U.S. Bancorp (USB) 17 Apr 242024 Q1 Earnings call transcript

Welcome to the U.S. Bancorp First Quarter 2024 Earnings Conference Call. [Operator Instructions] This call will be recorded and available for replay beginning today at approximately 8:00 a.m. Central Time. I will now turn the conference call over to George Andersen, Senior Vice President and Director of Investor Relations for U.S. Bancorp.

be Officer, good and Today, Cecere; Chief Chief Chair Chief and our joined our the schedules Officer, Financial will presentation, Rochelle, at release supplemental with analyst Senior and President our on and Together presentation. our usbank.com. slide and Stern. initial Chairman, prepared Executive Administration earnings a you, John morning, Andy A President are website remarks, some I'm everyone. John by referencing copy of Vice Executive Thank Vice Dolan; and Terry Officer; and Andy

during Please uncertainty. call and in note release, that change are any forward-looking on could of reports that subsequent Page subject statements our and press with made today's risk on Form forward-looking the our SEC. assumptions today's described our to XX-K materially file current are Factors X presentation,

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

call Andy. I to turn now the will over

thank George. call. and Thanks, per joining on $X.XX reported $X.XX, we first share morning, begin per X. earnings of our notable which I'll Good In items. of quarter, included the everyone, you share for Slide

earnings notables, per $X.XX. share Excluding totaled

Our strong. balance remains sheet

our and benefits our and lines. seeing investments underwriting are of strong technology through-the-cycle the payments in across the digital, form in our business We multiyear ecosystem of maintaining growth discipline fee

continue to we Importantly, accrete capital this quarter.

on ended Our basis. XX.X% equity common tangible return was period ratio CETX on our the adjusted ratio and XX.X% an at

a metrics both performance reported additional provides on adjusted X and Slide basis.

healthy book share our a expectations, quarter balance basis. X, in with to Credit we and continue observations both the achieved quality develop Slide for quarter. Starting On provide sheet. on growth with value the some I'll linked high-level tangible additional line year-over-year per in and metrics

growth quarter. industry, remains pressure Loan this our impacted that and net and interest income the dynamic for deposit under

a on guidance, Our of billion taxable within lower approximately $X the of range. equivalent albeit was on basis end NII our the

see to portfolios. deposit in good on continue notably, the impact of despite for QT And loan we consumer seeing opportunities deposit growth are industry targeted growth We levels.

for outlook behavior rate deposit rates has the and environment have changed Over potential meaningfully the up. to Client our industry as pressure is in has deposit response XXXX that potential interest rate cuts impacted across higher-for-longer the mix costs. few past long-term adjusting in the weeks, backed

As than NII the a now we result, for year expect full be our to anticipated. lower

on However, importantly, base given near-term go NII we overall at will near-term take we expense and but lower-than-expected to our details John to are headwinds this of plan a topics, closer taking is believe the mitigate profitability. our these look actions impact a to NII more into these phenomenon.

X. Turning to Slide

We continue about and feel rate current to trends position rates of across of by by income our fee to represents revenue across are us Fee as we a XX% momentum Overall, our good lower our client the have net revenue, environment. seen continued the evidenced which businesses. total encouraged businesses differentiated in our interest penetration stands many growth quarter. in our this well strength fee about we

our provides update payments X -- X on ecosystem. Slide an differentiated

grow good relationships associated made our both have progress payments past business we the Over to banking related relationships. years, these and and few expand with revenue

XX% You business to revenue may years small XX% XX% discussed grow a an and XX% by to recall, relationships by we related ago. to opportunity few

in further progress related expand revenue see these the see term. and medium As relationships slide, and even opportunity making on you greater good can we're this to

guidance. call the as who provide more over turn as forward-looking now will on me Let provide quarter the John, detail well to

provide Slide X, an earnings summary. On we Andy. Thanks,

assessment. anticipated following of including Bank increase the $XXX related and last to special $XXX diluted after costs and Union This per notable quarter, we $X.XX acquisition reported million merger integration FDIC of share of adjusting our for million an $X.XX share earnings or per in of the items,

environment. average X. see to deposits industry were total we current consumer-related billion quarter monetary industry-wide deposits, loan stable of interest average $XXX billion, in demand pressure our deposits continue as grow by our were as rate linked on and impacted Turning materialize. tightening the loans slow efforts quarter higher X.X% $XXX growth down Slide Despite was linked to policy Total ongoing to

higher seasonally deposit of would was than inflows Trust the first the End-of-period deposit growth a typically end in corporate little see the we at quarter. quarter. and are first higher

resulted cash impact at outflows quarter end levels. institutional in the deposits, of timing higher holiday planned which However, of delayed temporarily

