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Listen: Street Talk | Episode 117: Banks face slow-cession, credit slippage as PE waits in the wings

Many bank boards are stuck as they face investor scrutiny and wait for slippage in credit quality, but experts at Raymond James’ inaugural whole loan conference noted that private equity firms are waiting to infuse capital into institutions so they can play offense in the future.

In the episode, John Toohig, head of whole loan trading at Raymond James and host of the firm’s recent conference, discussed the outlook that speakers shared for the economy and the credit quality of mortgages, credit cards and commercial real estate. Toohig also shared how depositories and their boards are reacting to the higher for longer rate environment, the current gap between buyers and sellers in the secondary loan market, and investor appetite to support bank M&A and loss trades in institutions’ bond and loan portfolios.

Banks face slow-cession, credit slippage as private equity waits in the wings

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Unknown Attendee

Welcome to Street Talk, S&P Global Market Intelligence podcast that offers listeners a deep dive into issues facing financial institutions and the investment community.

Nathan Stovall

I'm Nathan Stovall. And on this episode, we're talking about the outlook for the economy, the mortgage market, the commercial real estate market and credit quality broadly and what that means for bank performance and strategies going forward.

Those topics and more were covered in detail during panel discussions at the inaugural Raymond James Whole Loan Conference in Nashville. I was lucky enough to be in attendance and among the presenters. And I've asked the host of the event, John Toohig, the Head of Whole Loan Trading at Ray J, to come on the show and talk about the many great takeaways from the conference. John, thanks for coming on the show.

John Toohig

Well, Nate, I have to say thank you to you. I'm a huge fan of you. I'm a bit of a fan girl as it comes to that. I'm a huge fan of your podcast. So to get -- to be invited is a real honor for me also. I know a lot of our clients love your content as well.

So was glad to have you for the presentation and really thought you brought some great wisdom to the discussion. I've already heard tremendous feedback from clients on how your panel went and others. And so I'm excited to decompress after a couple of days with you on all of the discussions that went around lending and banking and it was -- I thought it was a great time.

Nathan Stovall

For sure, definitely a great time and lots of terrific content and takeaways about what is going to happen to our space. Before we get into that, though, it probably makes sense to sort of lay out how you guys set up the event. What was the event? Who was there? What was sort of the structure of it?

John Toohig

Well, we put a lot of thought into it. And don't laugh, this was supposed to have happened on September of 2020. Ha, right? So we had started the planning process in late 2019, early 2020 and we were ready to kind of go loud with it on paper, looking at the calendar kind of March, April, May of 2020. And obviously, the pandemic hit and so this had been talked about for quite a while as we were trying to kind of pull it all together.

But the goal was to kind of hit -- looking at the depositor's balance sheet, and I'm not talking about Goldman Sachs or Bank of America, I'm talking about regionals, talking about even community depositors, maybe large-sized regionals, but $75 billion in assets in town is really kind of the folks that we were looking for. And we wanted to hit anything that might be on the balance sheet and not the bond of the day, but more on loans.

So mortgages were a heavy piece. Automobile lending was a heavy piece. Commercial real estate, obviously, one of the hot topics in lending right now and what's going to happen there was a heavy piece. Fintech lending has been hot, so we had some real specialists there. And kind of the consumer, unsecured space, credit cards, also a real focus.

I mean so that's kind of the asset side of the conversation. And we brought in a few folks like yourself; Bill Sammon, more on our investment banking side. I'm looking at it more how an investor might look at your balance sheet and what might make you attractive candidate for future investment or for M&A.

So it was a hope the takeaway from a lot of our customers was good information about the assets they own, good information about what they may need to do to position themselves to go on offense in '24 and a thoughtful approach to managing certain assets that might be a problem for them, maybe, say, in the commercial real estate sector or maybe in the lower credit, unsecured consumer sector.

