U.S. Bancorp (USB) 19 Jul 232023 Q2 Earnings call transcript

Welcome to the U.S. Bancorp second quarter 2023 earnings conference call. (Operator instructions). This call will be recorded and available for replay beginning today at approximately 11:00 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.

are Stern, Dolan, our Thank With Chair of and President good Finance. and Officer; Vice Vice Chief Andy and President Financial today Head John and Terry you, Chairman, Executive Cecere, Officer; morning, Executive Chief our Senior Brad, me everyone. and

call release, a and today's press Form with remarks, XX-K, assumptions to that forward-looking Andy during analyst are Factors uncertainties. usbank.com. presentation, and slide described referencing presentation. prepared reports be the the at and A initial on SEC. available in release, During that our any our subsequent of and are will on earnings our can are Page supplemental file schedules website made change on of presentation, current copy subject materially our Terry forward-looking our statements note X risk today's Please

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

I Andy. call over to will the now turn

Good morning, everyone, on joining begin I'll George. X. you thank call. Slide our for and Thanks,

per equity than The $X.XX one XX by our the was highlighted common of of to in totaled balance Earnings conversion items. Bank share ratio earnings $X.XX a the notable second sheet higher first quarter and meaningful quarter, in basis share accretion our successful points and X.X%, increase quarter, actions. per second Union by tier driven including optimization

share $X.XX. Excluding of the earnings impact items, was notable per

X other results key and reported metrics. income adjusted statement Slide provides and

deepening primarily pressures our with was lines, Net of were the disciplined interest compared supported by income across on as Our first expense customer business continued new growth results quarter, pricing. to second and management. account deposit due quarter well lower as relationships

fee momentum continue businesses strong. However, and income

strengths both of is our the model deposits. and our a of operational consumer and mix stable that funding business includes One wholesale diverse of

higher X.X% deposits pre-pandemic such our Credit by are billion, $XXX normalizing as but decreased operational expected. period largely our corporate X.X% This seasonal trust linked-quarter, versus reflective areas balances were approximately and quarter, average in deposit strong of levels, businesses. end remained banking by while or flows as metrics quality deposit

by our quarter, approach loss balance loan to sheet credit strengthened prudent our reflective of the risk reserve, increasing This management. we

Slide provides metrics. key performance X

Excluding Slide return assets notable X on tangible items, our average conversion about of was completed and return summary our a was equity Union X.XX%, recently Bank. XX.X%. provides of our common on

June. investment on conversion credit and more I'm were systems encouraging, strategic weekend, Memorial deal. this Early indications and and of trust today transitioned cards, main our platform even confident our Following accounts, merits all are in Day to of financial the

opportunities, our cost quickly We expect capabilities targets than highlight and our expected. remain the Union continue intact. Bank meaningful to revenue One more customers synergy digital are adopting is

half one just this conversion, XX, and June of to a over As million we've month continues number enrollments digital had a in our following offerings, product grow.

progress. the - Our continue of services updates continue on Bank and teams and to products we all we'll to our our of working as customers diligently are Union to overlaying leverage to provide provide value

over call more to the Terry, turn provide on the quarter. now I’ll who’ll detail

Andy. Thanks,

balanced the for mix and bank. to Slide source of to our corporate be of a Turning deposits X, key strength commercial continues consumer,

increase billion linked-quarter. billion on total on basis, the of highlighted, in or $XXX Andy As balances declined while deposits X.X% period representing a ended ending deposits, average $XX.X with we a X.X% linked-quarter a

a dynamics of to conversion. to bearing from our period non-interest to both Union deposits Bank first change accounts approximately end industry in percent and the quarter, quarter, retail made we of due at XX% XX% This declined

a was the by more conversion volumes and customer-friendly To an to a interest-bearing driven us. to benefits. product mix shift, customers impact customer better the decision This Bank benefits product, our about will change on other checking half without of as well half Smartly experience, provide a increase Union other Specifically, decline retention offers primarily material Bank margin. create checking deposit solution, upgraded while related which our by as a positive we was customer interest net in

rate across the cumulative and but be significant deposit previous expect slightly pricing Given to the the current in mid competition volatility the than interest in we industry, expectation, this deposits rate range dynamics by the with cycle, consistent the higher for XX% industry. beta deposit of our now our end