deposit move outflows seasonal line in more to expect patterns. with typical We

exceeded to further continue we of mix. and our funding the our Importantly, manage capital proactively by that optimized cost opportunities prioritizing sheet balance

on continue limit borrowings short-term we paid deposits. as We on reliance deposit our to disciplined on and focus rate relationship-based remain

shift a Slide net well XX. as Both pressure and X.X% on declined billion, income by deposit slower driven taxable and Net down to basis margin mix basis continued margin were as $X.X approximately points pricing net interest interest linked interest X.XX%. equivalent net income unfavorable loan deposit quarter, totaled X and demand. interest declines to Turning

highlights our and payments impacted of strength X.X% the and banking by $XXX fees, and tax continued capital trends stronger basis, pressured which discussed On a to noninterest reflective fees. noninterest as linked cash adjusted, Noninterest income, underlying $XX syndication income. a higher revenue, income declines driven exiting in XX lower business, increased decreased or other which volume Slide in year-over-year impacts of or mortgage seasonal on X.X% quarter ATM previously in activity basis, million credit charges provisioning million, service markets revenue. payments related

or synergies decreased noninterest with basis linked-quarter by Bank Union year-over-year, as quarter billion, cost both expense continued $XX Turning Noninterest million to on driven which focus $X.X our million Reported XX. included and totaled $XXX or of a X.X% efficiency. million and for approximately on $XXX expense, Slide items. X.X% operational the adjusted, notable

credit our highlights XX Slide quality performance.

Linked in to one X.XX% continue and XX other loans ago. real increased Asset office quarter to The estate with December expectations. at real compared loan. a reflecting ratio nonperforming estate nonperforming at with assets of XX year our idiosyncratic X.XX% quality metrics X.XX% in stress and portfolio March assets XX%, our develop continued line commercial and commercial was

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

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

to Slide XX. Turning

We equity net transitional XX.X% our ratio of March was as included of well common reflective offset regulatory XX Tier XX XX accretion, from X impact capital which basis XX increase of minimum year-end, Our of a above point by basis a points basis of requirements. points. remain CECL capital

provide forward-looking guidance now will I Slide on XX.

quarter to year income XXXX second $X.X approximately expected of relatively be to FTE on of basis Full net be expect interest FTE is on in the to stable billion. an billion. basis quarter interest $XX.X an We $XX.X income net the for range first billion with now the level

revised Our behavior deposit reflects shift higher-for-longer commercial a in a environment rate in dynamics. industry guidance and competitive client heightened

continue in noninterest full to the expect we year, income. mid-single-digit growth For

on billion we pressure expense interest compares are the reducing our lower, or to now the seeing are full for year Given $XX.X net of we noninterest guidance expense billion We XXXX. which $XX.X income, expect year. in

hand now closing back me remarks. Let for Andy it to

John. Thanks,

wide continue now, despite We for current range stress. returns economic deliver have we to for scenarios of the been industry-leading and some industry time preparing a

with payments digital are allowing and of is we mix well successfully lens. continue manage diverse ecosystem. our we the seeing investments in our . The and the we've is competitive with through Our capabilities, in is long-term more the leave are company a and importantly, to to and technology that like us I'd will to to the you for a the benefit navigate facing, industry modernization the future challenges but near-term we market, message positioned continue our business made differentiate make

Let our shareholders that all constituents performance the execute our remain growth exceptional expect. and to is continue talent pool financial the to close we to they poised recognizing national by of to dedicated employees franchise. of our deliver come many banking me because It for have on our support capital-efficient do objectives, the

now the open for call Q&A. up will We

[Operator Instructions] question Sandler. Your of Siefers from comes Piper the with Scott line first

Was about in the in a guide detail talk sort NII for more tougher you the could little just hoping, or Andy year. full of either nuance the John,

course, got couple whether level, the longer an on of industry at at of for deposit guess, dynamics loan and impact higher I challenging we've or, the costs So it's growth betas. environment a play, of

X maybe points kind of X or pressure you the saw? main So

guess might not it It be doesn't necessarily follow-up. lot to will like just Is And second in It's about the a then there the that feel NII. advance half. think as more best I it? pressure way the on that

for Scott. Sure, the Thanks question.

