U.S. Bancorp (USB) 19 Apr 232023 Q1 Earnings call transcript

Welcome to the U.S. Bancorp First Quarter 2023 Earnings Conference Call.

Following a review of the results, 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 o'clock A.M. Central Time.

the and over for Director turn Senior George U.S. now President Vice of will conference to call Anderson, I Investor Relations Bancorp.

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

Andy Terry be referencing the slide presentation. During and prepared a remarks, will

remind on risk A you are would supplemental analyst and our earnings copy release I statements forward-looking of the any subject usbank.com. are that presentation our available made a like call at s to and well as today's website schedules during uncertainty. to

that with today's forward-looking assumptions presentation, the SEC. Factors subsequent Form are of press our our its two our release, page materially could in XX-K change file described on current and on reports

will questions and prepared you that Andy Following their remarks, take any Terry have.

will the I Andy. to over turn call now

everyone, $X.XX, for on we George. thank Union of share slide Thanks $X.XX to Bank charges the acquisition. In MUFG related our begin reported the three. and morning, first quarter, per share which call. per I'll of Good you includes earnings joining

earnings notable the per quarter. was achieved record $X.XX. items, net billion revenue those Excluding for We of $X.X share

led close revenues. reflected stronger acquired in fee of in Bank Union first quarter by commercial net interest of banking XXXX, assets, earning product mortgage higher results Following acquisition income franchise, and successful a our non-interest benefit of year's growth and full December the continued expansion, margin

and end performance reported and period metrics. details our statement balances as as Slide income other of four results well and average adjusted the

normalize credit starting as quality On remains the strong, to the right, is you'll expected. see but

of disciplined pre-COVID points basis risk levels as management of and ratio well charge-off Our below adjusted culture. XX our reflective is

our X.X% and end regulatory binding the ratio. our with at The quarter the target was capital ratio, CETX is consistent of constraint

to year optimization this later initiatives. X.X% quarters continue and quickly next capital exceed back we as on to expect risk-weighted focus over the accrete few We asset

provides key metrics. performance five Slide

on return and was average average return XX.X%. assets our our items, was on notable common Excluding X.XX% equity

on tangible equity XX.X% common on basis. was an return adjusted Our

on Slide six been conversion We provides on both of Union by the Memorial a over high-level half weekend. progressing full update anticipate systems Integration track accounts we for have transition a main time Bank. well of of upcoming and Day the remain and second our planned general successful year. our conversion all the line efforts

XX% the Turning to deposits maintaining deposits reinforced a slide are Over in our seven. appropriate in uninsured business retail and base. deposit and of profile. has importance resilient with well-diversified industry the early We maintain March half The of disruption or risk a operational an diversified insured are of nature.

sources, credit Our hallmarks diversified by supported levels to all of strong ample approach are disciplined risk funding management. our liquidity underwriting standards and quality

call and quarter to the results. Terry, I'll first now over turn who the sheet provide detail more the balance strength on can earnings

Andy. Thanks

of key Turning source to stable is bank a the remains deposit our slide a of funding. eight, well- which -diversified strength base, low-cost

quarter, of the reminder, a As Union $XX Bank. deposits of last billion, following $XXX from approximately acquisition including of end-of-period Bank our deposits Union billion our totaled completion

deposits were the acquired in the back billion first that we to in to As returned transitory this additional moved MUFG billion in year. and Bank quarter billion quarter of with $X last of nature, quarter, $X.X Union MUFG discussed $X fourth

we a acquired sale of PurePoint, In addition, gathering to in deposit related $X.X broker discontinued. billion deposits included the that branch or were mechanism

saw business seasonal with largely March our deposit expected Importantly, of large patterns, trust business. consistent the outflow events X, prior including reflective our we to mix, of

yield of market trends. broader balances deposits the slightly were of From and down industry and with their clients by funds quarter, X.X% money inflows deposit through the relatively end as seeking only offset stable, were impact from new X March customers the consistent diversifying

management and businesses. of funds During in our wealth increase an approximately billion saw investment this market services money we within period, $XX

expect competition deposits high industry XXXX. for the the to We for remain in

to first by Our expect previous the beta XX% quarter rate expectations. and increase to that deposit we with in through the approximately XX% cycle, end our generally about was line cumulative of this

Slide of deposit diversified composition our additional highly detail on provides nine the base.

slide a deposit our balances As expansive are footprint. support shows, and we customers and broad the commercial corporate of across with our mix of national composed an distribution network branch that capabilities consumer, mobile

services sound. was reflects bound our with that industries customers and At percent institutional the retail wholesale our funding XX, activities Our management provided deposits, of and operational is our total to deposit XX% stability deposits base insured source our March composed to or of to uninsured that are of treasury trust companies because deposits wide deposits corporate the serve. they of XX%. our Approximately contractually consumer-based trust deposits are tied are and Combined and stickier, either of clients. range

XX. to March of as XXX% billion, representing deposits. Moving our slide was U.S. $XXX available total liquidity Bank's of XX uninsured