loan which real X% average this of flat of total XX.X% XX% quarter total up exposure a loans, loans total on with commitments. our Slide of basis, Commercial represent X, On were office year-over-year. real commercial billion, estate and approximately linked-quarter was average and only portfolio, loans total $XXX estate representing X%

amongst well a districts, exposure balanced office is of and specialty, at suburban, business initial and XX% ratio weighted underwriting. approximately central average Our loan-to-value had

macro current we real portfolio commercial for ratio loans well estate X.X%. Given the reserve factors, as other as considerations, increased to office

for the of auto additional securitization $X.X an These of balance as optimize earnings provision largely driven million sale charge approximately million common Slide earnings $X.XX loans. loans, as summary per for profitable related charges indirect million and by in of after $X.XX enable of returns. as notable adjusting to Notable diluted amount the well the provides effectively to quarter, mortgage as well we items $X.X billion the diluted per the capital million more included associated or the detailed of $X.XX $XXX merger $XXX sheet quarter for related a balance to moves growth with Turning actions, X, to share this optimization quarter. acquisition of billion share. management and position share $XXX of items $XXX or reported sheet Bank Union integration-related Bank, and per Union for us a XX Slide more of

of X.X% XX, to net a basis, acquisition the $X.X and ago impact on basis year rising Bank. XX.X% rates the due equivalent Slide a fully taxable Union increase billion, Turning on decrease income a interest a approximately a which represented of in to totaled linked-quarter from

the second somewhat partially lower in rates is interest ceiling the Our levels earning declined than to in from the linked-quarter concerns The on higher which assets. to and the debt expected. due maintaining higher X.X% was pricing primarily offset deposit pressures, given net margin X.XX% by decline quarter, of cash quarter impact first

services, revenue by merchant increase highlights Non-interest income. and on product in higher basis, basis, driven or linked-quarter credit services volume, processing trust Within non-interest revenue payment million linked-quarter income reflecting revenues. driven fees, or in XX a by X.X% and increased increased revenue sales payment XX.X%, of trends of $XX commercial $XXX an margins revenue, million million and a growth $XXX higher on Slide $XX management and investment and $XX million quarter. or Compared fees a increases growth income debt business by company non-interest or $XXX driven by million of year ago, core or largely X.X%, in investment management activity fee capital strong increased XX.X%, income. driven for higher with driven and by of commercial by were the trust revenue or pricing. Also million million the markets noteworthy X.X%, driven $XX in core product X.X%, card

loans as March Turning XX, be strong for X.X% expense million year linked-quarter $X.X second from of to was but at the X.X% $XXX estate XX, expected. X.XX% to Slide company ago. and to June X.XX% in shows non-interest continue a non-performing and a basis. credit quarter, a on other normalizing Slide $XX which at charges. as million or included the assets trends, The reported are XX, XX real adjusted, perspective, merger compared ratio which billion Non-Interest of quality integration-related decreased totaled expense, historical to and

to when net of adjusted, compared X.X%, of quarter and as second XXXX from X.X%. increased higher as points adjusted, charge-off Our first was basis quarter level a the ratio X.XX%, five quarter level second

$X.X or June Our allowance for X.XX% billion credit totaled end as losses loans. period of XX, of

to points attributable the with balance CETX basis additional basis sheet ratio, XX, low impact. accretion of linked-quarter and distributions, increase in XX neutral The to earnings risk-weighted our with optimization Turning and CETX and reflected the capital XX ended to basis accelerated a asset of of initiatives, an capital ratio X.X%. XX Slide points we points earnings other actions net quarter

of stress which charges, last and of billion with subject to During of from economic is the to test, Despite we results synergies merger-related buffer the scenario limited stress requirement X.X%, additional recognition we Union XXXX Federal more related the Reserve’s stressful year. an cost year's $X.X the unchanged capital minimum and Bank. expect quarter, this be of to received