the throughout in about number -- XXXX of past take back question. the So we talked actions our and given income, the looked we to had line we expected fourth MUV our with was a at, the year. January, In maybe in that just be annualized to net when answer just interest taken we your quarter that step guidance, course

speaks new your guidance lower And have X% the dynamics changes the of was new things. the here. And deposit year, to we're outlook that X% the environment, cuts. the -- there course, our we the sorts beginning conversation, with point, really or dynamics to guidance the in so to than rate economy, of environment, The the those shifted. and has interest At multiple of the

over fast see this mid-market sections out shifting clients that. time client longer. corporate is we more what what in as deposits and we're are into We and we've our higher would just anticipated. their slowing. witnessed that of as rotate have pace shifting action to low-cost of to behavior, cost And continuing that higher the slowing deposits absolutely particularly not It's Now for the behavior have and been is

interest that be that of we of terms relatively that see variety. So growth in given we is do see our things we uncertainty all guidance And stable we what year. to range net half will second second the now income in together, client and a and of have that provided the the boil behavior should quarter with

thing I action. is upfront say taking would we're we this the And and final recognize that just

expense taking have looking some are our levers that pulling base at We been action we looking at. and and

that's guidance so how about think the from kind of big And perspective. a picture we

for particularly improve in continue rate Thanks, And Scott, opportunities I'd efficiencies, look environment. this that higher-for-longer John. add to we just to

from So workplace real spend, additional Bank of in our efficiencies focus transaction. areas estate. we benefited to properties on and we cost and And from million our the and third-party takeouts like Union $XXX continue procurement the management

in to area centralize and the we we effectiveness products and the operations operational technology and is greatest efficiency efficiencies emphasis as of probably how services. our made improve our And investments deliver we've really activities

So the we're focus -- taking. us, that a for be lens and those that's will continue to actions are

America. Your line of with comes Ebrahim Poonawala the of question next Bank from

the I NII, guess went maybe One, just little a if down sequentially. John, up into yield it. point securities X drill basis bit following on we could

book mindful of be of should that us the and remind we fixed rate dynamic, in going of Just terms the both asset forward? repricing security

the what's noninterest-bearing way then right as about And Again, deposits, mix saw end forward? surge big at the a of think, look and balances we I to the think quarter. NIB

Sure.

So It start maybe first cited. you X your basis yield. I'll down was with relatively as or on securities the question point flat

had was a would that some asset quarter some of little bit see. different. We taken actually churn hedging offset This that typically we the actions

I would this thing. as view a temporary of more And so

I would look that of I that asset as in see you the repricing -- typical look forward, churn book.

a reminder, replace, about will and that's forward. quarter $X rolling to at that going per As off million going is what at kind really level and we're it's of looking so be lower the

So I just this as anomaly. look at an

holiday lot the we through the season. with -- out lot of tax a see did question the your here Very those end did temporary. in I kind was of of hung deposits. side, at in There A a on place We yes, in balances On on balances much us. the and customers surge believe was of quarter. a there, deposit surge

see higher typically And reasons. than what just we so that. would we for typically have It's various

get our And expect levels. -- mentioned that we seasonal so as we to to more in comments, we

to your just XX% right that NIB the We're noninterest-bearing on total versus category continued of deposits. then side was things. kind follow-on of mix And of now. on down It's that really in trend

that lower based marketplace. in in we're a that, we're just on the the that continues drift dynamics to longer, higher As seeing for it's possible

separately Got I just for guess revenues. it. outlook around fee And

of that but NII? you're -- momentum addressed if give Andy upside what side? think whether get surprise prepared us I a any room areas in -- his there's guide And any we on sense downs fee the additional of remarks, sort your So for negative revenue on seeing

Yes, sure.

-- account very deepening with good saw overall, pleased the X mean, I we results. relationships. quarter So We growth. We're feel we're

of see things. growth metrics view We Union there. single-digit continue is And aspect our Capital fee underlying progress that spending are -- all growth continued to the we activities metrics the on the strong. markets on are and see opportunities strong. supportive on the Consumer of that

even Areas has strong see in activity, we benefited came that our income that capital market we issuance extremely a lot Mortgage market the areas more has that. be we're on to that a lower and production on -- And higher to of space. basis, growth, given of had returns fixed that spreads, continued focusing particularly on just applications return the a in we're of constant overall. and on. markets or theme just seeing capital We focusing absolutely seen have that's much from actually been equity though terms franchise year-over-year how wider we're strong an

be payments continues in And business and then line expectations. with do the our to well

and we've -- that helps and we made that's so And and time. payments that the us -- the over ecosystem have that just investments support all initiatives

comfortable very So fee about together, is very we outlook. our feel coming all that much and

John Research. McDonald Autonomous Your of next with the comes line question from

for How saw John. trends this and provision net are about outlook kind the the you charge-offs quarter, and you just credit thinking of

was you outlook You what you thinking kind And commercial. this than are helpful. year mentioned about for be of idiosyncratic of Other of would kind still there one kind the that, net a charge-off seeing? mid-XXs are

Terry. Yes, John, this is

question. take that me Let

end up looking credit again, pretty generally is So when credit, strong. we at

to I first and in real assets the primarily think office we're see nonperforming tick in continue estate up tick commercial up It's will to related that that, continuing that space. quarter. to did