Nathan Stovall

Sure. And kick things off with kind of a level setting of where the economic landscape was, great presentation from Cris deRitis, Deputy Chief Economist at Moody's Analytics. And I felt like he kind of put as recession or no recession and then dove into it. What was your takeaway there? Do you think that he sees one coming? The other piece that really stuck out to me was sort of the potential threats to the downside he talked about. But what was your sort of takeaway from Cris?

John Toohig

Cris and I have formed a really good relationship over the pandemic. And if you can remember how we went, almost everything webinar because we couldn't do things in person. And so we formed a really nice open dialogue with him and Mark Zandi as well. Cris is the Deputy Chief Economist, Mark is the head guy.

And they're very easy to talk to, first of all. They're very conversational in their approach. They don't just get up there and read a lot of numbers to you. They can really kind of communicate the guts of it. And I've got to give both Cris and Mark a little bit of credit in that they've been contrarians throughout most of this.

They have said that the economy is going to hold up, it's going to be better than you expected, the consumer is going to remain strong. They've got a host of savings, their bank accounts are full and plush. And we're a consumer-driven economy and a consumer spending-driven economy. And so long as the consumer keeps spending, everything is going to be rosy.

So when Cris got up onstage and he started mentioning what he has coined -- and sometimes people give Mark the credit for it, but Cris was the one that mentioned maybe a slow cession, not a recession. Seeing a gradual slowing of spending, a gradual weakening of wage growth, a gradual weakening of employment, but not a sledgehammer.

And maybe not even a soft landing, maybe a no landing, not a hard landing, really buoyed by whatever number you want to use, the $5 trillion dumped on us with a $10 trillion worth of different programs that are out there that might buoy the economy.

So Moody's has been maybe a little bit more rose-colored glasses, a little more glass half full in their outlook as opposed to those -- and everybody is out there that's the doomsayer that's saying that the recession, the most forecasted recession than ever, is coming and it's coming like right now, all of those folks that were making that statement that we would be in a recession in June, July, August, September of '23 have been just proved wrong and that the consumer has remained resilient.

And we may not see something until this time next year for the first rate cut. So I think, if anything, from Cris, it was a more optimistic look. I think it was a thoughtful look at some of the big pieces of data that are wages, that are jobs, that are consumer spending, that are slowing but not plummeting. I think that would be my takeaway from his chat.

Nathan Stovall

Yes. And I talked to him beforehand and we were having a similar conversation about what he was thinking about. And he pointed out, isn't it remarkable that you have the bank runs we did in March and the second, third, fourth largest failure ever, and we're just sort of kind of truck in a wall. You never would have predicted that. The market certainly wasn't there. It really does show how much momentum I feel like the consumer had or -- and maybe it was because of stimulus and a lot of reasons that you said, but it really is pretty remarkable when you think about that.

John Toohig

And I hope this is okay that I can give them a plug, but both Mark Zandi and Cris deRitis have a podcast on Moody's Talks called Inside Economics. I've visited it before. It has some good conversations. A lot like your content, really, to be honest. It's about banking, about lending and they talk about things that we're really chatting about here.

Nathan Stovall

And one of the other things he mentioned that I thought was interesting, too, and I brought this up when I spoke is when he was taking apart the inflation pieces and looking at what's driving it, service piece has been kind of sticky and he pointed out on sort of one of his threats to the downside, but he saw it as small and manageable.

And I got a question from the audience was, student loan debt repayments coming back on for, I think, he said 24 million Americans that are around $300, $350 a month and that's a headwind. But I kind of made the case and I said this to him and he said, possibly that might help do some of the Fed's work for it. So it kind of keeps us, yes, higher for longer, possibly, but not much higher than where we are today.

John Toohig

Thank God.

Nathan Stovall

Right. Right.

John Toohig


Nathan Stovall

And I think everybody in that room wants it that way, for sure.

John Toohig

His 3 takeaways say, all right, okay, I've presented a half glass full kind of approach. And I get it, not half the room is probably looking for the half glass empty and his thought was, okay, consumers are anxious.