As December ratio coverage of as liquidity March -- XXX%. XX, of was our

our diversified sheet and liquidity well-collateralized balance profile, credit liability and balance our in reflect exposure, and optimization asset ratings capital healthy debt attributes disciplined framework. management practices sheet. strength to These ensure with of profiles strong stability our strong our business mentioned, management work As concert and

provides composition on the details of XX our portfolio. Slide securities investment

reduced assets well the last our XX% cash of to while securities XX% of portfolio total increasing disruption, of levels. the Over quarters the five most size recent from and ahead banking investment we

Union as by of paid cash securities, part backed increased acquisition maturity our dynamics, and response for sale. investment the we borrowings off and rising rate uncertainty, securities federal rates as and industry our XX% government interest Bank, to portfolio and of balance with fixed available the selling At held to market volatility. for securities XX% of designated the investment in increased balances completion approximately sponsored and our of repositioned March designated loans XX% US as XX, economic preparation sheet are by and are of In in

on available a in XX% of by linked-quarter investment our the as percentage first portfolio AOCI unrealized sale losses total and basis. for Further, improved securities quarter a improved

slide Turning to XX.

the CETX completion of following which a purchase of Bank, end accounting and about impact As years. of at balance and we ratio encouraged sheet into capital reflected next from declined of as X.X% our Strategically, benefits XXXX of to to the of financial third accrete Union as be this a quarter reminder, December the the will acquisition capital our XXst, back the we over synergistic few realize merits optimization institution. deal expect that the continue of the to combined adjustments X.X%

from ratio the points. points XX earlier, XXst Andy offset XX CETX XX transitional basis capital X.X%, CECL was basis March As mentioned increase of reflected of point capital basis by our accretion, of a impact year-end at

expect per quarter Union points capital as integration approximately March of accrete XXst, complete and the to we basis As we to cost Bank synergies. XX realize XX of

this mentioned does optimization of Importantly, not planned impacts initiatives include the RWA earlier.

which loan Leverage was CRE on Turning exposure end-of-period a of year-over-year. to representing and portfolio. our portfolio a total total Commercial were office only lending approximately component $XXX X% loan loans XX. of balances loans up significant basis slide estate are loans real not X% and with XX% the flat of XX.X% total billion, linked-quarter represent commitments. Total approximately of

to was X.XX% the to X.XX% ratio which with but -- compared Slide XX are loans year trends, starting and The nonperforming X.X% across to are December at expected, and real as shows assets credit portfolio. quality estate be other XXst strong, March a started normalize at ago. of XXst continue

compared Our basis XXXX, as when X.XX% of fourth the quarter seven as level adjusted points versus first of the quarter first net a X.XX%. was increased was charge-offs of quarter adjusted, level which higher to and X.XX% of

as Our allowance loans. credit $X.X totaled X.XX% losses for XXst or billion of March period-end of

performance our side upper chart this on the differentiator credit key as a demonstrates, bank. the of through right the slide cycle serves As the for

for earnings $X.XX notable Union In first of recent detailed per share, a we quarter, Slide acquisition XX items the the excluding Bank. provides summary the quarter. to diluted $X.XX of related earned

interest net $XXX the from in which on and a trends million, the for linked X.X% revenue totaled from quarter, margin quarter. highlights interest year-over-year, driven rising revenue first benefited revenue included expansion, Bank billion income interest quarter of a primarily Net and XX representing Union XX.X% asset growth by basis net interest contribution income. earning full rates. continued grew Net Slide which quarter $X.X of

compared offset adjusted losses $XX by commercial and million fourth increased trust sales. Non-interest quarter, securities from the income revenue, product to revenue by as and investment of X.X% partially fees, mortgage banking higher driven management

compensation XX. expenses. a of linked-quarter on $XXX and $X.X billion Union for in expense including driven from Adjusted increased non-interest non-interest largely amortization totaled Union adjusted deposit the million first Slide and the quarter, expenses, X.X% the additional as basis operating other to impact months company Bank. higher two Turning core by intangible Non-interest expense of Bank's

$XXX as accretion. revenue, I quarter and range will $XX average XX. we $XXX billion, Slide approximately billion margin Starting billion forward-looking of and earning year guidance, including to billion the net adjusted, of quarter in XXXX now estimated provide quarter expect $X.X interest between guidance and Total updated a XXXX the with on in be $X.X second of of full million assets the is X%. purchase accounting to of approximately second second

to expense million non-interest deposit $XXX in of of amortization expected core billion, billion be as is Total Bank. range of inclusive approximately the to Union adjusted to $X.X intangible $X.X related

to XX% costs million and and have basis. incurred charges -- million between and To merger million we tax $XXX in Our quarter. rate $XXX date, the a be is and for anticipate charges integration approximately anticipated expected second of on between of equivalent $XXX taxable

with earlier integration and guidance. estimate billion, We costs continue $X.X total merger to approximately consistent of