The a that about in mind aggressively portfolio. And year, But bit. rate covered respect like keep tick feel the thing rest of I content with think space that's probably we've really going a quarter, for up the real office going moderate in that. second is think it's we of to is to reserve estate when the bit commercial a we've We then to in lost to more. that kind quite the adequately growth

we a standpoint. to don't though P&L up, impact that from as real So NPAs even tick are likely a see

that first would to basis, the charge-off the our expectation up to in of we rate a then the going also in And come in in cards point second On and charge-off XXX. the year in first be then moderate that quarter view probably expect second is downward we bit a move credit principally will by a driven year start of pretty again. quarter the we From is quarter would see on a about that's rate that, the cards. charge-off credit full similar full quarter, just to But up. basis, charge-off that expect probably to rate that

of Okay. charge-offs. company the the Got it. that trending And on then for to overall perhaps kind of still kind mid-XXs

to we've commercial will XX Yes. we a I like going occur for it's to be year. that mid-XXs, closer because bit again, would the estate of say timing maybe real again, lumpy basis And feel it. charge-offs that think just of But adequately little reserved points. through the I

Got it.

depending You going the mentioned the expenses on Andy, Okay. reason, how through flex expense Great. NII. within environment flex? plays guess out I the the you're then thinking And offsetting year? are to you about the revenue

Yes, John.

we're continue where it's And environment we to -- that's efficiencies, look always it we is We've areas flex focused and centralized very at something to we're operations. on. -- important an see about, talked So we'll opportunities. that

have spend. on It's company-wide We and to in other initiative, we'll opportunities a focus continue that.

made and we're with investments. services though, tell products to that our efficiencies I as importantly, while a we're the basis. helping we've you efficiencies still but we deliver is investments want operational Because at on investing, looking us go-forward the Again, John, continuing

question Stanley. the Betsy line with next Your of Graseck from comes Morgan

deposits around from -- is things. see Or a want NIB follow-up should is it from on I to to behavior MMS? do more One shift deposit it you corporate shifting had the your NIB IB? understand to comments I in So corporate two NIB. the

typically, then because are And balances NIB separately, corporates in compensating other services. it's for

going as or this to on, of uptick going it an example, shift lines? is in, treasury other does we're services say, So that for see the any suggest fee

for Betsy, Thanks it's that. John.

seeing IB. is client. answer And the what first think what is trade-off more balances, from I at sheet, behavior, to being the of they rate going higher to balance really to time, this clients The more trends the as And looking in -- more more just for know are here slowing. We're period that of just seeing environment. it's especially taking optimizing of it's NIB your there maybe question, and more. we're just that are for their going, terms is And they're in we're So looking rotation the seeing their a now at be a eye closer longer into it. and

just So anticipated. we what the mix than have trends have longer of that been would is shift slowing taking

are are we balances, the on the So with at make rates and a pay in look that of ECR those We basis that. that customers the on decisions based things we compensating clients. terms case-by-case would

to And so right trade-offs kind those now. the see relative of that we are that

Okay.

as services overreach? changes? potentially little see for up could pop So services treasury that how a growth in Or pay is an you

It's pretty would But again, dynamic of I describe possible. fluid how it. is kind the is

are sheet And balance MMS? going folks as Okay. on sheet balance opposed into to also your staying off

Yes. A pace them. is just that's great make sure It's thing. taking for a it them as of for run clients long clients what the continuing. want transition phenomenon. for through the this the as longer to than environment. and there making little going sure -- of just here is We And It's just bit really our churn kind we on it we for we lot here. serving view we're stabilize we're have being would -- and this what's anticipated. here of timing this is Again, a really This defending a is temporary to

Got it.

could you of just U.S. this about understand we here, Okay. organization? for about That's the help higher what at of how super longer just should you How Bancorp currently whole thinking means think kind for then sensitivity stage? for the are you helpful. XX,XXX-foot asset question And us

Yes, sure.

So be. lot as environment I seven rate taken -- management the is. different I can a cuts a the sensitivity year, we terms don't market because neutral in think was We've know from make the perspective, of it to the where as of risk had. sure beginning asset mean you we are just actions at of

it's zero. closer to Now

different make environments. are we prepared So want to we rate just for of sure type

that And think positioning about asset we really so think we're ourselves. I sensitivity, how the as is

loan and thing be about think on going offset we the what drivers all side going have And portfolio is longer The may up. creep that As our over to things terms of of and time. those are to to over matter those betas and really that churn and sort will move favor. higher be means turn to ultimately as and side. for that do well as going the But deposit investment in paid it's that's clearly there offset what that asset to timing rate the we're shift time, things in going and

