U.S. Bancorp (USB) 14 Oct 222022 Q3 Earnings call transcript

Welcome to the U.S. Bancorp’s Third Quarter 2022 Earnings Conference Call.

Following a review of the results by Andy Cecere, Chairman, President and Chief Executive Officer; and Terry Dolan, Vice Chair and Chief Financial Officer, there will be a formal question-and-answer session. [Operator Instructions] This call will be recorded and available for replay beginning today at approximately 11:00 a.m. Central Time. the for to U.S. turn of Andersen, now Relations Investor will conference George over Director I Bancorp.

and Dolan, Thank With Financial Andy President me Allan Officer. today and you, and are Cecere, good our and Vice Chair our morning everyone. CEO; Chief Terry Chairman,

A like to as are During presentation. uncertainty. I’d our at to remind and in analyst subsequent Andy schedules Andy. I earnings file with on Page any made risk X are over a remarks, our slide press could will subject our on forward-looking usbank.com. the forward-looking prepared during reports on Terry now presentation today’s will release of their referencing you in that today’s presentation and and our materially current available website change XX-K be to SEC. our call of and slide described copy as well statements supplemental the release that the are turn assumptions and Factors Form call

morning, Good you call. everyone thank George. Thanks, our for joining and

which of remarks, Following charges acquisition reported And X. $X.XX to I have. any you on questions begin MUFG of will of share integration Bank. the I the and our share $X.XX, per Union third per quarter, In Terry earnings merger will we and take prepared planned included related Slide

quarter. Excluding these notable items, we share of reported for the earnings $X.XX per

achieved quarter, net totaling revenue we third record During the $X.X billion.

growth, and well results expenses credit revenue quarter by controlled strong Third were highlighted quality. stable

ratio September XX, are quarter risk At approach through CETX underwriting loan reserve, capital the to This loss reflecting loan million $XXX consistent was growth and we added our to management. X.X%. our cycle

key of September the metrics. per X.X% share or prior than interest X available-for-sale on Our tangible our impact rates quarter, provides lower Slide XX, securities. driven value $XX.XX performance the totaled at by rising book

items, return return average of we a delivered on of on and notable equity a assets X.XX% average common XX.X%. Excluding

positive trends basis. which across a is Register, our and digital expanding human initiatives and consumer as payments our for efficiencies drive in capabilities in digital core a both tangible that and continued to a business differentiation benefit X our banking was are digital gain XX.X% convenience progress deepening and will customers. our business plus Slide all on advantage our company. highlights and competitive equity of common digital of on our and shows our helping customers engagement we One meaningful greater X from bring next-generation believe return launch and core competencies Our understanding point-of-sale deeper initiatives Slide business [ph] simplicity, approach. to profit example talech of is one platform the our our that analytics payments to return digital

their can day-to-day an are the through of transactions greater innovative XXXX. the to Recently, auto transactions. gives right helps cash to where side we XX, dealer the operational control This introduced loan continued instantly real-time momentum slide, than see full efficiency. is September over flow of On in funds Year-to-date gaining improve higher XXx payments participating the our finalized. are of number loan a total the dealers after we you we provide real-time clients contract and solution payment year

to and and past payments gain business in XX relationships Slide banking steady total has both meaningfully share. over to both our Turning growth with initiative expanding relationships traction growing in continues outpace the in with X, progress to Growth accounts products banking continued months. wallet

between deepen customers. we and in and recently ahead, existing help to payments relationships banking offerings business our launched development expect Looking innovative further

let the quarter. Now to who the Terry, over detail turn will call me more on provide

Thanks, Andy.

to a card discussion credit quarter loans corporate in the on growth portfolio, X.X% linked and our credit middle opportunities focus the market growth capital. deploy portfolios. growth large compared activity and in Purchase sheet loans, residential followed growth balance and increased and I'll balances, commercial Underlying demand year-over-year reflecting higher market solid reflected continued in increased rates. by growth with prudently growth both retail rates loan remains X.X% gains start quarter utilization earnings continue trends. balance we to we strong saw loans growth. healthy X.X% review across balances. by driven second Commercial In in quarter lower mortgage X.X% return X, card If prepayment you appropriate activity as mortgage business payment turn lower activity spending share to and third with mortgage Average support of Slide a and to