We keep hearing -- we keep reading about this recession and is it a self-fulfilling prophecy that if we talk about it enough, eventually we'll tighten up and it will happen. But if the consumer does falter, that was one of his things. So you've got to focus on that, you've got to watch the consumer. If that spending does truly slow, you've got a problem.

And then two, wages and jobs, which are somewhat hand-in-hand, is that if layoffs come, they come in droves. They don't often come in drips and drabs. And so if you see massive layoffs start to happen or a significant move in the unemployment rate, and I think his forecast was a move sometime late next year, even in '25, around the 4.25%, 4.5%, which is not that big -- some might even call that full employment unlike where we're just at historic full employment right now, is where you should maybe start to focus on if you're kind of looking for if you are a naysayer and you're wanting to find some bad, those are places you might want to start to monitor.

Nathan Stovall

Let's pivot to the next session, which was really focused on mortgage. And you had a great panel there, representatives from the MBA, Fannie and Freddie and your own Steve Moss, great bank analyst, who I've known a long time.

And I thought the outlook there was pretty darn positive when you think about it from a credit standpoint in that the outlook for housing was very strong and that housing remains resilient because of lack of supply. But then on the flip side, it kind of depends on how you're looking at it, you guys quite rightly spent a lot of time talking about, okay, what does it look like for the origination environment, the amount of new paper that can sort of hit the market.

What was the outlook really for both? Do you agree, one, that it was pretty positive in terms of resiliency? But then on the flip side, that maybe we need rates to come down to really see more origination activity?

John Toohig

Well, we got originators in the room, so you've got to know who your audience is, right? To your point, credit -- the theme on credit was that it's probably as good as it's ever been. Mortgage was the villain in 2008. It's what brought everything down. And we never really got back to the building and the oversupply of housing and the too-many units and getting out of balance from supply and demand, which kind of led us into the property value crunch, and then ultimately, the subprime crisis and then brought us all down to our knees.

So the builders never came back. And as such, if you look at the mortgage market, it's probably as clean as it's ever been from an underwriting standpoint. There's just not really much to talk about if you look at all the different consumer lending products out there in autos, in unsecured, in credit cards, in personal loans, in mortgages. Mortgage seems to be the winner from a delinquency and a charge-off standpoint right now. There's tremendous equity in housing.

And so I think Moss said on the credit side, bullet proves too strong of a word, but it's a leader, if you will, in safety from a true raw credit default standpoint. Again, back to my comment that there's a bunch of folks out there in the room that are loan officers and originators and they want to hear that we're getting back to a $4 trillion a year mortgage origination market.

And I thought Hamilton Fout from Fannie Mae did a good job; Len Kiefer from Freddie Mac, who's a must-follow on LinkedIn, by the way; Mike Fratantoni from Mortgage Banker Association, all fairly lockstep in their forecast of somewhere around $1.5 trillion to $1.7 trillion in originations for the foreseeable future, largely dominated by purchase-money. Refi is flat on its face, dead, right now.

And trying to remember that over the last 20 years, a $2 trillion origination average is the norm. Two years of 2020 and 2021 of $3 trillion to $4 trillion in originations was an aberration of policy and ultra-low rates and the quick return of refis and almost refi-ing your originations from the year before.

So it's interesting to see those folks in the origination market try to find other products. We talked about non-QM lending, bank statement/asset depletion lending. You can argue that's a step down in credit, but it's very equity-based lending. The loan-to-values on those loans are in the 50% context and the FICOs are pretty good. You just don't have perfect clarity into what their cash flows, their income is.

HELOCs have been really a shining star in mortgage kind of orbiting the market, and there's a lot of trapped equity in the housing market. How can we get that equity out? You don't necessarily want to do a cash-out refi at 7% today, you'd rather just take a smaller balance HELOC loan. So a lot of talks about how there are other products out there absent just 30-year fixed rates at 7%, 7.5% today that might drive product outside of the mortgage market.