year. now I updated the full for provide will guidance

are assets $XXX expected now in earning of billion to average be range $XXX XXXX, to For billion. the

the $XX.X We to million between be now for in inclusive as to year. accretion. X.XX% adjusted accounting the billion, range year expected to of expect purchase full X.X% interest net $XX.X approximately full of million is $XXX the revenue of be margin to Total

as inclusive of is adjusted core Union $XX.X range deposit year amortization related to to to expected billion the $XX.X $XXX approximately intangible be expense non-interest billion, Total the Bank. of in of million for

is full income a XX.X%. be to estimated now on Our rate basis expected equivalent year taxable approximately tax

of and continue million XXXX. $XXX to in integration We have to charges expect $X billion merger to

to I for will Andy hand back it closing remarks. now

Thanks, and appropriately the Terry. the risks economic regulated must outlook. risks of Events these of weeks taking and prudently few mitigated. of the industry health certainly banking have carefully questions about involves and balanced raised the banking managed, be Business overall past

we sheet. U.S. stability the and of At are on strength balance focused Bank, our

Our investment that serve. the practice thing right always our doing communities, we many by in stakeholders, principle guided the management includes risk and constituents core for is

business the of diversified of geographic is combination and A service differentiator and mix of offerings mix breadth bank. a commercial and and full high-quality operational our deposits, institution reach, key and as corporate for depth with a significant The key and base. our of a product customers deposit consumer, broad strength serves

Our capacity times during resiliency deliver of funding sources earnings test ratings, resilient debt high regulatory enable to profile, uncertainty. strong us industry-leading our contribute to results and liquidity available and

the seeing continue of of Union bring benefits already to as As next we a product digital customer share broad work and we conversion successful enhanced month, we Union Bank diverse to ensure our capabilities to set increased scale base. and Bank and are the market

performance balance prudent many has we been of on a sheet. earned as more over been risk reputation Our through have the manager cycles never strength stability and our focused and our

employees that Let on our all our they customers, and basis me shareholders. for daily for close do communities, by thanking a

incredible to and ability our We more deliver have I during service, am in client shown times confident strength environment. challenging product a these rapidly exceptional stability continue offerings in changing to and superior than ever

open now Q&A. the We'll call for

you. Thank

Instructions] Please We question-and-answer [Operator Siefers, now go will Piper We'll Sandler. the Scott to session. ahead. go begin

everybody. morning Good

Scott. Hi

balances for Hey. total I to sort of as through guess, forward, what flows quarter. first then deposit we deposit Lots the in of or be your in would noise moving the get flows mix cycle? this non-interest-bearing total the expectations and of

Yes.

that that is the quite well it in think expectation that pressure with if will to We be going deposits we Our looking changes up will see industry, that. deposits, based respect kind the upon of to just at To on you and fare end be high competition. there's extent competition.

would but relatively say So, stable. I --

and that think to then an question, kind was It's XX%, And hitting the XX% NIBs your XX%. our quarter mix -- the as kind in mind keeping of of deposits example sustain our lot Corporate of tied operational second it's our that helps in have of and both We about kind stable roughly fourth Corporate ballpark. in coming to we Trust that businesses, of it. that a to level,

Scott. things, of combination a it's So,

Thank light I would bank, to you and report perfect. then around, And could X talk was Category of guys couple of days categorization that a for I about a lot second ago. from chatter there's the Okay, we hoping in just expect especially going think when you. be a a of

Fed's your So, sort then asset guys that X size thanks would maybe by just as flexibility to get clear time? be designate when the that in And would to there you to or of to a terms, bank? due expect one? be Will how you you Category

Yes.

Our And is size. more earlier that of whether than decision I driven not than or respect -- will no trajectory Fed end by to the be that be makes that rather X with will Category think XXXX. the asset

continue Again, loan as be manage company, -- of very like growth and to kind things profitable we be going to focused the on that. we're

expectation we there. than there get no get our -- is in right of end So sooner when the But we XXXX. that now

like Okay. Perfect. And there you're time by you guys to basically? feel prepared that get

just It a on earnings transaction. course, be by capital the Union management. will of generation couple we the then, Yes. talked from capital helped Bank the and we're a -- combination focused things very that of And of about, is

growth. be we'll sure profitable We very on have the be that asset of focused making we're and risk-weighted And II. just on -- to focused optimization because Category

Perfect.

Okay. Thank much. very you

go go Erika we'll UBS. Next, with Najarian ahead. to Please

morning. Good Hi.

morning, Good Erika.

question USB I even your PPNR that peers. or well the doubt relative is, very adjustment minimal outlook don't through-the-cycle think the the your credit for to guess revenue was strength. I noted outperformance It's the investors to

starting think have from X.X% CETX. I is, question big that the investors you're

us and new power asset capital as is, when But decide endpoint and generation telling your points. capital to of decide necessarily XX that could earnings note of could your not II and anticipate we organic line basis in the XX Fed Cat the You that CETX what is view? size -- you're

bogey? investors And about I think of thinking to you think faster? if the is growth that to we that, priority year? is then your sub right the so, about higher don't into a question level dividend X% sort as the new Because Andy, getting this is, X.X% to how that going think are category, And, capital

So, Erika, good question.