$XX $X.X the in billion, expected of million of Total billion adjusted $X.X Union provide approximately the income to accretion. approximately core approximately of related deposit acquisition. $X.X accounting interest full XX. year Slide updated with Total on forward-looking expect billion and and is $X.X we as estimated quarter Starting will guidance purchase intangible billion non-expense is net XXXX guidance, of $XXX between million $X.X amortization be revenue inclusive third including third to be third I adjusted billion, quarter of quarter. as to Bank the range to XXXX in

approximately on Our basis. tax to a taxable is income adjusted XX% expected as be to equivalent rate XX%

We integration $XXX charges in the expect merger and quarter. million to between million of third $XXX

I for will now the provide updated full year. guidance

billion, For in expected be billion, of XXXX, as $XX.X be purchase $XX full $XX.X million range inclusive accretion. the of intangible year expected of $XXX income inclusive $XXX billion amortization the core as the to Total in net to deposit expense to year range approximately to related for approximately Bank. of approximately to billion of expected billion. interest $XX.X is $XX.X be adjusted to now is revenue of million adjusted is Union accounting non-interest Total

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

We total million have in and consistent $XXX earlier integration continue and expect to $X.X $X of integration billion, of merger merger charges and XXXX, guidance. to approximately to billion cost with

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

The up for XX. finish Thanks, strength remains our I'll our on Terry. a company. and of sheet Slide differentiator stability balance

indicate, diversified prepare strategic economic and ability we Category key disciplined are we Building our growth environment, remains a challenging approach execute our capitalized credit confident risk opportunities in our management. for for prepared II given more designation, top strong and we to initiatives. priority mix, as to a and As metrics liquidity, these well and capital and potentially on business consistent are

we Bank set and business consumer Following meaningful opportunities new the to reach, the banking, by entered and scale, of growth well-positioned provide quarter, management million Union services significant second the customers broad industry-leading X.X opportunities our commercial addition of business of revenue we as a with provided products franchise, Across Union capabilities. year and the a customers. from and small with banking increased half consumer see the to conversion to successful and digital business, broader Bank of this legacy national wealth

be the savings Additionally, still synergies identified fully into head are million to run rate cost in XXXX. reflected of we expected $XXX as

for exceptional to our all Let our stakeholders. our service they that that close to clients choice thanking us valued of employees a makes do partner all for by destination help a me provide and

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

Siefers first Scott Instructions] [Operator Please go with ahead. go We’ll Sandler. to Piper

quick out with or just expand sort couple Maybe start of could And view. how pace Category Hey. light get just quickly the here, from I the we in your a II of refresher sort there was ideally you on you under capital. build hoping then on of targeting, was second maybe when a especially - in presumably quarter. what how the of thoughts thoughts and you're might rules capital just anticipated in

thanks, Scott. Yes,

I ended the X.X% up at quarter. of think CETX at that end we the second

the the horizon. earnings well kind originally accelerate of impact different of execute accretion. still through function to distributions, a which vast because that year, We would a of neutral some accretion preparation over we on to basis this had earnings number a I and be them we'll end now to in have felt perspective. the and from articulated of a year position actions XX as of which that's to game very of like the end in rest be We XXXX, points expectation feel pull, about the in be majority we II plan asset time year, Category if have could the were confident XXXX, to least we’ll what on that able optimization be be but for some X.X% that risk-weighted of end we is the order some we is lot low of of two-year risk-weighted call going of a asset necessary. at this that fully can We to adopt of at levers able to this to at to continued year, by get by net able by be of as Our least X.X% a

it, the of sort any those just right, the the And Union change curious the interest still given or commentary deposits? guess question for could of thoughts All you. optics NIB the runoff half I Thank being expect as then where the to of maybe in customers. light just done rates - is a that out, maybe non-interest-bearing or you the firm, of Appreciate perfect. about all would on Bank by Okay. out - of just pretty deposits. and fleshing continue about flow But the driven broader product integrated balances you would see much total entirety are, the percent you as where on

Hey, is John. Scott, this

So, terms Bank $XX mix, DDA of interest the We Smartly that that billion checking in of moved into illustrated over about you product. correctly. deposits

about And so, that think through a but that kind we're a or we quarters, go we about land that low gets the us point It'll as at think minus be ratio. where of to XX% here. that's We of course, plus here. we

Perfect.