Nathan Stovall

And I definitely talk for the number of bankers who were having that discussion, trying to figure out another way to sort of have growth. I was a little steering them away, should you even be kind of growing right now, but that was a conversation that came up a number of different times.

And the place that they were sure that they work, they want to load the [ bullet ] up anymore was more in CRE where they said that there was lots of opportunity there. That was the next panel, and I thought the panel did an awesome job of really giving a big overview of all the different things that are in the CRE market, and of course, focused a lot on office.

You had a couple of your colleagues with Raymond James on the panel, the MBA represented; Victor from Manulife, the buy-side represented there. To me, one of the things that I think stuck out most was that they thought this was going to take a while to play out. There's been plenty written on this topic. Plenty of talk about fears in office, and we've even seen some [ loss ] content pop up.

We just had another bank yesterday write something off at 50 cents on the dollar, notion first. What stuck out to you? I mean, the timing piece, did you think that was pretty interesting that they were talking about that this isn't just going to be this binary event? It's suddenly we're just going to see this show up?

John Toohig

I think, again, the naysayers, those with that half glass full kind of approach, they want to see the world burn, right? And they see fresh tinder in the commercial real estate where they're ready to see that just explosion happen. And could it be a 2008 mortgage-like event but applied to the commercial real estate world?

Now you're going to have your jingle mail when someone just hands you the keys because they know they're never going to make their money back on the property because you made a dumb loan. But we felt that in the pandemic as well, right, if you can remind your brain to June of 2020 when we all thought it was coming to an end and the agencies were quick to say -- NCUA, FDIC, OCC were quick to say, give grace, be patient, work with your borrowers, listen, stay in touch, work with them.

You, here, even recently have those 3 regulators release another newsletter saying that, again, give grace, listen, work with your borrowers, we're not going to come with the hammer on you. So to your point, Nate, I think what we've seen so far have been the strategic sellers. Those that are trying to make their first loss their best loss and move on and clean the balance sheet up and communicate out to the market that I don't have an office exposure that's a problem anymore.

I fixed that issue. And yes, it hurt. It was 50 cents on the dollar, but I'm ready. I'm moving forward and I can play offense and I'm off that. Extend and pretend, I think, is the word of the day on that. A lot of -- it's real though. There's a lot of maturity defaults. We talked a lot about the debt wall that's coming, the number of loans that are either in CMBS that are coming due or in whole loan form that are coming due.

And those loans can't pay, can't make the payment to the step up today at a current cap rate or a current debt yield. And -- but they can keep paying yesterday's rate. And so they will continue the cash flow. That's the good news. But the cash flow has not stopped, it's just not the cash flow today that where a new issue, new origination current market cap rate might need to be.

And so the question, I think, is how long are we going to be higher for longer? And if we are higher for longer for years as opposed to we're almost to the end of this, cuts are coming. Over time, you'll start to feel the strategic sellers having been the winner, but eventually those that are forced to sell, that gun gets ever closer to their head. And we just haven't seen credit truly break yet. That's, I think, the part that everybody was trying to figure out is when might that happen.

There's a lot of money on the sidelines. Victor Calanog, I thought, from Manulife did a great job and formerly from Moody's Analytics. And he was quick to quip with, show me an offer. I've got money, I'm ready to spend, but he's going to be opportunistic in his purchases. And the gap on the bid versus the ask -- pretty much any asset, whether it be office, which is the obvious target, but even multifamily, even industrial, even retail, even hospitality, even self-storage, there's a pretty wide gap between where a seller owns it and might be willing to sell it as opposed to where a buyer opportunistically feels that they want the right yield to make the math work.

So that, I think my biggest takeaway from commercial was that we still have a -- we're frozen, I think is the right feel for it. But we're not making really truly any progress to close that gap. There are the strategic sellers, but it's not en masse.