I'm so, going And from the just to go beginning.

be would that helpful. think I

down a transaction. as were X% came Bank of and know, the well result you X.X% we as above So, Union to

We're Bank terrific transaction a revenue expectations. is The Union our transaction. exceeding

expected. expectations. accretion greater is are The we than We coming under our on expense

value is for positive the So of sure. the franchise

we cost I I which Union accretive growing, have as get takeout strong about the integration. one the Category and about, we even will factors, think is through talked become As think the or component earnings Bank is II, that the accretion four Number three about. and more we of

number credit things Number two sheet have ought focused your risk that is, and this we risk-weighted optimization. transfers, of of transfers, as board asset optimize question. end very think we initiatives things to across for on X% number to the balance are And a are exceed by a like to Those focused to of those the think, on with year. I I be things, two mentioned, we the expect I

comfortable timing, our we II of with makes the as with relates -- end Category the burn accretion XXXX, coupled prepared whatever to no later down go event and XXXX. mentioned, we AOC as in occurs That, me that as additional than no Terry earlier into it are

AOCI, kind of that Yes. things. function back to things of A a different right that's add will maybe burn a I Coming couple on. of would lot of because that be

proactive of portfolio, security at repositioning asset AFS terms looking very sales, and in or sales asset securitization been have -- et sales, the We cetera.

the you that the the give sense, portfolio of gone X.X% in little investment to X.X% to first in portfolio of -- the a Again, the of at fourth -- AFS has about quarter. quarter some end over from duration

hedging in to going to duration reducing respect to through essentially shorten have AOCI that's rate up addition going we of managing we're help continue the interest the So And and to activities. volatility to to with been AOCI. us then environments that,

combination of that going a we're variety of through. things So a go it's to

change as about X.X%, shift year on the Cat is next XX% appropriate an think for bogey we And II? new

the… know, you as Erika, So

ahead. Go

going to regulators right ought through a now changes the whatever think that how analysis industry are be to game about an IV in the and the end Basel occurs. levels with process across categorization capital board and Yeah, the

have plan So waiting environment you in discussed. we what that But just to that look are assuming what new Terry for the are understand what as you like. is place the we -- will

one could just I And last if one in sneak in.

investing. in closest But your your we you debt how at about short-term the a think that size noticed little went pretty times. to still more here. anticipate Clearly, dislocation little a much a bit level less on the about potentially stack you issuance markets from funding you noticed should the of wholesale as TLAC by Terry, was borrowings the I done are rating I plans One hold peers TLAC, billion. senior debt dislocated. period-end several should superior mentioned market? borrowings up really basis, in or there's we think senior until debt debt of $XX that bit how your

learn those we the of to course Yeah. of months. XX is one Again, that things over going the as go next TLAC we're more

range at that that, within we us within and manage, us, one foreign be And I have reflecting would not TLAC. of looking TLAC flexibility the banks, operators I think manageable. it estimate we're think gets case I that get place. how to would out the based I the whether able gives end does a then It risk there. into for there's we and is will range levels or put to will -- up real regional exist estimates too. it wide question are that the how bank that calibrated when believe that profile maybe is upon reasonable with that for very be do be expecting relative something that the respect be G would be just bank. And utilize that the not of a If because But subs? to we we the would that

Thank you.

Thanks Erika.

Please Securities. go Mayo And to next, with we ahead. Fargo go Wells can Mike

morning Good Mike.

market is seven Hi. I believe Well, and consensus is your XX. the to around close PE,

one history. is PE lowest relative the of your in So

earnings. something is I the pause about than concerned So other market that would it,

question will the need issue you to I simple are And So how about capital? guess you, going Andy, for U.S. back, that? confident is Bancorp

on once And to losses an up page is of X% papers, the forced CETX? the are And get reason and you and to if with you're potentially securities then you've other come a buybacks all side, bring articles up seen unrealized the numbers. Fed that sooner? down Could need sorts people would might you stress the you and option recognize I so? do that burn that? heard realize or And What's force that capital to can incorporate issues. confidence about your give. as the year the You Could to hand to these you forced next issue of current part talk you Congress you the be forced your be Any front over color test?