Okay, very good. Thank you much.

with Pancari Please go John ahead. Evercore. to go we'll next, And

morning. Good

also non-interest-bearing that of growth that possible. you help behind well, margin mix Regarding deposit overall that your income expectations, just maybe terms as in guidance can the well XX.X growth as assumption non-interest unpack the if the XX, Thanks. guidance and loan beyond provided, you commentary of as to

Sure. again. John This is

So, say would things of provide a maybe context. couple additional I to just

As a Terry to basis comments. the ending mentioned big about we loans $XXX in about about then billion. of you in start given a had mortgage X% talked deposits, auto our a saw - sale we up that and actions, on saw our with X% our had capital period we the as as drop within increase we results, And point our

pricing stalled I on bit as be loans favorable little And disciplined those cards forward, here bring in more at think less as a on little will coming and bringing there's bit given thinking. mortgage addition, moderate for as things, in and a deposit be of in in we that that wider term And about we mix are a I loans, the of in near bit loan And go so, our think as little spreads, here. line is although the growth we have the ability and less those that to should loans more new as we're demand auto.

and that. So, made I those guidance. as about to are net deposits then the income we interest think I well, takes puts can came of you kind how and a there just the on with comment up And touch

our businesses that as I would deposit probably more all had even trust of the we're think as we in bring in the and corporate in that industry, deposits large typical a we quarter seasonal side, being think on the deposit commercial given tightening uplift, - other decline though second we that anticipate line from normalize, to which are balances, with a the industry. headwinds quantitative things in the we and for sorts of begins

our that the the mention, stable question few And I rate of rest thing relatively the then expectation a kind looking other down now of at probably you is just market is through quarter the environment, John, and Yes. would regarding year. NIM asked in the points implied just basis a third

the turning deposit of beta confidence about in just lastly, helpful. the just that thank the high number to into around And your of confidence and No, have XXs looks banks like of we XXs. XX%, that gives expectation very in a what you through-cycle XX? are That's it. beta Got the you. through-cycle

Yes.

to flight things we'll think goes we come in have - that So, earlier at mid-XXs XX% where given the a where we have of beta. calculations coming of some we're we're indicating loans the And did well, we We just actions. is that current about think capital have - back looking the I talked down - big deposits. it about And shows our land. at in we're

deposit there'll our pricing. betas gives all go but But guide. course, as little it, flexibility pressure as relates that into just kind through of so, baked we it with that us be of more a bit is to And mid-XXs

Okay, great. Thank you.

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

are you? How Ebrahim. Morning,

Good. build. just big wanted this How capital topic. up are Good you? obviously to on I morning. It's follow a

of think executed things It mentioned I seems the like were on As quarter. you neutral. we - I remind RWA EPS think about some hanging fruit, this those low optimization, that future you guess,

but back us As into should action hit how that's about? that these those actions I and some you be we assuming from standpoint that going from for should to to, an think let's punitive we your think the sense the XXXX, look RWA we in EPS more some half, in much ‘XX, EPS of guidance mentioned think now ‘XX? forward are and a about give just optimization year-end of how between say I'm

Yes, great question Ebrahim.

bit take. maybe of an types kind example down a provisioning winding to be likely let it the are is, different in unpack little of terms as of to a that we're me actions business. cash One, so, we going of And

very big risk-weighted a but it an earnings assets. perspective of from that'll terms in of significant is a pretty user that impact So, not capital minimal because have it's of business,

the that's MSR, that So, of to how asset enhancing our opportunity basis. servicing low on be over similarly we several now kind other sort out next look that size We'll California which We'll number portfolio sort think rebalance our be improving focused minimal a to continue mortgage related and kind our reducing up setting some relative area the a just in portfolio. some of of one more of to continue one balance things, there's risk-weighted the it end we're on of asset well example the still there or should will the the impact able improve loan is but impact, our us position done. programs structures portfolio working not risk-weighted of of us go-forward to of And mortgage in right significant. is again some to terms asset area course the position. then of of that neutral of similar have business. sales securitization Bank concentration And it's at of But that of the Union size to exposure, to importantly, year, other overall quarters. kind that continue to the reduces mortgage positions. thing an basis mortgage it the allows to we've That's the Again, sort has and on sheet probably other a and of on between of