Betsy, said, the tried given is to So the volatility outlook. this uncertainty John We've of corridor narrow in Andy. the

as puts about. And takes can as and so all we are talked about John the be, neutral we given

Your comes next Usdin of Jefferies. the Ken line question from of

couple could questions It like growth I year-over-year the the the rate can looks One, we a was through a side. fee of little on X%. businesses. ask If bit payments talk just overall

year-over-year rate merchant It aspiring slowed you're looks down upper a in think the little was single for I corporate bit. digits. and maybe like

So expect that those you dynamics just talk some then forward? to us and going can traject how through of

Yes. Sure.

order. We We was space. Ken. digit Merchant mentioned, -- other of thanks, I strong the other X% really a underlying that things. We I at area, tech-led look very we -- kind fee side, saw can think that the bit saw high take metrics single continue of really quarter, On in as saw categories them initiatives that. virtually you -- being I'll appreciate that on propel this side in to for the in other little down, all our travel nicely. but have growth. maybe

to of single good there. we're So thing positioned nature about just high feel we think here, digits kind and the travel is well a continue short-term and

be that year weight -- lapping the over and is quarter. continuing the On we spend basis, of a side, than side year-over-year was again, look happened this strong payment freight that you really are business -- and the see like corporate has might bit things case. we negative that that little There the over -- in mentioned, corporate it to that will are as past churn. fundamentals be more the but second But in as momentum we

single we high digits. good feel about So

the And payment side, we're spreads, fee trends strong for payment then really it. card good rates constructive on spend growth, how -- about thinking

-- trends that about we standpoint. all a all from the So payment good feel underlying

Okay. a And other lot then did terms better. mortgage in the just and of Got services corporate some lines, of it.

and I think and gain sale. better you corporate mentioned DCM on

both any Just there both of those was wondering, are forward areas this quarter? those pull sustainable? on Or

market here is the XX% think slower -- that a an from of little we're almost underlying I production of on I been markets even think has quarter. kind legitimate playing standpoint. gain all in that, But maybe it the I double strength the the in the digit, is underlying though sale think first standpoint, still down It's had from positivity a bit year-over-year. application

-- just going the and are volumes lot there's but that of continue anticipate there's -- are the to spreads So lower, we forward. wider, a

one. Okay. cleanup Great. And last

profit. know net update the I ATM service Did profit, us didn't not neutral on changed. but net can know And that I business, that? Just a it's look charges it's you close just like that? it

in some the in so and was of that they'll here quarter, kind fully second off of There quarter. run Yes. this

an With offsetting costs?

Yes.

of Your Mayo next with question Mike from Fargo. Wells comes line the

used and your or temporary word talking the Andy you I the the income. decline what interest net didn't know by on one about remarks, temporary. Another guide, opening either meant in worst

dissipating just of we're then back the stable pressure growth relatively And going than that saying, quarter 'XX. has a is dissipated. we as we this Mike, believe, expect dissipate in the John that, what thought. described, we second slower to half and in is It's So and

meant what that's I So by temporary.

color? where any XXXX and any other the have Or for for you Do floor expectations is deposits? noninterest-bearing

start in We're I the not going of that 'XX. because 'XX expect momentum give would volatile But importantly, we what guide be. environment now longer see it's terms half even to so cut go of to rates that 'XX, 'XX in we in a the second rate right second continue half of to So the lower for up. would higher Mike, see a could and

but this applies, I've know asked I think. still And it before, I

big you the here acquisition. Bank the So picture $XXX from Union got is savings of million

The for in good X/X highlighted is revenues expenses. business you the of your slide, over revenues in that's So banking terms up relationships. years and X

have payments. then You you efficiency long and are for the a revenues working, we have are efficiency under for have company mortgage, number so you capital markets, The at an the XX% expenses look and quarter like the working, XX%. had around core ratio is for that ratio this

it's Now like have that lot the [ effect at get I heard you under that NII nationally. XX%? some peers that XX% get know ] you're but distorts are but things, investing the under do We conference, And bad do when you a just I now.

we should how Bancorp? think U.S. So about of efficiency

create efficiency. why continue to Mike, at and expense pulling Yes, levers we're looking these that's

categories. positive So fee very I our about feel

other We have That's like the banks services, that about, revenue. of a that trust, helps have drive X.X%. us corporate that that businesses, don't set payments fund strength diversified of fee lot a businesses products, talked we commercial and

downward, There and get and efficiency ratio expense and those headwinds, look We'll efficiently ourselves. to continue and ours. for some margin the past to of that's industry an headwinds on for objective that we'll are operate get for levers

comes question next the line with from Evercore. of Your Pancari John

maybe that holiday that and up in at seasonal end could much how impact of surge you On growth pull saw and dynamic you more was the tied the deposit the can more the to the in back? size the quarter, period, growth

you competitive deposit dynamic that and the pricing? on then your regarding the front? loan you impacting seeing commentary, Is on shifting. -- competitive some And you also mention separately, mix landscape NII are just Or the the did on also

to mix side. John, necessarily answer loan the It's Maybe rate paid. first. not thanks. a and It's your more deposit question second of