Mike. Thanks,

So confident team, said, get I'm thinking as all optimization, I our our we not I'm that our that part accretion, as burn -- is to our down earnings we the today. sit will will myself can of the entire assure us RWA a including that management AOC point I focus capital at high appropriate area Terry. levels, and be it's for you that a and

we're is So on. that something focused very

I a that it of as to as tell from lot know, will Now changes relates we standpoint. are regulatory capital there's to buybacks, you, a occur likely all

possible, have going that to we not the clarity But anything to around do second appropriate as one. to we're base as getting more year. So have we in on until priority half focus levels building that, capital and of is capital which the capital quickly the accreting hope the

to the But significant capacity. gets losses how of because pretty a going to I as category and our CCAR to into -- learn our that, two earnings in reminder, just the Yes. PPNR exists already performance performance respect add credit of incorporated unrealized that And we upon to with based buffer moving have just thing inclusion and exactly process. we're a Mike, would the the that amount

volatility the I the through AOCI reduce doing of rates. and We're shortening that pay-fixed things that to interest continue earlier. talked about duration just and to rising hedges We

very there's the will think likely environment process. I rate higher they CCAR that incorporate a into

perform scenarios our given I a will we et of the tell in because cetera. to that you that lots environment revenue environment stagflation we've at up better actually business, that hold of done mix streams tend sort and of look

to said, raise. feel we're consideration. into that go And of we So capital Andy pretty taking confident through we a lot like don't a have that

stress losses unrealized this they no? horizon incorporate or would of part that As year's the include nine-quarter test, would securities since the time

in of required the as CCAR That the is was analysis condition No. deal a not structured. the way

average I And It then more too much. you're certainly your this short one, guiding you margin but before. down up quarter, deposits. went brought not last non-interest-bearing know you're that down than

the I You guess, deposits down said this you decline non-interest-bearing guiding X% given X.XX% versus, quarter. wouldn't be X.X% to that Why even in further quarter-over-quarter?

different XX% some go be think end business, at couple that that a the particular again deposits, of It's knew flows, total again, of Part of of that of mix total relatively looking this that back mix et and be cetera. also you deposits door or were of trust closing the seasonal the our part One we deposits relatively down. NIB around PurePoint, the the will if decline up is, out in stable Yes. the going just things. ties will quarter stable which the but of to to we because down are MUFG to up

things those the why reason tie kind saw in of to this the decline All we quarter. of

Thank you. right. All

Next, to go Autonomous McDonald ahead. we go Research. with Please John

Hey, John.

just Terry something talk Is little that will to Can opportunities, on RWA getting kind before or a help the that year? points CETX. is of mentioned you basis to Good Does end of rely on that the ask RWA next Wanted hi. morning, Yes, by on mitigation benefit? the that the about above XX that X% you the that? year idea XX bit guys. of the

core Yes, we that we'll generation, see think that is earnings the the capability. accretion capital the

not So RWAs. on it does rely those

earlier. the through above beyond of strategy talked will that. will that capital part overall we and that go So be that about That's Andy a RWA optimization

happen end target? this you year, that work as year next towards and maybe of XXXX of you benefits of the end capital into should The help towards

year will Yes, as this well next into help Absolutely. it as year. both us

tools, year. kind and optimization through. going quarter. in fourth a actions in we'll and over that We John, of utilize As quarter We those of you things Cat took the well the fourth been some place of to a we've process the will, go a preparing lot part put third know, if of as RWA for in you for lot X we're

Yes. to by just The the you XXXX, with of Terry, right? it's it Fed So, And XXXX, any would of Fed, to end correct? to that January this the XXXX color end happened not the like hasn't tell would prior effect they're there, tell clarify, even right? take going you on

That is correct.

And natural quarter then down of where idea Okay. Obviously, down, AOCI on that with came of you this again. rates. burn-off any help might of pace of not year down? a AOCI just XX% or pace expect Any help reminding kind over of the the the And for what's burn world rates the are the But coming kind two? in that duration of a that? us

The of AFS now about portfolio right again, duration Yes. years. is the the -- well, X.X

rising to you of interest down with kind some fairly And the rates of we've that again, So, put respect without reasonable, into just take rates. interest if burden AOCI. consideration, will be even still

Thanks. Okay.

Thanks John.

go Next go Pancari Please ahead. with we to Evercore. John

Good morning.

John. morning Good

John. morning Good

within of the that? Thanks. is benefit And a and then just business as other divestitures On flesh little at that the RWA bit considered us know kind can potentially mentioned of the more RWA little maybe risk lastly, that on you're looking transfers. result to of of materializing and a -- back But see idea or give you you if actions? you portfolio sales magnitude out a you maybe there? maybe transfers I an color credit or the what optimization, can the

was? the of question part second The

Their business sales.

we've in number of sales. we're years. that a least look of Business I sell. that is last lot mean, times Yes, this several optimization the things and of may different at point always at at time, to obviously, businesses different a terms at portfolio that we in over something we'll particular doing done look

So, that look obviously we'll will at. be something

securitization portions rights the But asset that mortgage We'll look we quarter. makes we'll a servicing where have selling a like we at sense, fourth of in look that take did portfolio. sizable at

put on place -- on moving of There can. and when put of that shelf transfer are start have to sort we of when both we're into a we have we whole ready variety we structures kind forward the risk

that as opposed a capital-intensive capital-intensive So, of businesses well businesses. balancing I the will variety toward whole think to a we mix I at less would different take it's growth what as as in, things say, look

So it we move whole John. a will be of forward, combination as things

thinking RWA do a estimate you the And in that optimization magnitude targeted you're of the help about us strategies? from have how contribution terms way to

we place the So are that the we reflected strategies provided. that in have in guidance