Clearly, a holding one new all under adding of today are That's should And for Strategically, think levels ideal think much take constrained market Give Competitors one us balance is, Union sense capital you your follow-up. picking how share, sheet just growth, how helpful. as maximizing be environment of sort factor accomplish a just of share. pressure. the this well. I those. about USB getting to capital just market the question to up is franchise, quite up customer a of restrictive of much - are

Yes, go Andy. ahead

Ebrahim, We're focused So, say profitable growth. a it's constraint. wouldn't on I

a have ours small I'll capital penetration of is allow grow to We way. legacy business give Bank are businesses a diverse bank. about of consumer XX% credit and efficient service about on that in couple you single card is half products US customers. of examples. The what I base, services a set us Union Their the mean, customer across the

to broad set way, a have efficient very given in product the we that we So, opportunities lot have. relationships a deepen of capital

focused we're and feeling is an that constrained. looking So, much forward opportunity very not to, that on,

businesses, much Yes. the capital be efficient, of service focused sort those relationship fee-based And Andy on sheet said. many which of are as balance will as today, our single on deepening

questions. my Got Thanks for it. Thanks. taking

Usdin move to Jefferies. ahead. we'll with Ken go Please next, And

with Page just the at you good trend good I'm quarter. slide fee guys. what's to where for you on ask looking going the first I growth result Hey, just across is does slow rates on economy? a Hey, payment you, how all ahead, like the you as XX, to about spending Can the look morning, year-over-year look versus a the to payments it this expect as the quarter. did and given slowing corporate just regards really wanted consumer potential talk

the that question, But course not. has of recession this is held not or at from the excess that really or is we're whether past seeing in some of in we point time. think of have some the the a $XXX,XXX savings macro that particular into things come broadly actually that's to and move consumers I down pre-pandemic perspective, Yes, a levels

itself So, I manifests that normalization spend. consumer of of in think kind a

merchant strong if out softer a soften, was consumer we seeing what of taking information dynamics than to We're came equation, very spend So, those but yesterday sales, business the payments slower, expected. are travel I bit where amount sort sales, and the there's softer place. in you same side sales expenditure still starting little retail of maybe normalize that the for fair of was a retail in seeing that's will. of some example mean,

to and spending customers maybe little choosy So, where as certainly choosing their being more are a they're dollars.

dynamics have is maybe in softened the Some have improved. some actually that businesses the bit, the a sales of margins we're of seeing while

the a on little card credit down So, the of bit, a little the margins equation where sales side stronger. have come are actually

sectors, On margins the because corporate be has the get continue to reasonably - of to at the corporate the commercial corporate equation, continued T&E stronger strong. side spend in payment

mid-single to it'll on upon kind what the digits of single but the seeing, forecasting normalize, acquiring equation. of of year out So, range, we're and side we in kind It'll the revenue high the high this the what point kind corporate of on single of revenue consumer digits, card in rest particular merchant that fee kind we're behavior. that at equation range. kind payment on digits of in still of time of side that That's based normalize of sort credit the continue look in

losses, unrealized you Got one all like forward what that pull quarter rates looks also point? ‘XX just give capital was to view if the can you your number Thanks. on we to right so AFS the have of, here, from perspective, year-end same inclusive your it. look this par and stay just where as just of follow-up CETX And that us,

Yes.

XXXX. we our to kind calculation of II, So, target upon under X.X%. if end levels actions, our of to you CETX expect And capital get were all the been by of to into Category the at based AOCI embed that, it'd the

We get plan have to be order the able game in there. to

confident about we So, feel that.

do does have at the the maturity. risk-weighted to AFS par the asset track Because be, us to for piece view least portfolio by year? pull Do just Okay. how to of much your end of the part it's of hard we might can you understand of what but the kind

Do have that, Yes. you John?

Yes.

So, in of and or terms ‘XX, between the burndown of XX% here so. about it's the end

Yes.

Okay. Thank Got it. you.