the compared quarter. the average rising increased June at of bearing at ago. X.X% trends, bearing with September compared interest of deposits The Total total customers X.XX% interest compared deposits total portfolio. a ratio deposits Slide in lower offset Turning slightly across XX, more X.XX% as to than impact estate to year-ago. environment. noninterest quality by rate credit to second shows increased be X.XX% deposit a continued to and XX loans to year total average Growth real respond other X, XX loan our balances was to Slide which strong the and assets nonperforming

primarily a Union an excluding we quarter, charges share, uncertainties and of to share provides $X.XX integration reported loan Our growth increase $X.X this slightly merger third credit of versus was summary. period the quarter outlook. reserve as earnings the XX September extent in in allowance XXXX quarter third $XXX or $X.XX third planned The of charge-off quarter our of per loans. XXXX of the lesser ratio quarter economic billion, per related losses reflective to XX of and MUFG and million for end totaled In The Bank. of the Slide acquisition of second levels. X.XX% improved X.XX%

a highlights year fully XX, an basis on XX.X% quarter interest management billion, offset in partially Noninterest income. Turning increase compared a in the Linked $X.X more card decreased card lower to trends from lower the better revenue primarily by market a of to increase a businesses. Because pressure related banking compared third ago. the card payments business which declines representing payments quarter deposit excess Slide our other activity card fee of declined industry Slide linked partially gain a stronger due and taxable second income corporate quarter continued totaled for revenue lower ago, strong and performance our growth refinancing in believe capacity. year-over-year The a payments noninterest the by a year volumes total linked interest lower the and an X.X% service three or In reduced underlying on continued offset provides XX growth by fees. Credit Slide equivalent net pricing were a changes investment as X.X% which on earning basis revenues the basis cyclical payments XX on income to revenue, was borrowing treasury rising quarter revenue than and and in by total and increase earlier. increase XX in increased mortgage offset in year-over-year trends revenue year trust higher increased with XX.X% and costs. revenue margin, and sale rising environment. trends decline deposit decreased credit with basis, net in given application our activity. prepaid with was policies, a as and by Compared are volume offset and from management normal debit fees rates point driven to reflecting mortgage of by nature management asset banking a of and noninterest income we noninterest payments short-term indicator higher X.X% mortgage revenue. charges primarily partially revenue year-over-year impact in the due interest reflected businesses, benefited rates, margins and growth X.X% debit quarter, treasury

Excluding which merchant would prepaid growth with credit have unemployment slide the the the increased debit and X.X% was XXXX. last quarter the bottom last with fee elevated fee and half supporting revenue card card quarters. rates in both revenue several corporate illustrates in year-over-year third payments activity, processing of over programs, of The connection year compared

Third currency volatility given negatively impacted specifically foreign Growth exchange and in unfavorable Europe X.X% the year-over-year. by was quarter revenue processing U.K. rates, merchant market in increased

revenue approximately merchant year-over-year in additional X.X%. impact, business. XX growth services payment our Slide Excluding the on some provides fee FX information was

strong you The our to have within the the the in number X.Xx seen business. year-to-date of key in new strong side XXXX. new of And tech-led continuing partnerships. partnerships On Through the acquired continued we seeing are were the third acquiring new we in the these are quarter, to growth had revenue merchant year is our trajectory partnerships partnerships right tech-led slide of that in grow. momentum tech-led partnerships entire will the we see

marketing and X.X% was highlights The higher basis, linked XX, a development associated and our Slide change pending by expenses. acquisition to merger on position. expense expense the Turning services integration Slide excluding professional compensation, and noninterest capital driven costs of Union Bank. increased with in XX business quarter

was X Tier On Slide Tier Again, -- of guidance U.S. common Union X include Bank common September capital Our basis. for not I'll Bank. our potential ratio this XX standalone equity X.X%. equity guidance provide forward-looking a impact common any does some on XX, at

XXXX expectations. start consistent previous me year with full our Let is which guidance with

to to to expect XXXX. to continue We in increase total net X.X% revenue X% compared XXXX

our income, expect slightly We improved growth. equivalent of which low net in is previous interest taxable mid-teens from to growth mid-teen outlook

to market. due pricing the impact in due to in to interest Lower rates for other of expect the decline noninterest primarily a higher continue changes and year, service refinancings revenue a charges in to income. mortgage deposit revenue We the due fee full on decline lower