I loans are soft the loan this side. on is good. there. period-end think momentum even The Spreads are at see we growth We all good saw side, -- do churn on point, the we positive decent commercial actually there. asset see though

I in think again, the side things back on -- deposit it's it's the just mix. not of

the would rates mix, would just environment I really I rotational even changed The And it's on hasn't side. side, thing. commercial say say commercial in the the on a

side, and have those consumer On growing make been sure growing sometimes the want retail of growing. and We've and as we depending But sorts we go deposits, geography down, competitive all been that there, we're we on rates we're up, sometimes and mentioned. market things. to

first they of the for on type number end holds just surge, end get quarter the hold of the up sometimes it very It's typically all of duration to and It quarter. have well you of or the been a for in than received. kind billion is that And way exactly that the the through that's on it starts at of of tax question month lot the to your payments, tax seasonal. at surge of prepare it's season. through Back people -- this seen. as the as deposit as as down $XX we That's of probably kind stand get the we what what bigger we've month. seen the wind here the a $XX just inflow area billion We end-of-the-month payments outflowing then -- first fifth

updated And taking evaluate separately, measures the somewhat you expense outlook those Okay. expense look, Or then a opportunity? that year? efforts you the the billion on are $XX.X in the reflected taken as a of of could drive you're number that areas, efforts for lower you've where closer fully mentioned your and some

why efforts. the reflected least. in And it they're to we at down note, billion in million. the you'll John, $XXX So brought $XX.X That's see that

continue on levers focus reflected to additional but So in the we guidance. it we this, as could pull is

the from JPMorgan. comes question next Your with Vivek line of Juneja

what Just about up you Could interest net that? expect in to see to that bit you a half drivers of throw talk comment little the want second you Andy, the of 'XX. as income a go

going let I'll start I'm on. to add and John

It's Yes. we and foremost. time. as of rotation seeing first the The it's comes again, to migration things driver taking slow. And is really Vivek, just we're just side the some -- again, it the deposit -- really talked about down and

So asset say on investment that that. I then And stabilize. would we've -- goes, a taken grow efficient lot have will to that going that growth things and the like see as well we portfolio, also continue. that. churn eventually, been loan continual you're that have as ways asset Union at opportunities loans enhance looking as spreads capital underlying on of action equity. The return favorable. to We're themes Those to both

So that kind to a that income bend reasons those Andy the and are nature we interest see the talked of positive about.

of of of the expectation that So loans, deposits the talked and churn flow the as John securities it's the of stabilization about. we repricing said, portfolio

hedge an which the that little or was just this that's anomaly about something put -- you did, impact? out And what quarter, was talk protection to that? an bit a capital that Was ongoing a it? you that you could have going not you said Was that for

Sure. Yes.

get sensitivity So to to be it continue -- asset our be more to neutral. really was

kind those as So a onetime we actions took are of that matter.

this So rate temporary it the in I measure it's That's called a of in here and I quarter. -- why kind forward. as go

now rates. at and $X driver that's be in forward, the so current or billion will portfolio lower the replaced Going yields investment interest at again, here higher is rolling off

you said Got were neutral. Because always it. you

to understand trying So do was change that to go to that's make to what you make to had what sort it of I [indiscernible].

managing team the We're We're on of a that get basis. neutral. on part taking that. we're Those just basis. are the those are And and that is actions, to looking markets take we the at of actively result at this a frequent things Yes. daily looks the actions that

did Okay. just you that And added swaps you or is terminated? Or fixed received what what do?

in -- that was our just just it were Well, fix terminated. had pay But pay were because been nature, sensitivity. gone. were we but that the sort the specifically, They rate reduced fixed -- swaps yield had they interest they neutralized carry

next from Your line Cassidy the question comes RBC Gerard Markets. Capital with of

coming. Basel John the and regulatory securities capital, move had course. your final for which be XX% proposal you will obviously, in -- and up now knows category at is certain like seems that But today, of with endgame be for know through Andy, the X is and CETX can not that will when case all III you the we ratio the us is unrealized it in Nobody banks, a carried nice losses place. X share

that us ratio? you on CETX you that update a with as where So backdrop, can want

And buybacks. annual in you could your XX% of historically, when good we dividends get possibly have back been And to guys you back and kind do XX% so of think earnings track? that giving at on

Sure, Gerard. I'll start.