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

Hi. such and good morning. some to question sort math because again wondering big been woman's of I'm just a capital here. that it's I in need if ask indulge deal stock, me for your could cave you

So, quarters X.X% quarters you're six six right, on another that'll you add basis you today, generate to CETX, have Based you and for X%. times points, XXX to capital. get what could XX, earning

you So, and can throughout RWA mitigation? just can add potential How XQ some RWA for the actions call, X% given Terry mentioned, how additional ‘XX much from much John, earnings. RWA both loaded enhance that that on CETX you've actions, fully by

expect in maybe of mind. to benefit XX Erika, of kind accretion still And XX so kind different a going be the in couple somewhere keep is to points unpacking that of Yes, from earnings things to basis just bit. that little a We or average. on accretion capital

of a is run into end While the to year. the really next equation, on there's standpoint. from that lot pressure merger We’ll be substantially year, at will and fact come the a the kind side charges synergy more cost be a little start rate we of lower the that, well of equation done by with things integration revenue full will that the as as the

between of from So, when accretion starts the in terms at at to that's us And of things protect about based as upside mind, I that - end through market implied. I you if being keep that to the why just in might risk But talked move hedging strategies bit creep today. now think put about John said end into there's we were think rates year, where accelerate place level the little we from have have a then the we or that burndown number to feel upon also that is, some going up of a confident XX% up. up and and exist we're

in where the of again, need good that the tied we talking to then game really And pretty about assets I achieve is it risk-weighted which of going feel reduce we order hit. rest asset to targets is actions, So, come respect many be pretty to to a ended have up able And about. that to we ability to confident with our to risk-weighted plan in.

of capital me another way some being again, stuff ask regarding the just ignored company Let the it feels because in is on that's of like it good going just because this question CETX Category II. range you Based loaded XQ do X% under ‘XX? think economy, to scenario by on get your X.X% outlook the of for fully and a could reasonable you to

Yes, absolutely.

Thank you.

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

the X%. from Terry. to follow-up that to X.X%, starting getting on last walk X.X% thanks, Yes, Yes, one Hi. just

kind that AOCI the the something by or that'll drag point XXX a of shrink is next and kind basis drag So, to, XXX, year? of like that in your idea that XXX number, is of end the like today

Yes.

things FDIC walk your CECL and does like phase-in, that? assessment like And Okay. include

Yes.

Okay. while, from it credit. kind you XX do see said normalized quarter. on do The you of points, question guess see XX, you I won't basis playing from point here? How but I was there is get charge-off trajectory How off this just you've here? next the for know jumping a out

about. continue the going been talking talking different I been think about have to that for normalize has we Yes, all and industry things it's the to

normalizes the kind XX by XXXX. get into of that up expectation end around basis Our of next of into creeps And maybe points XX then mid-XXs that the is it kind the once we year. year, early

expenses the achievement of fourth does this merger And of in year? quarter it. year for guidance Got some Okay. full this year saves incorporate the on

In or? terms synergies of cost

exactly. Yes,

the XXX the Gets full the absolutely. the quarter. by run of John end Yes, to rate, of us

XXXX, of into of have we will run $XXX cost rate get we achieved when a full So, million synergies,

And achieved year, of the fourth quarter those of this most you by will have

By Yep. fourth quarter. the the end of

full the guidance year? built for that's And the Okay. this year into

Yes. Yep.

Okay. Thank you.

go Please Oppenheimer. And we Kotowski with go ahead. to Chris

Yes.

for portfolio like or last quarter us the duration quarter years give the of reinvesting X.X that. kind in the down maintaining of that from that duration the similar think or the the securities into you wonder you year average of Is to about I could maturities. cash have? your going shared X.X like you And I the outlook something second of and are your balance that philosophy kind trend and went in you if just general

and measurably, Yes. with portfolio had bit, a we little years AFS there. about talked the but The not to from X.X down has bit duration a little that was continued respect come down to

Our game shortening more the that of we're that, helps of work the cash, be securities, portfolio. plan, it'll term kind I in it's sort combination. guess, to continue us of or a meaning Again, of to whether but de-risk short we'll going that is kind keep AFS it duration on

there or HTM shorten duration, to portfolio, the on And is are where you move similar a comfortable it kind is? of

portfolio, to at Yes. just Well, down kind the particular adding of to with portfolio HTM time. run We're the HTM that's to over over respect or point. going this time burn down not

Okay. great. All right, Thank you.