Union We basis least with related in the merger of the XXXX, and costs Bank points operating excluding continue XXX positive to acquisition. integration expect of at leverage associated impact

our quarter. the rate to year tax guidance expect be now we provide XX%. of will fourth the For for taxable approximately full equivalent XXXX, I

a We continue to total income approximately increase merger be asset costs expect expenses supported higher linked to core by interest by integration both quarter and will earning and basis. growth X% revenue excluding and on rates. total Net

be and lower fee seasonality Credit typical reflecting of our strong. will businesses. quality revenue However, fee-based remains our some

lower quarters, outlook. losses for growth will the the net loan remain normalize few Over charge-off allowance we expect the in the ratio than primarily over to levels, historical but in changes Changes reflect credit to near-term and time. next economic

XX, to on to turn regional Union definitive announced we into provide you XXXX, September we an had entered Union of a the banking core previously of of agreement Slide In acquire our announced MUFG update franchise pending Bank. acquisition Bank. If I'll that

in deal closing while the we progress the We the await make approval. fourth and for continue planning regulatory XXXX, significant of quarter of to

the of not approvals As the closing the control regulatory of may deal. company's the you and know, within are impact timing

the reminder, a on close approximately regulatory approval. expect we being XX As days after to deal U.S granted

in previously targeting first we of the As The conversion financial the deal remain merits half discussed, of the intact. date are XXXX.

CETX target we XX%, of return our to of ratio well rate X.X%. -- generate would internal interest estimates October of continue would at accretion capital. The approximately CETX unchanged, Our company's estimate above EPS of an is XX, ratio X.X%. as are capital approximate and will rates close acquisition the which is on capital approximately Our Based cost

CET the valuation closing it to accounting expect as back accrete the purchase hand remarks. into increase earnings. towards X% I'll ratio capital We Andy for through to adjustments

lines The environment terms we management continue investments have -- Expense Bank at across our look in and scale is the customer made of our a confident We customer one markets, we financial improved core This target benign. closing to deeper merits and beyond. new credit of the and Union to make remain continue positive the XXXX in and experience, unique credit Thanks, strategic operating is and relationships. acquisition, forward off to we of paying opportunity Terry. in current approval. business pending a and acquisition leverage are the priority deal. on regulatory is The in

near costs of lead metrics our is stage remain off is rates any points highs. quarter ratio In the lows, That that the pressure decline net to inflation in building starting are seeing well we meaningful that historic Borrowing we in third being fact, not said, to several recognize stress the early the and are in causes the are and high, concern. economy savings its areas increasing, future. market charge-off could stock are

at may see an So to be that backdrop while investment. to which slowdown would develop to the today, There a some are confidence and may favorable business out lower economic scenarios quarters. levels, is point surprising spending driven by next not it over play the reduced several number us lead of

industry credit, possible capital, framework to prudently within liquidity grow We are In by managing summary, deliver cycle paying of of We leading range and are investments through a the risk -- we off. our that for preparing continue returns. so and remain stewards diligent management capital. outcomes our

to long-term. on Our balance and thank for sheet is our the by focus you the saying company strong, firmly employees. is I'll our fixed close managing

Your hard We'll work and open thing day, and Q&A. right appreciated. up it our for now its communities doing the focus to are recognized and customers every

online John Go question. with Evercore Pancari is Instructions] ahead. [Operator a for

Good morning.

Good morning, John.

that need X% falling your Can around resume get give the PA X.X% you time? in think little CETX, when to On color magnitude reach before about think accretion, we up the should and at X% commentary but buybacks. can how you us that back close, to around you more of a you a timing to terms the on with buybacks that of the Thanks.

Yes, thanks, John.

timeframe. again, four the expectation end up will quarters. earnings driven growth up of will will that our earnings closing that part impacting mark-to-market we a expect about to So big roughly a But during X.X%. particular is get obviously, that And by X% the do within of accretion that be,

that been buyback X%. start what we expectation get we is once our So, program would to we past signaling that in share the our and have

So, about four quarters.