So that that would conditions guidance, the not the given economic scenarios change update and continue that, and see. and to we that we'll rates

as is appropriate is of banks initiatives capital and precious forward regulatory a the is number we environment. for to have more we think us, a But to this going mentioned, which for Terry priority all the as about underway, because thing do, I think be

of potentially coming down Got pipe. just other And it. And terms in then, one more me. for the I know mentioned you regulatory

on rulemaking proposed of the phase TLAC. advanced the in already You're

capital just see the FDIC front know on? down the about commenting that I other the talk anything around buffer, you regulatory pipe? And can you potentially efforts, potential about down on AOCI but worth can mentioned the talk rules, you coming liquidity stress you changes had or

just number of about we mean, different a be TLAC, I talked of mean could it mean, I levels I things. Yes. capital.

important talking domestically banks. You hear them about significantly

the level stress of in increase of piece another So buffer the capital it. is

I think another one will around LCR. be

think test goes And sort of down. to I to traditional up stress used rates say, unemployment I where back but incorporate, do. would have then, They'll come of, say, what kind will in of I a they to the and kind would CCAR scenarios, that of process, multiple what one they'll be go multiple kind

different you we think think, credit would loss withstand variety a be risk scenarios, will one able again, one I experience high either more, like stress. our profile. of And feel based just rates those, Another of some we relatively be form of upon the stagflation, stay we've run and and I to where

it. Got

Terry. Okay. Thanks,

to can ahead. Please, we go RBC. go Gerard Next with Cassidy

morning. Good Gerard. Hey,

Gerard. morning, Good

Good Good morning, a morning, Terry. question. have narrower I Andy.

I eight. think it was on slide

I talked more it Because, referenced, guys in did versus Bank non-interest-bearing? X. was You more know in you in that inflows following about the consumer California. the as of primarily second, that have it March California deposits was then And obviously, Union come commercial franchise? well. been guys versus The or impacts you located interest-bearing

the Yes. Maybe, of in terms mix.

customer of actually that opposed so So XX% after saw lot within getting trust by progressed. inflows kind to month the -- of the the offset account March of commercial saw more corporate that right equation, but side of up opening the we probably kind would a X, we ended side, say, as on as flows on I side rest of again, seasonal the on consumer corporate

I say at in when is March actually previous that customer side, accounts in the to The net that, a would California -- other deposit in nice months. or increase new look we consumer relative thing pop I saw and specifically

probably that. I So I had. benefits think with you seeing we're think that that that actually addresses And questions associated the some

then underwriting you. up and you well years, Thank CCAR over loan tests And done guys quite over always your have the credit. in portfolio, show years the the well on you

have area, be Any don't big credit banks be helpful. very are that real area you talk seeing exposures exposure problem. a a have potential interesting in to big color to so would I find And particularly in What portfolio? to that commercial guys to the estate commercial office don't real it could always that estate. And you

Sure, Gerard.

all, the first portfolio So stable. very the rest of is of

rates around think the to starting I a the normalize, behavior office I maybe to some expected. is little charge-off sponsor numbers at the rapidly. was normalizing thought think rest what activity an of us And with occurring you is for of portfolio so of industry cause real but metrics, the within as tenants, behavior forth look going of our we there's of to area occurring is If stable do focus more estate. and and changes. pressure do non-accruals and we all the in That longer some be process in acceleration changes, going because credit there

So focused can you on that we're imagine it as very well.

very years. have a the been last lot on very, that. office of We not around over put conservative CRE We've many

think an large have but emphasis area do you are focus as I I say, be of a do exposure, and So don't it's pressures we occurring. a because of there to going lot think

Thank you.

Please Bank America. with Poonawala Ebrahim go to go can we of ahead. Next

Ebrahim. Good morning,

question. follow-up a had I morning. Good

mentioned think can seen if against five-year back few AOCI briefly We've the you on again elaborate the I I was last in think rates Terry, you if come weeks. wondering, about that. hedges I spiked.

in downside the or to the to you just to in increase spiked rates AOCI just us risk talk if basis to of points? expect hedge against terms And that? another which what's an capital XX extent Just

Yeah.

So again, order we've actions been taking a number in dampen the of effect. different to

the first in As we long which fixed putting pay of shortening selling did end then in the place were appropriate, nicely, duration, quarter. swaps I I said, guess, the And the curve. against very securities

over be meant in of rates I bit a the dampening some would couple basis we've a quite quarters. the that five for -- to XX-year of up moved the example, of sort extent, We obviously, -- and AOCI both XX up move course impacted if So the space. in of of dampened effect points, rates -- last but

Understood. And betas. just going back to deposit

might a XX% XX% the where downside much end that risk closer Fed you on risk? a X% be shock the to think I we've XX%. actually talked relative sure system, terminal all had mean, How risk? But handicap quarter. beta What's up. obviously do of betas mean funds analysis the to to the do something about maybe ton XX% turning of to plus. this I higher, you I what's I'm being out you

