhaps feeding in other data that hadn't been accessible before and seeing how we can use that to help our corporate clients on the macro front. A reminder this morning in terms of the tariff volatility has threatened 50% on Brazil, 50% on copper. Yet markets, global markets, global stocks are close to record highs. Yeah. Is that rational to you or is that complacency in these markets? I think we thought we say the markets are always rational at some level. At some point in time. I think that the markets are pricing in. There's so much more information now versus early April. And I think what the markets are saying is, look, we have a lot of information that might come in on specific tariffs. You mentioned the ones that came through last night. But looking through that, you know, where do we see value or where do we see opportunity? So in very specific sectoral areas and specific companies, I think people see value there. I think in other areas of value has diminished. Absolutely. So the headline numbers may be where they are, but I think what we need to look through it, say where in tech is doing or where in the supply chain. I think my thanks, I'll be doing So In your conversation with corporate clients, what are they telling you in terms of where the cost of tariffs lands? Is it squeezed margins or they passing the cost on to the consumer? It's interesting because also you're trying to look at an inflation data and saying it's not going to hit. When is it going to hit? Right. So a lot of economists projections on is there a recession? A lot of that has diminished in our fund manager survey. The confidence in terms of I would say the US economy in the broader economy is much better. Two or three months ago, I think from a corporate space they would. But my sense is that there is some absorption of the costs there. Be really interesting to see as we get through Q2 what ending results are like. So there's been some sense that there's some absorption of the cost, but there's also real efficiency gains or some restocking coming up in March. And one or two have sort of said, well, we had a four or five month, maybe three or four month horizon in terms of where terrorists might settle down. Then we know what to do. We're in that zone now with sort of three or four months in. I think if there were further volatility around that time, some things might be back in the troika and as a US bank. But with your global purview, the time you spend internationally, we've heard from some banks. So they're getting they're losing out on bond deals, for example, to domestic banks because those clients don't necessarily want to deal with US banks as much. Are you saying that at all you're losing out on any bond deals a result as a result of that? So I haven't and I have been asked that a couple of times, think there's been nothing that has hit my my radar. We have to be out there all the time. And I think our proposition, which is trying to be close to clients and provide that value remains and I think there's very few of us that are scared that can do that across the globe. So as we are in the as we're in the C-suite, in the Treasury offices, in the fine, in the in the CFOs office, I really haven't seen that before. We let you go on the Fed. I was speaking to the UPS O'Connor CIO yesterday. He said markets are underestimating the risks to Fed independence in 2026. Do you agree? I'm not sure if they're underestimating it. I think that if you look at the forward prices in the markets, there's some the market, surprisingly, they think rates would be next year. I think in that price signal is some sense of what they think the Fed's reaction function will be next year. I think for all of what we hear, the market data will be what it is. You know, I think that ten year rates where they are reflects a reasonable assumption as to what growth rates will be. So independence or not, I think there'll be a range of you know, there'll be a sort of a range of activity or, you know, a range of outcomes that I think the Fed will look to work. 20 minutes. Thank you very much indeed.