Thank then to you seeing trends there and you the give just just processing on the And activity see the just moderation about in businesses? you economy can could potential the you're right. separately, could that as more Fed the all talk reacts helpful. That's maybe and merchant color And action? you. corporate both Okay, if payments payments

a the pound well this related have have have we've a as The categories topic, standpoint, of the We that interesting for mentioned, we the up FX third quarter it's noted and year-over-year about John, prepared consumer last it's our flat, XX% of spend pre-COVID talked the by Andy. merchant the been is see of quarter. as would before fairly from and about been Yes, sort X And account did it's his about second shifted over flat, above can in modestly card as seen it's just impacted, get been levels. spend as we revenues processing, our credit spend deposit for XX% of strong, still excluding -- up not We in And down is we level relatively a rate levels our while years, we bit. by a on -- X%. -- and basis, comments, increase. -- quarter Terry flat here in

it moderation of yet. some but expect would we So seeing spend, we're not

Okay, thank taking questions. my for

Thank you.

Matt O'Connor Bank with with Deutsche a question. online is

Hi, are morning? this Matt. How you

the want is this on Stein quickly follow-up Hello, payments O'Connor. outlook. just Nathan to behalf Matt of on I

moderating -- growth about in year-over-year previously, think this of I year. digits high single talked normal you've to higher than second half in the next before year second

still Just talking were to follow-up in make on what you sense just environment? about. Does that guidance this

is revenues that, particular And with are I is upon based we what realistic. is Yes, expectation high to with digits. very in consumer payments at our respect respect point to single time that of seeing this spend think mean, still our we

strong. shift that is volumes is As still Andy continue very And where a continuing. of said, spend pre-COVID, to occurring, a while bit to be respect to it's relative there with

tail impact of levels will I offsetting an if off, effect. have is -- transaction think The and inflation to start other that when thing where the

pretty about it. feel still confident we So

billion you threshold. Bank, one helpful. the to follow-up the That's sheet then quick closing much. above were total And I with the of above $XXX think billion whenever post quarter. you plan you Thank question. the Union is? the this on Can just it'll that so deal great. assets touch push And manage just Okay, end $XXX at balance

how So forward? that are about you going thinking

manage very Yes, prudent looking our the are sort we'll and continue supporting relationships relationships. a balance that for way, of profitable expectation higher to is sheet that in

to you're because heading I is think really Our related CAT II. that is -- where expectation

the assets category balance to and But manage extent. end that extend we expectation may sheet get some our XXXX. that to of weighted Our into earliest is risk that levels is ability would the that

you. Thank

Wells online Mike Fargo with Mayo with the is question.

Mike. Good morning,

Hi.

Bank think conference you will I no in achieve at correctly? change not I year a that but that as recent Did you EPS Union much you said from originally as hear synergies thought, next guidance.

about expect offset And be extent little with will synergies be the correct. the changed we of is of timing stronger. implemented, fully associated some mark-to-market when Mike, you to million to bit the achieve a think synergies the the will the $XXX accretion the timing by while and if that Yes, has dynamics, that

with So levels guided respect accretion past. to the we still that feel pretty we the in confident have

Right.

XX% XX%, of said instead XX%? you to So

XX% Yes, to XX%.

X% XX% EPS XX% to and accretive.

you're originally Bank? synergies if year So you of than thought the merger next Union same getting less you you have from de the expected and facto guidance, accretion result are increasing EPS end

we the approval think of would estimates to I think get in time, provided off don't then moving that estimates and change in I past this the the Yes, would think significantly we the our need at closing I that at we're particular closing, we -- beyond point. any this have before point

year? are saying early some number you now much kind But back. for invested banks terms tech out to leverage should I a of And XXXX on expect your years Okay. just business best this be know hope infrastructure. continuing. any next for you in general trying And that a how years, follow-through of the capitalize operating this in some giving that X to for leverage. I positive coming at the in for confident Some operating guideposts how And guidance And leverage? time guess. over of other you are is figure when operating is investors would in of guidance

Yes, we'll on that. leverage a and focused achieve Mike, we're operating on core to continue positive basis