Vivek to with go Please we'll And JPMorgan. Juneja move ahead.

the Sorry, calls. multiple it’s sort of repetitive given

also the you such terms color Terry? X% couple On that's of what why on digits, a and lower turns to slowdown So, but the fees? only up around hear I there's on year-on-year travel fee. caused of any mid-single processing, that flowing, - I guess in sharp merchant things. What's a a

of growth the how is kind it'll processing out. become is merchant specifically, airline point particular it the the of higher travel, starting Vivek, that to is play the have lower in in that In happens a to stabilizes. biggest overall much think is comp has the Yes, but kind think year-over-year at of been the that this some most airline - of mix space, Airline continuing But and the that to driver, stabilize. of we words, portion of that margin. other fact a we

the so, seeing. that's And that dynamic you're

it. Got

have there seems you Okay. underneath? you on, benefits OCI, the to is up. on gone hedges from any Did not put get else something have And your loss or going

Yes. John. ahead, Go

points basis XX rates points went up about declined the mark to think portfolio. the AOCI the XX million matter I investment upon - curve portfolio the the declined linked-quarter, but or that $XXX is, that of went by to

to we So, a talked totally book. as that - it's about, there's not flat duration

And of would rates. level given mark wider so, expect higher a you the

add think see have have portfolio higher. I And that that. continue spots with could to we helped So, place, in across we that picker hedges hedges been put when and fall. we that It the mute rates

you. Thank

to And we'll go Gerard with RBC. go ahead. Cassidy Please

just bit morning, of share the a that moving using kind both you're rate may normalization a way about normalization what charge-offs to assumptions Good the into economic Terry, XXXX. customer with to in you you gentlemen. Can us in behave? base and charge-offs, get talked net

want talk to about that? You

landing Gerard, our I'll we'll soft get a is an start. probably a year This do fairly recession, in a From think mild short early it - either indicate economic weight models see be either equal or probability this would that XXXX. And standpoint Andy. and late we We there's a or if would recession. shallow

not You know the still there's pricing and pressure solved. inflation's

modeled on slowing. significantly, year the the the hike hand, by rate So, is other as of one we excess end then come but mentioned, have - savings consumer spending and And has down Terry in. more

desired Fed is the outcomes. getting its So,

picture, said, get Terry or what big shallow articulated this and the either soft as landing and those a modeled think is to probability we recession mild Fed's of has close soft I or So, of we've to And done. in being to assumptions sort

normalizes, things see us. that's incorporated but commercial a And it space couple real terms from of just We're maybe dynamic that through it's perspective. both over estate in I increase add you'll card into would think nice because credit next lumpy, balances going up work and card start it growth credit to few portfolio seeing of balances. as ratio a A continuing kind little the higher years. course may I the just of as be somewhat office then it And mix to for of

apologize Basel this And a Very the risk-weighted I residential assets. addressed are thinking this gain then of but if are requirements than in do you good. expectation and of guys mortgages higher RWA of to How it III other greater end with that capital exposed areas expected? mortgages the risk shortly terms disclosures, bigger about seems question, coming in be may get you the weight that like if week, strategies,

de-risk, to for mortgages so respect of and to a certainly, particular that actions, example, lot speak. Well, just Yes. to business, with continuing is our

So, we're to that kind take trying of into consideration.

apply it's seeing of specific see fairly our neutral based we're it and say maybe right terms rules the to portfolio. expectation just now, little game, upon of then really what Gerard, to final be that to in bit probably we a a to it going Our that but is benefit everything the wait end and have

you, Thank Terry. Thank you, Andy.

go next, Stanley. with to And Graseck Betsy Morgan we

Hi, good morning.

the have quarter of that couple this One, revenue you was did that beginning at sales quarter, the portfolio how end? understand I'm much trying XQ. in the quick a from Just the asset to or of follow-ups. just like that you

to them the the so the of timeframe. June completed the of of in were Most end closer end quarter, second - Yes. the

including end? the actions and And on or sheet XX year, Okay. that outlook June full revenue between on the then the now that planning for based is RWA you're is also year balance taking

incorporates between to on end of the we now It of Both. the terms our capital and expect what actions in year. execute

Got Okay. right. it. All

Okay. That's it. Thank you.