the First loss. of on just update to unrealized all, an give

XX a positive -- throughout we hedging in I really that questions, the our from do up neutral. XX, basis fairly about prior even because rates points So we though that just was help talked had of part AOCI quarter, activities here standpoint, were the

have the So investment we common AOCI the basis that now XXX from pension the equity to the XX X impact about on portfolio in X. points versus right is Tier

capital returns. levels. we'll to along is call, going our continue do on You're dividend is build right. priority. what of a all important In the sorts see and things we'll make we declarations our us, our CCAR forward. large The before those also Basel ratios that, any for with, need And III what to I endgame two will the would are milestones Obviously, focus on results we meantime, capital grand be

Additional company. priority in investing is the

pausing of in. the that we're time, normalize so repurchases at But to capital. we're transitional this will that we Over And kind of we where this were. is back build that time as on share period kind

good. a back for -- back And stepping to moment. coming Very

de I about the novo that Can expansion. Now share with fully integrated. Bank, assume focus acquisition. your has And obviously, that us thoughts since Union is you been your

behind down Charlotte expand look thoughts to your come out months? area. that you acquisition in the What's that, had . next as XX is the over You there now XX there to the more you? again, Is

with focused base Gerard, and set on those customer deepening building through core customers we have of the the we relationships our services offer. we're and Yes, products that

We have mechanisms. -- do we a through number of that

is them through of branch One system. our

that them our managers and novo effort of de doing together. is One is working relationship through And well.

with We which State increase also have partnerships distribution Farm, our base.

some Gerard, that our to customers other we is line continue that all to U.S. benefit to levers, products we are more the from have. services the providing could customers we at the of continue lot a on Bank offer. opportunity that relationships more is look and focus we'll businesses So those of services of across bottom diverse customers, the who set of deeper already And but

a commercial multiple When market a versus only accounts that your customer versus they your preferred just products? just quick one you deepening that mentioned, the relationship a would it or follow-up what has your loan of you And have have estimate to between is that customer you Andy, middle comes multiple commercial that profit relationships, your core loan customer just account, on deepening the only relationship kind identified. that of there if has differential a

higher the It's more certainly. return, relationships, significantly the higher. the revenue, more The

have So deposit if payments, up. adds a versus it they products management all plus . plus treasury loan a only commercial loan plus plus

agree. I No,

Matt Bank. Instructions] next Deutsche from Your [Operator comes O'Connor with question

lot of obviously And kind But NIM net There's this of what and you a banks if like takes, margin you put medium-term thoughts interest out NIM guys. think we've a of for is over as number on about a the wondering time. target. have puts any sustainable you seen more

are flowing don't $X if where talked But medium guess chunky you of the about about off. right roll is, swaps versus of cash the billion. now? securities kind NIM that think are you do term any and You I what there's underwater I kind question know

Matt, that. just on it's you the it like it interest asset cash the on could of can costs of the and net Yes. churn I'll that things of net some and variety obviously, track terms drive be -- well. mentioned, start the here. creep The things some That, to levels time, deposit margin, around the liquidity drivers. portfolio, as also and over things and investment mix the going of bounce interest income in but obviously may

income. or here's don't we focused interest have a interest on net where our really base We're a So of more call margin. net

And are years? way either perspective. that's out a that long looking should go mindful clear I cash the could then cash and the there from fairly swaps on be pretty flow there, flow any -- we book, again, you're of duration that of think Any securities the next couple

Matt, sorry, I'm didn't... I

Swaps.

So we go ahead. again, --

The swap Yes. have. activity we that

our as in just no a very hedging change. there's really active hedging we're activities, -- our fundamental while So we --

-- that are that in but have the some actually . And We swaps continue We risk adding or hedge have took a off well the over -- been we swaps it's X/X receive-fixed investment pay well on portfolio. still book. hedged securities over XX% that on as fixed have temporary to focus Obviously, thing. well. then we

that spot, excellent has and that's some come flattened Some for the add and the some to net downside of be us and has position forward curve depending starting for of adds of up occur. here, does the if that an protection rate kind the a nature all that risk up when that opportunity in. curve we're And to interest higher, neutral on as that

line Your from comes with the next Martinez HSBC. question Saul of

guess NII. on one I another

back does reacceleration guidance Your modest some NII end. of in the

at the sort much I what's is -- best the cycle measures? mentioned the could bit could little John, midpoint, NII for half. what's the assumption. How second guess your embedded to in first migration that far of half now could a what's embedded where ultimately down X% But embedded through continue than XX%. and more think you more And about -- from be what's guidance at in as land can you those move the how to specific and deposit higher deposit the in noninterest-bearing