The a Generally, that's We've is those sorts X% source community different into are getting deposits done funding. competition of is We've their for in it right. markets, over stronger. occurring, smaller of of those And because banks primary Yeah. And that's I taken seeing We're analysis. is where entities, you consideration. that some lot markets. that things. for mean,

to in of at deposit And consideration that into beta. XX% all kind terms going occur. been so looking that's taken of has that of But

who looking very and things. the If the again, et betas competitive corporate on especially against, our articulated. flows which tracking confidence equation business, the side But both we of our terms you market to in us pricing end that of is is up at that, end now, while deposit high and respect that's institutional looking sorts fours. at up rates the why with those and end of is Right up we've with we money of kind gives it deposit competing cetera. in And is,

deposit and year? today don't a you pricing of in see at consumer the mean shift I the major start maybe it. versus Got retail

if basis I up with But on comfortable even that at. depend. here, example, to going still deposit mean, or betas. implied up Fed, looking a pressure It's XX upon or mean, would for we're depends Yes. goes it I bit, pretty another XXX feel more obviously, points the where environment. the I end up rate from you put the if at market

you. Got it. Thank

to go Bank. go can we Please [indiscernible] with O'Connor next, Matt ahead. And

Matt. morning, Good

It's Deutsche Bank.

to loans you is a the I us Bank very basis. it can on? were on the -- reserves took got for you You've that you impact adjust guess, loans Union when strong handy? have marked you what at them value if first, fair if remind that stated

Yes. first you? part I of question. the missed Andy, the do

you're reserve don't you're if I the to it Union think, what on ratio or -- think and it to trying understand impact. an Mike, has trying loans is. Bank has -- I Matt, impact our to major understand a

one. Not a significant

rest Okay. broadly reserves you mean, think And thoughts your the of period on your the guess year, just as current the obviously on. taking like at then about at best you're speaking I

Hey, Matt.

It's Sorry. to hear you. hard

can now? better me hear Sorry, you

Yes. you, better. Thank That's Matt.

Okay.

reserves from in Sorry the about asking loan I here just base about outlook for case. the was your that. loss

Yes.

talked outcome for preparing our So is fact we're about of has that, the exist. expectation sort economic might again, any Andy that that

early a or into marketplace, you I this recession, some probably at late look of form the next the that. And kind up you if consensus end softer at of think year. the implies, sort if market I tie year, looking recession of moderate would in

We respect make to through is look look downside. side. scenarios. We would rest reserving Only call our multiple we with I the it's at and case different XX% towards scenarios. at weighted assumptions the what go We process, that. it of to of wait When five we base conservative the

good reserve levels we pretty So about are. where feel

kind how economic we if different. But a pretty good feel might above beyond little saw about that being expected Obviously, is we of be bit what shock it. and we're thinking about

maybe I XQ, spending through if then And a guys, payments Great. your trends squeeze in lot. could obviously just throughout business, see on Okay. you

any on April? comments maybe in trends you. so observations throughout any Thank far And of the quarter? Just kind

to our to sales, merchant these things business, XX%-plus, to high strong corporate for Yes. single-digits continue processing The a to with end in our respect pretty we you In business. our if any payments -- very roof. example, through mid pre-pandemic the see payments Payments strong business, of is comparing up

So, a we the continue see good spend business. in to

to disruption, watch. concerns softness retail sales you around add? after Andy, early whether the really we're to say was to would that. continue would we'll really a market It's to that but bit or the disruption, there too in that going watch which more was market of whether a that's I or continue not the tell trend some what

is a Airline math, be and at lower is that but a in sales Yes. continues airline spend have the very high, thinner. is that very, rate, a And still to to reason the growing in between because spread of just bit growth which it's differential growing we little particularly revenue little a growth retail.

but came Retail strong. be still bit, to a down continues growing. travel So,

you. Thank Great.

Sure.

go Chris to Kotowski go can Co. we Next ahead. & Please Oppenheimer with

good Yes, morning Chris.

question. Thanks Good Thanks. morning. my taking for

wonder also plan burn portfolio. let and managing I lot You've given bit discuss just to you down could if kind how the of anticipate the you little side. on held-to-maturity you good us of detail Do a AFS shorten? that a

given are burn another there of just month. in does each you And How portfolio we quickly in payments get rates? mortgage decline to a that that's lot see backs down, the lot need curious I'm just principal case do of maintain they or duration and that a that

The you what more the up how to Yes. we see of at. of HTM ends nature sides duration of simply is the mean, it at looking Yes. quickly the I the because side equation. down on and obviously, that look of both burn really tied payoffs

I we of of the going et at just duration function we think into size more a what that's that downs cetera, want and the to the consideration time. -- look over but take in portfolio, portfolio, in have investment pay of level will to as HTM be payoffs

duration the devices. But and directionally mean let portfolio just your own next Yes. couple the question a to in of burn guess the I you'd size left down quarters, -- shorten I the of probably

Yes. Absolutely. Yes. Yes.

you. it That’s righty. All from Thank me. Okay.