I think it's all being discussed at the Board level. Anybody would love to sell if they could get something close to par or maybe in the high 90s kind of dollar price where the bid is maybe more in the 70s and 80s depending upon the asset and the location. And that gap has got to close, I think, before you see anything really shake loose in the commercial real estate market so long as credit doesn't break.

Nathan Stovall

Right. And that was my takeaway as well. And I love that you went back to '08, in particular, because it is the 15th year anniversary of Lehman's fall today, the day we are recording this.

John Toohig

I didn't know that. Thank you for sharing that a little bit of negative knowledge, that's fantastic.

Nathan Stovall

But I happen to agree with you, and my takeaway from them was that maybe what drives that gap closer, it is just time between, one, getting more comfort over where the economy is; two, getting more comfort over what [ loss ] content looks like; and three, that maturity wall getting closer.

John Toohig

Yes. Nate, one of the other things we didn't mention was the lack of valuations. Since nothing is trading, you see all of the data coming out, which implies cap rates are going up. But when you have 70% fewer transactions in the commercial real estate market, that data is, one, thin; and two, late.

It's a lagging indicator right now. Until we get back to a more normal unfrozen market, LTVs, they don't really mean anything. It's all about cash flow right now in the market. Can it support the debt at whatever level you're trying to have it support it? And if so, that, I think, is going to be something that comes into the data in Q3, Q4, into '24, into '25.

And I think we'll find right now that most of that data is wrong. And not because it's wrong because someone is trying to misrepresent it, it's just because there's not enough of it. It's the absence of the valuations and the trading that's kind of creating that gap in the bid and the ask spread.

Nathan Stovall

Right. And Victor even talked about, too, you mentioned quite rightly, we're seeing strategic sellers, but he talked about how a lot of what we've seen in terms of just even markdowns, write-downs and charge-offs from some of the bigger guys. We've got 3 or 4 other businesses outside of being lenders. I don't mean outside of commercial real estate lending, who -- so for them, it's a much smaller piece of their book. So it's not necessarily representative of what everybody else can do and will do, one.

And two, they also own different kind of properties. It's not the same. That might have been you who made that point. We're not talking about loans to doctors' offices and dentists in smaller markets. In a lot of cases, we're talking about big Class A office properties that we've seen move thus far. We haven't gotten down to what most community banks own.

John Toohig

Well, and they'd also wanted to point out very rightly, and it's been publicized a thousand times, that community banks do not own 70% to 80% of this risk. It's just not true. It's been publicized even as broadly in the Wall Street Journal here recently. When you look at that breakdown, that number is much, much lower, maybe in the 20% to 25% context.

And to your point, it is more everyday America. It's not the $80 million San Francisco office complex. It's the $1 million to $10 million loan. It's not the Empire State Building, right? So it's a different kind of bucket for community and regionals, which is not to say that does not have some risk associated with it. It is relationship-driven often.

And so I mean, just as we think about what we read, to be a true student of the commercial real estate market, to know there are winners and losers, location, location, location as they say in real estate is a really important and cash flow. Cash flow, cash flow, cash flow. That is what matters today in commercial real estate.

Nathan Stovall

Certainly. We also talked plenty about card and fintech and auto, but I want to jump to Bill Sammon's presentation, which I thought really, really interesting.

John Toohig

He's one of our best speakers. He's really strong. He's so good.

Nathan Stovall

And the thing that stuck out at me is how he started off in saying, talking about where the investment community is and how investors are skeptical and how it feels like nothing is happening. There's money on the sidelines being waited -- waiting. There was more [indiscernible] that at your bank conference a couple of weeks ago he said that they've ever seen, but they're waiting. They're waiting. They're waiting.

And it feels like nothing is happening. But then he said, when you go into a bank board room, it's chaos, which really, really stuck out to me. And what was he talking about there? Just why do you think he described it as chaos in terms of what's going on in bank boards.

John Toohig

And for the listeners who don't know his business, he makes a market in [ small ] bank stock, thinly traded institutions that are looking for liquidity in periods of volatility. And it's not Bank of America per se, right?