Next Bank coming year with large on. a Union fairly has moving prior

yet. is make which will in we convert more going for top provided but operating is leverage, we to company, sure that successfully guidance that positive that haven't allow priority So update that to this our be integrate on any and

thank you. right, All

Mike. Thanks,

online question. Najarian from Erika a UBS with is

Good morning, Erika.

have X.X% forma that pro the morning. going about to Terry, you to Good CETX I'm you Hi. mentioned. ask

close. at estimating You’re

that of conversation market realize it the concern been a didn't the has has contributed widening interest significant that months X I the think rate underperformance with marks. in to the perhaps there about I

think XX looking mark basis you given point loan that that loan a I So resi. portfolio is at a significant UB's that on were portion portfolio in announcement you're bringing that up over,

a math giving I being lower side, the you say, think lot of was XXX than there points a done in us. let's what were basis buy was, that

sheet be here the relative mark question one day there Or into built announcement? from that my interest the street forma are is greater guess CETX seems have since balance math on getting to I to hedges are So moved how wrong? how protections pro are UB's that there Or the a deal? protecting rates your is,

it they're think I could available a I the kind to portfolio for sale make whole there tangible within is is the for an sale Yes, certain of available level will book they combination for Prior so be related the mean, extent different is things. of a value of to and part of provision there deliver that is the agreement expectation example, it. to acquisition, a impacted. securities, that that

of could just related some we're timeframe. capital resi again, to this balance And then environment allocating portfolio. as the think to we'll can it looking I rate what appropriate in end to are sheet the businesses managing and at the this during duration be the up as that of the we assumptions ensure prudently

different things, variety a it's of of combination Erika. So a different

it. Got

question, portfolio, the presuming, is question but the the AFS that's have portfolio billion Terry? as what guess a $X.XX I to loan deliver not there's that on provision a you're they on saying, So I'm whole make -- that follow-up

That is true. Yes.

potential day there's also offset. that presuming after? in would I'm and amortization -- a But could be CDI cost there offset and close Is that it. two at a higher Got obviously help

portfolio the that estimates terms quality were, but of not mean, final marks, a all things. I the relative it's combination be. what at a to like we up the CDI. have parts look different going better, of in I whole think of that what the Yes, overall is variety coming original the what mean the of of mark-to-market we kind moving our is terms I mean, only to is think impact you it's loan rate of slightly interest look to of in with it's

you Thank much. so it. Got

with is Research Wolfe Carcache Bill with question. a online

you? you. Andy and morning, Thank How Good Terry. are

Bill.

Hi.

the just nice remixing specifically high follow-up started sale whether helpful to that of available you for you how sale on available mix mix It'd and to held of to on can what for we some give out the for I wanted could take So and guides more on if HTM color there's go? be maturity. your higher? room decision

Yes, question, Bill. great

we're rates today available maturity held us increase currently versus allowed in moved at to able dipped, So, And we about for that securities to of percentage. be some to when XX% kind sale. July, that early

with AOCI. with that to also consideration floating very fact the AFS rate thing respect is take into impact other the we that respect portfolio, have that to there's The little securities

XX%, when end that interest it's combining So protected protected, together, movements you about up for that substantially is rates. in

XX-XX have influencing fourth positioning quarter. and hopefully excuse with closing to amount to help here going ends deposits, on as with of of we'll up mix. sheet that almost positioning. the a some in to whether I split Union protection thing balance the me, at that But then the well. deposits that, makes the AOCI it the And that there balance that of continue the opportunity? sheet. interest pretty about with in sense, our other have respect of respect gives balance to to sheet. is right And securities sensitivity on we're that's to at feel decisions we'll think with And about So comfortable sort mean, we of of to now flexibility us we make is be managing kind a also as think coming Bank us going to as the to as rates. terms well portfolio, And look we significant you and least have It that then respect relative the

of deposits separately to views proceeds Fed more level then for in at and of you could deposits. gradually with specifically helpful. noninterest follow-up as pre-COVID Maybe expect bearing decrease reasonable to and revert your it any if bearing levels Is that USB? wanted sort on I the you QT? Very have funding address noninterest the the that, And specifically, to industry going is if mix to

