Consumers 'in a good place' amid inflation: Santander US CEO
Several Federal Reserve officials have continued to signal a higher-for-longer interest rate environment. As investors await potential rate cuts later this year, Santander (SAN) US CEO Tim Wennes joins Yahoo Finance Live to discuss why the American consumer ultimately remains "in a good place" despite inflation uncertainty.
Wennes notes the consumer has shown "strength" through strong and resilient employment. Per a Santander survey, over 70% of middle-income Americans feel on the "right track" financially.
However, he acknowledges "challenges" to affordability in areas like mortgages and auto loans as higher rates slow "loan demand." With inflation the "number one" challenge, Wennes says two-thirds of consumers are adjusting their spending.
Editor's note: This article was written by Angel Smith
Video Transcript
JULIE HYMAN: Well, as the Fed continues to hold rates higher for longer, it seems banks are holding steady, too, when it comes to loans. That's the finding of the latest Senior Loan Officer Opinion Survey. It's known in some quarters as SLOOS. It found around 85% of large and mid-market banks are leaving lending standards basically unchanged from the previous quarter after almost all loan categories saw weaker demand. Santander saw its loan growth decelerate in 2023, but it's now outlining how customers can use the high-rate environment to their advantage.
Let's bring in Santander's US CEO Tim Wennes. Tim, it's great to see you. Thanks so much for joining us.
TIM WENNES: It's great to be back with you.
JULIE HYMAN: So given the results of that loan officer's survey, given what you're hearing from customers, first of all, just give us sort of a big picture look about loan demand, what you're hearing from customers right now, what the overall sort of vibe about the economy is like.
TIM WENNES: Yeah. So what we're seeing on the consumer side, we still have the strength of the consumer. Employment remains strong. And they remain resilient and confident as we've seen in our survey here. In fact, we saw the highest level of confidence among consumers and optimism that they're on the right track financially, with over 70% of middle income Americans feeling they're on the right track to achieve financial prosperity and 80% feeling that they're confident they'll achieve their prosperity goals in the next 10 years. And we had the lowest number of the year, 24% who were feeling financially insecure.
So I think the consumer is in a good place. What we're seeing in terms of loan demand is some challenges around affordability, affordability in the areas around mortgage, auto, et cetera. With higher interest rates and still reasonably high prices, that is impacting loan demand for certain categories.
JOSH LIPTON: I'm interested, you know, Tim, your perspective on the consumer is helpful because, as we've kind of moved through this earnings season, Tim, it's been kind of difficult to actually get a strong, clear read. Visa will say the consumer is resilient, but then you'll have a name like, you know, Whirlpool report and disappoint. But your survey work showing a strength and resilience.
When you survey those, Tim, consumers as well, what are the challenges they talk about? What about-- what are headwinds they're concerned about?
TIM WENNES: So number one is inflation. And that's been consistent. We do this survey each quarter. And each quarter in 2023, inflation is the number one impact or challenge to consumers. And two out of three consumers are saying that they're adjusting their spending patterns because of inflation. And that this is the biggest obstacle that they're facing. And we're seeing this in terms of some of our middle-income borrowers having challenges with respect to all their loan payments. Inflation is causing them to adjust their spending habits, delay purchases, or make adjustments to ensure that they can get through.