And so he's often described it, as I've listened to his calls with our customers, it's kind of like the duck on the pond, right? From the top down, the duck looks steady and not much going on. And when you look under the water, he's paddling like mad, right, trying to keep things going and stay above water.

And we're feeling that, too, in our calls in fixed income as we're analyzing portfolios. There's not a lot of people wanting to do anything because they don't like the execution or they don't like the math, but there's a lot of people wanting to figure out how do -- how could -- I'm going off.

It's one of his big drivers, one of those big kind of talking points was if you can position your balance sheet today so that you could go on offense so that when an event happens, if there's some opportunity that comes to you from the market and you know it's a good opportunity, you know it's cheap, that you have the ability to act because you've positioned your balance sheet right.

But right now, everybody feels stuck. They can't move. They've got a lot of underwater loans. They've got a lot of underwater bonds. They're starting to feel funding pressures and margin compression and everything goes along with climbing and higher for longer. How can they position themselves today?

Whether that is through M&A, which has obviously had a pretty rough go of it in the last 12 months and is almost at historic lows, but if they could identify a target and they can make the math work on how they could use that influx of cash to create confidence and drive the story forward and get past some of those things that are just kind of clinging to them and get out of being stuck, I think, was kind of the gist of his conversation.

Nathan Stovall

Agreed. And I'm looking back at my notes, one of the things that stuck out to me is him saying the opportunity cost of not taking action is going to be huge. And that he feels that boards are starting to recognize that. You mentioned underwater bond portfolios. He said there's lots of people talking about a restructuring trade. There's obviously a capital hit that comes with that.

But I was encouraged to hear him say that he had recently seen, I think, it was 4 or 5 PE funds raised pockets of $400 million to $500 million aimed at basically helping facilitate that trade or -- and I even spoke with him afterward, kind of trades like what we saw a Banc of California-PacWest.

John Toohig

I say PacWest was the one that came [ around ] as well. Yes. And I think that's what the market is going to need, is going to need creative bankers like that, that say, hey, let me you $400 million. We're going to sell x trillion dollars of deeply discounted underwater loans, and that's going to free up that anchor on the asset side of the conversation that's going to drag on earnings, and we just recognize it's a loser.

It probably doesn't have a credit problem to it if it's a -- particularly if it's a mortgage conversation around PacWest and others. But it's a below market coupon and we know that's a problem. The good news [ is it's ] going to perform. The bad news is just, I mean, can we price it right, to get to the yield that the current investors can look at.

So recapitalizing and taking advantage of an opportunity moving forward and presenting to investors that now am past that issue, and I'm ready to go forward into this new market that we find ourselves in.

Nathan Stovall

For sure. And he also mentioned how he was more encouraged, after coming out of your bank conference, than he had been in a long time. He gave the caveat of, I go home and cry every night because there's no activity. But I thought that was very interesting, though, that money is forming right there and that it could position banks to, first of all, best of all to be able to go on the offensive.

Because it does feel like, to me, and he kind of rhymed with what I put out there that, yes, earnings are going to be challenged and next year is going to be a little bit tougher, but there's a disconnect between where the market is, which is down 25% versus earnings being down about 10%. So if you're ahead of this and you're ready to go, there's a big opportunity on the other side of this.

John Toohig

That's what the market is telling us is we're not done yet, right? And there's something out there that's going to cause, but if you can be in a position to play offense. I actually scheduled you to one back to back for that reason, I thought you 2 might play very well off each other.

Your message, which I thought was wonderful in kind of the totality and the look at the liquidity of the banking sector compared to. So that looking at it maybe from the banker talking out and his conversation to us looking at it from the investor talking in. Your presentations, though, you all didn't talk beforehand, I thought rhymed with one other, I think, play -- it could have been a very interesting panel to have you and him kind of rifting off each other. I think that would have been an interesting discussion. Next time, hey. That's why -- we'll figure out what Round 2 looks like.