they make nature. respect estimates, I you'll I would And is was when say focus their that our as hard down, it better probably to stays cetera, part pressure where put to we've think bearing worked I on offset make Yes, those grown pre than more to trust because a as portfolio, deposits to interest in bearing also rates bearing. assumption they on interest -- probably well, think to business more tends deposits QT in the that rise, operational how to nature, then little consumer sheet they COVID more And to interest as interest With corporate our bearing, that noninterest with it be which continue shift much a noninterest to going balance depending in bit et operational to out liquidity in bring within of that. that much -- certainly whether see overall. And if pre-pandemic sense, it are may how the tend upon I we've -- they're bearing us, system. leave respect because had retaining toward opposed

relative back that sticking And gradually Can we quarter terms in funding, you sense. fourth to mix below to that speak still the remix that overall levels? makes That to theme, that's your 'XX should pre-COVID -- levels. the expect well to of of likelihood with to debt

going is within coming based. Yes. And percentage a -- I they their a would deposit have assumption think higher actually they be fair, Bank broad to keep on. but Union be that base, significant Again, in have consumer its the again, mind

I we be I And a at better look going think is so going think have be kind And probably you to think, pre-pandemic. I specifically to we're mix. in U.S the to than Bank, position entire were of --

great. That's

in could squeeze the bring that? back dynamics off surrounding to Could if one last one. speak sheet on balance ability of money maybe your sheet, some market to Finally, I you funds balance

Yes, great question.

we bring So, to upon XXX money that's Based billion we have a market currently, need And business. a balance have Investor Services pricing sheet, going tied balance -- to a in is as to for do the funds. our forward. from from great view influence source there funding perspective, we it's then sheet, about from ability deposits very it a in business behavior. $XXX that more a off what Institutional is customer of point on pricing funding back that is that decisions roughly but And standpoint pressure or us

questions. Great. taking Thank my you for

with Cassidy RBC is a online with question. Gerard

Gerard. Hey, good morning,

Hi, Gerard.

the Hi, the Andy. Terry, residential in line still lower. capacity business your I And of and about in comments I talked sale margins some the you negatively out Can if by rates? of what’s share your elevated of purge You've Hi, business. the seen that outlook? remain the coming refi you capacity think Terry. that over quarter, activity, in fourth you being mortgage rates long-term for on think elevated affected course, there's excess were gain reference,

various back mortgage or capacity announcements of industry, think I and non-bank operations, of pulling seeing capacity. the come we reducing bank are in certainly you'd seen Yes, down kind

still it as with it down. do to the extent, we might it coming sales. have impact what's I happening as refinancing home think But probably needs that see rates rising to and both some reset on well

on and we reverse more gain the between about that probably valuation stabilize a other by about is bit. and was down sale secondary of which us will correspondent think improve excuse really a quarter, for third half anticipated. gain expectation than that, bit. a But In maybe sale and had me, on Our what margins little our really market we of and it, the half retail, some of mix some which that issues the kind revenue timing issues, recognition, is of is more driven half bit

color hearing I estate and strong real a more less your obviously, you've back little what very that real pulling some? squawking, had apparently be loan some seen and don't a you that when the insights hearing average just growth liquid what REITs or guys had looked Very and it for business portfolio, mortgage mortgage we I it's and what on growth you're that might Any good. growth, very you can and chatter you're if are commercial Is views area your market commercial I some are seeing estate? know but some at know equity saw year-over-year. the nice but color business? an in you're today. maybe offer on seeing We're

Yes. commercial to And us, important will Certainly estate, dynamics with and the marketplace. focused. very think one respect to in that just part I be continue for business an of it it's is real

in at homebuilders third some making saw looking we that REITs particular starting potential the probably maybe -- I If decisions planning even then were cycle. out are from real at doing. the space space, growth standpoint, know quarter. sort particular extending terms it's in competitive. pricing financing, with continue market of we're to you of they this we end pull But in of with back, commercial actually to and estate, still space, that's and comfortable that projects not lend associated the And up large terms that to middle point corporate pretty do the pull on in people And we actually a in

market a with but in little we're middle that. So seeing we're bit of space, pressure fine maybe a the