Thanks Chris.

we Next with Please go Usdin have Ken Jefferies. ahead.

Hey Good morning. guys.

we for XX to you points First in the versus credit. ask the On on in comments release first? CRE the per charge-offs outlook delinquencies as we and saw your data about earlier, quarter. we the of your go and see What's about that question, basis, were adjusted forward NPAs you points increasing. charge-offs I this the basis made And some XX just basis an want

probably year continue to XXXX, Yes, I throughout of into expectation XX basis mean sort on will that the our is similar normalize a and pace.

points I think the basis fourth quarter. in it's XX

will progresses, of that move of that, kind continue year up think normalization. as I the So, just part to

Yeah. Understood on that.

can thoughts Thank on, full you Okay. mostly the Obviously, just side, growth prior year given any the side your well of any, were versus had a of fee us underlying you can think to that's outlook? of And adjustment and give the then is kind just you. it's I growth you versus some rate fee just of But change the on versus just outlook. back coming where on if changes into some NII the and made NII kind that, We in back refresh seemingly that prior the expected guide. given us which modest changes just the outlook.

and the well were that XX%. rate made To of rate about reference your the curve, point, NII, increases Terry most changes it's rate function the as the pricing environment, beta in a of in to the approaching of the expectation deposit as

change So of in was most the NII.

follow-up. And last just Okay. so then

mostly expecting outlook year areas would you're be payments it decent then embedded fee expecting that in? some the are to other to the pretty is growth your in there you business, still growth, seem are And then. that driven good for or by So see

they're diversity great all and doing of have sources revenue We a well.

of X% basis, payments Terry up levels as talked double year-over-year spend digits, about, So is good. approaching are

categories, our and a have group had across driving of in well. quarter Commercial well. this the environment bang is doing terrifically in Trust a and We that just is as just revenue doing growth Products

and mortgage. – So

many So and stream. that's the There different sources fee income. value revenue are of of a revenue diverse

Thanks, Got guys. Understood. it.

Thank you.

JPMorgan. Juneja with Vivek go to we Next

Vivek. Hi,

accretion know thus mentioned together, trying you it just deal, of I a Andy, couple I expected think better this you far? A clarifications, talked are where seeing you Terry. you've just Hi, Andy. lot, the from better Hi, to all than had all going is that pull any.

Yeah.

XX% we So -- about fourth actually talked expectation and of that going in X% that through the the better. this, returns the and Vivek quarter

base, if first at and base picture, big quarter, it's in XXX that. $X.X $X.X or a about look PPNR had so double initially look $X.X so so a Bank billion billion revenue and -- the the expense you So Union it or the thought I deal, billion when we at and

rate of plan. continuing deposits in little So on expectations our our are expenses are and be a because of value to the this principally less, are The environment. efficiencies the stronger, revenues on

adds So up higher accretion. all that to a

given Net car higher accounting accretion in the deposit negative the actually net intangibles. is purchase

So it's strong. very

Right. I And that's you -- that's until anyway. mean, before that integration second finish quarter the not you even

Yeah.

right. That's

That's correct.

Thank right. All you.

we Next, Erika can go to with Najarian UBS.

Yeah.

I apologize. the rank I question had think over the if as in call. priority? prolong you stack growth a Andy, compound how by about CETX question. dividend asked year-end, a to just I way, accreting you follow-up Sorry, to would so X% one But

priority, a Erika. growth Dividend continues be to

continued in the capital dividend. numbers expectation math. have to The the is would growth not hugely we accretion dividend our material growth So

numbers If you component that, is negative a downturn that through relatively go the a capital. on small in of

talked includes strong a about dividend. I expectation So that expectation the that of

you. Thank

And next to Mayo Mike Securities. Fargo Wells with over

Mike. Hey,

of recession last do about that low reserves think was an environment of charge-off range accounting, stay about extent unemployment. this the with even started, were that? had before wondering or you if release you're does some normalization? with quarter, And has what the the the X% down for mentioned even you you And Hey, done how given I Hi. reserves update mean you reserving that. your an for CECL

yes, it comes up case little kind the of uncertainty what know was said bit we to. I is and a that had weighted Yes. our the Well, today X%. about quarter was think At average. the see given regarding it the weighted But -- peak, that's wait average we'll of X.X% in ends over the up peak happening about I of what was last It's it. economy kind

what very we to So had similar before.

what Okay. And soft hard landing, of your outlook recession, kind for the thinking? you're economy,

of recession year. two-thirds sort one-third downturn, later But CECL base So Mike, of a mentioned, we a Terry soft half is a accounting a assuming expect moderate recession, as our this case.

bit reserved scenario. we more So a are to downward little

you. Thank Okay.

bet. You

will no have I time. Please at turn this questions further we to it now back Anderson. continue. George And

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

concludes today's this participating. conference. for And Thanks

may disconnect. now You