Saul. Sure, John. It's

specifically, So to that beta on the continued has slow. side

and quarters. points only quarter think I here X, this the prior we're up X or X

the as a little be clearly Retail follow bounces market I side competitive bit, course. flat. and it are have there, They So commercial of to mentioned, very we're And going the not but around slowed. rates has changed. deposit in

the it's kind that -- we But point all look it right forward. as up the -- for XXs or higher going it's but creep low place to be of feel like in, to for if longer, X here may you're X, we is probably

bearing, Okay. terms And where the total deposits, or total of does in noninterest [indiscernible]? liability

Yes.

that we're I a mentioned little as It's like customers for It at go and couple noninterest-bearing side, bit yes, we more efficient -- little points on bit longer I I this -- think XX%. are a as about lower higher of type could a say, that. things the think down at being period.

an surge, earlier I to And a Great. to a but to on a on the $XX me was Forgive normally noninterest-bearing missed the sort going I'm this, your base response guess in surge. forecast noninterest-bearing $XX is, that's surge, I deposits to the normal surge guess just deposit question just Okay. question surge, billion billion clarification follow-up this on if But to What which see? forward? I get deposits you of incremental the the quarter the deposits. trying normal incremental what to a what on

Sure.

or we was absolute the So billion terms surge, and of or for like $XX in in terms type typically so. $XX the what the this see it above surge of probably was billion quarter. It's beyond about so

question comes Mike Your Wells from Mayo next with Fargo.

NII. on still Just kind of a cleanup

for Just didn't great sure in you're I Did quarter? to before neutral this something neutral the [ NII? you if rates, or that to weren't I very expect you lower simple fully make want terms, just that happen why guide have ].

Sure. John. Yes. Mike, it's

shocks the the to So yes, are interest your to answer rates. we question, -- neutral,

I think to that little a judge time. what we're in be more of point explaining is can the challenging behavioral sometimes at which it, aspect

again, bit pace as anticipated. so is what we rotation it's of had a little just the bit little it's a down not And much as -- slowing

to a just shocks down, very we've feel continue rate It's that behavioral from moving again, aspect that neutral we talking So standpoint. been about and up good here.

a for driving asset of your through guide into what's think next next have repricing, this for second the say, And Because fixed end half and I the of do you higher year number year? year. that's

for priced? you have securities. grand year, assets have do you next So the fixed talked in about you've be should that much $X Do one billion But end that? number by like of of how

about of way the rate I component. it fixed think think half is our would I loan is book about Well,

The other and component half rate spreads are widening. is floating

me, growth card. time. So credit decent seeing you We're can see -- improve rate in over components some the excuse perhaps of floating or payments

mix And so the of working is at also some play here.

so wider at They're coming out loans on. coming commercial spreads. are And

think So I about that that's picture of a perspective. big kind from how

for mean last spreads it And heading one, loan we're then a there, spreads. the while loan were and looks to I recession not like widening.

are that just and not an and loan now? in markets spreads I we're like having guess a why would spreads loan are widening. recession widening I be the looks it positive. capital spreads incremental Now

Yes.

I just different markets. So think it's

We seeing So that access saw that has capital and Spreads markets. in of side fixed of is been and income reflected good. you're some market the things the think in commercial I variety. have very -- been capital our the drag volume fees

been I And volume away decent a spreads think areas so extent. but markets pronounced, has other that In certain as a I -- to there taken would access capital to has opportunity is for say there. where

Bank America. with comes next the question Poonawala of Your Ebrahim of line from

expect number, surge billion John, quick a you just follow-up to noninterest-bearing, think does in, Am the that so I about came quarter? leave. as we sure is think into going to deposits The of the -- $XX I that $XX mentioned second get out the billion make about right. you this go mid-XXs we

this is of temporary. Some

be market So of the the to a mix as time, surge material may It happens, to that the well period be it money quarter. but surge not NIB. both going of as a NIB can for brief it's

the a so about of be been -- we've surge talking So mix even can though that both.

of both. Mix

Is from of billion. And NIB so fair? you north $XX do a very just standpoint, dollar that staying balance expect

said, we is the continuing. rotation I Yes. would as expect,

expect DDA, do deposits in to it but wouldn't growth expect basically be necessarily I stable. overall, So we

a just separate And question.

I guess terms these guide all Because on the surprised? of And think, wrong to love now. from months is hear to would baked order Given the so what hearing outlook? into be would for we concern X in see us to I and another NII, for questions another degree go whether NII you're conservatism yes, of down guide downward NII see in on your you

the aggressive. about all just the talked don't provided, look we given that's that range. here uncertainty just I It's range Ebrahim, factors or market that just conservative we've the as the It's the in just given today. Yes,

back Mr. this There are further you. time. the over at questions to Andersen, call I turn no

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

conference this concludes This call. you. Thank

now disconnect. may You