Very good. you. Thank

Gerard. Thanks,

Jefferies Usdin online with question. Ken with is a

Ken. morning, Good

know bit Terry. morning, whole just more deposits. want on ask for I the the I Thanks. to talked about good Hey, mix. you a outlook little

completely eventually to, ago? most any that months you're different all guys thought fact the in of you little you X thinking of peers a where regime in and might Just betas seeing wondering a that what of versus just given rate go we have about just what mix bit a are different have than we're the terms given updates

relative have changed we if kind might Trust what again, our we a will up et better maybe business, rate the start Trust on ago, deposits of deposit our coming Bank operational know maybe et Well, Certainly last X X, on that represents And bit a that years deposit our we to only little stronger went I'll base, cetera. with more a maybe cetera. of relative deposit But of expected. consumer, than looking today. within the by a then end about base through cycle, mix think at Yes. also betas back the performing reiterating it to you Union and we're what probably bring. dynamics XX% rising around about actually of some is were has just context, basis we focus little coming little then that

maybe coming very high betas in percentages. we But second it's about XX% as about XX%. up aggressive, rise quarter. into to as certainly higher be fourth continues quarter to and Fed I rates be in migrate to deposit the expect from to that the XXs We the to about get were would going the think continue

mid through the now think entire Our still kind XXs, cycle going that kind through. it's though, we're estimate of about right cycle rate the of we

gives the that follow-up a plays as fourth Or Can I quarter as just expecting the good but of NII so then can like 'XX still that, and it sequentially? understand and And check growth the takes just us you're quarter. mix grow these that is you're post you make? that is fourth a to make help reality to what still tougher? forward, beta Okay. guidance, you into NII giving know some functions about

been continue the be beyond can the I though, in deposit a industry I the we industry. quarter. that get loan certainly base be as think it'll the growth say, that, And of changes of fourth we I to know continue experienced, that'll that move a forward. strong. of pace the I would very to whether is keep probably well, that of kind don't function we grow What think has particular And -- it'll is the function NII betas growth Yes, as changing.

right. you, All Thank Terry. Understood.

Morgan question. is with Graseck Stanley Betsy with a online

morning. good Hi,

Betsy. Hey,

Betsy. Hey,

book, -- would be [technical AFS should par helpful securities difficulty], as to give sense pull you be us own in we a here, how is the or years models? maybe quarters our big thinking your should it be we from how don't into but or change like, about On it's F, it to many that a breaking I rates if if could know

Yes, well, X the is said have a duration little what the is we years. portfolio I over think of that

kind So of I you the into guide with capital that if think some comes about if you about equation. respect how AOCI -- gives that, you think think to probably

Okay.

So it should a longer like X-year than period? it's --

Yes, not much. a longer, little bit but

you're regard to anything thinking is restructuring books Union on? And Bank about Okay. the there with comes once

may again, remix we portfolio kind might securities up expect where end Yes, cetera. do bring et makes the balance we and it increasing look it's sense. over as at of a We HTM when we'll of that on. the what all result We comes it -- sheet see take a

will it definitely So something at. look is a we take

And you Any shaping the be you as side, behavior, you. to give in changes could relatively just lens know up to to I quarter what you payment as insights strong think sense that end XQ will a consumer XQ for any just then the separately on on up? in have how us a you tends saw XQ?

were hard bit bit to credit about a the non-discretionary consistent and before, Betsy, strong, XX% services about a little with year-over-year overall we've categories a consumer XX% pre-COVID on from from and has about levels. talked up away basis, from goods non-discretionary of they The changed to So, mix what bit discretionary. -- levels little continue above away spend to card be spend more a

overall continues, in are So that levels but that spend have very shift strong. discussing we the still been also

hanging of are the levels there? And savings in the consumers

Betsy. Yes,

we that of stable all X the two category. So about been last increases for years, mentioned I across the across but saw stratas all have quarters balances

So not growing as shrinking but dramatically well. anymore, not

so All right. much. Thanks

bet. You

rates I've quarter. we to make bit just deposit XX%. quarter to sure third fourth quarter got Hey, were when about I Ken, accelerate want Deposit just to were and second increase -- rise the respect high betas a in would and the with to XXs just probably betas continue deposit expect XX%. we into get right. the to something The shy that in again betas of that the percentages as in the clarify And

now it Please further time. will at no I have George back this turn questions continue. Andersen. We to

contact call. the any questions. if you Thank Please listening Investor you to Relations for have department earnings follow-up our

conference. for This concludes today's you participating. Thank

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