Nathan Stovall

Well, the one other thing he said, too, that I think sort of feeds in the transaction activity that stuck out to me, it wasn't so surprising, but that the evolving regulatory response that there is a lot of concern what is coming...

John Toohig

That's one of the unknowns. Yes, that's right.

Nathan Stovall

And it's something that we've heard, too, from policy experts that the regulators want to make sure that they don't have March again. And to me, that doesn't mean that everybody has a problem. That means I want to have my house in order, for sure. But it also might mean that if it is a little bit tough out there right now, as we know, and this isn't necessarily going to get any more fun real soon unless I take some real action, that I'm probably more encouraged to do something with somebody else and look to partner with somebody because I just don't want to deal with it.

John Toohig

That was the -- I mean, if there was a negative takeaway from his presentation and one of the reasons why investors might be on pause, one, was have we gotten through the credit crunch and I think that's an open question for those that are more on the naysayer side.

But two, was regulation. I mean, do you have to -- I mean, if you're a $100 billion institution or higher, do you have to raise 25% more capital right now? How does that look? What does that regulation kind of come out to? So it's -- there's -- not to say there aren't a few speed bumps along the road that are out there that, I think, haven't completely played out Fed policy as well.

It's obviously one of the things that we've talked about really throughout every panel on are we done raising rates, is there one more hike to come? When might that first cut be, so that kind of the road map is fully formed. But Bill would tell you that he's bullish on the market. I think he said that several times in his presentation, he is more of a half glass full kind of approach to this.

Nathan Stovall

And ultimately, in closing, I felt like that was the top-to-bottom takeaway for me. Whatever asset class we were talking about or whatever the topic was, nobody was saying there's not pain. Nobody was saying that there isn't there. But think about it relative to where we are, whether that was the expectation we're going to have this highly anticipated recession, we're going to have some sort of downturn in commercial real estate, whether we've got underwater loans because of where the yields are, yes, sure, right? But it's better than a lot of what people are assuming.

John Toohig

In January, we weren't having this conversation. In January, we were talking about the coming calamity that was just right around the corner, that the recession is here. I mean it's -- we just haven't felt it yet, but it's going to be one of those things.

The latter part of yesterday, towards the end where we started a little bit more on the consumer side, the fintech side, the credit card side; there was a little more negativity. The younger end of credit with student loan repayments coming back on, there's some worry there. The lower end of income, if inflation is persistent, that the lower credit and younger credit card buyers, owners might be more impacted.

Same thing with autos. Maybe on the auto side of the conversation, younger borrowers, lower credit borrowers, might start to feel the pinch on consumer. I don't remember which speaker it was. It might have been Cris, might have been KBRA that Eric or Brian from KBRA that mentioned that $300 average payment is going to come back online here soon and that's going to eat into consumer spending and that's going to slow down some of the talk track. But it was resoundingly positive, I think, with maybe the exception of a couple of spots in the lower end of credit on fintech and on auto and card.

Nathan Stovall

Well, I'll take positive. That's what I'll stick with and as well as the idea of let's work on playing offense and moving forward.

John Toohig

I think that's the right -- that was the right takeaway from me as well. As we get in towards the end of the year and a lot of times people do clean up their balance sheet before year-end, we probably expect to see more of those strategic sellers come to market this year. And I don't know that we see any of the forced sellers come to the market this year.

And so I'm sure those conversations kind of like we talked about a moment ago, the Board is kind of crazy and there's a lot of conversations talking through Bill. I think those conversations are being had if they can find the right asset, if they can find the right price that they're willing to move it so they can carry the narrative into '24 that they've cleaned things up and they're ready to move forward.

Nathan Stovall

Fantastic. I think that's a great place for us to leave it. John, thank you so much.

John Toohig

Really, thank you. It was great to meet you in person. I know we've talked so many times during the pandemic, but it was good to finally put a face to the voice. And thank you so much for the invitation today. I really enjoyed the time.

Nathan Stovall

My pleasure.

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