00:00Well, tell us about, you guys have a great vantage point. I love middle market. That is
00:04so much a part of our economy. Tell us what you're seeing and what you're, in terms of lending
00:10activity, business activity, concerns. How would you describe how middle markets kind of,
00:16or middle market businesses see the world right now? Well, it's a terrific business. And so when
00:20we talk about middle market companies, we cover US and Canadian based companies. We also cover
00:25their international subsidiaries around the world. And what is terrific about the middle
00:29market space? They're a real driver of the economy right now. They're driving growth,
00:34they're driving hiring, and they're driving innovation. And, you know, when we look at what
00:38that means for us at Bank of America, that's driving deposits, it's driving lending, and
00:43it's driving strategic activity. And most notably, M&A has been a big opportunity for our client
00:50base across the middle market space. And they're using M&A to grow, to manage supply chain, to
00:58bring costs down, and then also to expand globally.
01:00So what's driving the M&A? Is it, and we were talking private equity last week, and somebody
01:06who's in middle market private equity, and a big narrative there is that there are a lot
01:11of family businesses that the people, you know, maybe they're second generation or first generation
01:15businesses, and they don't have, their heirs do not want to continue to run the business. Is that
01:21driving M&A?
01:22That's part of it. You know, we see, when we talk about the...
01:25That was like the opportunity for private equity.
01:27Yeah. So for us, you know, when we look at the privately held companies that we cover,
01:32a lot of them now are run by third, fourth, or fifth generation. So they have had succession
01:37planning that has worked well. You know, it's not to say that there are companies that don't have
01:43that opportunity, and so they do look to sell. But it's not that binary. You know, some of our
01:47clients that, you know, would like to have a liquidity event. They want to take, you know,
01:51some of the valuation off the table. And so they might sell a portion of the company,
01:56but not the whole thing. They continue to run the company. Some companies are looking at M&A. They
02:01want to acquire other companies because they're really looking to grow, whether that is grow
02:05geographically, whether it is, you know, sector adjacent. And then, you know, other companies are
02:11looking to solve for specific challenges that they're facing. You know, supply chain has been
02:16a real consideration. And so where they can diversify supply chain and look to grow globally,
02:21they've been doing that too. Would these firms say globalization is dead or not dead? Because it
02:25sounds like they're growing internationally. If they're also thinking about supply chains around
02:29the world, to me, it would say no, but tell me what you're hearing. I would say it's evolving.
02:33So if you remember a few years ago, there was a lot of conversation about friend shoring,
02:37reshoring, near shoring, and a lot of our client base did that. However, the world continues to change.
02:42And given the geopolitical uncertainty, you know, clients have to be flexible. And so an area that
02:47might have been a really good opportunity for them may not be as appealing. And conversely,
02:51an area they've gone into, they want to double down. The other thing that we're finding is that
02:55as clients are diversifying, they leave opportunity in one part of the world, and they're not looking
03:01to move that into a different part of the world. So they can then protect, you know, the business
03:06ecosystem in Europe, as an example.
03:08Go ahead, Carol.
03:09All I want to ask you is, what's the relationship? Because you said you work in North America,
03:12so U.S. and Canadian firms. What's the relationship between U.S. and Canada,
03:17based on your clients that are doing stuff back and forth? What's the reality?
03:21So the reality is that the relationships are strong. So I'll set politics aside. We don't
03:26focus as much on the politics. We focus on what the business relationships are like.
03:30But politics can impact those relationships, right?
03:30It can. But what I would say is that, look, our clients are much more pragmatic than they are
03:35political. And so, you know, they want to make sure that they are well-positioned,
03:39to continue to grow their companies. And the best way to do that is to have the right partners
03:43cross-border. And there is a lot of back and forth between the U.S. and Canada. And, you know,
03:48the Canadian-based companies that we work with, the U.S. is an important market for them,
03:52as are other markets outside of North America. And so, regardless of where they're doing business,
03:57we're able to support them.
04:00The companies that you cover, it's very diverse. It's geographically diverse. It's diverse in terms of
04:06industries. But are there certain areas where you see strength versus weakness, not geographically,
04:11but in sectors?
04:12You know, I would say we're seeing a lot of strength in most of the sectors that we cover. That's
04:18by
04:18design. We want to cover sectors that are growing so that we can continue to do business over the long
04:22period of time. You know, they have different challenges, different opportunities. You know,
04:27if you're looking at manufacturing, there's a lot of growth in manufacturing, but talent can be a
04:32challenge. If you're looking at healthcare, there's a lot of growth in healthcare, but the capital
04:36investment required for healthcare, that's an opportunity, but it's also an expense. And every
04:41sector has different opportunities and challenges. You know, we talk so much about geopolitics and White
04:47House actions. But would you say that there are bigger themes and trends that are much more important
04:55to that middle market space?
04:57Yes. One is AI, which I am sure you are thinking about. But the way our clients are thinking about
05:03it might be a little bit different than what you would expect. I mean, our clients are thinking
05:07about how to use AI to do four things. The first is they've got to deliver a better customer experience.
05:13The second thing they're looking to do is enable frontline employees. The third thing is to improve
05:19process. And the fourth thing is to drive efficiency. And in order to do that, they've got to make sure
05:24that they have their data in order. They've got to make sure they understand their processes
05:28and then look at how to overlay AI so that they can get the benefits that AI will deliver.
05:33And one or more of those four things that I've mentioned.
05:36How are you using AI?
05:37Well, we have a similar approach at Bank of America. And so we too also have looked at all
05:44of our data. We've got our data well organized so we can utilize it. I actually think it's the
05:49holy grail for us. I mean, when you think about the number of clients that we cover,
05:52not only in global commercial banking, but across our company, we have millions and millions of
05:57clients. And so we have a lot of data, but the data is only as good as the insights that
06:02we can pull
06:03from it. So we've been very focused on how to do that across all of our lines of business.
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