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

capital. just mechanistic Well, asked need capital would mean, where they tangible to you dividend? underlying issue the losses, quarter, raise I the you And chance Hi. there's securities I’ll think give no say capital doing or on these that that or people I and to any what you need then cut ask raise take credit, the were from analyses reduce do last again, - to would you equity,

that you year-end reiterate no if no I in your capital would at what met dividend put And cut. degree goes actually said guess you've of in Fed, of deposits. addition, increase, chair that target, the last capital would banks equity higher you value a the up or broader could week of economic context, the value Barr, of because now you vice So, reiterate, to

to seems the of we it analyst signs that he like a do. analysis lot on So,

the bigger capital could the you So, and there. your flexibility just comment if picture on about

so end our Terry And of actions, accelerated the ahead of RWA second is this the year. Mike, X.X we the Andy. mentioned, quarter, end our of by as the Yes, got well at to X.X

better. XXXX. be game definition not of under get and Basel And a end least confident we're we We by enough of to to - plan if with expect have under X.X the II year, the X end by the the to the Cat comfortable at

walk those all talked in make capital we're about So, things that we confident us the actions and taking. the

in of you're side, expected. Do quarter on do exit a NII. I little or what for kind year, down regional you is that. continued NIM downward could on not sure said think I'm that, you than revision lot as has mean, negative inning we mentioned to said I bit. And you think here that You be the maintain NII? and if do now? of expected. up guess had flat than and you're or go faster rates be NII, have there level terms third I curve quarter more look, The this you you lot but think went think third with you - you you What after up banks And a And would then anyone you lower a competition the again guidance of yield more inverted. picked

next NII what kind seventh mean for revision or inning, of that done, rate year? and downward eighth does to inning, the is run for going So,

Yes.

So, the respect and NIM. you again, heard obviously guidance to NII with

in policy there. me, a is this We then kind rate, relatively be quarter to it's expect points basis the Fed excuse third it Obviously, few down and dependent. from of stable

to to a trying is had what in, policy the current monetary Fed are the simply feel late we're if innings I inning but like, like environment what kind of at I standpoint. look looks think we where put we're in So, the of from because we

as pressure, add? to here. would what downward Andy, being significant little we you from while So, be bit there may of continue a don't it see

other one thing the revenue. our add of think model Mike, benefits of is, business of the I'd is I the diversity

the in of that, million synergies deposits, the a act and have we the stressed $XXX you're that on. revenue, top right absolutely trust cost environment even on So, revenue, to which about, on going commercial revenue, we're payments all of products

pulling lots we're just not on of levers, So, margin.

Okay. you. Thank

Please a follow next, John with And from up go have Research. McDonald we ahead. Autonomous

targeting? next talked Terry. size is just - points might One see you got year between more. more you now Thanks. and remainder the is Originally, about this opportunity. original trying there of XX mitigation had total XX Hi, much I'm optimization way opportunity the out relative to were year. a how there year And basis to this to and of you on the Obviously, XX you more sounds like harness to the it quarter. this

of the they being confidence it a et XX we we Again, neutral definitely we of there were Yes. achieve knew on were level terms to that believe low and that things of we high were that targeting, the - in able had could kind impact execute because we kind of little get that to and XXXX, to the standing perspective need us talked many gets cetera. a a up, actions into be we take earlier, to the securitization from standing when consideration which as into burndown, of about programs obviously we where you capital up takes the longer, of I

probably So, my XX would - be guess. that another line basis is points, in think with certainly I opportunity

no mean by charge-offs you Is or taxes, type rate. did in they're not this say have like some could run see quarter quarter, we you low what and the impacts? when terms And episodic impact I one Okay. guess impact, you that like of

Yes, balance absolutely. think see the net when impacts again, We'll taken we all are impacts. continue the But as sheet. into those to about RWA that we reposition consideration

you Okay. what? want you And again, your for end the target to by to next you loaded say get year When fully … the that of want to is

be be - fully Yes. adopted, X.X%, roughly it'd X%. it'll Well,

you. Thank Okay.

George this it continue. no at Please to have Anderson. further questions time, and we I'll And turn back

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

And you for Thank this concludes conference. participating. today’s

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